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Increased Salary Cap is Welcome News for Chicago

From Chris Kuc at the Chicago Tribune:

“We should know the definitive (cap) number very soon (but) it’s going to be in that range,” Bowman said Wednesday. “It’s certainly going up from where it was ($59.4 million). We’re not in the salary-cap crunch that we were in. We’re able to obviously do some different things and we’re not as stuck as we were a year ago.”

The summer following the Hawks’ Stanley Cup championship in 2010 was marked by the departures of 10 players from that that title-winning team as Bowman battled the salary cap. But things are different this time around.

“It’s a nice change, to be honest,” said Bowman, who is in Minnesota for this weekend’s NHL Draft. “We’re not trying to deal players to get to the cap. We have room to add players. Having that additional flexibility is going to help us not only in the summer but during the season when there may be opportunities to pick up players. But you have to have cap space to do that.

continued…

Filed in: NHL Teams, Chicago Blackhawks, NHL Talk, NHL Business of Hockey, | KK Hockey | Permalink
  Tags: salary+cap, stan+bowman

Comments

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Can someone please explain to me how the NHL can raise the salery cap based on increased revenue, yet there are at least a dozen teams that claim to be losing money?  The math makes no sense to me.  If teams like the Panthers, Islanders, Blue Jackets, Preds, Coyotes, Blues…, were in the red, how can they afford to pay the new minimum of $48 million when they were already in debt.  That means those teams will lose more money to reach the salery cap floor.

Posted by RogerNYLA on 06/22/11 at 04:55 PM ET

awould's avatar

Thanks to the salary cap increase, Stan Bowman looks like less of a terrible GM.

Posted by awould on 06/22/11 at 05:05 PM ET

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yet there are at least a dozen teams that claim to be losing money?

Well, because while there are teams with low payrolls that are losing money there are also teams spending right up the cap and ROLLING in money that balance it out.

Posted by Garth on 06/22/11 at 05:18 PM ET

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Well, because while there are teams with low payrolls that are losing money there are also teams spending right up the cap and ROLLING in money that balance it out.

That still doesn’t address the problem on the teams losing money.  The NHL should not have raised the minimum to $48 million.  The should have left it where it was.  The teams losing money will become more unsolvent under the new salery cap.

When I metion a dozen teams, that’s from various reports I’ve read.  I don’t know how accurate they are because I don’t know the actual numbers.  I’ve read the Kings, Stars, Hurricanes, Devils, and Lightening lose money too, but I don’t have the financial figures to back it up.

Posted by RogerNYLA on 06/22/11 at 05:37 PM ET

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That still doesn’t address the problem on the teams losing money.

Of course it does.  This is the league as a whole that has increased revenue, not any one or five or dozen teams separately, but 30 teams altogether.

The NHL should not have raised the minimum to $48 million.

The CBA states that the floor is $16M below the cap.  When the NHLPA activated the 5% bump there’s nothing the NHL could do to change it.

Posted by Garth on 06/22/11 at 06:08 PM ET

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When the NHLPA activated the 5% bump there’s nothing the NHL could do to change it.

How does the 5% bump work?  Is it something they can do every year and if revenues don’t come in as expected they owe money back?

Posted by timbits on 06/22/11 at 06:30 PM ET

cs6687's avatar

How does the 5% bump work?  Is it something they can do every year and if revenues don’t come in as expected they owe money back?

The players’ union has the option each summer to trigger the five percent increase. Apparently it’s to account for inflation. The players just provide more escrow to the league. The league returns the escrow if the revenue that season meet the revenue of the previous season. If the revenue falls short, the league uses the escrow to account for the shortage.

Posted by cs6687 on 06/22/11 at 07:22 PM ET

J.J. from Kansas's avatar

I have a feeling the next CBA will address the idea of indexing the floor directly to the cap by $16M, but until then, their own rules prevent them from lowering the cap without the revenues of the entire league being down.

The simple math (reality is much more complex):

-The league counts revenue of all 30 teams from the previous season. With those numbers, they predict what league-wide revenues will be.
-They take the total revenue amount and match it up to the agreement in the CBA that decides what portion of that TOTAL revenue belongs to the players (at $3B, the players are guaranteed to be paid 57% of TOTAL revenues
-Then, they take that share (57%), multiply it by the players’ share, and divide by 30 to get the average spending per team.  This is the salary midpoint. 
- From the salary midpoint, they add $8M to make the salary cap.  This amount is built in to allow the higher-earning teams to spend closer to what 57% of their revenues would be.
- From the salary midpoint, they also subtract $8M to make the salary floor.  This amount is guaranteed to ensure that teams are trying to spend enough money on players.

For instance:

If the league expects to make $2.5 billion, then all of the players in the league expect that they will be splitting up $1.425 billion.  The average team expects to pay $47.5 million to make their salaries equal 57% of their revenues.  The cap in this situation would be $55.5 million and the floor would be $39.5 million.  There is no room in the CBA for them to allow the floor to be lowered beyond what the math they established says.

If they try to simply say that they expect less revenues, they get sued by the NHLPA for lying.

The reasoning behind the NHLPA taking the 5% inflator (which is a 5% bump of what they expect revenues to be, not a simple 5% increase in the cap) is varied and is worth another four or five paragraphs to explain. 

The bottom line behind why they take the inflator is the same answer to the question of whether you’d like me to give you a $100 bill right now with the chance that you’ll owe me back 20 of those dollars next year or whether you’d like me to give you $80 right now just about no chance for that to happen.  That extra $20 is yours to do what you please with until you have to give it back. If you’re smart enough to invest it (which, from what I understand, the NHLPA actually does with Escrow money), you’re still giving back the $20, but you’ve used that to earn interest, so you actually end up with $81.

Sounds like a big pain in the ass until you extrapolate that $20 to $20 million.

Posted by J.J. from Kansas on 06/22/11 at 08:39 PM ET

Baroque's avatar

That still doesn’t address the problem on the teams losing money.  The NHL should not have raised the minimum to $48 million.  The should have left it where it was.  The teams losing money will become more unsolvent under the new salery cap.

And THAT is the problem the league is having when there is exactly such a large disparity in earnings from one team to the next. Without a large bucket of shared revenues that all teams can draw on, regardless of market size, the small markets (such as Columbus, for example) are affected not just by how much they can charge their own fans for tickets, and what sponsorship opportunities are available locally, but also by how much a large and profitable market (such as Toronto) can charge THEIR fans for tickets.

Perhaps if the league had used the median team earnings in the first place, instead of the mean (total revenues divided among all the teams, roughly) the salary cap would have better reflected reality for more teams because the disproportionate impact of the extremes would have been moderated, but they did not choose to do that in the CBA.

Unfortunately, they are now stuck with the agreement and need to wait until the next CBA to try to fix it. As long as there is such a wide range of revenues between top and bottom teams, I’m not sure how they can without major alterations.

Posted by Baroque from Michigan on 06/23/11 at 05:34 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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