Friedman: Cap to stay at around 81.5 million the next 3 years

[TS Quint]

The problem is escrow. Can't see how compliance buyouts affect this issue?

Who pays for the buyouts?

 

[Qwijibo]

The problem is escrow. Can't see how compliance buyouts affect this issue?

Money paid out as compliance buyouts is added to the players take of HRR. So they actually act to raise escrow. That’s the opposite of what they’re trying to achieve

 

[TS Quint]

I agree. That's why I feel if the cap is flat for three years there will be a compliance buyout.

Why?

 

[biotk]

Bad part about escrow is players on the hook for difference between salary cap and revenue. This year it is going to be huge. Close to a billion dollars. Players be paying 30% escrow.

That is not a bad part about escrow. That is a necessity of the 50/50 split. Everyone knows when they sign their contracts that the amounts are dependent on 50/50 split of HRR. If the NHL didn't have revenue splitting they would just not bother to start up next season.

Prior to this summer the players have always known that they could eliminate their escrow problem by getting a memo of understanding to change the cap calculation so that it is based on teams all being at the cap instead of being based on teams all being at the half way point between the cap and floor. It would have necessitated a roughly 15% cut in salary. This was never done because players only care about cutting down escrow when other players are taking the hit.

To me what is most disturbing about the current proposal is that it is transferring the costs away from players making big money this year and next year and towards players who will be making more money several years down the road.

Players like Matthews, Marner, Tavares and several others who signed large front-loaded contracts will be saving a ton of money because the NHLPA wants to shift the burden away from this year and next year (when the losses are occurring) down the road several years.

If escrow is capped at 20% next year, but HRR falls so much that it should actually be 50% then someone like Matthews is losing 3.2M to escrow instead of 8M. If that is made up by escrow being 10% higher than it should be 4 years from now, well Matthews is only making 8M come that time because his contract is so heavily front loaded. He will be gaining many millions through this set up. But because the players always get 50% of HRR in the end that money is coming from other players.

By comparison a star player on their ELC this year and next year would be saving very little now from the cap on escrow, but will be paying much more in subsequent years when the cap is, say 10% higher than it should be to make up for the shortfall these early years. This is a transfer of wealth from future earners to current high money players.

None of this was necessary. They could have just decided that the cap would continue to rise as it had been previously projected to and the players would pay high escrow. If escrow was a concern they could agree to cut back salaries. Both of those would affect all players equally for the time period in which HRR is depressed. Instead of flattening the cap which screws over UFAs and RFAs and capping the escrow which screws over the future earnings of players instead of the current earnings of players.

 

[Connor]

Why?

The cap staying flat for multiple year's is in essence a rollback of the cap.

It would not be fair for the players getting to UFA status in the next two years nor have the teams had adequate notice to manage their teams accordingly.

 

[Qwijibo]

The cap staying flat for multiple year's is in essence a rollback of the cap.

It would not be fair for the players getting to UFA status in the next two years nor have the teams had adequate notice to manage their teams accordingly.

Not fair? Adequate notice of a global pandemic? You do understand that they’re considering these actions as the best possible recourse in an impossible situation right? They didn’t wake up one day and decide to randomly freeze the cap.

 

[Big Muddy]

Is the decision delayed? Did the league ever give a date they would pick the hub cities?

I'm guessing not, and wouldn't it be prudent for them to pick later rather than sooner? Is there a downside to picking later?

I'm going on the basis of what a few of the talking heads (regular NHL analysts) said. Its no big deal to me.

I was thinking training camps were supposed to start in 11 days. Don't recall how the quarantine thing went should games be played in Canada .....

The more important part of that post was the stuff on the CBA.

 

[TS Quint]

The cap staying flat for multiple year's is in essence a rollback of the cap.

It would not be fair for the players getting to UFA status in the next two years nor have the teams had adequate notice to manage their teams accordingly.

#1 it’s not a roll back or even the “essence” of one. In fact it’s artificially being held up.

There was never a guarantee that the cap was going to go up in perpetuity. The NHL shouldn’t reward bad GMs and punish good ones.

I don’t understand what you mean by “fair” for the UFAs.


Who pays for the buyouts? The players?

 

[Menzinger]

#1 it’s not a roll back or even the “essence” of one. In fact it’s artificially being held up.

There was never a guarantee that the cap was going to go up in perpetuity. The NHL shouldn’t reward bad GMs and punish good ones.

