buce said:
As long as you have teams with incredibly diverse budgets, the league will continue to be unfair. Who the hell wants a league where 40% of the teams never have a chance. The NHLPA of course wants the same deal baseball has and points to it as a success. Baseball is the worse example of sports system and it will come crashing down in 2006. It has become absolutely ridiculous. When studying economics there is always talk about how governments raise money through taxes. It's always better to broaden the tax base then to raise taxes to a higher level. Create an environment through low taxes where more business are able to open up. It's the same in sports. Is it better to have fewer teams of higher paid players? I think a league is healthier if there are more teams competing. The track the NHLPA wants to go down is a system where salaries keep spiralling out of control and the risk of losing some teams is not a concern. I find it crazy that this association doesn't care that they could lose 50-100 members through contraction. Keeping as many players employed should be their first concern.
http://slam.canoe.ca/Slam/Baseball/MoneyMatters/2005/01/28/913366-ap.html
This is why a salary cap is not necessary:
I have made the following points variously in a number of threads over the past while. I am trying to bring them together in some semblance of order. The post is kind of long but please bear with me as this is a rather complicated subject.
If you do not like long posts - DO NOT READ FURTHER!!!!
The problem Bettman has is that instituting a real salary cap starts with complete disclosure of revenues which is completely foreign to how the NHL owners operate. That is why every time a luxury tax or revenue sharing is mentioned Bettman acts like a deer caught in the headlights - like a cap, a luxury tax and revenue sharing would require financial disclosure.
What Bettman and the owners are trying to do is set an artificial cap level (initially proposed at $31 million) without first going through and proving what the total league revenues actually are upon which a cap would be based. The NFL, NBA and even MLB have disclosed revenues to the respective player associations - but not the NHL owners. The best we get is a work of fiction by Arthur Levitt, the guy who was supposed to ride herd on the the SU Securities and Exchange Commission and protect consumers - on his watch you has Enron and World.com.
A report on the NHL by by investment banker Moag & Company this past summer summed up the league's stand on revenue sharing this way:
"There is currently no plan emanating from the Commissioner’s office to tie a salary cap to revenue sharing. Previously, the players’ union has said that it would only consider limiting salaries in the context of significant revenue sharing. That said, the league has suggested in the past that revenue sharing does not require NHLPA approval. If nothing else, this rhetoric suggests that the owners have been unable to agree even amongst themselves as it relates to revenue sharing."
A consultant who works for the NHL was more blunt, telling the New York Post recently,
"Hockey owners won't do this; they'll fight to the end not to share their revenues, since most of them get their revenue locally. The real trouble is that the conflict isn't going to just a labor issue of players versus owners — it's going to be owners against owners."
Many experts (such as Matt Witting and Stephen Ross of UBC law school) dispute that salary caps are at all useful. Other people have pointed out that the NBA soft cap doesn't work very well at all and the NFL cap is all but ignored.
The NFL system works fairly well NOT because of the salary cap but because of the socialistic nature of the NFL and its huge TV contract. Revenues are shared across the board in the NFL including locally generated rewvenues.
As John Davidson on SportsNet points out the owners in the NFL generally are family or closely held private companies not conglomerates that you see in the NHL. Such owners would have problems surviving in the NHL (think Arthur Griffiths) but because of the revenue sharing (and the HUGE TV contract) they can not only survive but compete. As Davidson points out it is easy for the conglomerates to move money around within subsidiary and associated companies to hide the actual ammount of hockey related revenues.
As one NFL insider put it rather pithily:
"If you can't make money in the NFL, I think you may be considered the village idiot," (referring to the owners).
However although the NFL supposedly has a hard cap M.J. Duberstein, who is research director for the National Football League Players Association, told USA Today
"If you total up the actual dollars paid to players since the cap came in with the 1994 season, the total is $2 billion greater than the sum of all the salary caps."
So even the so-called hard cap is honoured more in the breach than in practise even in the NFL AND the NBA is worse.
"An effective salary cap is too Draconian and unreasonable. If you're going to use a cap to drive down player salaries, you're just padding owners' pockets," economist Andrew Zimbalist was quoted as saying by USA Today.
While good for owners, Stephen Ross, a University of Illinois sports law professor who also teaches classes at the University of British Columbia, said salary caps can be bad for fans.
"It is the solution to cost certainly and it is a solution to rising costs," said Ross, who has written an article on salary caps for the UBC Law Review.
"But salary caps come at the expense of the best interests of fans of every team other than the Stanley Cup champion."
A salary cap can make it difficult for a team to rebuild, Ross said.
He also argues the NHL wants a salary cap that guarantees owners can make money even if they are bad businessman and no matter what market they operate in.
"Things need to be done to permit well run teams to make money," Ross said.
