Potential CBA negotiation issues (was: Is a lockout actually inevitable?)

[AmericanDream]

Well, its simple to determine. Average team salary is about 74M * 31 = 2300M. Escrow eats off 10% or so, lets guess at 2B (probably +- 10%). Players get half of, so revenue would have to be about 4B, players get 2B.

But its not 2B in profit. There are many other expenses off a hockey team, travels, GM, coaches, scouts, minor leagues, rinks, etc etc etc.

NBA brings in far more than that, and the players make far less of revenue (they get a 50/50 split too). Average NBA team seems to have about 120M in salary, so that likely 7.5B revenue, 3.75B salary.

But you are right, the costs to run a basketball team are definitely less than a hockey team, and the players get the same percentage. Same with football and baseball. Hockey pays out the most in terms of % revenue (tied with the NBA roughly).


You cannot compare NBA salaries and NHL salaries though as there are far less NBA players, and the truth is only the top ones make decent coin. A ball game can be dominated by one player as they play 80% of the game, less players on the court.

the bolded part is what I thought and why I think the players need to really look at that and see where they really stand.

thank you for the time on this as I really do want to see how much NHL players salaries are vs revenue and compare that to the other sports...so for a league with far less revenue (NHL), are players salaries actually on par with NFL salaries/NBA salaries on a % of revenue basis despite the numbers being higher (average salary) for those other sports. Obviously as you stated the NBA has far less players, so numbers can be off, but even with less players they still have a higher payroll...

 

[Negan4Coach]

I don't get the obsession over "escrow". Do other sports have this sort of thing?

I am not going to get caught up in the daily "OMFG they are only a few days from making a deal, maybe we'll just miss the pre-season" like last time. I assume at least a half season without hockey, and will tune everything out until news that it is back on happens to catch my attention somehow.

 

[LadyStanley]

NBA, NFL have salary cap implemented with luxury tax. MLB doesn't have cap.

So, no, only NHL does.

Let's say your salary is $50k. Let's say that taxes take 25% (or $12.5k). Now teams have gone closer to the max, rather than the middle of the cap range, so the escrow pull back is 15% ($7.5k); now that does reduce your tax hit by $1.875k. But that means your salary "take home" is $31.875k. Nearly $20k or 40% of your earnings gone. So wouldn't you much rather have $37.5k take home rather an losing that $$ to escrow?

 

[LeHab]

NBA, NFL have salary cap implemented with luxury tax. MLB doesn't have cap.

So, no, only NHL does.

Let's say your salary is $50k. Let's say that taxes take 25% (or $12.5k). Now teams have gone closer to the max, rather than the middle of the cap range, so the escrow pull back is 15% ($7.5k); now that does reduce your tax hit by $1.875k. But that means your salary "take home" is $31.875k. Nearly $20k or 40% of your earnings gone. So wouldn't you much rather have $37.5k take home rather an losing that $$ to escrow?

NBA also has an escrow system.

II. ESCROW AND TAX ARRANGEMENT A. Escrow (1) The escrow level will be set at the players’ agreed-upon share of Basketball Related Income (“BRI”) for each year of the CBA. This percentage will be guaranteed to the players so that if total player costs are less than the agreed-upon share of BRI, the difference will be paid by the league to the players. The agreed-upon share of BRI for the 2011-12 season was 51.15% of BRI, with no further adjustments. For each subsequent season, the agreed upon share of BRI equals 50% of BRI, except that (A) to the extent BRI exceeds or falls short of projections for a season, the agreed-upon share will be increased or decreased respectively (i.e., above or below 50% of projected BRI for the season) by 60.5% of incremental BRI in excess of or below projected BRI for the season, and (B) the players’ resulting overall share of BRI for the season will be no less than 49% and no greater than 51%. (2) The maximum amount that can be withheld from the players for purposes of escrow is 10% of salaries and benefits plus 1% of BRI. Specifically, if a 10% reduction via the escrow system is insufficient to reduce aggregate player salaries and benefits to the agreed-upon share of BRI, then the overage will further be reduced or eliminated through a reduction of the new benefits pool that is funded with 1% of BRI each season. (3) Escrow proceeds for each season may be distributed to all teams in equal shares or used in such other manner (not payroll-based) as may be determined by the NBA (e.g., to fund a league program). (4) The CBA includes a formula to adjust annual Salary Cap and Tax Levels to help reduce the likelihood that total player salaries and benefits for a season will exceed the agreed-upon share of BRI by more than the maximum escrow withholding; the formula also helps to reduce the likelihood that total player salaries and benefits will fall short of the agreed-upon share of BRI (thus triggering the guarantee).

