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The Salary Cap (Mod: Comparision between 2005 and 2013 CBAs)

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Old
01-10-2013, 05:46 AM
  #1
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The Salary Cap (Mod: Comparision between 2005 and 2013 CBAs)

Honestly.. how long is it now until it becomes redundant?

The cap now is at 70 million and next year will fall to 64 briefly.. only for it to keep rising and rising and rising.

Is it only a matter of a few years now when the cap is in the high 70s close to 80 million? Basically where payrolls were pre 2004 lockout for the higher end teams

Which would of course mean the floor is 50-60 million.

Will the smaller market teams really be able to last paying out this much in salary?

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01-10-2013, 07:17 AM
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I'll start the comparision in Y3 because thats when the new system really kicks in. I assumed 5% revenue growth with a base of 3.3B in Y2. Here's how it plays out with 50% players share and +/-15% distance from Midpoint (to a min of 8M and max of 14M).

Y2: 3.30B
Y3: 3.47B Ceiling 66.4 Floor 49.1
Y4: 3.64B Ceiling 69.7 Floor 51.5
Y5: 3.82B Ceiling 73.2 Floor 54.1
Y6: 4.01B Ceiling 76.9 Floor 56.8
Y7: 4.21B Ceiling 80.7 Floor 59.7
Y8: 4.42B Ceiling 84.8 Floor 62.6
Y9: 4.64B Ceiling 89.0 Floor 65.8
Y10: 4.88B Ceiling 93.4 Floor 69.1

As a comparison, the older system, with 57% players share and +/- 8M distance from the Midpoint.

Y2: 3.30B
Y3: 3.47B Ceiling 73.8 Floor 57.8
Y4: 3.64B Ceiling 77.1 Floor 61.1
Y5: 3.82B Ceiling 80.6 Floor 64.6
Y6: 4.01B Ceiling 84.2 Floor 68.2
Y7: 4.21B Ceiling 88.0 Floor 72.0
Y8: 4.42B Ceiling 92.0 Floor 76.0
Y9: 4.64B Ceiling 96.2 Floor 80.2
Y10: 4.88B Ceiling 100.6 Floor 84.6


Last edited by Crease: 01-10-2013 at 07:23 AM.
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01-10-2013, 07:23 AM
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metalfoot
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How long can a consistent 5% year-over-year growth be assumed, especially since it's a pricy commodity and is already in the minds of many overpriced?

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01-10-2013, 07:27 AM
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Quote:
Originally Posted by metalfoot View Post
How long can a consistent 5% year-over-year growth be assumed, especially since it's a pricy commodity and is already in the minds of many overpriced?
I just used 5% because thats what both the NHL and NHLPA liked to use for the purpose of selling their proposals.

If I have some time today, maybe I'll put together a spreadsheet that does scenario analysis for user-defined revenue growth figures.

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01-10-2013, 07:39 AM
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Originally Posted by metalfoot View Post
How long can a consistent 5% year-over-year growth be assumed, especially since it's a pricy commodity and is already in the minds of many overpriced?
Except it not really all that overpriced everywhere. Sure it is in Montreal, Toronto and New York (R) but everything is overpriced in larger cites. Bigger demand than what you can offer create rarity and that always a recipe for driving price up. The NHL is also badly underpriced in other market because some franchises are just not in viable market. What the NHL got going for them is the Canadian TV deal are all up for reneawal in a few years. But come hell or high water the NHL will have to relocate franchises during this CBA and maybe start thinking about a beachhead in western Europe, before the KHL does it.

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01-10-2013, 08:51 AM
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Quote:
Originally Posted by madhi19 View Post
Except it not really all that overpriced everywhere. Sure it is in Montreal, Toronto and New York (R) but everything is overpriced in larger cites. Bigger demand than what you can offer create rarity and that always a recipe for driving price up. The NHL is also badly underpriced in other market because some franchises are just not in viable market. What the NHL got going for them is the Canadian TV deal are all up for reneawal in a few years. But come hell or high water the NHL will have to relocate franchises during this CBA and maybe start thinking about a beachhead in western Europe, before the KHL does it.
Not entirely sure how you can claim overpriced in Montreal, Toronto, or NY when they consistantly sell out.

If anything its overpriced in the markets that get marginal attendance. Overpricing something is charging a price superior to what the market is willing to pay. That is not the case in Toronto or Montreal.

To teh topic at hand, revenue growth and its affect on the cap. The whole issue depends on where the revenue growth is occuring. If its the "small markets" that are driving hte growth then its not an issue. If the growth is being driven by a few arge markets while the smaller markets remain stagnant, then for sure it will cause a problem. (Depending on how comprehensive the revenue sharing package is. )

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01-10-2013, 09:33 AM
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Quote:
Originally Posted by Crease View Post
I'll start the comparision in Y3 because thats when the new system really kicks in. I assumed 5% revenue growth with a base of 3.3B in Y2. Here's how it plays out with 50% players share and +/-15% distance from Midpoint (to a min of 8M and max of 14M).

Y2: 3.30B
Y3: 3.47B Ceiling 66.4 Floor 49.1
Y4: 3.64B Ceiling 69.7 Floor 51.5
Y5: 3.82B Ceiling 73.2 Floor 54.1
Y6: 4.01B Ceiling 76.9 Floor 56.8
Y7: 4.21B Ceiling 80.7 Floor 59.7
Y8: 4.42B Ceiling 84.8 Floor 62.6
Y9: 4.64B Ceiling 89.0 Floor 65.8
Y10: 4.88B Ceiling 93.4 Floor 69.1

As a comparison, the older system, with 57% players share and +/- 8M distance from the Midpoint.