"The problem is the salary cap guarantees all teams, well run and poorly run . . . will make money."
As Joe Sheehan of the Baseball Prospectus explained it, the goal of the salary cap, which he says should be actually called a payroll cap, is
"to restrict the amount of money management can spend on labor. It's an agreement among competitors to inhibit the labor market, lowering salaries."
That would of course be an antitrust violation but for the NHLPA. The only way the league can avoid that issue is to get the union to agree to it in the collective bargaining process. That is why the NHLPA is so reluctant to agree to a cap.
How about the argument that Bettman and the NHL owners trot out that a salary cap will let them lower ticket prices? Not likely since revenue and profitability have little to do with ticket prices.
"Prices are set by teams to maximize revenue, and are based on anticipated demand. They are not set to "make up" whatever rise in payroll is anticipated, no matter how many teams send out letters to season-ticket holders claiming this to be the case. Rising player salaries do not drive ticket-price increases," Sheehan wrote in a column for the Baseball Prospectus.
Toronto Sun columnist Al Strachan once put it this way:
"As for ticket prices, they reflect what the market will bear. The Maple Leafs have the highest prices in the league for one simple reason. People will buy them at that price. Surely you don't think that ticket prices will go down if salaries are reduced, do you? If you're that stupid, you could become a judge in this country."
How about building a team? Critics say a cap would do anything but encourage team building. In the NFL teams are often forced to make decisions where staying under the cap takes priority over building or keeping together a competitive team. Teams that draft well could eventually have to part with their players if they could not fit them under the team's salary cap.
"[A cap] punishes success, forcing well-built, winning teams to shed talent on a near-constant basis," said Joe Sheehan of the Baseball Prospectus.
Larry Brooks of the New York Post said a cap
"would destroy team-building, would destroy the ability of a successful club to maintain its nucleus. It would base every personnel decision on an ability to pay while remaining under a prohibitive cap."
That, in a way, benefits teams who makes poor decisions. They'll have an excuse for not being able to put together a competitive team because their hands are tied by the cap.
"No matter what the level of the salary cap, there are going to be a lot of teams who have lousy teams because they have overpaid, underachieving players and now they are at the cap level," Ross, the law professor, told the Canadian Press.
"If you are an owner, that's exactly what you want. You want to be able to tell your fans 'I'm sorry there is nothing I can do to improve the product because of the cap.' The fans are stuck with another year of a lousy team."
Here is my analysis of salary caps based on Matt Witting's comprehensive study of salary caps.
The owners are trying to fix the problem - which is that any number of them and their GM's do not have a clue how to run their teams
AS A BUSINESS. They want to transfer the results their own incompetence to the players without addressing the underlying management problems.
The NHL owners refuse to share revenue with one another yet they demand that the players in effect do this for them. Not likely to happen with someone as astute as Bob Goodenow at the helm for the players - Goodenow is NOT "Good Old Al Eagleson the Owners' Pal".
The NHL owners have historically misled and defrauded the players, diverted revenues, hid income, etc. - why is now any different? The NHL owners have steadfastly refused to open up the real books so there is no starting point for a salary cap since there is no real number to set such a cap against.
Some players have a different view as do some GM's. Here is one player and a former GM (The Mouth that Roared - Brian Burke) on this issue. Sather sang the same tune while in Edmonton but he has gone over to the dark side in New York.
"If they [the owners] want to pay us, they must be making money, it's not up to us to say: 'No, don't give us that much money.' " - Vincent Damphousse.
"I have never been more embarrassed to work in the NHL as I was on July 1st and 2nd [2001]. I know we can't support the salaries. I know that some of the teams who have spent that money are doing it without the financial capability to pay the money. I'm running my business like a business. I'm going head-to-head with people who are crazy, as far as I'm concerned."-Vancouver Canucks GM Brian Burke, July 2001
As former financial guru and the guy who guided the Canucks financial ship for the past few years prior to joining the Vancouver Olympic Committee, David Cobb, chief operating officer of the Vancouver Canucks, said it is important not to lose perspective in the debate.
"We're in a period of time with our franchise where we have an excellent team, we have excellent support from our fans, we have the top retail sales in the league, we have the busiest website in the league," Cobb said. "Everything's going well for us."
One moral - run your team as a business and do not hire financial idiots (think Pat Quinn, Mike Milbury and Booby Clarke) - and you can do well under the current system.
MEMO TO THE OWNERS AND BETTMAN - INSTEAD OF TRYING TO HAVE THE PLAYERS IDIOT-PROOF YOUR BUSINESS - TRY NOT HIRING IDIOTS IN THE FIRST PLACE.
And here is another quote to keep in mind when talking about salary caps from yours truly:
"Be careful what you ask for you just might get it." - Wetcoaster
Many are braying for a salary cap without faintest clue of what it is and what it entails.
