Seravalli: Salary Cap to $82.5 million next season

[tenken00]

I know the pandemic season had some to do with it, but how did the players ever allow the total escrow amount get to $1 billion... (edit: $1.3 billion)


Daily Faceoff's projections:

SEASON	PROJ. SALARY CAP	PROJ. REVENUE	ENDING ESCROW BAL
2021-22	$81.5 MILLION	$4.8 BILLION	$1.3 BILLION
2022-23	$82.5 MILLION	$5.4 BILLION	$0.98 BILLION
2023-24	$83.5 MILLION	$5.6 BILLION	$0.63 BILLION
2024-25	$84.5 MILLION	$5.8 BILLION	$0.20 BILLION
2025-26	$85.5 MILLION	$6 BILLION	PAID OFF
2026-27	$91.4 MILLION	$6.2 BILLION	N/A

[TBODY] [/TBODY]

Click to read more...

 

[A1LeafNation]

It says 82.5m

 

[Chips]

Can someone explain to the financially illiterate roughly how long paying back that escrow will be/what it means? I mean, I assume they’ll never be like “okay you owe us the entirety of this years salary still”. Is that just a number we’ll hear about all the time like the US debt but little ever happens

 

[tenken00]

Can someone explain to the financially illiterate roughly how long paying back that escrow will be/what it means? I mean, I assume they’ll never be like “okay you owe us the entirety of this years salary still”. Is that just a number we’ll hear about all the time like the US debt but nothing ever happens

I edited the OP to show what the best case estimates look like.

Of course, it will all depend on what ticket sales look like, but the NHL got a bump in revenue due to the new ESPN and TNT TV deals in the US.

 

[Confused Turnip]

The players used their full escalator every year to make the numbers bigger, that's how we got here. It's Hollywood math, Tom Hanks or whoever didn't really make the salary numbers you hear, just like NHLers don't make the salary you hear, but you'd rather have the news reporting that you make 10 mil instead of the 7 mil you actually made for image reasons.

 

[tenken00]

The players used their full escalator every year to make the numbers bigger, that's how we got here. It's Hollywood math, Tom Hanks or whoever didn't really make the salary numbers you hear, just like NHLers don't make the salary you hear, but you'd rather have the news reporting that you make 10 mil instead of the 7 mil you actually made for image reasons.

Of course, but Tom Hanks isn't on the hook for paying the 3 mil back.

 

[Big Daddy Cane]

The players used their full escalator every year to make the numbers bigger, that's how we got here. It's Hollywood math, Tom Hanks or whoever didn't really make the salary numbers you hear, just like NHLers don't make the salary you hear, but you'd rather have the news reporting that you make 10 mil instead of the 7 mil you actually made for image reasons.

It was paying it forward. Reducing escrow by flattening the cap would have squeezed those in need of new contracts in the short-term, benefiting those that took advantage of an overinflated cap to get their money locked in. That wouldn't be fair to union membership overall.

 

[Confused Turnip]

Of course, but Tom Hanks isn't on the hook for paying the 3 mil back.

Neither do the players. They just never get it.

 

[Confused Turnip]

It was paying it forward. Reducing escrow by flattening the cap would have squeezed those in need of new contracts in the short-term, benefiting those that took advantage of an overinflated cap to get their money locked in. That wouldn't be fair to union membership overall.

I see this argument, but it only became an issue to begin with because of silly use of the escalator. Had they just never started the escrow would function as intended (sometimes going to players as a bonus and sometimes going to owners to make up shortfall) and this whole issue wouldn't exist.

 

[tenken00]

Neither do the players. They just never get it.

And while players are not getting their yearly escrow amount (capped at a percentage) back, it's still not enough to offset the amount they owe every year. To the amount of $1.3 billion dollars.

It's not until the emergency MOU to keep the flat cap in place while total escrow is paid back that it's being paid back at all.

 

[Confused Turnip]

And yet even players not getting their yearly escrow amount (capped at a percentage) back, it's still not enough to offset the amount they owe every year. To the amount of $1.3 billion dollars.

It's not until the emergency MOU to keep the flat cap in place while total escrow is paid back that it's being paid back at all.

Yes?

You're describing why ramming your foot on the escalator clause is a bad idea, I'm not sure what you're looking for here.

 

[tenken00]

Yes?

You're describing why ramming your foot on the escalator clause is a bad idea, I'm not sure what you're looking for here.

Ah, I thought since you were using the example of Tom Hanks getting paid $10 million in name while getting $7 million in actual that it was the same situation. It's really not.

Because yes, while players don't get their escrow, they also owe on top of their annual escrow.

 

[Confused Turnip]

Ah, I thought since you were using the example of Tom Hanks getting paid $10 million in name while getting $7 million in actual that it was the same situation. It's really not. Because the players are getting that $10 million in actual, not just in name only.