I don’t understand what you mean by “fair” for the UFAs.


Who pays for the buyouts? The players?

There was near universal predictions pre pandemic that the NHL was going to see a noticeable rise in cap.over the next few seasons, with the incoming new tv deal + Seattle expansion + gambling partnership.

Teams that are close to the cap now or in the near future also arent necessarily the result of poor management as well, so thats an unfair thing to claim: teams with more talent than others have to pay them.

 

[Qwijibo]

There was near universal predictions pre pandemic that the NHL was going to see a noticeable rise in cap.over the next few seasons, with the incoming new tv deal + Seattle expansion + gambling partnership.

Teams that are close to the cap now or in the near future also arent necessarily the result of poor management as well, so thats an unfair thing to claim: teams with more talent than others have to pay them.

How many big contracts were actually dubbed in the short window between when NHL pundits estimated the cap was going up to $84m to when the pandemic hit and shut the league down? Not many. The bottom line is some GM’s play it close to the cap, regardless of what the cap is.

It’s an unfortunate situation but they knew there was no guarantee of a cap increase. Last fall there was talk of the cap only riding slightly for the next few seasons until the new tv deal actually kicked in.

you’re right to say it’s unfair to classify trans close to the cap as poorly managed. But by the same token you have to admit that they were aware that the cap could become an issue.

There’s a legal warning in the financial sector that I think applies here. Past performance is not a guarantee of future returns. That is, invest with the knowledge that you may get burned. Lol

 

[Legion34]

How many big contracts were actually dubbed in the short window between when NHL pundits estimated the cap was going up to $84m to when the pandemic hit and shut the league down? Not many. The bottom line is some GM’s play it close to the cap, regardless of what the cap is.

It’s an unfortunate situation but they knew there was no guarantee of a cap increase. Last fall there was talk of the cap only riding slightly for the next few seasons until the new tv deal actually kicked in.

you’re right to say it’s unfair to classify trans close to the cap as poorly managed. But by the same token you have to admit that they were aware that the cap could become an issue.

There’s a legal warning in the financial sector that I think applies here. Past performance is not a guarantee of future returns. That is, invest with the knowledge that you may get burned. Lol

this is completely different though

yes you are correct in that within the Current system. There was no “guarantee” the cap would go up. However they did project 84 .... there was no “gaurantee”.

However there was a “guarantee” that it would be based on 50/50 HRR every year. This system of a frozen cap is not at all what was agreed to and people were projecting


They are completely changing the system. So your line of reasoning doesn’t make sense for this specific scenario.

 

[Qwijibo]

this is completely different though

yes you are correct in that within the Current system. There was no “guarantee” the cap would go up. However they did project 84 .... there was no “gaurantee”.

However there was a “guarantee” that it would be based on 50/50 HRR every year. This system of a frozen cap is not at all what was agreed to and people were projecting


They are completely changing the system. So your line of reasoning doesn’t make sense for this specific scenario.

Ok. Right. The cap is supposed to go up with HRR. Here’s the thing. HRR is town dramatically due to covid. They can keep it at 50/50 if they set escrow at 35%. Doing that won’t increase the cap. It’ll just keep it where it’s at. There is literally no scenario at this point where the cap naturally increases.

The seasons beyond next year then become the issue. The league and the NHLPA are working together to lessen the hit to the players this year. In order to do that they need to spread the debt the players owe over a few years. And that’s assuming they find a way to get full seasons played after this year (with fans in the seats). The odds of the cap naturally increasing in the next few years don’t look great to begin with.

This proposal is primarily a benefit to the players. Is it ideal. No. But in an economic catastrophe like the one that’s happening you pick the path of least damage.

As far as teams being close to the cap being hurt by this. I have no sympathy. Teams who are close to the cap have to make hard decisions every season. The cap going up lessens the impact , but the teams up against the cap are more or less always up against the cap. The GM’s are paid to figure out how to make it work. Time to earn their money.

 

[Connor]

#1 it’s not a roll back or even the “essence” of one. In fact it’s artificially being held up.

There was never a guarantee that the cap was going to go up in perpetuity. The NHL shouldn’t reward bad GMs and punish good ones.

I don’t understand what you mean by “fair” for the UFAs.


Who pays for the buyouts? The players?

Has the cap gone down other than when there was a CBA holdout?