It is complex and takes some time to wrap your mind around the concepts. Fortunately there was a consultant and statistician in Washington, DC, Matt Witting, who did an incredibly detailed and exhaustive in-depth study comparing the salary capped NFL and NBA to the capless MLB and NHL in February 2003. His figures, charts and analysis reveal some very interesting things. They also explode a number of popular myths about salary caps and their effects on competition and the movement of players.
There is a lot of simplistic bashing of the NHLPA and the players. It takes place IMHO because the players' salaries are visible. Crank up the NHLPA website and others and you can see what each player makes. Salary disclosure was one of the best things Bob Goodenow pushed so that teams could not trade on player ignorance in negotiations as had been the past practise but it is a two-edged sword. However try and find out what owners make off the game - good luck.
Most team owners run a series of companies, usually private, with the hockey operations in one company while revenue generation from hockey related operations are held elsewhere. The NHLPA has challenged the owners to open up all the books and prove their contention that the game is not economically viable. The owners have steadfastly refused the request. The Leavitt report did not look at the real books only those figures the owners already voluntarily disclose to the league.
If you intend to institute a salary cap as in the NFL or NBA, the first requirement is complete financial disclosure by ownership (as was done in those leagues) as there has to be some form of revenue equalization and establishment of a formula which forms the cap. Any other approach is pure salary suppression and done only on the backs of the players. That is the system the NHL owners are trying to impose.
The NHL owners refusal to disclose leads me to conclude what they are looking to do is cap salaries without revenue sharing. In other words the entire burden will fall on the players and ownership is free to do what it wishes. This was actually done in the last CBA where the NHLPA agreed to salary restrictions for new players entering the NHL. The maximum salary was set at $1.175 million for 2002 and bonuses were restricted. If you want to see this check out Article 9 of the CBA "Entry level Compensation". The CBA can be found at:
http://www-ix.oit.umass.edu/~splaw488/NHL_CBA.htm
or
http://letsgopens.com/nhl_cba.php
It simply is not going to happen this way for established players. In restricting entry level compensation the NHLPA in effect gave away rights for players who were not yet even part of the association - cynical yes but a very good bargaining chip. Besides who was going to complain.
When salary controls are proposed they are supposed to accomplish all or at least most of the following:
-keep team salaries down
-keep individual player salaries at a reasonable levels
-keep ticket prices increases under control
-reduce the difference between "haves" and "have-nots" and
-increase competition on ice league-wide.
Salary caps are not the be-all and end-all and do not necessarily work as intended and they have side effects. For example under the NFL cap system trades of any skilled player is virtually impossible. Just think no more trade deadline fun in the NHL. The "Law of Unintended Consequences" has dogged the salary cap systems in the NBA and NFL
As I noted above many fans fail to realize that the NHL already has a salary cap in place. The maximum entry-level compensation for players under the age of 25 is dealt with under Article 9 of the NHL CBA which limits the maximum yearly compensation for rookies to just over $1.25 million in salary and 50% of that in signing, reporting and roster bonuses for 2002. It went up another $50,000 this year. Rookie contracts are also deemed to be two-way deals under the CBA.
The NHL had a salary cap in place for decades (they just lied to the players and colluded with Al Eagleson on sweetheart deals) until Goodenow brought the NHLPA into the modern pro sports world and the NHL still does for new players entering the league.
A general salary cap for players without the NHL owners agreeing to revenue sharing will be a non-starter. The NHLPA will never agree and do not forget the players have their agents and their own legal and finacial advisers who keep them informed of the effects and ramifications of any changes in the CBA. This is not the 1950's when you can give Gordie Howe a team jacket to keep him happy. Or banish superstars like Ted Lindsay to Chicago and Doug Harvey to New York for challenging the owners hegemony.
The NBA and NFL caps are based on calculating league-wide revenue from virtually all basketball/football sources and revenue streams to generate a figure against which an allowable salary ceiling for each team is calculated. If you have ever read the CBA's for the NBA or NFL (and I have) you will realize they are two of the most complicated and convoluted labour relations documents ever produced. Teams employ an army of legal and accounting consultants on a full-time basis to assist them in conducting their business and in negotiating contracts. It takes three weeks in the NBA to figure out if you can make a trade.
The NHL owners have consistently refused to consider revenue sharing and will not disclose how much money is being made from all hockey related enterprises. In most cases the hockey operation, i.e. the team is run under one set of books while other income is generated through other companies. The NHLPA has challenged the owners to open the books so a true picture of the financial system can be seen. The owners have refused. As noted the Leavitt report was nothing more than another PR exercise produced by the owners to buttress their position pending the nuts and bolts of the labour negotiations.