https://www.nba.com/media/CBA101.pdf

Here is a table with how much was returned to players from escrow. 14-15 & 15-16 players got more than they actually put into escrow.

2011-12	2012-13	2013-14	2014-15	2015-16
BRI:	$3.375 billion	$4.293 billion	$4.522 billion	$4.840 billion	$5.289 billion
Designated share:	$1.727 billion	$2.145 billion	$2.265 billion	$2.439 billion	$2.6885 billion
Salaries:	$1.610 billion	$2.109 billion	$2.134 billion	$2.175 billion	$2.346 billion
Benefits:	$173.8 million	$204.9 million	$207.4 million	$206.8 million	$212.0 million
Amount held in escrow:	$162 million	$212.2 million	$214.4 million	$218.6 million	$235.8 million
Overage/underage (amount salaries & benefits exceeded designated percentage):	$57.0 million	$168.7 million	$76.4 million	($57.3 million)	($130.5 million)
Overage amount retained by NBA:	$57.0 million	$168.7 million	$76.4 million	$0	$0
Remainder of escrow given to players:	$105.0 million	$43.5 million	$138.0 million	$218.6 million	$235.8 million
Supplemental check to players (in event of an underage):	N/A	N/A	N/A	$57.3 million	$130.9 million

[TBODY] [/TBODY]

NBA Salary Cap FAQ

 

[BigBadBruins7708]

NBA, NFL have salary cap implemented with luxury tax. MLB doesn't have cap.

So, no, only NHL does.

Let's say your salary is $50k. Let's say that taxes take 25% (or $12.5k). Now teams have gone closer to the max, rather than the middle of the cap range, so the escrow pull back is 15% ($7.5k); now that does reduce your tax hit by $1.875k. But that means your salary "take home" is $31.875k. Nearly $20k or 40% of your earnings gone. So wouldn't you much rather have $37.5k take home rather an losing that $$ to escrow?

nope, NFL is a hard cap like the NHL. NBA allows overages/luxury tax.

MLB doesnt have a cap, but it does have a luxury tax threshold

 

[ottawah]

I don't get the obsession over "escrow". Do other sports have this sort of thing?

They all have rules in place to guarantee the percentage they allot players (other than baseball which has no set percentage, but also pays out far less).

The whole point is if its not escrow, its something else. That something else will have the same effect. So why the obsession? Because the players just do not get it, obviously.

 

[ottawah]

NBA, NFL have salary cap implemented with luxury tax. MLB doesn't have cap.

So, no, only NHL does.

Let's say your salary is $50k. Let's say that taxes take 25% (or $12.5k). Now teams have gone closer to the max, rather than the middle of the cap range, so the escrow pull back is 15% ($7.5k); now that does reduce your tax hit by $1.875k. But that means your salary "take home" is $31.875k. Nearly $20k or 40% of your earnings gone. So wouldn't you much rather have $37.5k take home rather an losing that $$ to escrow?

Yes, but you are thinking of contract is terms of dollars. Its not really. Yes, there is a dollar figure, but its not a real dollar.

What the players are signing is getting a share of revenue. You can almost think of each dollar they sign for as a share in a company for that year, and they get dividends depending on the profits. It is the exact same thing.

they could make a cap a trillion dollars, sign players for billions, and the salary will be the same. The cap could be 50 bucks, sign the players for cents, and the salary would be the same.

What they are signing is not a money contract anymore, its a share.

