Can someone help me understand revenue sharing?
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12-07-2012, 12:55 PM
**** Cycle 4 Eichel
Join Date: Mar 2011
what you said you understood, revenue sharing between teams, is the only kind of revenue sharing there is. Nothing else to know here. The only thing being negotiated about this is how much money will get redistributed, and both sides have agreed it will increase substantially.
When you talk about "make whole," that a mechanism put in place so that salaries can immediately drop down to 50%, and stay there, while eventually paying out the nominal value of current deals. This is how it works:
average player salary is 2.5M. Dropping to 50% makes it decline to 2.2M.
In year one, pay 2.2M
In year 2, revenues have grown somewhat, so the league can afford to pay 2.4M while staying at 50%.
In year 3, ditto, so they pay out 2.6M.
In year 4, ditto, so they pay out 2.8M.
Over the lifetime of the deal, the average value is 2.5M. The reason players call it "players paying players" is because, when the team starts paying out 2.6 and 2.8, that comes out of the team's cap, meaning they have less money left to sign other players. So other players face less market demand than they otherwise would so that their brethren can get backpay.
Of course, it's worth noting that the league has since conceded that it would pay for about half of the cost of "making whole," meaning they would shuttle some money around off the cap in order to pay out full value, so future players don't face quite as much diminished demand.
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