linkage / no cap idea ..

Discussion in 'Fugu's Business of Hockey Forum' started by Brent Burns Beard, Dec 14, 2004.

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  1. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    Ok ... at this point in time, its really important to be solutions oriented. since its clear both parties are entrenched its of no value to think this will be worked out with the ideologies on the table. while the owners hold all the power, they still must be pro active in finding a way to get the game back on before it suffers permament damage.

    the players will agree to a deal that doesnt involve a "cap" on what they can earn and the league will agree to a deal that has "linkage" to revenues.

    lets say 1.1b is 55% of 2b in revenues for arguments sake.

    no cap on any teams spending. however, if total league salaries exceeds this amount, then the teams exceeding the average (37m) will pay at a rate of 1:1 for the revenue differential amount. so if 10 teams are over 37m and the total salary wound up being 1.2b, than each team over will contribute to the deficit on a pro rated basis.

    this is not really a tax, its recovering the revenue differential. follow me, it might be a bit complicated.

    if 55%(1.1b) is ok on 2b revenue, the league wouldnt mind 1.2b in player costs IF the revenue was 2.2b, so if player costs creep up to 1.2b, than the offending teams should make up the REVENUE difference so that the other teams are compensated as if they actually had the revenue of 2.2b.

    I would propose if these were the #'s (1.1b threshold, 1.2b final result) that each team over 40m in payroll (1.2b/30) will pay in equal proportion the revenue shortfall from 2b to 2.2b.

    if it was 10 teams and by chance they were all equally over the 40m mark, they would each pay 20m to the league revenue base in revenue differential payments.

    Is that stiff enough to create cost certainty for the owners, but flexable enough to not act as a cap in the players minds ?

    dr
     
  2. ceber

    ceber Registered User

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    Works for me. I think Goodenow would argue it's in effect a cap though, since the tax threshold is low and the percentage is high. You also run into the classic problem of defining revenue.

    It's the sort of thing I would expect both sides to be able to start negotiating with, though
     
  3. copperandblue

    copperandblue Registered User

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    If I am following your suggestion correctly, I think the owners would jump all over it and Bob Goodenow would be burried in a shallow grave deep in the woods.

    Just to simplify the numbers;

    Say the revenue and 55% equals a perfect 36 mil / team payroll.

    Therefore league revenues are 1,963,636,364.00

    Now if every team spends their 36 mil perfectly and 1 team spends 40 mil then the equivalent revenue based on 55% would be 1,970,909,091.00 for a difference of approx 7,272,727.00

    That is almost pushing past a 1.8:1 equivalent luxury tax.

    Or am I misunderstanding your suggesting? :dunno:
     
  4. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    well the tax could be quite low as well. if 20 teams were over the threshold, its still the same amount of tax, but split over twice as many teams.

    i dont think goodenow has a choice anymore. the owners are better poker players. however, its still important for the owners to be pro active and find a solution based on compromise so that the we dont need to find out how damaging a lost season will become.

    the problem with this system is it still can be considered inflationary. however, if the compensation paid by the offending teams resolves the "cost certainty" issue, why would hte owners care ? as long as revenue and costs are tied, who cares how mcuh the players make ?

    dr
     
  5. eye

    eye Registered User

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    Interesting - call it a Flex Payroll system and we have a deal. :handclap: :handclap: :handclap: :handclap:
     
  6. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    lots of #'s .. lol

    the one offending team would need to make up the revenue differencet that exists to make it OK for them to be at that level. so in your simple example, the single offending team would pay the entire portion of revenue that is short. in this case, its only 7+m dollars.

    i would think with no cap, more team would spend over 40m though. i can see how this is quite punitive, but it still has no salary cap.

    dr
     
  7. Its an interesting spin on things, but I don't see where the players become a partner in the game and assume some of the risk. That's part of the league's plan is to have the players assume some of the risk should revenues fall. Why should the players have the business one way? They want to deprive the owners of the one thing that ownership really offers, and that's running your business the way you like to make a profit. The "employees" are telling the owner how to run his business and expecting to take all the profits. Its not the way the business world works. You want the right to make that big profit, go a head and assume some of the risk. Until then, enjoy being an employee and doing what you're told. If you don't like it, find work elsewhere.
     
  8. s7ark

    s7ark Bouch

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    It's an interesting idea. Quick email it off to Bettman so he can suggest it in 23 minutes :)
     
  9. me2

    me2 Calling out the crap

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    Simplify it further.

    Calculate 50-55% of revenue/30 (NHLPA-NHL to work out %) as soft cap per team

    Any team over soft cap gets taxed
    1:1 for portion 0-25% over
    1.5:1 for portion >25% over

    ie if soft cap figure is set at $40m, and a team has $55m in payroll it gets hit with 1:1 tax of $10m + 1.5:1 tax of $7.5


    Very similar but simplifed slightly. Teams will know their budget ranges and won't have to work out if other teams going over or not going over.
     
  10. chriss_co

    chriss_co Registered User

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    Your proposal brings up an interesting question

    is the PA against tying league revenues to player salaries or is it simply against a salary cap?

    from my feeling, the PA is against the former and my initial assessment of your proposal (which i wouldn't mind) is that it ties league revenues to player salaries

    and in that case according to the PA, it is unacceptable and unnegotiable
     
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