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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, NHL revenues, relocation and expansion.

Mark Spector: Reflecting on bad decisions

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Old
11-19-2012, 11:14 AM
  #26
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Originally Posted by cheswick View Post
Bettman didn't put the teams in Anaheim, Florida, Tampa or San Jose. I don't think he had much to do with Dallas either but I could be wrong on that one.
tampa and san jose were admitted in around 1990 or 1992 during the ziegler era....

anaheim and florida came in during the 1993 NHL expansion draft, this happened under bettman....

the "southern" experiment, not only has its roots in the gretzky trade of 1988, but it was a plan by john ziegler who predicted the NHL would have 30 teams to by the late 1990s......

read here:
http://www.thestar.com/sports/hockey...ned-in-sunbelt

Quote:
"Beginning in 1988, we drew up a strategic plan for the NHL," says the former hockey boss who still serves as an alternate governor with the Chicago Blackhawks. "We projected the NHL would expand to 30 teams by the end of the 1990s."

Dubbed "Vision for the 90s," the unanimously accepted plan predicted with precision what would unfold over the next decade.

The expansion blueprint did not identify specific locations for the new teams, said Ziegler, who was commissioner between 1977 and 1992.

"It was absolutely vanilla as to where the teams would come from. What we were looking for was a strong urban centre, a place that had an identification with professional sports and the other was a financially sound owner."

After Ziegler's departure, NHL expansion aggressively charted new territory in the southern U.S. – a decision that has proven an unmitigated economic failure, say business experts.


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Old
11-19-2012, 11:21 AM
  #27
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Originally Posted by HaroldVonKimblestein View Post
I don't think there are any sports teams that make a profit off of the television contract alone, even in the massively television-driven NFL. For example, the Packers, the only NFL team that publishes income statements (due to being publicly owned), received 37.13% of revenues for 2009-10 from television and radio.

Blaming expansion may very well identify part of the problem, but I don't think it's a very big part. Even if you contract some of those teams, there will always be a revenue disparity in the league, and as long as there is a salary floor linked to revenues, there will always be teams at the lower end of revenues struggling. Significant revenue sharing is a must for a healthy league if a salary floor linked to revenues is to exist.
2B split into 32= 62,500,000 for each and every team.

Green Bay has a total salary for 2012 of $75,046,474.

Conversely the Green Bay of the nhl could be Edmonton.

200mill split into 30=6,666,666.

Edmonton has a total cap/salary for 2012 of $62,933,333.

You could argue there are regional and National tv deals in Canada for the Oilers, and that even if you were to estimate their take at around 20mill for that, which it may or may not be, you have a total tv take of ~25mill, which is far short of the 75mill for GB, even though the salaries of the respective clubs are within 10%approx of each other.

So while saying they dont need to sell a ticket to make a profit may be an exaggeration, it isnt that far off and the disparity between the two leagues in tv revenue, makes it a difficult comparison.

Add into that the Florida's and Phoenix' of the world who sell beers for a dollar and tickets for ten bucks and its hard to get on board with revenue sharing from an owner's perspective when you are talking about a Toronto or a NY Ranger perspective.

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11-19-2012, 11:53 AM
  #28
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Quote:
Originally Posted by sawchuk1971 View Post
tampa and san jose were admitted in around 1990 or 1992 during the ziegler era....

anaheim and florida came in during the 1993 NHL expansion draft, this happened under bettman....

the "southern" experiment, not only has its roots in the gretzky trade of 1988, but it was a plan by john ziegler who predicted the NHL would have 30 teams to by the late 1990s......

read here:
http://www.thestar.com/sports/hockey...ned-in-sunbelt
Bettman became commissioner in Feb 1993. So while technically Florida and Anaheim became teams "under Bettman" they were already decided by the expansion committee before he become commish.

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11-19-2012, 11:54 AM
  #29
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Originally Posted by HaroldVonKimblestein View Post
Even if you normalize for that, I suspect you will still find the NHL is way behind the curve.

