Thread: Setting the cap
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12-19-2005, 02:05 AM
  #16
kdb209
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Quote:
Originally Posted by Spongebob
For the benefit of some here is how they got the salary cap figures for the 2005-06 season.

Revenue Projections

$1,740,000,000

Minus player benefits of $60 Million

$1,740,000,000
- 60,000,000
---------------
$1,680,000,000 = total adjusted revenue

$1,680,000,000 X 54% = $907,200,000 = Player's Share

$907,200,000 / 30 Teams = $30,240,000 = Average Salary Mark

Then add/subtract $8.75 Million to get the salary range.

That makes the salary range $21.49M - $38.99

Then it was rounded to $21.5M - $39M
The one open question is the ~$66M in benefits ($2.2M/team) deducted before or after the multiply by 54% - I have seen examples do it both way. It would make more sense for the $66M in benefits to be taken off after the 54%, since they are part of the total player costs.

Since we don't know the exact magic number the league used for it's '05-'06 revenue estimates or the exact number for benefits, we can't back track the numbers to verify the algorithm, but recently the $1.8B number has been bandied about, so, if we assume that the benefits come out of the players share (post 54%):

Total Revenue Estimate: $1.8B
Players Share: $1.8B * 54% = $972M
Minus Benefits: $972M - $66M = $906M
Salary Midpoint: $906/30 = $30.2M
Salary Cap: $30.2M + $8.75M = $38.95M - round to $39M
Salary Floor: $30.2M - $8.75M = $21.45M - round to $21.5M

The numbers seem to work out for a revenue estimate of $1.8B, benefits of $2.2M/team, and benefits costs coming out of the players share.

Based on that, cap projections can be made with the following adjustments:
- Total revenues are based on this years real revenues plus a 5% inflation factor
- The Cap/Floor spread is reduced from $17.5M this season to $16M next season - midpoint +/- $8M.
- The player share increases to 55% @ $2.2B

'05-'06 Actual Revenues: $1.8B
5% escalator: $1.8B * 1.05 = $1.89B
Players Share: $1.89B * 54% = $1020.6M
Minus Benefits: $1020.6M - $66M = $954.6M
Salary Midpoint: $954.6M/30 = $31.82M
Salary Cap: $31.82M + $8M = $39.82M
Salary Floor: $31.82M - $8M = $23.82M

'05-'06 Actual Revenues: $2.0B
5% escalator: $2.0B * 1.05 = $2.1B
Players Share: $2.1B * 54% = $1134M
Minus Benefits: $1134M - $66M = $1068M
Salary Midpoint: $1068M/30 = $35.6M
Salary Cap: $35.6M + $8M = $43.6M
Salary Floor: $35.6M - $8M = $27.6M

'05-'06 Actual Revenues: $2.2B
5% escalator: $2.2B * 1.05 = $2.31B
Players Share: $2.31B * 55% = $1270.5M
Minus Benefits: $1270.5M - $66M = $1204.5M
Salary Midpoint: $1204.5M/30 = $40.15M
Salary Cap: $40.15M + $8M = $48.15M
Salary Floor: $40.15M - $8M = $32.15M

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