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A Floating Cap For Individual Teams

from Jesse Spector of The Sporting News,

If the NHL really wants profit certainty for all 30 of its clubs, and not just certainty of exceptionally high profits for its most powerful owners, it cannot treat all 30 teams as financial equals when they very clearly are not. This is not the NFL, where the main source of revenue is a massive national television contract, and local TV rights, one of the NHL’s greatest sources of both revenue and financial disparity, don’t exist outside of the preseason.

Instead of trying to apply a league-wide salary structure, the NHL should base the salary cap and floor on the revenues of individual teams, after revenue-sharing payments have been made. In addition to disconnecting small-market teams from a system in which they have no hope of keeping pace, those teams would have an incentive to grow their business, both in order to be able to put a more competitive team on the ice and to increase their profit margins. Fans in those markets also would have more reason to spend money, as they would be legitimately supporting their favorite team.

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Filed in: NHL Talk, NHLPA, | KK Hockey | Permalink
 

Comments

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This is why I don’t confuse Mark Spector with Jesse Spector. Jesse is actually attempting to look at the real problem the NHL faces and has made an attempt to come up with a fix. The drawback to this approach will be the “parity” crowd that won’t be appeased until each team is handed a Stanley Cup for participation once every 30 years regardless of their record or playoff games won.

Posted by hockey1919 from mid-atlantic on 11/05/12 at 02:30 PM ET

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That was the stupidest idea I’ve ever read.

Posted by HockeyinHD on 11/05/12 at 02:46 PM ET

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You don’t read your own posts very often do you .... kidding.

But after 500 word responses on why CBA > SPC, here would be a good place to expand on why it is so stupid.

Posted by hockey1919 from mid-atlantic on 11/05/12 at 03:09 PM ET

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That was the stupidest idea I’ve ever read.

Why?  Because it wouldn’t force small market teams to spend more than have,  or force large markets teams to not spend as much as they would be willing to, thus enabling the league to cry poor when the next CBA expires despite years of record revenues?

Posted by Garth on 11/05/12 at 03:16 PM ET

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Why?

Crickets. My only conclusion is that CBA > SPC.

 

Posted by hockey1919 from mid-atlantic on 11/05/12 at 03:27 PM ET

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Crickets. My only conclusion is that CBA > SPC.

HAH!

Posted by Garth on 11/05/12 at 03:29 PM ET

J.J. from Kansas's avatar

I think one of the challenges of this would be in verifying the accounting.  In the last CBA they had agreed-upon means to calculate the overall league figures based on per-team information and all of that was subject to review by external accountants and the NHLPA. 

It doesn’t really change the amount of information that has to be processed and checked before each season (to set individual team caps), but it has a much more-pronounced effect on a team’s motivation to find creative ways to fudge their accounting a bit more, as doing so has more of a direct influence on your own spending expectations.

It also has the problem of making things a bit clearer to the public as far as what teams expect to make and for an industry full of people who love not having to supply that kind of information to the public, I think it’s kind of a tough pill to swallow.

Posted by J.J. from Kansas on 11/05/12 at 03:56 PM ET

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The accounting conundrum is true of any scenario. Whether it is reported to the NHL and then released at the aggregate level or if each of the 30 teams revenues are reviewed individually.  I would think the NHLPA would want to audit individual team books to prove the NHL numbers are correct either way.

Its true that the system is harder to manage and not as easy for the public to follow since each team would have a different cap.  However, what I like about this idea is that it at least attempts to fix the actual problem that the league is facing and not trying to put square pegs in round holes.  The current system just ensures that smaller markets spend themselves into a deeper hole each year.

Posted by hockey1919 from mid-atlantic on 11/05/12 at 04:23 PM ET

J.J. from Kansas's avatar

Personally, I think they could solve that and the problematic parity issue by just ensuring that the applicable share is scraped from each team and used to pay player salaries instead of the last system where it appeared that they simply balanced out the poor teams spending 65% of revenues on living up to the floor by letting the rich teams spend 49% of their revenues.

You can keep the narrow cap, you just make sure that every dime that comes in is scraped for the players share and put into a pot that’s used to pay their salaries without sneaky clawbacks built in to rob the poorer teams of their ability to recover money spent.

Either way, the Maple Leafs spend $98M on player salaries. This way just means that their money spent is essentially paying for nearly two full teams.

Spector’s idea is probably the more-palatable one to the teams we’d be asking to pay that much though.

Posted by J.J. from Kansas on 11/05/12 at 04:43 PM ET

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That was the stupidest idea I’ve ever read.

Yep, we can just throw out the last two lockouts and go back to the free for all.  The NHL has the most competitive league of all sports as it should be. There is plenty of revenue to make the current system profitable for all teams. There is no reason a team that averages 14,000 per game with an average of $40 dollar tickets should ever lose money. But we have a situation where teams that average 17000 and have average ticket prices near $60 and they still lose money. There isn’t a revenue problem in the NHL, there is a cost problem.

Posted by timbits on 11/05/12 at 09:09 PM ET

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But after 500 word responses on why CBA > SPC, here would be a good place to expand on why it is so stupid.

Because teams already have them.  They are called budgets.  What the author is talking about is, essentially, a league with no cap and no floor.  What the author is talking about is a bunch of teams in non-traditional markets spending 20-25 mil a year on players while teams in traditional markets spend 70-80 mil a year on players.

Don’t get me wrong, I think trying to force hockey into non-trad areas was stupid… but they are there now.  That’s water under the bridge.  You cannot set up a system where those teams are going to be awful forever, and that’s what this idiot is talking about doing.

Further, it’s a stupid idea because there is no way teams that make money would ever consent to give their money away so another owner could make money.  That’s not going to happen.

There is plenty of revenue to make the current system profitable for all teams.

Not really.  You would have to tax the profit-making teams at right around 43% in order to cover the losses of the teams on the other end of the scale.  If you exempted every team that made <10 mil from having to make RS payments the percentage goes to 47%.  If you exempt teams that made <20 mil the percentage climbs just over 55%.

A 43-55% revenue sharing tax is not ever, ever going to happen.  It would be Toronto cutting a 36-43 million dollar check at the end of the year to pay off teams that run on the cheap.  Forget it.

Posted by HockeyinHD on 11/06/12 at 03:49 AM ET

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Crickets.

Sorry, I had to step out for a bit today.  Can I use a floating holiday or vacation time, or will I have to dip into my accumulated sick leave to cover my absence?

Posted by HockeyinHD on 11/06/12 at 03:50 AM ET

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Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.

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