So you want to throw the TV revenue out of the equation? Okay:

http://harvardsportsanalysis.files.w...al-lockout.pdf



That was prior to the most recent NFL and NBA CBAs. In the new NBA CBA (http://www.cbafaq.com/salarycap.htm#Q24), teams contribute around 50% of their revenues to the revenue sharing pool. This was specifically designed due to concerns about ticket revenue disparities (http://offsidesportsblog.blogspot.co...e-another.html).
Just throwing this out there: the disparity (by percentage, not actual dollars) between the highest and lowest ticket prices in the NHL is roughly equal to that of the NFL; going by 3ish year old numbers, they were actually equal. So the NFL plan for sharing ticket revenues is certainly relevant to the NHL.

If I can find my original post about that I'll throw it in here.

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11-19-2012, 12:20 PM
  #30
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Originally Posted by Cheesesteak Invictus View Post
Just throwing this out there: the disparity (by percentage, not actual dollars) between the highest and lowest ticket prices in the NHL is roughly equal to that of the NFL; going by 3ish year old numbers, they were actually equal. So the NFL plan for sharing ticket revenues is certainly relevant to the NHL.

If I can find my original post about that I'll throw it in here.
Semi-related but I've been trying to gather information about the NFL's new supplemental revenue sharing program. One of the biggest issues during the NFL/NFLPA labor dispute was the disparity in local revenues between franchises. Jerry Jones flat out said that revenue sharing was on it's way out the door. He got fined hard for that. Ralph Wilson Jr. managed to convince 24 owners to sign off on his suppemental plan.

What I'm trying to figure out is what % of local revenues are now shared in the NFL. Owners, historically, have been more generous about sharing national revenues because the costs of generating them are so low. Anyone know where I can find this info?

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11-19-2012, 01:12 PM
  #31
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Here's what Bettman has to say about RS and expansion today:

http://www.winnipegfreepress.com/spo...179909441.html

Quote:
FP: The league has 30 teams. Not all are stable and the league remains in flux. There are franchises that don't work. The players say revenue sharing should fix those problems. But meaningful revenue sharing historically comes from league-wide revenue such as national TV rights, and there's not enough in that pot right now to fix all the league's woes. It's hard to get markets like Toronto, or even Winnipeg for that matter, to subsidize teams like Phoenix or Miami that don't generate substantial gate revenue. Is this the crux of why there is a lockout?

GB: Not completely. It's not wholly inaccurate, but it's more inaccurate than not. The fact is, we have revenue-shared, we do revenue-share and we've offered to increase revenue sharing by more than a third. Our revenue sharing as a percentage of HRR is at least comparable, if not more, than either baseball or basketball. This notion that we're not prepared to revenue-share in a meaningful way is not true. Perhaps more importantly, revenue sharing alone does not fix what we believe needs to be corrected. We believe all 30 franchises are viable and can be successful. We think all 30 franchises are important. Each franchise counts for lots of player jobs and other jobs and is important to its community. Most important, this notion that clubs are not willing to help other clubs is simply not true. We are simply at a percentage under our old deal where our player costs, for a whole host of reasons, are just too high. If you look at the experience in the two other sports where revenue is shared with the players, namely football and basketball, the players in those sports acknowledged exactly what we've been saying.
Couple of things. Seems he's saying that they'll increase RS to some extent, but it's their belief that player costs are the problem, not the lack of greater revenue sharing. (Or this is the better way for the NHL to skin this particular cat.) I think both pro-NHL and pro-PA people here would disagree. The problem may be that HRR in so much lower than NBA and NFL revenues, while supporting a similar number of franchises that they simply are under the hypothetical break-even point (minimum revenue required for the structure) that the other leagues don't face.

I also don't like that he ignores the MLB and its sharing structure. Is it somehow forbidden to discuss, at least academically, the ways that league ensure all teams are financially healthy?




Quote:
FP: Revenue is growing, but there's an imbalance from franchise to franchise. If the weaker franchises can't compete from a revenue standpoint, why not contract?

GB: We believe all of our franchises are important and can be viable and can be successful. And frankly, if we're going to continue to grow the game and grow what you refer to as national revenues, you need to have a truly national footprint, not just in Canada but in the United States.
Seems he believes the NHL can continue to grow in the US and in order for that happen, the current footprint has to be maintained. It's too bad there wasn't more time for questioning on how much money has been transferred via RS, vs expansion fees collected, and what exactly the ROI could be. The philosophy or strategy hasn't changed, but what metric is being used to measure if it's working or not?

