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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.

What is "players' share of hockey-related revenue"?

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01-07-2013, 10:20 AM
  #1
Fedorov
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What is "players' share of hockey-related revenue"?

I copied this out of a TSN article
- The players' share of hockey-related revenue will drop from 57 percent to a 50-50 split for all 10 years.

I don't understand what the fight over this percentage was. I thought players were payed by contract. Do they get a revenue sharing check as well?

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01-07-2013, 10:26 AM
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haseoke39
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Prior to a season, the league makes a projection of what revenues will be. They take 50% of that projection (the player's share), divide it by 30, and that's what the cap number is per team.

Every time a player gets a paycheck throughout the season, a piece of it is withheld in what's called an escrow account - a special trust where the money is held until actual revenues can be calculated. At the end of the season, if league revenues end up being exactly what they were projected to be, the players will get paid everything in the escrow account. If league revenues were shorter than projected, then players get less. If league revenues were larger than expected, ownership will have to pay up the difference.

In this way both the cap number and the player's actual contract number are adjusted via the escrow system so that the players cumulatively get their 50%. The dollar value of the contract, then, is only an estimate of what players ultimately get.

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01-07-2013, 10:33 AM
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A minor further clarification: "the cap number" that is derived from the revenue is cap mid point. The ceiling (the actual salary cap) is the cap mid point + 8 million (NOTE: I have not checked whether the salary range between mid point and cap is changed in the new CBA).

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01-07-2013, 10:33 AM
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Ginu
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Can someone explain this then?

Quote:
A pro-rated salary cap of $70.2 million for the shortened 2012-13 season followed by a salary cap of $64.3 million -- the cap is guaranteed not to drop below that number moving forward in 2013-14. The salary floor will be set at $44 million for both years.
http://www.cbc.ca/sports/hockey/nhl/...fehr-ends.html

If the cap is guaranteed not to drop below that number moving forward then is this not true 50-50?

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01-07-2013, 10:35 AM
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Fedorov
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Mind = blown lol. I had no idea about that part of the player contracts.

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01-07-2013, 10:39 AM
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Quote:
Originally Posted by Ginu View Post
Can someone explain this then?



http://www.cbc.ca/sports/hockey/nhl/...fehr-ends.html

If the cap is guaranteed not to drop below that number moving forward then is this not true 50-50?
The cap and floor is simply a mechanism to help the salary paid out be close to the 50-50.

That's what escrow is for. If it turns out the players were actually paid on aggregate more than 50% of HRR then the money they put into escrow is used to make it so the amound pais is actually 50-50.

So the fact the cap doesn't go down, has no affect on the 50-50.

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01-07-2013, 10:40 AM
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Fedorov
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What is the impact to contracted salary amounts that were on the books before the new CBA. If I was on a contract 2011 - 2014 for 2 million a season as an example would I now be on the books for 1.8 million a season or something like that? Or will I still be at 2 million and the pay will be adjusted through the escrow methodology?

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01-07-2013, 10:43 AM
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Quote:
Originally Posted by Fedorov View Post
What is the impact to contracted salary amounts that were on the books before the new CBA. If I was on a contract through 2011 - 2014 for 2 million a season as an example would I now be on the books for 1.8 million or something like that? Or will I still be at 2 million and the pay will be adjusted through the escrow methodology?
The contracts on the books remain unchanged. They are adjusted for escrow, but the amount of escrow taken off is somewhat limited due to the "make whole" amount the league is giving. So the league is giving the players $300 million over and above the 50% of HRR to limit the effect escrow will have on their contracts in the first few years of the deal since it would be substantial going from 57% share to 50%

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01-07-2013, 10:45 AM
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JaymzB
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I have a question. Assuming the players will have to pay escrow (which seems very likely), how does that escrow $ get divided among the teams? Is it an even amount for all 30 clubs? Based on their own salary #s?

