A Salary Cap Primer
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09-30-2003, 03:50 AM
Join Date: Nov 2002
Originally Posted by
However that would be considered fraud. If the owners and players agree on a cap based on such revenues and the owners shuffle the revenue elsewhere, then they would be defrauding players by trying no to pay them their fair share. Now that would be a criminal offense...
It would be very hard to prove that it is fraud. If I own a team and a television broadcasting company, and I sell my the broadcast rights for the team for $8 million a season to my broadcasting company, how can they prove that it is the fair value for the team. Maybe the rights are worth $15 million a season.
Also, arena deals are very complex. Whose to say what the fair market value for use of the arena is. With arena's its even harder to judge than broadcast rights, since their likely isn't any competitors to the arena in each market. In most cases, for each market there's one supplier (only one NHL calibre arena) and one consumer (one NHL team). It is very easy to create a deal that is more favourable for one party than the other, and there isn't any benchmark to compare against.
Also, as new revenues streams are developed, it gives owners more options. Let's say PPV revenues are not included in the original cap agreement. An owner can now expand that form of revenue at the expense of other revenue streams. Let's say that eliminating all free broadcast games will cost a team $20 million in revenues, however making all games PPV will increase revenues by $15 million. Looking at those facts, the obvious solution is to show games on free broadcast TV, however, if those revenues must be shared, a team may be inclined to show all games on PPV. It's not fraud. It's just a team making it's business decisions based on the factors that allow it to maximize it's own profits.
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