No they aren't. If you really insist on labouring this example it's more like they're getting 10 mil on paper, 7.5 mil in hand and 500k has to be paid back by other actors out of a pool next year because their contract limits how much can be escrowed per year.

 

[tenken00]

No they aren't. If you really insist on labouring this example it's more like they're getting 10 mil on paper, 7.5 mil in hand and 500k has to be paid back by other actors out of a pool next year because their contract limits how much can be escrowed per year.

Because the NHLPA, meaning the players themselves, are the ones that fought for those very limits.

It's not like those limitations were put in there by the owners or by the government. It was the players that forced it in.

 

[mouser]

The players used their full escalator every year to make the numbers bigger, that's how we got here. It's Hollywood math, Tom Hanks or whoever didn't really make the salary numbers you hear, just like NHLers don't make the salary you hear, but you'd rather have the news reporting that you make 10 mil instead of the 7 mil you actually made for image reasons.

The players stopped using the full escalator many years ago.

The current cap situation has nothing to do with the escalator.

 

[Confused Turnip]

The players stopped using the full escalator many years ago.

The current cap situation has nothing to do with the escalator.

You're talking about like 2-3 seasons and they still used it, just a bit less. Yeah covid tanking revenues is a big part of this, but that deficit just added to the enormous deficit pile which had already accumulated and spilled into big debt.

 

[Richard]

It is my understanding that they simply won't increase the salary cap substantially until the escrow is paid.

 

[mouser]

You're talking about like 2-3 seasons and they still used it, just a bit less. Yeah covid tanking revenues is a big part of this, but that deficit just added to the enormous deficit pile which had already accumulated and spilled into big debt.

The 2019-20 escalator was 0.5%. Which increased the cap ceiling by roughly $400k.

Multiplied by 31 teams, that's $12.4m in additional space, but not every team used it. A rough estimate is the escalator maybe added $10m of player debt into the Escrow Balance account in each of 2019-20 and 2020-21. That would contribute about $20m to the Escrow Balance that's over $1B. Frank suggested $1.1B.

In summary the escalator is a drop in the bucket, accounting for less then 2% of the Escrow Balance.

 

[dechire]

I know the pandemic season had some to do with it, but how did the players ever allow the total escrow amount get to $1 billion... (edit: $1.3 billion)

The current escrow situation is almost entirely due to the pandemic. The only choice the players had is in which specific way they wanted to get f***ed- either through escrow or through deferred salaries.

 

[JAK]

The current escrow situation is almost entirely due to the pandemic. The only choice the players had is in which specific way they wanted to get f***ed- either through escrow or through deferred salaries.

The owners fronted the money and risk, I think the players with guaranteed contracts comes out better overall, than losing their jobs.

50/50, both sides gives up the same amount of money.

 

[DownIsTheNewUp]

The current escrow situation is almost entirely due to the pandemic. The only choice the players had is in which specific way they wanted to get f***ed- either through escrow or through deferred salaries.

To be fair both the players and the owners got f***ed by Covid. The players probably less so because they got way more than their share (which is why they’ll need to make it up in the coming years).

 

[JAK]

To be fair both the players and the owners got f***ed by Covid. The players probably less so because they got way more than their share (which is why they’ll need to make it up in the coming years).

It's a sign that both sides work together.
Billionaires deferring millions to future years will allow their army of tax accountants to do funny things.
Players with high income will get enough to sustain their life styles as long as they are not addicted to gambling.

Players with low income are the only ones getting hit hard. But to them, it's a lot better than not having an NHL job and have to go work at a car dealership.

 

[dechire]

To be fair both the players and the owners got f***ed by Covid. The players probably less so because they got way more than their share (which is why they’ll need to make it up in the coming years).

I completely agree that both sides got screwed by Covid and under the circumstances I think it's a pretty fair deal for all of the parties involved. But the OP was suggesting that the $1B escrow is somehow due to the players' choices and that's very much not true.

 

[HockeyVirus]

I completely agree that both sides got screwed by Covid and under the circumstances I think it's a pretty fair deal for all of the parties involved. But the OP was suggesting that the $1B escrow is somehow due to the players' choices and that's very much not true.

Well I mean they chose to be paid for a full season instead of a shortened one. That is their fault. They voted to preserve the present instead of making the league recover faster.

 

[mouser]

I completely agree that both sides got screwed by Covid and under the circumstances I think it's a pretty fair deal for all of the parties involved. But the OP was suggesting that the $1B escrow is somehow due to the players' choices and that's very much not true.

The players did insist to be paid 82% of their 2020-21 contracts even though they knew it would be a severe escrow overpayment and result in a flat cap for years to come while paying the balance back.

I don’t like the word “blame”, but where we are at now is much more due to the players’ decision then any owners’ decision.