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01-07-2013, 10:46 AM
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Quote:
Originally Posted by JaymzB View Post
I have a question. Assuming the players will have to pay escrow (which seems very likely), how does that escrow $ get divided among the teams? Is it an even amount for all 30 clubs? Based on their own salary #’s?
Escrow is a % amount on an individual players salary. So ever paycheck they'd have a certain % removed for escrow.

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01-07-2013, 10:49 AM
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Quote:
Originally Posted by cheswick View Post
The contracts on the books remain unchanged. They are adjusted for escrow, but the amount of escrow taken off is somewhat limited due to the "make whole" amount the league is giving. So the league is giving the players $300 million over and above the 50% of HRR to limit the effect escrow will have on their contracts in the first few years of the deal since it would be substantial going from 57% share to 50%
Your knowledge of the topic is quite amazing. One last question. With the cap going down to 64 million and prior contracts staying the same value, won't leaving the $ in tact will it hurt players with grandfather contracts a bit. Theoritically they will hit the cap a little harder because contracts going forward will be a bit less won't they. Or am I not thinking of this correctly?

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01-07-2013, 10:55 AM
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Quote:
Originally Posted by Fedorov View Post
Your knowledge of the topic is quite amazing. One last question. With the cap going down to 64 million and prior contracts staying the same value, won't leaving the $ in tact will it hurt players with grandfather contracts a bit. Theoritically they will hit the cap a little harder because contracts going forward will be a bit less won't they. Or am I not thinking of this correctly?
That's exactly correct. Which is one of the reasons the PA fought so hard to increase next years cap. The NHL wanted it to be $60 million. Leaving at 60 would severely limit the opportunities for pending free agents to sign since many teams would already be at $60 million with a few roster spots yet to fill.

So the PA "won" a $64.3 million cap. Such a cap likely increases escrow amounts current contracted players owuld have to give up, but it opens up room for pending free agents to sign under.

Another mechanism introduced to open up cap space is the ability to buy out two players per team without any cap hit. The NHL initially only offered up one buyout.

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01-07-2013, 11:08 AM
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Quote:
Originally Posted by cheswick View Post
Escrow is a % amount on an individual players salary. So ever paycheck they'd have a certain % removed for escrow.
Which percentage is adjusted several times over the course of the season.

In the last CBA, if league revenues cratered, and escrow wasn't enough to cover the shortfall, the players were still on the hook. That never happened, but... Ouch.

One other note, escrow was also the second listed source of funding for the league's RS system ("Player Compensation Cost Redistribution"), which is perhaps another reason the system was (and probably still is) so hated by the PA. Some of the revenue shared came out of player pockets!

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01-07-2013, 11:10 AM
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Quote:
Originally Posted by cheswick View Post
That's exactly correct. Which is one of the reasons the PA fought so hard to increase next years cap. The NHL wanted it to be $60 million. Leaving at 60 would severely limit the opportunities for pending free agents to sign since many teams would already be at $60 million with a few roster spots yet to fill.

So the PA "won" a $64.3 million cap. Such a cap likely increases escrow amounts current contracted players owuld have to give up, but it opens up room for pending free agents to sign under.

Another mechanism introduced to open up cap space is the ability to buy out two players per team without any cap hit. The NHL initially only offered up one buyout.
It's also another example of the PA placing a stronger bet on growth than the League has been willing to place, which goes back to the last CBA negotiation.

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01-07-2013, 01:32 PM
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Quote:
Originally Posted by JaymzB View Post
I have a question. Assuming the players will have to pay escrow (which seems very likely), how does that escrow $ get divided among the teams? Is it an even amount for all 30 clubs? Based on their own salary #’s?
If there is an escrow refund by the players to the owners the money is apportioned in 3 separate phases--or at least this is how it worked in the 2005 CBA.

1) Up to 1/3rd of the total pool of Revenue Sharing $'s can be provided from the Escrow refund. (In practice it's probably 1/5th or less depending on how much central revenue is generated)

2) If there is still escrow money available, then all teams with an actual club salary below the cap midpoint can receive an amount that would bring them up to the midpoint. (subject to some other total revenue restrictions)

3) If there is still escrow money remaining it is divided evenly between the 30 teams.

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