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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.

If Revenue Sharing Is Important, Why Isn't There Linkage?

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Old
12-10-2012, 11:30 AM
  #1
RedWingsNow*
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If Revenue Sharing Is Important, Why Isn't There Linkage?

Simple Question.

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12-10-2012, 11:58 AM
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Stewie Griffin
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I'll play.

Linkage to what?

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12-10-2012, 12:07 PM
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cheswick
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The NHL's proposals on revenue sharing (at least what has been made public) were linked to revenue growth. ie the amount of revenue shring would grow at the rate of growth of revenue in general.

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12-10-2012, 01:48 PM
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Simple answer: revenue sharing is linked to HRR.

It was linked in the past CBA and by all reports the current negotiating proposals are also linked to HRR.

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12-10-2012, 01:52 PM
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Quote:
Originally Posted by mouser View Post
Simple answer: revenue sharing is linked to HRR.

It was linked in the past CBA and by all reports the current negotiating proposals are also linked to HRR.
Up to 4.5%?


True, but it's not linkage in the sense that that amount indeed will get paid out. Teams were disqualified if they failed to meet growth criteria per the CBA.

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12-10-2012, 02:08 PM
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Quote:
Originally Posted by Fugu View Post
Up to 4.5%?


True, but it's not linkage in the sense that that amount indeed will get paid out. Teams were disqualified if they failed to meet growth criteria per the CBA.
It was set as a "target" of 4.5%. Depending on how the numbers crunched it was possible for the actual figure to end up being higher or lower than 4.5%. If a team was disqualified that only meant the money they would have received was shifted to the other eligible recipients.

Based on some past estimate models I did, I suspect the actual revenue sharing amount paid out was rarely if ever below 4.5% HRR, and there may have been a couple years where revenue sharing could have hit 6.0% or higher like 2008-2009.

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12-10-2012, 02:37 PM
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Quote:
Originally Posted by mouser View Post
It was set as a "target" of 4.5%. Depending on how the numbers crunched it was possible for the actual figure to end up being higher or lower than 4.5%. If a team was disqualified that only meant the money they would have received was shifted to the other eligible recipients.

Based on some past estimate models I did, I suspect the actual revenue sharing amount paid out was rarely if ever below 4.5% HRR, and there may have been a couple years where revenue sharing could have hit 6.0% or higher like 2008-2009.

It still sounds like there's plenty of fudge factor there. In other words, a team can only get money to get it from the floor to the midpoint. That portion is guaranteed by the CBA. If that isn't what was happening-- then it's not linked if the amount needed to have that happen was capped at 4.5%. If indeed, it was exceeding that figure to 6% or higher, then the league did have to come up with enough money to bridge that gap.

As such, there isn't direct linkage regardless, because not only did they have a formula to bridge the gap, but then had to consider if teams met the growth metrics. Hence the portion of the CBA that had the 100%, or 75% but never below 50% of the full share absent the growth targets.

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12-10-2012, 04:18 PM
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Quote:
Originally Posted by Fugu View Post
It still sounds like there's plenty of fudge factor there. In other words, a team can only get money to get it from the floor to the midpoint. That portion is guaranteed by the CBA. If that isn't what was happening-- then it's not linked if the amount needed to have that happen was capped at 4.5%. If indeed, it was exceeding that figure to 6% or higher, then the league did have to come up with enough money to bridge that gap.

As such, there isn't direct linkage regardless, because not only did they have a formula to bridge the gap, but then had to consider if teams met the growth metrics. Hence the portion of the CBA that had the 100%, or 75% but never below 50% of the full share absent the growth targets.
Not completely sure what you're arguing here? The total amount of league-wide revenue sharing is linked, but it has banding on it for minimum and maximum payouts. Even if a team only got 50% of their share due to not meeting growth figures that 50% amount is still linked to HRR.


High level synopsis of how the revenue sharing amounts were banded under the last CBA:

Minimum Guarantee: tally up all the eligible team revenue sharing amounts that would be needed to lift the revenue sharing recipient team revenues up to $4m over the cap floor (halfway between the floor and midpoint).

Maximum Guarantee: tally up all the eligible team revenue sharing amounts that would be needed to lift the team revenues up to $8m over the cap floor (the midpoint).

The league sets a target Revenue Sharing Pool amount of 4.5% of HRR. If that 4.5% is less than the Minimum Guarantee amount the league increases the size of the Revenue Sharing Pool to make it large enough to meet the Minimum Guarantee. This is where I suspect some years like 2008-2009 may have exceeded the 4.5%.

If 4.5% is larger than the Minimum Guarantee but less then the Maximum Guarantee then the eligible revenue sharing recipient teams receive an amount lifting them to somewhere between $4m and $8m over the floor so that the whole 4.5% pool is distributed.

If the Maximum Guarantee amount is less than 4.5% then the revenue sharing pool is capped at the Maximum Guarantee amount. I suspect this didn't happen during the past CBA, or if it did that the gap between the Max and 4.5% was pretty small.


p.s. Yes, kdb I left out some details to keep it simple.

