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Mirtle: Why the NHLís push for a variance limit matters

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Old
01-03-2013, 09:08 PM
  #1
Fugu
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Mirtle: Why the NHLís push for a variance limit matters

http://www.theglobeandmail.com/sport...medium=twitter

Nice analysis, with some graphs, illustrating the different options proposed.

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01-04-2013, 06:18 AM
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This should be fairly easy on to settle in the end because it only affects so few players of the league. Should.

I like that salary can't drop below 60% of max. salary. Obviously the (star) players don't.

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01-04-2013, 09:23 AM
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Originally Posted by kemisti View Post
This should be fairly easy on to settle in the end because it only affects so few players of the league. Should.

I like that salary can't drop below 60% of max. salary. Obviously the (star) players don't.
What I don't understand is why the owners want both a limit on variance AND a limit on contract length. If the purpose of a limit on variance is to make the cap hit more reflective of the salary, then wouldnt the variance alone take care of it. Also can't they just redefine how the cap is calculated this time to prevent the deals they don't want.

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01-04-2013, 10:30 AM
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Originally Posted by sandysan View Post
What I don't understand is why the owners want both a limit on variance AND a limit on contract length. If the purpose of a limit on variance is to make the cap hit more reflective of the salary, then wouldnt the variance alone take care of it. Also can't they just redefine how the cap is calculated this time to prevent the deals they don't want.
The longer a contract is, the harder it is to insure

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01-04-2013, 11:03 AM
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Butch 19
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Originally Posted by sandysan View Post
What I don't understand is why the owners want both a limit on variance AND a limit on contract length. If the purpose of a limit on variance is to make the cap hit more reflective of the salary, then wouldnt the variance alone take care of it. Also can't they just redefine how the cap is calculated this time to prevent the deals they don't want.
On the surface, what you say makes sense.

But in reality, these types of contract issues affects only maybe 5% of players, so why even spend time on it ?

Just give the owners what they want here and move on to other issues that affect a majority of NHLPA members (the star players who get these deals will still get their big $$). Use this as another chip in the game as you negoitiate for something more meaningful.

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01-04-2013, 11:07 AM
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Originally Posted by Butch 19 View Post
On the surface, what you say makes sense.

But in reality, these types of contract issues affects only maybe 5% of players, so why even spend time on it ?

Just give the owners what they want here and move on to other issues that affect a majority of NHLPA members (the star players who get these deals will still get their big $$). Use this as another chip in the game as you negoitiate for something more meaningful.

I dont know, this was one of the hills they would die on. why would they be willing to die on a hill that affects so few players ? I'm not an experienced negotiator but I don't understand why you would go into a negotiation and say that these two items are where we draw the line and dig in, when implementing one of the two gets the same result. Ooooooooh, I think I just answered my own question.

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01-04-2013, 11:22 AM
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Originally Posted by sandysan View Post
I dont know, this was one of the hills they would die on. why would they be willing to die on a hill that affects so few players ? I'm not an experienced negotiator but I don't understand why you would go into a negotiation and say that these two items are where we draw the line and dig in, when implementing one of the two gets the same result. Ooooooooh, I think I just answered my own question.
I would guess that the players that have gotten these huge 10 - 15 year deals are basically not even in discussion of signing with "lower tier" teams.

It seems only the big budget teams have offered FAs these long term front loaded contracts. If you put a limit on the term, more teams can compete for these game-changing FAs (on a "more" level playing field)

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01-04-2013, 11:34 AM
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Originally Posted by Butch 19 View Post
I would guess that the players that have gotten these huge 10 - 15 year deals are basically not even in discussion of signing with "lower tier" teams.

It seems only the big budget teams have offered FAs these long term front loaded contracts. If you put a limit on the term, more teams can compete for these game-changing FAs (on a "more" level playing field)
the islanders are a big budget team ?

My understanding was this was being asked to kill front loaded contracts, but as you mention this could allow for more FA's to switch teams independently of the variance of their contract. Thanks, I had not thought of that.

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01-04-2013, 11:59 AM
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Originally Posted by sandysan View Post
I dont know, this was one of the hills they would die on. why would they be willing to die on a hill that affects so few players ? I'm not an experienced negotiator but I don't understand why you would go into a negotiation and say that these two items are where we draw the line and dig in, when implementing one of the two gets the same result. Ooooooooh, I think I just answered my own question.
The PA believes the front loaded contracts also benefited the "middle tier" of its membership:

1) Cap space opened up by those deals was not only spent on the superstar getting the deal; plenty was directed toward the supporting talent;

2) The length of those deals had another inflationary effect in favor of the middle class beyond the obvious circumvention. Assume 10% growth (last year's impressive growth!) and a $70M cap (just for easy math). In the last CBA, no individual player could be paid more than 20% of of the cap -- Oh heck, here's a chart:

Growth Cap Ind Max Spread Year
$70.00 $14.00 N/A 1
0.1 $77.00 $15.40 $(1.40) 2
0.1 $84.70 $16.94 $(2.94) 3
0.1 $93.17 $18.63 $(4.63) 4
0.1 $102.49 $20.50 $(6.50) 5
0.1 $112.74 $22.55 $(8.55) 6
0.1 $124.01 $24.80 $(10.80) 7

The "Spread" column is the difference between Year One's Max Individual Salary (or whatever cap number the Superstar gets), and the new, higher Max Salary made possible because of growth and a rising cap.

Since the Superstar is bound to a long deal, he doesn't have a claim on that new money. So where does it get spent? On middle class players.

The longer the deal, the bigger this effect.

What happens with shorter deals?

