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The Business of Hockey Discuss the financial and business aspects of the NHL. Topics may include the CBA, work stoppages, broadcast contracts, franchise sales, and NHL revenues.

75% on 40m ???

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12-11-2004, 04:50 PM
  #51
OlliMackBjugStud
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Quote:
Originally Posted by Thunderstruck
New CBA's bring new agent extortion strategies, simply because it wasn't popular in the past doesn't mean it won't be in the future. Owner initiated abitration does not eliminate holdouts.
well, now you are talking about some pretty sinister pre concieved bias on your part.

its the agents job to identify leverage points and use them. just as it is teh GM's on the other side. there is no system ever that wont contain leverages for both parties. why cant you just accept this is part of fair negotiating. i will accept the owners exerting their power and current leverage to acheive a cap, if they just simply admited this is why it is happening.

dr

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12-11-2004, 04:55 PM
  #52
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Originally Posted by DementedReality
well, now you are talking about some pretty sinister pre concieved bias on your part.

its the agents job to identify leverage points and use them. just as it is teh GM's on the other side. there is no system ever that wont contain leverages for both parties. why cant you just accept this is part of fair negotiating. i will accept the owners exerting their power and current leverage to acheive a cap, if they just simply admited this is why it is happening.

dr
One of the biggest potential benefits of the cap is the reduction in agent leverage. I'm well aware that the blood suckers are just doing their job, but that doesn't mean I can't support the NHL's attempts to diminish their role.

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12-11-2004, 05:03 PM
  #53
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Originally Posted by Thunderstruck
One of the biggest potential benefits of the cap is the reduction in agent leverage. I'm well aware that the blood suckers are just doing their job, but that doesn't mean I can't support the NHL's attempts to diminish their role.
well, i dont see why you care. why not support the owners firing the incompetent negotiators they have hired as presidents and gm's. this way you dont (as a fan) have to bear the burden of this ordeal.

dr

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12-11-2004, 05:09 PM
  #54
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Originally Posted by DementedReality
well, i dont see why you care. why not support the owners firing the incompetent negotiators they have hired as presidents and gm's. this way you dont (as a fan) have to bear the burden of this ordeal.

dr
Competent GM's make intelligent decisions based on THEIR SITUATION AND THEIR MARKET that negatively affect the rest of the league.

The solution is not to find 30 geniuses to run a flawed system, but simply to fix the system.

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12-11-2004, 05:41 PM
  #55
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Originally Posted by Tom_Benjamin
It will put a drag on Detroit's payroll, but not their spending. My assumption is that teams make decisions that they think are financially sound. If the Wings budget $65 million for player salaries, they spend $65 million. If several million of that is tax, fine. They won't spend $65 million plus the tax, but they will spend $65 million. If that was the end of it, we have a drag on the salaries.

The problem is that the several million has to go somewhere. It gets divided up and small revenue teams suddenly have an extra couple of million to spend. The owner sticks some of that in his pocket - which annoys Illitch no end - and spends the rest on players, thus undoing any good done by the Detroit cutback.
Tom I strongly disagree that a Luxery Tax simply moves money around.

Many try and argue that the NHL is broken because owners are stupid and spend too much money, I reject that opinion outright.

There have been some poor signings, but the vast majority of teams that sign these big money deals, do so because they feel the addition to their line up will end up making the team better and increase net profit.

Sometimes they miscalculate and everyone calls them stupid for it.

It's not stupid, it's simply risky, and good business people take risks all the time.

I believe that NHL teams make the decision to sign free agents based on a revenue maximization formula. I do not believe that they are assigned some arbitrary budget and then go out and find the best players to fit under that budget.

When the Leafs go out shopping they say hey yea we are willing to pay Paul Kariya 10 mill because he putt’s butts in seats and may get us deep into the playoffs, and according to the MBA's up in the finance department we will end up with more net profit because of it.

If Paul Kariya ends up getting 15 million from the new York Rangers the Leafs aren’t going to all of a sudden turn around and give the 10 Mill to Alexi Zhamnov and Sandy McCarthy?

If you’re like me and you believe that players are signed in order to maximize profit then you have to believe that a Luxury Tax will have an effect on spending.

If the Leafs believed that Paul Kariya would have a positive affect on their bottom line at 10 million Dollars, but that he wouldn’t at 12 million dollars, then they aren't going to offer him 10 million knowing that they will also have to pay 6 million in taxes.

That is of course if we assume that are acting rationally.

The wings example that you posed also works.

Had there been a luxury tax last season I do not believe it is a given that the wings payroll + luxury tax payments would equal the 77 million that they ended up spending.

Lets say that 17 million of the 77 was tax and the other 60 was there real salary. Well if you go through the Detroit line up and try and shave 17 million dollars, that team doesn't look very good. If fact one could argue that their team at 60 million is not a playoff team.

Well the MBA's up in the finance department come back and say, hey with a 77 million dollar payroll and no playoffs, our P&L looks like a dogs breakfast, you sure this team of old men can compete for the cup again???

No, OK well then how does rebuilding sound?

Granted, my example my be an extreme case, but the point is valid.

If we assume that rational decisions are being made then we can only assume that the Luxury tax will haven an effect on free agent signings.

It isn't just moving money around.


Last edited by Potatoe1: 12-11-2004 at 05:46 PM.
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12-11-2004, 06:13 PM
  #56
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Quote:
Originally Posted by Tom_Benjamin
What does Bettman do now? "No, no! We can afford to pay more to get a cap! Levitt was wrong!"
It was funny watching Bettman speak after the players proposal on Thursday.