 

[LadyStanley]

Share/portion comes to real $$s at some point.

All depends on how it gets calculated.

Most fans look at CapFriendly and look at the gross $$ amount players get (either by salary or bonus) and don't even calculate out the income tax that gets taken out to understand what a player actually "takes home". (And it's not straight forward with players having to file returns in nearly every jurisdiction they play in country/state. Just a handful of states they don't have to.)

 

[ottawah]

Share/portion comes to real $$s at some point.

All depends on how it gets calculated.

Most fans look at CapFriendly and look at the gross $$ amount players get (either by salary or bonus) and don't even calculate out the income tax that gets taken out to understand what a player actually "takes home". (And it's not straight forward with players having to file returns in nearly every jurisdiction they play in country/state. Just a handful of states they don't have to.)

Not just that. Start deducting escrow. Then agent Fees. Then taxes. Some years players would get less than 40% of their contract value, perhaps even down to 33% in a big escrow year.

But getting rid of escrow is not going to change that final takehome dollar. The sooner the players realize that, the sooner they can effectively extend the current deal and get out from under this cloud.

 

[Grudy0]

But that simply means the players want to take home close to the value of the contract...

And therein lies the issue with escrow. The fix would be to reduce the salary ceiling. If every team spends to the ceiling and the midpoint projections come true over that season, the players would always deal with 15 percent escrow.

Reduce the ceiling and the contract dollars would become closer to the actual payment received.

 

[LadyStanley]

Sports Labor And Agreements As Of Labor Day 2018 - Sports Talk Florida

In honor of labor day, article looks at sports CBAs. NHL (2020) and NFL/MLB (both circa 2021) may have labor issues in the near future. NBA has a few more years before labor agreement expires (circa 2023). MLB union has new negotiator who may want to make a name for himself.

 

[Noldo]

Is there any plausible argument that could get the League (i.e. supermajority of the owners) to support changes to the Escrow?

If the league continues to operate within the existing framework of hard cap, I cannot see how any change to the escrow could be seen positive from the League’s point of view. After all, it would weaken the main benefit of the cap system (restraints to spending / expenses) but retains potential discomforts (mainly limits to how a team can utilize its financial muscles).

It seems to me that the whole system would have to redesigned- and a successful argument would mean that the NHLPA would convince the big market owners (as they would most likely support a regime that could end up spending more in salaries) that they would be FINANCIALLY better off with some kind of luxury tax (which would shift the current escrow from being something that is deducted from the players’ salaries into amount that would be paid by teams that are paying the players more than their share).

 

[Stuzchuk]

I was actually having a conversation yesterday with a friend, an economy professor at the Laval University about the Wheeler contract and he said that by the end of it the cap percentage of his contract would be at around 8.0% (meaning about a 102M cap). with that being said, I highly doubt that with the last lockout that the owners were expecting the cap to rise so quickly and the bonuses of larger contracts to control 75% of their values (as per McKenzie about only 7-8 teams can afford them)....

Yes I would expect a lockout when the next CBA ends in 3 years due to the following clauses

1- Bonuses will be maxed
2- Full NMC/NTC will be removed (not M-NTC)
3- Players want to go to the Olympics (so are the fans)

 

[MNNumbers]

Not that long ago, I would have considered a lockout to be inevitable, but my mind is becoming more mixed. I say for a couple of reasons:

1- My impression was that escrow was an unsolvable problem, but in the last 2 years, the PA and the NHL have used the escalator far more responsibly, to the point where I expect that escrow will not be a big issue this year.
2- Many of the players have negotiated themselves payment in the form of bonuses, which they receive even in the event of a lockout, which diminishes the power of the owners in a labor dispute.

As mentioned above there are a few things to discuss:
Present advantage to players: Bonuses, NTC/NMC in contracts (which don't really affect the bottom line, but may take some financial control away from owners because GMs can't act responsibly).

