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08-13-2005, 03:06 PM
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handtrick
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Shedding Light on NHL Revenue Sharing

Found this on another board....and it appears to clear up some things about who gets revenue sharing, what markers they have to stay below, escrows, the fabled "midpoint," etc:

There's an informative article in the 8/1/2005 issue of Sports Business Journal [http://www.sportsbusinessjournal.com/ ]that tackles the whole "midpoint" issue with regards to NHL revenue sharing, escrow, and payrolls. Obviously the confusion about this goes beyond this message board; the article states, "even some of the people who negotiated the deal confess they don't fully understand it all." To summarize the article:

Each year the league sets a payroll midpoint, equaling 54% of the avg. club's revenue
Teams can spend up to $8 mill. above or below the midpoint (the range is slightly higher for the 2005-06 season)
Since teams can spend anywhere in this $16 mill. range, there's a high probability that total compensation of players will be greater than 54%
To protect against such overpayment, the league requires a portion of each player's salary to be set in escrow; that money will be used as one of several sources to fund revenue sharing, which is designed to allow representative and competitive payrolls
Clubs start with 54% of their own revenues for payroll, and revenue sharing makes up the difference.

There are two batches of revenue sharing:
First batch - equal to 4.5% of league revenues (estimated to be $78 mill. this season); this batch aims to allow clubs to afford payrolls of $4 mill. below the midpoint; it is funded by league media revenue, playoff gate receipts, escrow funds, and top-grossing clubs

Second batch - designed to help clubs get to the midpoint but not over it; funded by excess escrow funds, if available

Any leftover escrow funds are to be distributed evenly between all 30 NHL clubs.

An example: a club has revenue of $50 mill. in a season when the midpoint is set at $32 mill. They would be able to afford a payroll of only $27 mill. (54% of their revenue) "in the league's eyes." They would receive, as the first batch of revenue sharing, $1 mill. from the league to get to within $4 mill. of the $32 mill. midpoint. The second batch (if they are eligible--see below), would provide up to an additional $4 mill., bringing them to the $32 mill. midpoint.

Rules:

Any club in the bottom half of revenues is eligible for the first batch (regardless of payroll amount)
Any club spending over the midpoint on player salaries is not eligible for the second batch
Clubs in markets with more than 2.5 mill. TV households are ineligible for revenue sharing
By the third year of the deal, clubs will have to grow revenues faster than the league avg. and have attendance of 75% of capacity to be eligible for their full revenue-sharing allotment
By the fourth year, the required attendace capacity increases to 80%
That's essentially the article. It doesn't answer every question but hopefully is a start at understanding this complex agreement.

To view the 8/1` archived article referenced above, unfortunately, you have to become a paid subscriber, and not just a "free trial" member.


Last edited by handtrick: 08-13-2005 at 05:11 PM.
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