2005 CBA FAQ & Key Dates
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08-01-2009, 01:15 PM
Business of Hockey
Join Date: Jul 2006
Location: South Mountain
7. Revenue Sharing
7 Revenue Sharing
How does revenue sharing work? [CBA Article 49]
-- Quoted from the CBA:
Preamble. The NHLPA has conditioned its agreement to the Team Payroll Range System, set forth in Article 50 of this Agreement, on the NHL's agreement to establish this Player Compensation Cost Redistribution System. The Player Compensation Cost Redistribution System acknowledges the reality that the Upper Limit of the Payroll Range prevents certain high-revenue Clubs from spending as much of their revenues toward Player Compensation (i.e., Player Salaries, Bonuses and Benefits) as they might otherwise be capable of spending. In addition, there may be lower-revenue Clubs that may have challenges in spending much more than the Lower Limit of the Payroll Range. The NHLPA has focused on the limitations on the spending ability of the Clubs, and desires that these Clubs be financially supported and thereby able to spend sufficient amounts on Player Compensation Costs to achieve a closer range of payroll spending than might otherwise occur.
The Player Compensation Cost Redistribution System described herein, therefore, is designed to cause certain high-revenue Clubs to contribute even more of their revenues toward the payment of Player Compensation –albeit indirectly –by redistributing a certain portion of the revenues of such Clubs to the lower-grossing, small market Clubs so that such lower-grossing, small market Clubs may be able to, and elect to, spend more on Player Compensation. The Player Compensation Cost Redistribution System is intended to enhance the ability of all Clubs to be financially competitive with one another, and, at the very least, to allow all eligible Clubs to be able to spend to at least twenty-five (25) percent of the Team Payroll Range, plus the Club's share of Benefits, on Player Compensation (i.e., Player Salaries, Bonuses and Benefits).
Key elements of the system summarized:
-- A league-wide Minimum Distribution Commitment for revenue sharing is calculated as 4.5% of league-wide HRR [Hockey Related Revenues]
-- To be eligible for revenue sharing a team must meet the following requirements: (a) In the bottom 15 of the NHL in gross preseason and regular season revenue; (b) In a DMA or BBM [designated market area] with less than 2.5 million households; (c) have gross preseason and regular season revenue below a CBA-calculated threshold.
-- Each eligible team has a Minimum and Maximum possible distribution amount calculated based on that club's preseason and regular season revenue.
-- Depending on the total amounts of the 4.5% Minimum Distribution Commitment and the totals of the Minimum and Maximum amounts for each eligible team there are a few different scenarios that can occur:
(i) 4.5% Min Commitment < total club Minimums for eligible teams. In this case the 4.5% collected is increased by the amount necessary to fully fund the total club Minimums.
(ii) total club Minimums < 4.5% Min Commitment < total club Maximums. In this case all eligible teams will receive an amount between their Minimum and Maximum such that the 4.5% is fully distributed.
(iii) total club Maximums < 4.5% Min Commitment. In this case less than 4.5% will be distributed with each eligible club receiving the Maximum. Up to $10m of the undistributed funds will be placed in a Joint Marketing Account overseen by the NHL and NHLPA. Any additional unused funds are returned pro rata to the contributing teams.
How is the 4.5% Minimum Distribution Commitment funded? [CBA Section 49.5]
(i) Excess centrally generated League revenues, if any exist. Do not believe this figure has ever been published.
(ii) Up to 1/3 of the remaining balance from Escrow if there is an Overage where Escrow funds are distributed back to the teams. The funds collected from Escrow are limited to only those attributable to the top 10 highest revenue teams. There was a small Escrow overage in 2006-2007 and a very large one in 2008-2009.
(iii) After the previous two steps, the remaining balance necessary to satisfy the 4.5% Minimum Distribution Commitment is split 50%-50% between two sources: (a) A % of Playoff revenue is collected from all playoff clubs; (b) The top 10 revenue clubs [preseason and regular season only] are assessed an amount proportional to their individual revenues. See the following two sections for more details.
How does the Playoff funding phase work? [CBA Section 49.5(c)]
-- For each playoff game the home team is assessed either 30%, 40% or 50% of a "theoretical, fully-priced, sold-out
regular season game
in the Club's home arena for that League Year".
-- Teams in the top 10 revenue are assessed 50%, 11th to 20th at 40% and 21st to 30th at 30%.
-- Teams with arenas greater than 17,500 seats have their % proportionately decreased. For example, Montreal's Bell Centre at 21,273 capacity would be assessed at 50% * 17500/21273 = 41.1%
-- As most teams increase ticket prices for the Playoffs, the actual % of Playoff revenue collected will be less than the nominal 30%/40%/50% figure.
How is the supplemental funding phase from Top 10 revenue teams collected? [CBA Section 49.5(d)]
-- The league determines the top 10 teams "in terms of Club Gross Preseason and Regular Season Revenues Net of Arena Costs".
-- The "incremental" amount by which each top 10 team's revenue exceeds the 11th ranked club is calculated.
-- Teams are assessed an amount proportional to this incremental revenue. Hypothetical example: if Toronto had $20m in incremental revenue over the 11th place team, and the top 10 teams in total had $150m in incremental revenue then Toronto would be assessed 13.3% [$20m/$150m] of the supplemental funding amount required to reach the 4.5% Minimum Distribution Commitment.
-- The maximum amount an individual team can contribute in this phase is capped in two ways:
(i) A team cannot be assessed more than 20% of the supplemental funding.
(ii) A team cannot be assessed an amount greater than "its revenues derived from the telecast of its away games; its revenues derived from its playoff games; its pro rata share of national and international broadcast revenues; its pro rata share of revenues derived from NHL Enterprises; and its pro rata share of any other national revenues."
How are the Minimum and Maximum distributions to eligible teams calculated? [CBA Section 49.3/49.4]
How does the Final Escrow Disbursement work? [CBA Section 49.7]
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