Escrow, the Cap and the Next CBA

[Fourier]

We've been told that revenues were not so far off of $6B last year. Assuming a modest increase this year after all is said and done if HRR was say $5.7B at the end of this year that would mean the player's share would be at about $89M. At that level with a cap of $83.5M even with actual salaries being higher than the accumulated cap, the players should be getting money back rather than having to give up money to escrow. Next year the cap is now looking like it will be $87.3M, which would again be below the player's share. So I have two questions:

1) What are the chances that the NHL and NHLPA negotiate a higher cap next year to smooth out the return to normal?

2) Is there an obvious solution to the player's escrow concerns looming for the next CBA. The cap ceiling may well be very close to current player's share unless there is a radical increase over the next few years. Would it not make sense to take advantage of this and set the ceiling at something modest like 5% over the previous year's HHR starting with the first year of the new CBA? At 5% over the previous year's HHR escrow going forward should be pretty much a non-issue for the players.

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[Golden_Jet]

There’s some escrow to pay back for 23/24, but I think was less than a 100 million. So not too bad.
Escrow is locked in at 6% for the remainder of the current CBA.
Calculation for cap is now some combo of the previous 2 seasons HRR, to smooth out escrow better I believe.

 

[mouser]

We've been told that revenues were not so far off of $6B last year. Assuming a modest increase this year after all is said and done if HRR was say $5.7B at the end of this year that would mean the player's share would be at about $89M. At that level with a cap of $83.5M even with actual salaries being higher than the accumulated cap, the players should be getting money back rather than having to give up money to escrow. Next year the cap is now looking like it will be $87.3M, which would again be below the player's share. So I have two questions:

1) What are the chances that the NHL and NHLPA negotiate a higher cap next year to smooth out the return to normal?

2) Is there an obvious solution to the player's escrow concerns looming for the next CBA. The cap ceiling may well be very close to current player's share unless there is a radical increase over the next few years. Would it not make sense to take advantage of this and set the ceiling at something modest like 5% over the previous year's HHR starting with the first year of the new CBA? At 5% over the previous year's HHR escrow going forward should be pretty much a non-issue for the players.

Don’t forget to account for the $160m to $260m in non-salary benefits the players receive. At $5.7B HRR and $160M benefits that would bring the 50% split down to $84m in salary per team. At $260m benefits that’s $81m salary per team.

IIRC there were reports without the 5% per year cap raise default restriction that the 2024-25 cap ceiling would be ~$93m. Rather than the currently projected 5% default increase to $87.6M.

Also per media: The NHL has made approaches to the PA to increase more than 5%, but wants some unspecified concession in return. The PA wasn’t receptive to the idea. These reports were months ago, maybe either side has since changed their position.

 

[Fourier]

Don’t forget to account for the $160m to $260m in non-salary benefits the players receive. At $5.7B HRR and $160M benefits that would bring the 50% split down to $84m in salary per team. At $260m benefits that’s $81m salary per team.

IIRC there were reports without the 5% per year cap raise default restriction that the 2024-25 cap ceiling would be ~$93m. Rather than the currently projected 5% default increase to $87.6M.

Also per media: The NHL has made approaches to the PA to increase more than 5%, but wants some unspecified concession in return. The PA wasn’t receptive to the idea. These reports were months ago, maybe either side has since changed their position.

Thanks! I should correct my wording. Rather than HHR at $5.7B I was really meaning the amount after non-salary benefits. This was based on the assumption that last years revenues were in the $5.8B range together with a 4-5% increase this year which would cover the non-salary benefits at the low end of your range. Your numbers are higher than I had accounted for but it would still mean that the players share could be above the ceiling level.

My understanding was that the NHLPA had escrow concerns but I am sure they would not want to give up much in concessions to normalize the cap. Though I must say I do not know why the NHL would want concessions for something that will actually help to smooth out the transition back to normalcy.

(As an aside, some STHs on the Oiler board reported that their season ticket prices for next year went up 12% and that playoff tickets are also way up. With a report of a 21% jump in sponsorship last year NHL revenues are certainly not in the difficult place some had predicted.)

 

[mouser]

IIRC the concession the NHL wanted for increasing the cap ceiling beyond 5% in 2024-25 was increasing the Escrow withholding next season higher than the CBA mandated 6% maximum. Doesn’t seem like a completely unreasonable request to me.

Hypothetical example, bump the 5% cap increase up an extra 3% to 8%, $90m. While also bumping up Escrow withholding by 3% from 6% to 9%.

I haven’t seen the precise concession request details published by anyone. Simply taking a swing at what it might hypothetically look like.

 

[Noldo]

I suppose the fundamental question is:

As the League has successfully navigated the flat cap years after COVID, do you think that the parties have appetite to tweak the cap formula further in the next CBA in order to ensure that the salary spending would stay more naturally closer to actual 50/50 split?

It is clear that the players hate escrow and artificial limit on the escrow will eventually cause problems (or create a situation where the cap departs from the revenue numbers again, but to different direction). Addressing that proactively could provide smoother development for cap (if some kind of “escrow debt” becomes the mechanism to keep spending/ escrow in check, we end up with cap that jolts upwards every other year (no escrow debt, cap catches up to revue) and stays relatively flat the other years (excess escrow that is paid back by players)).

 

[Fourier]

IIRC the concession the NHL wanted for increasing the cap ceiling beyond 5% in 2024-25 was increasing the Escrow withholding next season higher than the CBA mandated 6% maximum. Doesn’t seem like a completely unreasonable request to me.

Hypothetical example, bump the 5% cap increase up an extra 3% to 8%, $90m. While also bumping up Escrow withholding by 3% from 6% to 9%.

I haven’t seen the precise concession request details published by anyone. Simply taking a swing at what it might hypothetically look like.

I agree it would have been reasonable to request a higher escrow cap had the cap been set based strictly on previous revenues and the old formula. But if revenues were $5.8B even with the $2.6M benefits in place the player's share would be in the $82M range. With a ceiling at $83.5M even taking into consideration a small existing escrow debt, would a 6% escrow not have been enough to almost ensure that there would be no issue last year in raising the ceiling 5% with a 6% escrow cap. NHL.com has stated that revenues are expected to exceed $6B this year. Lets say they are even right at $6B and again use the $260M benefits number. Would that not mean a player's share of around $86M per team.

While it is a zero sum game in terms of the total pot the flat cap has had a real impact on NHPLA members at the lower and middle end of the pay scale. Timing of the end of the flat cap has also been interesting. Some big names are coming off lower money deals looking for big raises. This seems to be the beginning of a salary reset that happens every 5 or six years it seems. Stars still get their money even if there is not a lot of room because everyone know that the cap is poised to rise substantially. But in the meantime, a lot of older guys are facing losing their jobs, taking big pay cuts or having to move on because of this. Teams are running short rosters which means AHL salaries for younger players who would other wise be gaining NHL experience.

At some point it seems that a transition to a higher ceiling is going to have to happen. I also think an acceleration could still be done in a way that would allow for a transition to a ceiling much closer to the player's share in the next CBA without much disruption.

 

[Djp]

I still have concern on local revenue from local tv broadcasts. Thus is a significant portion of local revenue.