 

[Connor]

Not fair? Adequate notice of a global pandemic? You do understand that they’re considering these actions as the best possible recourse in an impossible situation right? They didn’t wake up one day and decide to randomly freeze the cap.

How many players reach a form of free agency within the next two seasons? These players are part of the NHLPA as well. Freezing the cap to minimize the escrow makes sense but I would think there would be some form of adjustment to support both players reaching free agency in the next two years as well as teams that projected a larger rise in the cap than a nil inflation over the next three seasons.

 

[Qwijibo]

How many players reach a form of free agency within the next two seasons? These players are part of the NHLPA as well. Freezing the cap to minimize the escrow makes sense but I would think there would be some form of adjustment to support both players reaching free agency in the next two years as well as teams that projected a larger rise in the cap than a nil inflation over the next three seasons.

Teams are never guaranteed the cap was going to rise. They gambled that it would. Teams that are tight to the cap put themselves in that position. Now they need to make decisions to remain compliant. Teams lose players they’d rather keep due to cap constraints every offseason.

As far as the upcoming UFA/RFA’s are concerned. They can take shorter term contracts and hope they league bounces back, or they can take the security of longer contracts at lower dollars.

In an age of massive unemployment due to covid-19 I’m not to concerned about some players having to take a bit less than they would have gotten. Having a healthy league that is still able to employ them is probably more important.

The players union is negotiating with the league on this proposal. Clearly they view this as preferable to being hit with an estimated 27-35% escrow this season, and likely higher than 20% going forward for the forseeable future.

 

[Big Muddy]

There was near universal predictions pre pandemic that the NHL was going to see a noticeable rise in cap.over the next few seasons, with the incoming new tv deal + Seattle expansion + gambling partnership.

Teams that are close to the cap now or in the near future also arent necessarily the result of poor management as well, so thats an unfair thing to claim: teams with more talent than others have to pay them.

Can't remember if the league commented on that?

Edit: Found the article with Daly saying $84 - 88 m next year. Haven't found NHL/Bettman saying noticeable rise in cap over next few seasons (at least so far). Did find an December 2018 article where Bettman said cap would be $83 m next season, but, even at that point in time, that was actually a decrease from previous year (& it ended up at $81.5 m).

 

[Qwijibo]

Has the cap gone down other than when there was a CBA holdout?

No. Because of escrow. That’s the balancing tool. And now due to covid escrow is estimated to be between 27-35%. Players don’t want to pay back 35% of their contracts this year, so they’re working with the league on the proposal in the OP.

 

[biotk]

No. Because of escrow.

The amount of the salary cap and the fact that it has always gone up has nothing to do with escrow. Nothing at all.

 

[Qwijibo]

The amount of the salary cap and the fact that it has always gone up has nothing to do with escrow. Nothing at all.

The salary cap is based on revenue. The players have the option to use an inflator on it, but at its core it’s a percentage of revenue.

The players and the owners split hockey related revenue 50/50. Escrow is in place to adjust the players share when the projection of revenue and the actual revenue don’t line up (which is every year, thanks largely to the use of the inflator).

The cap has gone up every year because the league has been thriving under he salary cap and the revenue has increased annually ( plus the players have consistently voted to use the inflator to some degree)

So since both the cap and escrow are tied directly to HRR, escrow certainly does play a role.

 

[biotk]

The salary cap is based on revenue. The players have the option to use an inflator on it, but at its core it’s a percentage of revenue.

The players and the owners split hockey related revenue 50/50. Escrow is in place to adjust the players share when the projection of revenue and the actual revenue don’t line up (which is every year, thanks largely to the use of the inflator).

It is not largely due to the use of the inflator - which should be beyond obvious as the escrow has always been well above 5% and this current season the inflator was only like 1% while escrow was north of 10%. Reducing the inflator simply pushed even more teams to move closer to the cap and allowed others to get to the floor without taking on bad contracts, and did not really impact escrow at all (as people like myself, correctly, said would happen).

The 5% inflation applied each year was designated in the CBA. It is was not supposed to be something that the players could decide themselves, and the league should have fought back when the players decided that it was.

