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I hate the Salary Cap. It's an abomination. It's funny that NHL owners are strident Capitalists when it comes to revenues and hard-line Marxists when it comes to paying their bills. Anyway...
To try to avoid confusion, I'm going to call Canadian dollars "Loonies" and American dollars "Greenbacks".
Hopefully people know that the NHL players get paid 50% of "hockey related revenue" (HRR). I know everybody loves reading the CBA. Section 50.4 (b) says:
For each League Year, there shall be a Players' Share, which shall be equal to the percentage of HRR that the Players shall be entitled to earn in the aggregate as League-wide Player Compensation. The percentage applied to HRR in a League Year to determine the Players' Share shall be known as the "Applicable Percentage." The dollar amount represented by the Players' Share in a League Year (i.e., League-wide Player Compensation) shall equal (i.e., shall never exceed nor be less than) the Applicable Percentage of HRR, as calculated pursuant to this Article 50.
The Salary Cap, Salary Midpoint, and Salary Floor are defined by the CBA. The Salary Midpoint is 50% of HRR divided by 30. If HRR is 3.6 billion Greenbacks, then 50% is 1.8 billion, and the Midpoint is 1.8 billion divided by 30 or 60 million per team. The cap is 1.15 times the midpoint. In this example it would be 69 million. The floor is 0.85 times the midpoint. Here it's 51 million.
Escrow
So why do players have part of their salaries held in escrow? Well, at the end of the season, player salaries have to add up to exactly 50% of HRR. Suppose in the above example, every team chose to spend to the cap. That would be 69 x 30 or 2.07 billion going to players. Can't have that. So each player's salary would be discounted by the amount of the excess. 2.07 billion – 1.8 billion is 0.27 billion. Each player would have to pay back 0.27/1.8 or 15% or their salary. Rather than asking the players to pay it back after the season, an estimated amount is held in escrow until the final accounting is done.
Exchange Rate
In 2013-14 the exchange rate averaged 0.93. It's at 0.8033 as I type this, and predicted to fall below 0.70, with some projections as low as 0.60, by next year. Imagine Toronto takes in 200 million Loonies every year. In 2013 that was worth 186 million Greenbacks. This season it's worth 160 million. Next year it might be worth 120 million.
Projecting 2014 from 2013
Not accounting for the exchange rate, league revenues are up about 5% from last year. Some teams are up more, some teams are down, but for simplicity's sake, I'm going to increase last year's estimated revenues by 5% across the board. The 2013-14 figures are from Forbes. The first two columns are in local currency. The latter two reflect converting Loonies to Greenbacks at the listed exchange rates.
Team |
2013-14 Revenue |
2014-15 Estimate |
Exchange 0.93 |
Exchange 0.80 |
New York Rangers |
217 |
228 |
228 |
228 |
Chicago Blackhawks |
172 |
181 |
181 |
181 |
Boston Bruins |
164 |
172 |
172 |
172 |
Los Angeles Kings |
146 |
153 |
153 |
153 |
Pittsburgh Penguins |
141 |
148 |
148 |
148 |
Philadelphia Flyers |
136 |
143 |
143 |
143 |
Detroit Red Wings |
134 |
141 |
141 |
141 |
Washington Capitals |
117 |
123 |
123 |
123 |
San Jose Sharks |
117 |
123 |
123 |
123 |
Dallas Stars |
113 |
119 |
119 |
119 |
Minnesota Wild |
111 |
117 |
117 |
117 |
New Jersey Devils |
111 |
117 |
117 |
117 |
Anaheim Ducks |
107 |
112 |
112 |
112 |
Colorado Avalanche |
104 |
109 |
109 |
109 |
Buffalo Sabres |
103 |
108 |
108 |
108 |
Nashville Predators |
98 |
103 |
103 |
103 |
St Louis Blues |
98 |
103 |
103 |
103 |
Tampa Bay Lightning |
97 |
102 |
102 |
102 |
Carolina Hurricanes |
91 |
96 |
96 |
96 |
Columbus Blue Jackets |
86 |
90 |
90 |
90 |
New York Islanders |
83 |
87 |
87 |
87 |
Florida Panthers |
83 |
87 |
87 |
87 |
Arizona Coyotes |
80 |
84 |
84 |
84 |
US Total |
2709 |
2846 |
2846 |
2846 |
|
|
|
|
|
Toronto Maple Leafs |
204 |
214 |
199 |
184 |
Montreal Canadiens |
201 |
211 |
196 |
182 |
Vancouver Canucks |
166 |
174 |
162 |
150 |
Calgary Flames |
131 |
138 |
128 |
119 |
Edmonton Oilers |
128 |
134 |
125 |
115 |
Ottawa Senators |
126 |
132 |
123 |
114 |
Winnipeg Jets |
110 |
116 |
108 |
100 |
Canadian Total |
1066 |
1119 |
1041 |
964 |
|
|
|
|
|
NHL total |
3775 |
3965 |
3887 |
3810 |
So the drop in the Loonie is going to cost the league about $77 million Greenbacks this season. The net effect on revenue is that rather than a 5% increase, the league will only see about a 0.9% increase.