You could just tell that he didn't want to say anything until he got his marching orders from the owners.

Hadn't read over the proposal fully? Yeah, right. You can get the idea from it in an hour and a half.

He got absolutely blindsided by Goodenow. And the owners' bagman didn't know what to say, and won't until the owners put the words in his mouth.

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12-11-2004, 06:21 PM
  #57
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Originally Posted by Newsguyone
Ah, now there you have a point. But those teams might just count it as profit instead of spending it.
Could be, but the assumption is that teams spend what they can afford and they can afford more. Either way Illitch isn't happy. He gets less players for the same money. His competitors get profits that belong to him or there is no significant salary deflation because payrolls remain about the same. It is hard to convince Mike Illitch that this is any more than revenue sharing.

He would say he can accomplish the same thing just by writing cheques to the smaller market teams. Since he has given away the money, he has less to spend on players, so he cuts payroll. The teams he sends money to spend on payroll. it works out the same.

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I do care about the disparities between markets, only because I want NHL hockey to thrive in cities like Calgary, Edmonton, Ottawa, and maybe even in Winnipeg and Quebec City again someday.
Me too. That is a different thing than payroll disparities though. I don't care about payroll disparities.

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You may be right about half the owners not being here in 5 years. But they might want a cap. There is a train of thought out there that the salary cap is only a tool to increase the worth of franchises. Selling a franchise is where owners make their money. You wonder if big market teams will nix a luxury tax, knowing full well that sharing revenue won't help their franchise value.
Franchise value is exactly why owners don't want to share revenues. Wang paid about three times as much for the Islanders as the owners in Edmonton paid for the Oilers. He needs three times the profits even though there is absolutely no way he can get three times the revenues. He paid through the nose for his potential market and his revenues. He should share with someone who got their franchise for a song? Forget it, he thinks. Revenue sharing is a non-starter for a million reasons, not excluding the fact there is no common pool to split and these guys don't trust each other to come clean on their private pools any more than the players trust them.

A salary cap is presumed to increase franchise values but only because of the presumed long term effect on the bottom line. The player's offer has an immediate impact on the bottom line, an immediate impact on the value of 30 franchises.

Anybody who believes that this is now Bettman's baby is naive, in my opinion. Every owner is being polled.

Quote:
The only thing that will save hockey is the end of obstruction. It's the only way the league will ever increase ratings and gate receipts.
I think opening the game up again is the only way to increase ratings and gate receipts, but the game is not threatened. They can't do more than ruin the business of the sport.

Tom

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Old
12-11-2004, 09:02 PM
  #58
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Quote:
Originally Posted by Potatoe
Tom I strongly disagree that a Luxery Tax simply moves money around.

Many try and argue that the NHL is broken because owners are stupid and spend too much money, I reject that opinion outright.
Me, too. I think there was a plan - good or not - behind every signing.

Quote:
I believe that NHL teams make the decision to sign free agents based on a revenue maximization formula. I do not believe that they are assigned some arbitrary budget and then go out and find the best players to fit under that budget.
I agree that it is more complicated than I painted it. I'm certainly willing to concede that I am misreading what a luxury tax would actually do. (I think there are always unintended consequences and surprises when things like this are implemented. The same thing is true of a salary cap.)

I expressed what I believe the owners believe. Leaf fans know their team can blow through any luxury tax. They will be expected to blow through any luxury tax. If so how should MLSE see a luxury tax? As something that holds down salaries? Or as a gift to Craig Leopold or Eugene Melnyk? Maybe I'm too cynical to succeed as an NHL owner but I'd look at it as a gift that I did not want to make.

Tom

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Old
12-12-2004, 08:44 AM
  #59
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Tom, if you think that owners are impressed with PA's plan which simply moves the league to 2001 salaries you're in for a rude surprise.

A 24% rollback is eaten back in 3-4 years and then we will have the same problem as currently.

Owners are NOT going to accept this offer and their counterproposal is going to be very different. GMs are not going to fire Bettman and the hardliners are going to make sure that they get the deal they want, even if it means cancelling this season.

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Old
12-12-2004, 11:43 AM
  #60
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The idea of relying on a "stiff" luxury tax, would seem to me that it is only a cap for small markets. It ensures the elite dozen are on large markets because they will be the only ones who look at that "stiff" tax as hardly an impediment.

The reason for the "stiff" tax, is because its believed the owners are unable to act as human resource managers and manage payrolls within a properly designed market framework, now market to corrected to the desired equilibrium and with the new controls they were missing last time. This, "they must be protected from themselves" mantra. But of course that is patronizing and ridiculous.

The cap or "stiff" tax is not needed to ensure their spending in this market. It is far better to implement a threashold that all average markets can exceed, and raise just enough money to help genuinely struggling markets with their short term startup revenue shortfalls. The tax is just to raise some taxes for redistribution for the truly needy revenue challenged. It isnt needed and is coutnerproductive, unfair to the small markets, and patronizing to businessmen if you attempt to use it as a spending ceiling.

Another advantage of a luxury tax, is that similar to the idea of a home grown player cap, it makes star players on small payroll teams cheaper to those teams, than to the big spending teams. It provides a fair market, which is as fair as you can ask fair. Not to guarantee anything for anyone. Competition determines the rest.
.
The only reason for payroll disparity now will be that the expensive teams have loaded up on UFAs. But having an advantage in buying UFAs does nothing to give you the advantage in buying and developing an elite teams in its prime, where prime is less than UFA age.

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