Present advantage to owners: Olympic participation, escrow

Escrow solves itself if the players don't use the escalator as much. Other adjustments to the escrow system would be:
Easy change: Don't put the cap as high above the midpoint as the floor is below it.
More extreme change (actually eliminate altogether): Determine 2 things by use of a 5-year running average:
a- Amount of expected gain in HRR for the next year
b- Amount by which team spending on player contracts exceeds 50% of HRR.
Then, net year's salary cap midpoint is equal to the following number:
(Last year HRR * a) *50% /31 teams {This is the average amount allotted to each team}
But them divide that by "b" above.
Then establish the cap and floor as present.
No escrow, no adjustments to paychecks. Simply, your contract is what you get.
This would not be perfect. The owners would not have perfect cost certainty. If the estimate of new year HRR is off, the players might get 48%, or 51% or something. But, it would be pretty close. And, no escrow.

 

[LadyStanley]

Is there any plausible argument that could get the League (i.e. supermajority of the owners) to support changes to the Escrow?

Nothing doing. It's the $$ on the bottom line owners care about. Escrow or whatever mechanism is implemented to ensure HRR split is just a process.

 

[MNNumbers]

To agree with LS....

I'm not sure the owners require escrow. They just require a mechanism whereby player salaries are exactly 50% of HRR.

The place for discussion is in definition of HRR, and in the implementation of a math tool to insure the players only get the 50%.

For example, move the cap ceiling to only 10% above midpoint. I don't think the owners would mind that.

Or, something else....

 

[LPHabsFan]

I truly believe that if they want to lessen the impact of escrow, then they need to put stronger restrictions on the gap between actual salary paid and AAV.

 

[Tom ServoMST3K]

I actually found the shortened season quite enjoyable last time.

I wouldn't mind another one.

 

[Wolf357]

Without going through 9 pages...to answer the OP
Yes it is inevitable
Social Media and these boards will all be full of people with bold statements of how “They will never watch hockey again”
Lockout lasts half a season
Hockey returns...with better attendance and ratings...
And repeat again in 6-7 years when the next CBA expires

 

[LeHab]

To agree with LS....

I'm not sure the owners require escrow. They just require a mechanism whereby player salaries are exactly 50% of HRR.

The place for discussion is in definition of HRR, and in the implementation of a math tool to insure the players only get the 50%.

Floor/midpoint/cap spread and calculations could be readjusted to make players owing very unlikely while maintaining a 50% split. In fact, players would be getting their expected contracted salary + a check from escrow. Unfortunately this means there will be less money come Summer time for new contracts. If that makes them better sleep at night don't think owners will mind.

 

[patnyrnyg]

With how bad certain gms are with giving out contracts, it is only inevitable that the league will have to save the owners asses again.

Yup, and people on here will still be super pro-owner and anti-player once the lockout starts. Can't wait for all the "Players are just employees" posts and all the "If I tried to tell my boss how to run his/her business I would be fired" type posts.

 

[patnyrnyg]

Seems like everyone thinks it is. I'm not sure why things can't be worked out.

What are the main issues this time around?

On the owners side, they want shorter max term contracts and less signing bonuses.

Players want what, Olympics?

Are these really insurmountable challenges for them to hash out?

Obviously I'm not a player or an owner but it seems like there can be reasonable concessions on both sides here.

Max contract length becomes 5, 6 for extensions. Signing bonuses can only 50% of the salary.

In return players get their Olympics. Maybe reduce the age of UFA by another year. Or make offer sheet draft pick compensation lower so RFA status is more valuable. Make players be arbitration eligible right after their ELCs.

SOME players want the Olympics, but I seriously doubt they would be willing to give too many concessions for the Olympics.

Main issue for the Owners is they want to pay the players less money. Main issue for the players is they want to be paid more money.

 

[LadyStanley]

Main issue for the Owners is they want to pay the players less money. Main issue for the players is they want to be paid more money.

No, the two sides seem content with 50-50 split.

 

[sawchuk1971]

i'm wondering if the players want escrow changes, will the owners push for unguaranteed contracts?

 

[MNNumbers]

i'm wondering if the players want escrow changes, will the owners push for unguaranteed contracts?

Or, perhaps limits on bonuses.