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11-19-2012, 01:19 PM
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Gary can wish in one hand and poop in the other and see which one gets full faster.

Very disappointing.

Even if they do manage to "save the season" (seems unlikely), nothing will be fixed long term and more labour strife looms on the horizon.

Considering one of his mandates when originally hired as commish was to end labour strife, it is curious how he has been able to keep his job.

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11-19-2012, 01:27 PM
  #33
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Originally Posted by I am the Liquor View Post
Gary can wish in one hand and poop in the other and see which one gets full faster.

Very disappointing.

Even if they do manage to "save the season" (seems unlikely), nothing will be fixed long term and more labour strife looms on the horizon.

Considering one of his mandates when originally hired as commish was to end labour strife, it is curious how he has been able to keep his job.
bottom line he makes owners more money ....at least a large enough majority....and defintly those owners with huge sway.

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11-19-2012, 01:46 PM
  #34
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bottom line he makes owners more money ....at least a large enough majority....and defintly those owners with huge sway.

If that indeed is the bottom line, how do you justify another lockout?

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11-19-2012, 01:47 PM
  #35
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They could fix this with a sizeable contraction. Cutting the league down to 22-24 teams, possibly moving back into a couple of Canadian markets and living with regional tv deals in the States. They likely have gone too far down the rabbit trail to attempt such a bold move, so we will have to live with a broken model and labour strife, lockouts and strikes every five or six years.
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that makes perfect sense, unfortunately, that is not going to happen...
Quote:
Originally Posted by HaroldVonKimblestein View Post

Blaming expansion may very well identify part of the problem, but I don't think it's a very big part.
Even if you contract some of those teams, there will always be a revenue disparity in the league, and as long as there is a salary floor linked to revenues, there will always be teams at the lower end of revenues struggling. Significant revenue sharing is a must for a healthy league if a salary floor linked to revenues is to exist.
If one does the math, as HVK indicated, this is NOT the issue. When the cap is based off of average revenues, and there's little RS, then eventually the guy at the bottom (regardless of who that is) gets pushed out.

Do the math using 3 teams (even using the 3 biggest - Toronto, Montreal, New York) and see what happens. Eventually the bottom guy is screwed - regardless of how much they make.

KevFu did a great post showing how this would work if they hadn't expanded (assuming they received the same revenue as 2011).

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Originally Posted by KevFu View Post
This statement also blows my mind. Let's just suppose for a second that every team would make the same amount of revenues they do now if all the new markets since 1991 didn't exist.

Right now, with this 2006-2011 CBA, using 2011 dollars:
You have 12 of 30 teams who can't hit the cap floor by spending exactly 57% of HRR on payroll; 8 who are comfy to the cap, and 10 in the payroll range.

Eliminate SJ, DAL, TB, ANA, COL, NAS, CAR, FLA, CBJ, PHX (That's nine of the bottom 12 teams, plus #17 SJ).
Wild instead of North Stars, Jets 2.0 instead of Jets 1.0; Ottawa instead of Quebec; Hartford removed completely.

The midpoint skyrockets.
9 of 20 teams can't hit the cap floor by spending exactly 57% of HRR on payroll (35% of teams instead of 33%)
4 of 20 can spend to the cap comfortably (same 40% as now)
7 of 20 teams are in the payroll range (20% instead of 27%)

In other words: The financially unstable situation with a large disparity between competent owners and franchises and those on the opposite end IS EXACTLY THE FREAKING SAME.

The only difference is that without the 90s expansion/relocation teams, instead of people saying "Hey, we should move PHX, FLA, CBJ, NASH to Hamilton, Quebec and Markham" it would be OTT, NJ, MIN, EDM, WIN, BUF, STL and NYI (the bottom revenue teams in this 20-team league) in these bad financial situations. They'd be exploring relocation… you know, virtually the exact same teams that explored relocation IN THE 1990s!

MIN moved to DAL, WIN moved to PHX; NJ almost moved to Nashville, EDM almost moved to Houston;
OTT could fill the role of QUE, who moved to COL.
BUF could fill the role of HART, who moved to CAR.
The Islanders would have needed a new arena the entire time; and now they're moving to Brooklyn.
STL had the Saskatoon thing and a bankruptcy saga; OTT and BUF also had bankruptcies in the 90s.

