A Salary Cap Primer
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09-30-2003, 09:46 AM
Join Date: Mar 2002
Originally Posted by
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.
Well, it could be verified by doing a market study. Also, the total revenues could be calculated based on evaluations and not actual values. (like municipal taxes in Canada).
Something's for sure: If the players can prove that an owner deliberately (on purpose) gets around the CBA (which says they must share a part of their revenues), that's called fraud and players could sue the owner for damages and compensation.
This situation already happens where there are multiple owners in a company and where an owner takes a company decision that would favor his interests over the interests of the other owners. If the players get a fixed share of the total revenues, they become in a partnership with the owners for revenues and the situation it would put both parties into would be similar to the one I just described.
Of course there could be new revenue streams like PPV, but those should be covered as much as possible by the NHLPA. Also, the CBA would probably include means by which revenue streams could be added during the CBA course if they become significant.
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