Superstars "reset" more often, consuming more of the new money generated by growth (superstars always get paid), leaving less spread for the rest of the roster.

Whenever trying to suss out why one side or the other is making some claim, it's helpful to remember that both Bettman and Fehr don't represent monolithic individual entities. They represent agglomerations of interests, some of which are not well aligned. So while they have to negotiate with one another, they also have to negotiate with their internal constituencies. The options they wind up presenting across the table are often already compromises their own sides have made among themselves.

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01-04-2013, 12:16 PM
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Originally Posted by Model62 View Post
The PA believes the front loaded contracts also benefited the "middle tier" of its membership:

1) Cap space opened up by those deals was not only spent on the superstar getting the deal; plenty was directed toward the supporting talent;

2) The length of those deals had another inflationary effect in favor of the middle class beyond the obvious circumvention. Assume 10% growth (last year's impressive growth!) and a $70M cap (just for easy math). In the last CBA, no individual player could be paid more than 20% of of the cap -- Oh heck, here's a chart:

Growth Cap Ind Max Spread Year
$70.00 $14.00 N/A 1
0.1 $77.00 $15.40 $(1.40) 2
0.1 $84.70 $16.94 $(2.94) 3
0.1 $93.17 $18.63 $(4.63) 4
0.1 $102.49 $20.50 $(6.50) 5
0.1 $112.74 $22.55 $(8.55) 6
0.1 $124.01 $24.80 $(10.80) 7

The "Spread" column is the difference between Year One's Max Individual Salary (or whatever cap number the Superstar gets), and the new, higher Max Salary made possible because of growth and a rising cap.

Since the Superstar is bound to a long deal, he doesn't have a claim on that new money. So where does it get spent? On middle class players.

The longer the deal, the bigger this effect.

What happens with shorter deals?

Superstars "reset" more often, consuming more of the new money generated by growth (superstars always get paid), leaving less spread for the rest of the roster.

Whenever trying to suss out why one side or the other is making some claim, it's helpful to remember that both Bettman and Fehr don't represent monolithic individual entities. They represent agglomerations of interests, some of which are not well aligned. So while they have to negotiate with one another, they also have to negotiate with their internal constituencies. The options they wind up presenting across the table are often already compromises their own sides have made among themselves.

Thanks for the work. So the variance would be in addition to the 20% of cap restriction? Also with variance( I should know this ) is the variance off the most expensive year in the salary or within subsequent years?

If the variance is 10% and you start with 14 million then no year can be less than 12.6. If its from the previous year the cap hit at the end is way less than 12.6 and if you assume you stretch the contract out and use the gowth you hypothesised the superstars proportional cap hit is way low.

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01-04-2013, 12:56 PM
  #11
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Quote:
Originally Posted by sandysan View Post
Thanks for the work. So the variance would be in addition to the 20% of cap restriction? Also with variance( I should know this ) is the variance off the most expensive year in the salary or within subsequent years?

If the variance is 10% and you start with 14 million then no year can be less than 12.6. If its from the previous year the cap hit at the end is way less than 12.6 and if you assume you stretch the contract out and use the gowth you hypothesised the superstars proportional cap hit is way low.
Right, the variance is separate from the individual cap max. The individual cap is just that -- the max cap any single player can have in a season, as a percentage of the cap.

As I understand it, the League proposed variance limits the difference between salaries year-to-year (5%?), while the PA is proposing a bigger variance between the first year and any subsequent year (25%?).

[EDIT]. My figures for variance are way off. The League has offered bigger percentages year-to-year. The PA figure is also year-to-year.


Last edited by Model62: 01-04-2013 at 01:36 PM.
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01-04-2013, 04:58 PM
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Originally Posted by DopeyFish View Post
The longer a contract is, the harder it is to insure
IIRC, they can only insure for five years. That is why this is so important to the owners.

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01-04-2013, 05:05 PM
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This what I don't get. The PA is fighting hard to reduce restrictions on salary variances and contract terms when it should be doing the opposite if it really cared about the middle and lower end guys. They are the ones that have to pay back their salaries in escrow to cover the cost of the over inflated salaries given to star players. A player making 14 million and bonuses with a cap hit 7 million really hurts the rest. There is no need for a contract to last more than 7 years unless a team is trying to lowere the cap hit...which is eaten back through player escrow.

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01-04-2013, 05:14 PM
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This what I don't get. The PA is fighting hard to reduce restrictions on salary variances and contract terms when it should be doing the opposite if it really cared about the middle and lower end guys. They are the ones that have to pay back their salaries in escrow to cover the cost of the over inflated salaries given to star players. A player making 14 million and bonuses with a cap hit 7 million really hurts the rest. There is no need for a contract to last more than 7 years unless a team is trying to lowere the cap hit...which is eaten back through player escrow.
This is not about average players IMHO. It is all about star players. Just my opinion.

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01-04-2013, 06:00 PM
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How many times does this have to be explained?
Once is enough for me. Sorry for wasting your precious bandwidth. Let me know where I can send my Check for 1/10000 of a cent to make you whole again.

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01-04-2013, 08:42 PM
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Quote:
Originally Posted by Seedling View Post
This is not about average players IMHO. It is all about star players. Just my opinion.
I think the star players will get their money regardless, and everyone below them will be forced to slot in wherever they can. The lower they can push their cap hits, the more room there is for everyone below them to get a bit more. And the players know that fans aren't going to look at the actual salary paid every year, but will look at where their team sits against the cap. So even if someone is shelling out $65m in actual dollars, if their cap hit is only $55m, their fans will be wondering why they aren't spending that extra $10m.

I think variance is a bigger issue to more players than its made out to be.

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