Can we stop scapegoating "Expansion/Southern" teams as a CAUSE for this? The current [foul]ed up system isn't the byproduct of expansion/southern markets. It's a [foul]ed up system. Period. Regardless of who's in the league.

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11-19-2012, 02:03 PM
  #36
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KevFu did a great post showing how this would work if they hadn't expanded (assuming they received the same revenue as 2011).
It's amazing how many times that has to be demonstrated, but there are always those who choose to ignore it or someone new who comes around and it has to be pointed out all over again.

Economically weaker teams keep the League economically affordable for those teams above them on the economic ladder. Remove the lower rungs of the ladder, and the salary costs increase, creating economic difficulty for the next teams up the ladder.

There's no way you're going to get enough economic parity in the League in order to never have any teams struggling, unless you can remove the teams at the top end of the ladder, as well as those at the bottom, and just keep a group of middle range teams to constitute the League. And even then there will still ultimately be economic disparities, though likely not as disparate as they are now or in almost any natural context.
And while in the process of having things repeated,... that's again why the League should be using the median point (between teams 15 and 16) to establish Salary Cap limits (Floor and Ceiling) instead of the League average, because the average is too imbalanced, too skewed by a few teams at the top-end of the revenue earnings. Going with the League-average was the first error in the League's bad decision-making which led to this current economic predicament.


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11-19-2012, 02:16 PM
  #37
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They want to sign players to contracts the teams cannot afford, with the hope that they can use collective bargaining to reduce the cost of the contract. That was why the Wild signed those guys to massive contracts (which I wish would be voided at this point, since it is all too obvious what they were up to). This is a case of management using collective bargaining to deal with their own inability to properly manage their business. Boo to them.
Actually, I think most of them signed players to contracts in an effort to win games which is exactly what we want as fans.
It's real easy to sit here and say "nobody held a gun to their heads", but when your franchise misses out on player after player because you aren't willing to structure a deal a certain way fans don't tolerate it.

Worse yet, if all owners show restraint, then it's collusion.

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11-19-2012, 02:22 PM
  #38
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Worse yet, if all owners show restraint, then it's collusion.
Wait... so if all the owners (individually) said we're not interested in 10 year + deals... the PA would file collusion charges?! You don't say...

And everyone wonders why the league is looking to make changes to the CBA.

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11-19-2012, 02:31 PM
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Originally Posted by Riptide View Post
If one does the math, as HVK indicated, this is NOT the issue. When the cap is based off of average revenues, and there's little RS, then eventually the guy at the bottom (regardless of who that is) gets pushed out.

Do the math using 3 teams (even using the 3 biggest - Toronto, Montreal, New York) and see what happens. Eventually the bottom guy is screwed - regardless of how much they make.

KevFu did a great post showing how this would work if they hadn't expanded (assuming they received the same revenue as 2011).
All we need to do in order to get spending under control is to contract Toronto, Montreal, Philly, Boston and NYR.

Then they could expand into Charlotte, Houston, New Orleans, Kansas City and San Antonio.

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11-19-2012, 02:32 PM
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Wait... so if all the owners (individually) said we're not interested in 10 year + deals... the PA would file collusion charges?! You don't say...

And everyone wonders why the league is looking to make changes to the CBA.
My question is, How is it collusion to make a decision that benefits the League and doesn't create economic stress for a great many teams? Sounds like practical, logical economic decision-making.

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11-19-2012, 02:36 PM
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Actually, I think most of them signed players to contracts in an effort to win games which is exactly what we want as fans.
It's real easy to sit here and say "nobody held a gun to their heads", but when your franchise misses out on player after player because you aren't willing to structure a deal a certain way fans don't tolerate it.

Worse yet, if all owners show restraint, then it's collusion.
I just want to point out that some players have also taken home town discounts. Not all are forcing the teams to pay the max. Not sure if taking a home town discount is ever appreciated by us fans or owners.

That seems to be overlooked.

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11-19-2012, 03:03 PM
  #42
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Semi-related but I've been trying to gather information about the NFL's new supplemental revenue sharing program. One of the biggest issues during the NFL/NFLPA labor dispute was the disparity in local revenues between franchises. Jerry Jones flat out said that revenue sharing was on it's way out the door. He got fined hard for that. Ralph Wilson Jr. managed to convince 24 owners to sign off on his suppemental plan.

