Question about a Cap

Discussion in 'Fugu's Business of Hockey Forum' started by Gags1288, Jan 5, 2005.

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  1. Gags1288

    Gags1288 Registered User

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    I'm having trouble understanding how the NHL can ensure the players that they will receive a certain amount of revenue. If there is a cap instituted at say 37 million dollars and that resulted in the players receiving the 56 percent that the owners desire, how will the players be ensured that each team will spend that amount of money. For instance, if some spend the allotted 37 million and others spend less (which is likely), then the players will not be receivng the 56 percent. If anyone understands what I have just written, could they possibly give me some help here????

    I just think a cap will severly limit trading in the NHL like it has in the NBA. Teams will trade contracts instead of trading players. Also, teams will not be able to take on a little additional payroll to make a run at the cup. There is a reason that no sport has a hard cap (other than football, which does not have guaranteed contracts and is very different from the NHL) and I don't understand why the owners refuse to take any of the responsibility.
     
  2. Sp5618

    Sp5618 Registered User

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    Yes, the NHLPA would ask that question. The league has said there would be a minimum each team would have to spend, say $34 million, but could not spend more than the cap. Thus, it is not a fixed figure, is it, but a range (e.g., 54-56%).

    Another question I have always had is this. If we accept the 56% of league revenues as the basis for a cap, does the "real number" get adjusted each year? For example, if the league revenues go up by....$150 million somehow, does the cap get adjusted the next year? Or are we frozen in time to 2004 revenues and thus salaries for the next 5-10 years?
     
  3. HockeyCritter

    HockeyCritter Registered User

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    In theory the cap would be increased to reflect the new revenue. However, I want to know what happens if the downward trend in revenues continues?

    I still think a payroll floor of $34-million doesn't help anyone . . . . . I think the floor should be 40-50% of the ceiling.
     
  4. garry1221

    garry1221 Registered User

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    if the salary floor was that low then there would be quite a few owners who would look at it and say 'hey, i can have a team that doesn't put me in the red WOO HOO' and those owners would keep doing that and the players would suffer more than if the floor was only at 34 mil, sure every owner would have the opportunity to stay in the black, but what kind of hockey would you expect then? i can guarantee you wouldn't see half the talent level that we see now. the league would spiral down faster than it is now. the payroll floor @ 34 mil helps many people (ie players).
     
  5. Tom_Benjamin

    Tom_Benjamin Registered User

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    It would be adjusted as revenues rose. That's okay by the owners. The reason cost certainty is so attractive to the owners is the rising revenue scenario. The percentage is fixed. As revenues rise, player costs will rise but all the other costs won't. They don't vary with revenues. It does not cost more to run a minor league team when NHL revenues go up. Arena costs don't change because more people go to the game. If the percentage is fixed now to give the owners a reasonable profit, a disproportionate share of revenue increases will go to the owner.

    The NHL proposal made much of the fact that if revenues increased by only 3% and saalries somehow increased by 12% in three years the NHL is right back where they are today. In another part of their proposal they show that under their system if revenues actually increase 7% a year, the ALS is back up to $1.83 million with the average payroll of $39 million.

    Since the revenues increased 9% a year over the life of the last agreement 7% is not unreasonable. Look at the problems that will create for the small markets. Revenue increases are not distributed equally. The revenue gap between rich and poor team has grown dramatically in the past ten years and Bettman's deal does nothing to change that.

    Sooner or later - probably about the time the CBA expires - we will have the same teams crying about the same financial problems. Obviously the solution will be to reduce the player percentage because the NHL just doesn't have the revenues to sustain it. And hey, if the players don't like it, lock 'em out until they do.

    Tom
     
  6. Tom_Benjamin

    Tom_Benjamin Registered User

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    What downward trend? Revenue growth has slowed but it has not stopped.

    Tom
     
  7. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    and that folks pretty much sums it up right there in one sentance. although, as usual, the entire post was awesome. i cant believe Tom makes such a good case just about every time he posts and you simpletons just dont get it.

    dr
     
  8. mudcrutch79

    mudcrutch79 Registered User

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    Just to point out, the flip side of that coin is that if league revenues drop, the owners profit drops more, as other costs would seem unlikely to drop comensurately. I don't know how accurate a guide the last ten years are-I don't necessarily think you can point to them as a guide for either salary or revenue increases.

    In honesty, this seems like something of a red herring to me. If this is what was holding it up, it could be dealt with.
     
  9. Sp5618

    Sp5618 Registered User

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    The revenue gap and the revenue distribution. That about sums it up, doesn't it? I still cannot believe that so many fans have not questioned the "total" league revenues as the basis for how to fix things. The Levitt Report is simply not relevant to the real issues...that being the revenue at the disposal of any given team.