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12-11-2012, 01:57 AM
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I'm arguing that while the banding is based off revenue, the actual payout may be less if a team fails to meet growth targets, so it's linked and then delinked based on other parameters.

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12-11-2012, 12:34 PM
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Quote:
Originally Posted by mouser View Post
Not completely sure what you're arguing here? The total amount of league-wide revenue sharing is linked, but it has banding on it for minimum and maximum payouts. Even if a team only got 50% of their share due to not meeting growth figures that 50% amount is still linked to HRR.


High level synopsis of how the revenue sharing amounts were banded under the last CBA:

Minimum Guarantee: tally up all the eligible team revenue sharing amounts that would be needed to lift the revenue sharing recipient team revenues up to $4m over the cap floor (halfway between the floor and midpoint).

Maximum Guarantee: tally up all the eligible team revenue sharing amounts that would be needed to lift the team revenues up to $8m over the cap floor (the midpoint).

The league sets a target Revenue Sharing Pool amount of 4.5% of HRR. If that 4.5% is less than the Minimum Guarantee amount the league increases the size of the Revenue Sharing Pool to make it large enough to meet the Minimum Guarantee. This is where I suspect some years like 2008-2009 may have exceeded the 4.5%.

If 4.5% is larger than the Minimum Guarantee but less then the Maximum Guarantee then the eligible revenue sharing recipient teams receive an amount lifting them to somewhere between $4m and $8m over the floor so that the whole 4.5% pool is distributed.

If the Maximum Guarantee amount is less than 4.5% then the revenue sharing pool is capped at the Maximum Guarantee amount. I suspect this didn't happen during the past CBA, or if it did that the gap between the Max and 4.5% was pretty small.


p.s. Yes, kdb I left out some details to keep it simple.
The only significant thing left out is that this is only round 1 of revenue sharing.

There is a second round as part of Final Escrow Disbursement - if excess escrow funds are available (after a portion was used to fund the first round). Any team with an payroll (Actual Club Salary) below the midpoint can receive a distribution up to the amount they were below the midpoint. Note that all teams (even those disqualified from round 1) are eligible here. After that, any remaining escrow funds are split evenly - each team receives a 1/30 share.

Final Escrow Disbursement can result in the total revenue sharing being significantly higher than the targeted 4.5%.

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12-11-2012, 12:53 PM
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JR303
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I thought the league agreed to waive many, if not all, of the requirement triggers in their new proposals.

I think a better discussion would be this:

If the players are so supportive of revenue sharing, but feel that the 5 year contract term limits the middle and lower end salaried players, why not take the guys making $10-12 million per season ($ amounts I've seen used in pro NHLPA arguments) and share their revenue?

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12-11-2012, 02:06 PM
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Quote:
Originally Posted by JR303 View Post
I thought the league agreed to waive many, if not all, of the requirement triggers in their new proposals.

I think a better discussion would be this:

If the players are so supportive of revenue sharing, but feel that the 5 year contract term limits the middle and lower end salaried players, why not take the guys making $10-12 million per season ($ amounts I've seen used in pro NHLPA arguments) and share their revenue?

Perhaps because Toronto, NYR and Montreal et al. don't share their revenues over say $100 MM.

The real answer is that everyone is in it to make as much money as possible and to keep it for themselves. The teams aren't sharing money because of altruism or to make the game better, but as a giveback on the savings they reap from a cap system. I also see nothing wrong with trying to hang on to the money you earn fairly. The current quibble though is the acceptance that some teams simply don't get to keep enough of their own revenues, so who gets to give back some of it to them when there are two choices: the other teams or the players (or both).

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12-11-2012, 05:51 PM
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Quote:
Originally Posted by Fugu View Post
Perhaps because Toronto, NYR and Montreal et al. don't share their revenues over say $100 MM.

The real answer is that everyone is in it to make as much money as possible and to keep it for themselves. The teams aren't sharing money because of altruism or to make the game better, but as a giveback on the savings they reap from a cap system. I also see nothing wrong with trying to hang on to the money you earn fairly. The current quibble though is the acceptance that some teams simply don't get to keep enough of their own revenues, so who gets to give back some of it to them when there are two choices: the other teams or the players (or both).
I agree with that. I actually think that it should be a shared responsibility of the league and the players at this point.

While, I was just being a bit of a smart-ass, the reality is that 30 more or less healthy teams makes for a very, very strong league and very profitable livelihood for the players. I get that everyone wants to make as much as possible, but I think a healthy league affords players, and staff, the ability to enjoy as safe and comfortable a career as possible. Doctors, travel, etc... they all are part of the process and I think they get either taken for granted or overlooked fairly regularly.

The time has passed for pissing on your spot, at this juncture, it's best to do what will make the entire league (owners/players/staff) a healthier, more effective league and get back to work. In my opinion, anyway.

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