What I'm trying to figure out is what % of local revenues are now shared in the NFL. Owners, historically, have been more generous about sharing national revenues because the costs of generating them are so low. Anyone know where I can find this info?
I dug around for this briefly a few weeks ago when I was looking at ticket prices and gate revenue and didn't find anything useful. I gave up pretty quickly, so maybe it's out there.

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11-19-2012, 03:05 PM
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The players knew this was going to be a fight. If the players are going to stand on principle, then don't accept the fake contract offers from the owners, and the real guaranteed bonus money. Take a stand and fight on principle.
Given the quote from Ryan Suter in the press, he seemed surprised that Craig Leipold would be leading the march demanding reductions in compensation for existing contracts. Why is a man, who just signed two guys to massive contracts with big $10 million bonuses, at the front of this? If the bonuses were meant to appease them for the insult he was about to hurl at the negotiating table, there doesn't seem to be any hint of that in what Suter said near the end of October.

Quote:
Originally Posted by Ryan Suter of the Minnesota Wild
It's disappointing. If you can't afford to (sign contracts) then you shouldn't do it. (Owner Craig Leipold) signed us to contracts. At the time he said everything was fine. Yeah, it's disappointing. A couple months before, everything is fine, and now they want to take money out of our contracts that we already signed.
Quote:
Originally Posted by Tom Powers of Pioneer Press
Sometimes you have to wonder how the league has survived to this point. Think about it for a minute: Wild owner Craig Leipold signs two players to 13-year, $96 million contracts, and then a few weeks later he's banging his shoe on the table stumping for salary rollbacks and a larger slice of the revenue pie in order to try to make ends meet.
Only those ignorant of what happened would not be surprised at the hypocrisy of such a move.

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11-19-2012, 03:07 PM
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My question is, How is it collusion to make a decision that benefits the League and doesn't create economic stress for a great many teams? Sounds like practical, logical economic decision-making.
It isn't collusion as long as each team can demonstrate that they are not working together to drive down wages. As long as each team has evidence of the economic factors involved in their refusals to sign huge contracts, it can be defended against collusion claims.

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11-19-2012, 03:07 PM
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My question is, How is it collusion to make a decision that benefits the League and doesn't create economic stress for a great many teams? Sounds like practical, logical economic decision-making.
If the 10 yr deals stopped being offered, someone in the PA ranks or agents would try to prove collusion...it needs to be negotiated...for me it's not the 10-12 yr deals, it's the circumventing the cap, with front loaded deals that are the problem...

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11-19-2012, 03:14 PM
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All we need to do in order to get spending under control is to contract Toronto, Montreal, Philly, Boston and NYR.

Then they could expand into Charlotte, Houston, New Orleans, Kansas City and San Antonio.
From a league stability point of view, add in Vancouver, Edmonton, etc. So yes while that sounds ********, when the league cap is based on league average revenue, then anyone not close to the average (median was 96m, while average was 110m) causes issues.

One of the ways to correct this is to have heavy revenue sharing (NBA/MLB/NFL style). But do not think that contracting the low end teams will actually solve anything.

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11-19-2012, 03:25 PM
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It isn't collusion as long as each team can demonstrate that they are not working together to drive down wages. As long as each team has evidence of the economic factors involved in their refusals to sign huge contracts, it can be defended against collusion claims.
Not true when it comes to a civil suit. If the NHLPA lawyers can convince the majority of the jurors that it is more likely that there was an agreement than not then the NHL would lose. There only has to be the appearance of an agreement.

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11-19-2012, 03:28 PM
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From a league stability point of view, add in Vancouver, Edmonton, etc. So yes while that sounds ********, when the league cap is based on league average revenue, then anyone not close to the average (median was 96m, while average was 110m) causes issues.

One of the ways to correct this is to have heavy revenue sharing (NBA/MLB/NFL style). But do not think that contracting the low end teams will actually solve anything.
It would be the first step to labour harmony. If you take out the weak markets, ie those that cannot make a financial go of it, then the league will conceivably be able to pay their players and wouldnt have to continually have to lock them out (which has been the pattern under Bettman) in order to make the poor teams viable, off of the backs of the players.