    You can sum things up all you want, build market models that project some total revenue growth, take a % and say...yup, that's the fix. All the revenue growth may be in Toronto, Detroit, and New York (the favorite whipping boys) and the small market teams will have to up what they pay simply because total league revenues increased.

    I just hope there is an NHL the next time we would need to go through these shenanigans again.
    :shakehead
     
  10. Gags1288

    Gags1288 Registered User

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    I have a lot of problems with a cap.

    First, a cap will prevent any team from truely building a dynasty. I know many complain now about small market teams inability to resign their own players once they become stars, but I don't think this will change. Teams will not be able to hold unto a bunch of good players, despite the fact that they may have drafted them and developed them. I think there needs to be some cluase, like in the NBA, that allows teams to resign their own players despite the costs.

    In addition, part of the fun of being a hockey fan is watching teams trade youth for proven players at the deadline and watching those teams try to make a run at the cup. I think that this will almost be eliminated and the trade deadline will become a non-factor.

    I have a huge problem with how the NBA opperates and the trading of contracts instead of players. There is a reason that no professional sport has a hard salary cap. Football does to an extent, but they don't have guaranteed contracts so it really doesn't apply to hockey. Basketball and Baseball both have luxury tax systems.

    I just think the solution here is a strong luxury tax at a pretty low dollar amount. You need to allow big market teams to opperate at such in order to maintain their large fanbases. New York, Philadelphia, Detroit, Colorado; they don't want to pay to watch their teams be mediocre and they are not willing to watch their teams rebuild. No team in hockey is like the New York Yankees so I don't think that overspending will be too much of a problem. In addition, luxury taxed money will be distributed across the leauge as a form of revenue sharing. Let's be honest here, owners are interested in making money and the big market franchises are spending the most because they're bringing in the most. I still think you can have a very competitive league with varying salaries as long as no team operates like the Yankees.
     
  11. Sp5618

    Sp5618 Registered User

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    Actually, in this thread, most of us agree with Tom. I think there is only the one opinion that says the floor should be half the cap.

    For the record, I completely agree with Tom and think the entire Bettman/Levitt/"save the small market" stuff is a smokescreen.
     
  12. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    in this thread ... the majority of people on this board and in general have really bought the garbage hook line and sinker.

    dr
     
  13. shveik

    shveik Registered User

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    If the floor is close to the ceiling, then we have the garbage players on garbage teams earning the same as much better players on good teams. No incentive to be better.

    If the floor is far from the ceiling, then the effective salary average would significantly lower than the cap. To get to 56% one would have to set the cap at 80% perhaps. Which kinda defeats the purpose of the cap.

    Makes you wonder, what does Bettman really want :dunno:
     
  14. Tom_Benjamin

    Tom_Benjamin Registered User

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    Revenues could drop if the economy tanks, but they've been growing steadily for a very long time, far longer than Bettman has been around. That said, I don't think this is really the issue to the players. It is about the 4th level of concern.

    1) What are revenues?

    (Hockey revenues are defined differently in every market.)

    2) Would you trust Jeremy Jacobs or Bill Wirtz to report revenues honestly?

    (They don't trust any of them and annual forensic audits of 30 teams and affiliated businesses is not practical.)

    3) What percentage for the players is fair now?

    (Who Knows?)

    4) Won't whatever percentage that is fair now will become unfair as revenues rise?

    (Finally. Yes.)

    Tom
     
  15. Gags1288

    Gags1288 Registered User

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    This is what I am thinking and this is why the hard cap makes no sense. In the NFL teams want to spend a lot of money because they have so much revenue that they are still making a lot even when they spend up to the cap. In other sports, there is no hard cap. Bettman cannot promise the players anything because a hard cap just limits the salaries on top of creating many problems that I have stated above. I'm sure this is the issue that the players union has brought up, and despite the report, I just think there are too many major issues for anything to get done with the stance that Bettman has taken. Does he not realize that no other sport has a cap like the one he is proposing?
     
  16. triggrman

    triggrman Registered User

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    It hasn't yet, but the with the new TV contract it would had this season.
     
  17. mudcrutch79

    mudcrutch79 Registered User

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    Meh. At the end of the day, all the questions you've listed are just smoke and mirrors. I've come to agree with your position that from the view of the fan, what the NHLPA wants right now is better that what the NHL wants. That's particularly true if you're a Canadian hockey fan. That said, I don't for a minute buy that their motives and reasoning are so pure. They want to preserve the ability for idiot owners like Leonisis or the bozos in St. Louis to overpay or the ability of guys in Phoenix to dream up these business plans that involve massive land development schemes, and for those overpayments to reverberate throughout the league through arbitration. I don't blame them, I'd want to preserve that too, and it seems fair to me. That's why they object to a partnership with the owners; they might voice these other concerns, but they're just a way to avoid saying what is a much more unpopular argument to make.
     
