It says here Players talking of $60 million luxury tax threshold
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09-10-2004, 01:51 AM
Join Date: Feb 2002
Location: the dizzle!
Originally Posted by
At the end of the day a hard cap does not address the critical problem facing NHL teams, and that is the disparity between revenue streams. With no appreciable revenue coming from a national TV contract (in contrast to the NBA and NFL), teams are essentially on their own to develop revenue streams.
Some teams have been particularly adept at the development of revenue, either due to sheer market size or in some cases astute business decisions (e.g. Colorado). But other teams simply do not have the rabid hockey population base to compete at that same level. The New York Rangers for instance have nearly $25 million a year coming in from television contracts, whereas Nashville has a little over $2 million.
How is a hard cap going to increase revenues for the small market teams? Will it increase competitiveness and level the playing field? Well, it may increase parity, but for anyone that has watched the NFL recently knows, parity doesn't offer much in the way of financial security. A team may make the playoffs one year and not the next, that is the reality of a parity based system. There is little hope under a hard cap system of sustained excellence. It won't help the small market teams if their revenue is going to fluctuate widly under a parity-based hard cap system. How do you have any ability to plan financially for your organization whe you cannot predict your playoff appearances from one year to the next? That is the reality of what a hard cap will bring, a competitive balance that likely will breed greater financial insecurity.
When you are looking at the situation honestly, how will a hard cap increase the revenues for small market teams that have essentially operated under a self-imposed hard cap for years? Where will their much needed additional revenue come from?
Peter Karmanos, owner of the Hurricanes, alluded to the non-solution that a hard cap offers when he noted in a Carolina paper earlier this year that a hard cap doesn't solve his teams revenue stream problems.
This basic reality is why the NHLPA has seemingly taken an intractable stance with respect to the issue of a hard cap. The NHLPA knows that this is a desparate attempt for the NHL owners to solve a problem that they don't want to deal with directly. That problem is the revenue-stream financial disparity between NHL organizations. That is why the comparisons between the NBA and NFL are so ill-founded, both the NBA and NFL have an egalitarian system of revenue sharing, and both leagues have large pools of revenue to share. The NHLPA is banking on the internal unwillingness of the so-called large revenue cities to ultimately cause a rift in the owner's apparent solidarity. The NHL owner's have spun a brilliant media picture of this labor situation as being impoversihed NHL owners vs. the greedy NHLPA. But the NHLPA knows that the revenue sharing issue is simmering under the surface of this situation, and it knows that ultimately this isn't the NHL owners vs. NHLPA as it is large market owners vs. small market owners.
If you start looking at the financial realities of the situation, a luxury tax system may provide a means to revenue share that a hard cap system simply does not offer.
That is why you will see the resolution of this situation being a luxury tax that is phased in over a period of 2-3 years to allow the large market teams to adjust their salary structures.
That was a very thoughtful post, and I think you really did a good job to pinpoint the real problem: the NHL is not part of the so-called "big 4" because it doesn't gather revenues as much as the NFL, NBA or MLB. How come their salaries are almost the same? That doesn't make sense.
To solve that, I think that organized hockey at the pro-level should be completely changed, although it is clear this idea won't be popular. But what the heck, how can owners go on and lose that much money, when you witness some teams losing less money when they are not operating?
The solution in my mind is the creation of an entire new system based on european leagues (premier, second division, etc.), with big markets playing in the 1st, middle-ones in the 2nd and small ones in the 3rd, or something to that effect. Obviously, in the second tier, players would have smaller contracts and the level wouldn't be as good as in the premier league. It's a kind of contraction, but with all cities keeping their teams. However,we could witness even more expansion under this system.
That should fix the business of pro hockey in North America for good.
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