That has been the pattern and will continue to be the pattern moving forward. A 50-50 split will have to be re-negotiated down the line at the end of the new cba. The owners will want a 60-40 split in their favour and on and on it goes.

If all the teams in the league were financially able to make a go of it, then there would be no reason to have to pilfer the players at the end of every cba.

They may have to de-link the cap to do so. If that is what it takes, so be it. Start out with a fixed cap of 40mill if need be. Whatever.

What they are doing now isnt working, and a small adjustment to HRR% isnt going to fix anything.

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11-19-2012, 03:39 PM
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Quote:
Originally Posted by I am the Liquor View Post
It would be the first step to labour harmony. If you take out the weak markets, ie those that cannot make a financial go of it, then the league will conceivably be able to pay their players and wouldnt have to continually have to lock them out (which has been the pattern under Bettman) in order to make the poor teams viable, off of the backs of the players.

That has been the pattern and will continue to be the pattern moving forward. A 50-50 split will have to be re-negotiated down the line at the end of the new cba. The owners will want a 60-40 split in their favour and on and on it goes.

If all the teams in the league were financially able to make a go of it, then there would be no reason to have to pilfer the players at the end of every cba.

They may have to de-link the cap to do so. If that is what it takes, so be it. Start out with a fixed cap of 40mill if need be. Whatever.

What they are doing now isnt working, and a small adjustment to HRR% isnt going to fix anything.
Did you not read the post I quoted just above? Or run the math on a 3 team league? Here I'll even make it easy for you.

Going to an unlinked cap/HRR has it's own issues. What do you think would be happening today if the NHL had accepted Goodnows offer of a 49m cap (or whatever it was)? The NHL would have still locked the players out when the two sides could not come to an agreement. The players would have demanded the cap increase by 50% to match the increase in HRR. The league would have laughed at them, and we'd be in the same position we're in today. Actually this would have happened last year, as there's no chance the PA would have extended the deal by 1 year.

And if you think the PA would ever agree to a fixed cap of anything less than 80m you're dreaming (I'm not even sure that's high enough that the PA would accept it). 80m might work long long term... but it's still going to cause tons of issues short term.

Quote:
Originally Posted by Riptide
Here's a really dummied down example. I picked Colorado as it's a low revenue team that's actually doing decently financially. But feel free to replace it with damn near any team in the league... the effect is the same, it will just take longer to become an issue. You could even pick the top 3 teams in the league (Toronto, Montreal and New York) and the effect would be the same. Eventually the bottom team would be in trouble.

Toronto's revenue is 200m
Edmonton's is 120m
Colorado's is 80m

The league average is 133m, and the players get 50% of the revenue - cap is 66m. Leafs make millions and millions. Edmonton survives, and Colorado is in the red.

League growth is 10% (across the board... however that's likely not realistic that all teams will grow at the same rate - which is a huge part of the issue).

Toronto's revenue is now 220m
Edmoton's is now 132m
Colorado's is now 88m.

League average is 146m, and 50% split puts the cap at 73m. You can see where this goes right? Even if Toronto is putting money into RS, basing the cap on league average is doomed to failure when Toronto (and others) only need to sustain 4-5% growth, while the guys at the bottom need to grow at something like 10-12% to try and catch up... which isn't realistic.

RS will hide this issue, but will not sustain it. Now some will say that Colorado is the issue (in the example above), and if they moved them from Colorado to Hamilton where they could have 180m in revenue... then projecting that out, eventually Edmonton would have issues, and need to be moved. The point is there'll always be someone at the bottom who can't keep up. Moving/contracting them DOES NOT SOLVE THE ISSUE! Nor is it possible for most teams to keep up with the big teams (which is what's causing issues).


Last edited by Riptide: 11-19-2012 at 03:45 PM.
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11-19-2012, 03:39 PM
  #50
txpd
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i am in favor if eliminating all the mentioned teams and more. lets remove them and all the cups and heritage that they have. rockies, stars, lightning, hurricanes, ducks all have cups in recent history and not one in canada in that time. by making the league a canada centrique league. there will be no more whining about how bettman or the next american that runs the league is wrecking canada's game.

lets do it now so that a canadian citizen commish can be the one to ban fighting.

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