Projecting 2015 from 2013
Here I have increased each team by 10.25% (5% then 5% again) from 2013 levels. Again, the first two columns are in local currency. The latter four reflect converting Loonies to Greenbacks at the listed exchange rates.
Team |
2013-14 Revenue |
2015-16 Estimate |
Exchange 0.93 |
Exchange 0.80 |
Exchange 0.70 |
Exchange 0.60 |
New York Rangers |
217 |
239 |
239 |
239 |
239 |
239 |
Chicago Blackhawks |
172 |
190 |
190 |
190 |
190 |
190 |
Boston Bruins |
164 |
181 |
181 |
181 |
181 |
181 |
Los Angeles Kings |
146 |
161 |
161 |
161 |
161 |
161 |
Pittsburgh Penguins |
141 |
155 |
155 |
155 |
155 |
155 |
Philadelphia Flyers |
136 |
150 |
150 |
150 |
150 |
150 |
Detroit Red Wings |
134 |
148 |
148 |
148 |
148 |
148 |
Washington Capitals |
117 |
129 |
129 |
129 |
129 |
129 |
San Jose Sharks |
117 |
129 |
129 |
129 |
129 |
129 |
Dallas Stars |
113 |
125 |
125 |
125 |
125 |
125 |
Minnesota Wild |
111 |
122 |
122 |
122 |
122 |
122 |
New Jersey Devils |
111 |
122 |
122 |
122 |
122 |
122 |
Anaheim Ducks |
107 |
118 |
118 |
118 |
118 |
118 |
Colorado Avalanche |
104 |
115 |
115 |
115 |
115 |
115 |
Buffalo Sabres |
103 |
114 |
114 |
114 |
114 |
114 |
Nashville Predators |
98 |
108 |
108 |
108 |
108 |
108 |
St Louis Blues |
98 |
108 |
108 |
108 |
108 |
108 |
Tampa Bay Lightning |
97 |
107 |
107 |
107 |
107 |
107 |
Carolina Hurricanes |
91 |
100 |
100 |
100 |
100 |
100 |
Columbus Blue Jackets |
86 |
95 |
95 |
95 |
95 |
95 |
New York Islanders |
83 |
92 |
92 |
92 |
92 |
92 |
Florida Panthers |
83 |
92 |
92 |
92 |
92 |
92 |
Arizona Coyotes |
80 |
88 |
88 |
88 |
88 |
88 |
US total |
2709 |
2988 |
2988 |
2988 |
2988 |
2988 |
|
|
|
|
|
|
|
Toronto Maple Leafs |
204 |
225 |
209 |
194 |
169 |
145 |
Montreal Canadiens |
201 |
222 |
206 |
191 |
167 |
143 |
Vancouver Canucks |
166 |
183 |
170 |
157 |
138 |
118 |
Calgary Flames |
131 |
144 |
134 |
124 |
108 |
93 |
Edmonton Oilers |
128 |
141 |
131 |
121 |
106 |
91 |
Ottawa Senators |
126 |
139 |
129 |
120 |
105 |
90 |
Winnipeg Jets |
110 |
121 |
113 |
104 |
91 |
78 |
Canadian Total |
1066 |
1175 |
1092 |
1011 |
884 |
758 |
|
|
|
|
|
|
|
NHL Total |
3775 |
4163 |
4080 |
3999 |
3872 |
3746 |
If the exchange rate is 0.70, 2015 league revenue increases about 3% from 2013 levels. At a rate of 0.60, 2015 revenue would fall slightly from 2013 levels. Note, too, what happens to individual teams. Toronto falls from 2 to 8, Montreal from 3 to 9, Vancouver from 6 to 18, Calgary from 11 to 27, Edmonton from 12 to 28, Ottawa from 15 to 29, and Winnipeg from 22 to 30.
Cap Escalator
The CBA contains a provision that the estimated mid-point will rise by 5% each year unless either the NHL or the NHLPA requests a different value.
(Preliminary HRR for the prior League Year multiplied by fifty (50) percent (the Applicable Percentage), minus [-] Projected Benefits), divided [/] by the number of Clubs then playing in the NHL (e.g., 30), shall equal [=] the Midpoint of the Payroll Range (which figure shall be considered the Midpoint only for purposes of calculating the Adjusted Midpoint; all references to the "Midpoint" thereafter shall mean the "Adjusted Midpoint"), which shall be adjusted upward by a factor of five (5) percent in each League Year (yielding the Adjusted Midpoint, which shall then become the Midpoint of the Payroll Range) unless or until either party to this Agreement proposes a different growth factor based on actual revenue experience and/or projections, in which case the parties shall discuss and agree upon a new factor.
If the midpoint rises 5% the cap would rise by 5% also. For the NHLPA, this is a doubled-edged sword. On the one hand, it means more money is available to sign free agents. On the other, it is a form of discount on current contracts.
Suppose the NHL and NHLPA agree to keep the 2015 midpoint at it's current value, revenue grows the expected 5%, and the Loonie falls to 0.60 Greenbacks. Money would have to be paid back out of current contracts. The amount would be about 4.9% of each contract. Alternatively, if the 2015 midpoint is allowed to rise 5%, revenue grows 5%, and the exchange rate is 0.60, the payback amount is 9.97%