  18. Tom_Benjamin

    Tom_Benjamin Registered User

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    At worst that's a loss of $90 million, a figure that assumes there are zero profits from the NBC deal. Revenues haven't grown by less than that any time in the past 10 years. It probably still wouldn't have turned revenues negative absent the lockout. Even using the NHL numbers, the NHL had a good year last year.

    I've come to hate arguing about league revenues because, really, there is no such thing. Except for the TV contracts all revenues are local. That's a far more important point about the new TV deal. The $3 million dollar loss in revenue represents 7.1% of Nashville's revenue and 2.5% of Toronto's revenue.

    The total revenue in the league is not relevant to anything if there is no revenue sharing and the NHL has no revenue sharing.

    We should start a contest to decide the most misleading NHL talking point. Here's a nominee:

    Q: Uh, Gary, don't you think that maybe the problem is too many teams?

    A: The NHL turns $2.1 billion in revenue. With the right economic system that is plenty of money to support 30 teams.

    This is a true statement if and only if the team with $118 million in revenue shares with the team turning $42 million in revenue.

    Tom
     
  19. cws

    cws ...in the drink

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    The garbage is really coming from both sides of the fence and unfortunately the majority of the people here buy into one side or the other. That's a major flaw in my opinion.

    With our lack of real knowledge (and we do only know bits and pieces of this entire puzzle), it would be damn near impossible to draw worthwhile conclusions if we we're all looking at both sides objectively. When you start buying the party line from either side, anything remotely worthwhile gets thrown out the window.

    Personally, I'm not jumping up and down about the possibility of a cap. Like many, I do believe there is a better solution out there. But our utopian-like views of what should or shouldn't be, they don't matter for the purposes of discussing what the NHL or the PA will do in the real world. The set-up in place isn't really condusive to produce that perfect or near-perfect or anything resembling perfect solution. Like it or not, that's just the way it's going to turn out.

    Call it picking the lesser of two really bad evils.
     
  20. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    i understand what you are saying and you often try to bring a sense of balance to the issues.

    however, my experiance is that the hard cappers are just not seeing the duplicity of the NHL and their intentions. Tom has been very good at articulating some real issues that the "masses" are missing out on and upon real thinking, i dont get how anyone can support the owners tactics in this lockout.

    dr
     
  21. There gaurnteed the 54% not the 56% which is the limit. Its a range system so the payroll of a team cannot be under 54% of revenues, and there also will be a escrow so that if by chance player salaries do not eat up at least 54% of revenues then the players a compensated until that number reaches 54%.

    Hopefully that answers your question.
     
  22. cws

    cws ...in the drink

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    That kinda goes to my point from before. You call it duplicity and bad tactics on the owners part, while those on the other side of the fence might see it as the owners truly trying to protect the businesses that they spent millions on and assume the majority of financial risk on. There's no way that I could prove or disprove either side of that argument in reality, unless I could see every scrap of relevant financial info and read their minds as well.

    I just think that both sides of the argument we see on this board go to the extremes when trying to make their case, when it's pretty unlikely that's the way it plays out in reality. The answer has to be somewhere in the middle, but unfortunately all that we know/hear/see on the subject are on those extremes.

    That's just the way I see it. I could be wrong of course, the answer may live close to one of those extremes. If it does, I'll be the first to admit that I'm wrong. But I just believe the answer we're all looking for lies somewhere out of view, and the discussions had here do little more than spark up some anger.

    I guess I don't add much to the talk around here anymore. Vague responses in disclaimer-form don't really get the ball rolling or bring up many new points for debate. I just can't help but view and occasionally post here, not too many other places to go for this sort of thing.
     
  23. shveik

    shveik Registered User

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    First, wouldn't you think that the NHL have learned the lesson? Somewhat? At least to the point that the mistakes would not be of smaller proportions. Second, with the changes to arbitration the effect of the other teams decisions is reduced. Third, a lot of overspending was due to the expansion, which is over now. Because of all this, I am certain that the previous CBA can work just fine.

    Whatever it is, it is not partnership. The players would not be involved in the financial and other decisions (not that they would want to). The bottomline, whatever other consquences are, the players would have to trust the owners to agree to the cap. I do not, do you?
     
  24. Kaiped Krusader

    Kaiped Krusader Registered User

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  25. SENSible1*

    SENSible1* Guest

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