This was all extremely simple. During the lockout in the fall of 2012 the NHL and NHLPA decided on how the salary cap would be formulated. They decided on basing the salary cap on every team being at the midway point between the salary floor and salary cap and then adding 5% each year. They knew that this was going to lead to significant escrow throughout the entire length of the CBA (as the average team not only spends more than the midpoint, but there are other salaries that are outside the cap - IR, LTIR, compliance buyouts etc that all count towards the 50%), but the alternative of basing the salary cap on every team being at the cap would have meant that salaries were going to need to be chopped. This was largely the decision of the NHLPA who were hell-bent on the salary cap for 2013/14 being 65M (even with the choices they made, all of which increased escrow it still didn't make it that high). So the NHLPA pushed for the current setup. It was not like the owners cared whether the cap was based on the average team being at the midway or the cap - they pay 50% of HRR into players' salaries regardless. The players have been trying to change the system mid-CBA, but without doing it properly (which would be to have the cap based on the average team being at the top, and all salaries taking a cut of about 15%).

 

[TS Quint]

There was near universal predictions pre pandemic that the NHL was going to see a noticeable rise in cap.over the next few seasons, with the incoming new tv deal + Seattle expansion + gambling partnership.

Teams that are close to the cap now or in the near future also arent necessarily the result of poor management as well, so thats an unfair thing to claim: teams with more talent than others have to pay them.

You play with fire there's always a chance you can get burned.

 

[TS Quint]

Has the cap gone down other than when there was a CBA holdout?

Was there ever a guarantee the cap would go up forever?

 

[Dache]

Teams sign contracts nowadays with the knowledge cap Will go up. If it doesn’t, the teams that just sign are at a disadvantage. Actually pretty much all teams are at that disadvantage. Let players keep their salary but roll their caphits back

That’s does the same thing as raising the cap, so then the whole point of a flat cap is gone

 

[mouser]

It is not largely due to the use of the inflator - which should be beyond obvious as the escrow has always been well above 5% and this current season the inflator was only like 1% while escrow was north of 10%. Reducing the inflator simply pushed even more teams to move closer to the cap and allowed others to get to the floor without taking on bad contracts, and did not really impact escrow at all (as people like myself, correctly, said would happen).

The 5% inflation applied each year was designated in the CBA. It is was not supposed to be something that the players could decide themselves, and the league should have fought back when the players decided that it was.

This was all extremely simple. During the lockout in the fall of 2012 the NHL and NHLPA decided on how the salary cap would be formulated. They decided on basing the salary cap on every team being at the midway point between the salary floor and salary cap and then adding 5% each year. They knew that this was going to lead to significant escrow throughout the entire length of the CBA (as the average team not only spends more than the midpoint, but there are other salaries that are outside the cap - IR, LTIR, compliance buyouts etc that all count towards the 50%), but the alternative of basing the salary cap on every team being at the cap would have meant that salaries were going to need to be chopped. This was largely the decision of the NHLPA who were hell-bent on the salary cap for 2013/14 being 65M (even with the choices they made, all of which increased escrow it still didn't make it that high). So the NHLPA pushed for the current setup. It was not like the owners cared whether the cap was based on the average team being at the midway or the cap - they pay 50% of HRR into players' salaries regardless. The players have been trying to change the system mid-CBA, but without doing it properly (which would be to have the cap based on the average team being at the top, and all salaries taking a cut of about 15%).

The Players didn't unilaterally decide that on their own--the league agreed with them. The CBA says clearly if either the PA or NHL disagree with the default 5% escalator then they have to convene and agreed on a new %. The CBA doesn't say in the event the two can't agree then the escalator remains at 5%--it says they must agree. Therefore the default interpretation would be in the event the two parties couldn't agree that they'd take it to the arbitrator to hear their cases and make a ruling.

IMO the PA would have had a slam dunk win for a lower % if it ever went to the arbitrator. All they'd have to point to is the high levels of escrow they're experiencing.

 

[mouser]

Can't remember if the league commented on that?

Edit: Found the article with Daly saying $84 - 88 m next year. Haven't found NHL/Bettman saying noticeable rise in cap over next few seasons (at least so far). Did find an December 2018 article where Bettman said cap would be $83 m next season, but, even at that point in time, that was actually a decrease from previous year (& it ended up at $81.5 m).

Based on past precedent and expected escalator usage the realistic target for the 2020-21 season cap before the shutdown would have been ~$83.5m-$84.5m. The $88m was never realistic as that would be based on the PA using the full 5% escalator, which they have declined to do for multiple seasons now.