Quite rightly the players resist being the only side making the financial sacrifice. Historically in the NHL the owners r@ped and pillaged the players before the advent of the NHLPA. Probably the single most important move by the NHLPA was Goodenow publishing individual salaries and making contracts public. In the past players were forbidden from discussing salary on pain of suspension or being blackballed. It led to such things as Gordie Howe in his heyday being only the fourth or fifth highest paid player on the Wings while he was the best player in the league.
There are various forms of salary control.
The NBA cap which Bettman helped design and implement is a "soft" cap. The teams must disclose their Basketball Related Income ("BRI") which includes revenue from tickets, advertising, local concession and souvenir sales, local media and other league, team and arena income streams. The current NBA cap for each team is 55% of the total BRI for the league. Only two teams (Detroit and LA Clippers) were under the cap - the other 28 teams were over. There is also a luxury tax in the NBA. However there are so many exceptions and loopholes the cap is more honoured in the breach rather than compliance. Since most exceptions relate to the star players and their higher salaries, the cap has virtually no effect on the players for whom the cap was intended in the first place but it does hurt the journeymen.
The NFL has what is referred to as a "hard" cap. Again league revenue is calculated in much the same way as the NBA but it is called Defined Gross Revenues ("DGR"). There are virtually no exceptions - hence it is a "hard" cap. The cap is set at 63% - higher than the NBA but remember that football rosters are much larger.
Also you often hear of huge long-term NFL deals. However if a player is cut, his contract ends. So if he has 5 years left on a $5 million per year 7 year contract once he is released, the team is no longer obligated to pay. This differs from the NHL where contracts are guaranteed and if you want to end a contract you must pay out the remainder at 2/3 or negotiate a buy-out. This was the Pierre Turgeon situation in Dallas.
Of course many star NFL'ers (and their agents) know this and they sign deals with huge signing bonuses paid up front. Under the NFL system teams can then average out the bonus over the term of the contract for the purposes of calculating the team's yearly cap number.
So taking the example above a player may sign a $35 million contract with a 7 year term. His salary is $2 million per year and he has $21 million dollar signing bonus in his pocket. Essentially he has a $23 million guaranteed contract. The team is not charged $23 million in the first year under its cap but rather is permitted to spread out the total contract over the total term so it is only charged $5 million per year against its cap. However if the player is released, traded or injured the entire signing bonus (or its remainder) now becomes part of the team's next year cap. For example our player blows out his knee and retires. Now the cap room is lessened by $19 million dollars and you must still try to replace the player. Many NFL teams have run into this problem. Also do you think there is any way this player is going to be traded?
Mark Witting in his extremely detailed study of salary caps has concluded a number of things. If a cap is in place there is less of a gap between the "haves and "have nots" and the wealth distribution is more even. That is not surprising since that is the starting point for a salary cap.
However he found that in the NFL the competitive balance difference pre- and post cap was negligible and had done nothing for league wide parity.
In the NBA the cap was instituted (according to the league) to protect smaller market teams and increase their competitiveness. It has not worked as in 18 years the 4 largest markets have won 14 titles while in the previous 18 years (pre-cap) the 4 largest market team only won 5 titles.
He finds that baseball with no salary cap has excellent competitive balance across the league and that the NHL has been its most competitive in the last 20 years looking at each decade since 1926-27.
After his detailed calculations and analysis he concludes:
"The two leagues (NHL and MLB) without caps and significant revenue sharing seem to produce more balanced competition than the leagues with cost-of-labour restrictions over the last 8 years. In addition, we saw that the restrictions did little if anything to improve competition in the NFL and may have actually hurt the NBA's pursuit of parity."
How about player salaries? He found as follows:
"Just like in un-capped sports, salary caps don't strongly influence the escalation of player salaries. Players perceived as stars are being paid tremendous sums in all four sports (hockey least of all) while the salaries and job status of the low end and mid range players are adjusted to compensate."
On trades he finds:
"Salary caps were not set up to decrease the ability of teams to better themselves for the post-season/future through trades, but they have had that effect in both the NBA and NFL."
That could mean no more fun on trade deadline day when real hockey fans take a sick day and hunker down in front of the sports channels.
How about the effect of salary caps in rebuilding a team:
"(NFL) teams are often encumbered with "dead money", payable to players no longer on the roster but still counting against the cap. Teams with significant dead money can't afford to sign as many experienced/quality players and suffer for it. The descent into salary cap hell is often caused by a team doing everything possible to win in one season by knowingly compromising the future. The team and fans are then forced to pay for a short period of prosperity with what can be a long stretch of mediocrity or worse. This peculiar phenomenon is not found in baseball or hockey, although it is appearing occasionally in the NBA."
The moral - be careful what you ask for you just might get it.