Y2: 3.30B
Y3: 3.47B Ceiling 73.8 Floor 57.8
Y4: 3.64B Ceiling 77.1 Floor 61.1
Y5: 3.82B Ceiling 80.6 Floor 64.6
Y6: 4.01B Ceiling 84.2 Floor 68.2
Y7: 4.21B Ceiling 88.0 Floor 72.0
Y8: 4.42B Ceiling 92.0 Floor 76.0
Y9: 4.64B Ceiling 96.2 Floor 80.2
Y10: 4.88B Ceiling 100.6 Floor 84.6
Don't forget to subtract out about $100m in non-salary benefits that count against HRR. That will lower the midpoint by more than $3m per season.

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01-10-2013, 09:42 AM
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Originally Posted by mouser View Post
Don't forget to subtract out about $100m in non-salary benefits that count against HRR. That will lower the midpoint by more than $3m per season.
Ah, thanks for that. Here's a revised table based on 2013 CBA:

Y2: 3.30B - 100M
Y3: 3.47B - 100M Ceiling 64.5 Floor 47.7
Y4: 3.64B - 100M Ceiling 67.8 Floor 50.1
Y5: 3.82B - 100M Ceiling 71.3 Floor 52.7
Y6: 4.01B - 100M Ceiling 75.0 Floor 55.4
Y7: 4.21B - 100M Ceiling 78.8 Floor 58.2
Y8: 4.42B - 100M Ceiling 82.8 Floor 61.2
Y9: 4.64B - 100M Ceiling 87.1 Floor 64.4
Y10: 4.88B - 100M Ceiling 91.5 Floor 67.7

Pushes both levels down about 2-3M season.

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01-10-2013, 10:42 AM
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Quote:
Originally Posted by Crease View Post
Ah, thanks for that. Here's a revised table based on 2013 CBA:

Y2: 3.30B - 100M
Y3: 3.47B - 100M Ceiling 64.5 Floor 47.7
Y4: 3.64B - 100M Ceiling 67.8 Floor 50.1
Y5: 3.82B - 100M Ceiling 71.3 Floor 52.7
Y6: 4.01B - 100M Ceiling 75.0 Floor 55.4
Y7: 4.21B - 100M Ceiling 78.8 Floor 58.2
Y8: 4.42B - 100M Ceiling 82.8 Floor 61.2
Y9: 4.64B - 100M Ceiling 87.1 Floor 64.4
Y10: 4.88B - 100M Ceiling 91.5 Floor 67.7

Pushes both levels down about 2-3M season.
The $100m comes out of player's share of HRR, so it would have double the effect with a 50% player share. e.g. year 6 would be $63.5m midpoint, with $73.0m ceiling and $54.0m floor.

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01-10-2013, 10:55 AM
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Quote:
Originally Posted by metalfoot View Post
How long can a consistent 5% year-over-year growth be assumed, especially since it's a pricy commodity and is already in the minds of many overpriced?
That's what they ask about China too

I think players don't have to live under bridges with the new CBA. Hell yeah they still have a way bigger average revenue than e.g. NFL players.

Thanks for the listing anyway, interesting how big these numbers might grow.

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01-10-2013, 10:55 AM
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Originally Posted by mouser View Post
The $100m comes out of player's share of HRR, so it would have double the effect with a 50% player share. e.g. year 6 would be $63.5m midpoint, with $73.0m ceiling and $54.0m floor.
You're making me look bad.

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01-10-2013, 11:01 AM
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mouser
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You're making me look bad.
Just wait till we actually get a copy of the new CBA, folks on the BoH will be debating language in it for years

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01-10-2013, 11:08 AM
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Quote:
Originally Posted by metalfoot View Post
How long can a consistent 5% year-over-year growth be assumed, especially since it's a pricy commodity and is already in the minds of many overpriced?
The league wanted the cap tied to revenues (which is fine TBH). The idea being that the higher revenues are, the more money the teams will have to afford the cap. As for how long 5% is sustainable... they averaged 7% each year of the last CBA.

Quote:
Originally Posted by Crease View Post
I just used 5% because thats what both the NHL and NHLPA liked to use for the purpose of selling their proposals.

If I have some time today, maybe I'll put together a spreadsheet that does scenario analysis for user-defined revenue growth figures.
Attached is a sheet with where the growth is adjustable. Use the 3rd tab (latest offers). I guessed on what the 250m of make whole would break down to.

** I didn't include benefits into the PA's share.
Attached Files
File Type: xlsx cap.xlsx‎ (21.9 KB, 2 views)

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Last edited by Riptide: 01-10-2013 at 11:15 AM.
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01-10-2013, 11:46 AM
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Originally Posted by madhi19 View Post
Except it not really all that overpriced everywhere. Sure it is in Montreal, Toronto and New York (R) but everything is overpriced in larger cites. Bigger demand than what you can offer create rarity and that always a recipe for driving price up. The NHL is also badly underpriced in other market because some franchises are just not in viable market. What the NHL got going for them is the Canadian TV deal are all up for reneawal in a few years. But come hell or high water the NHL will have to relocate franchises during this CBA and maybe start thinking about a beachhead in western Europe, before the KHL does it.
Several things with this. If a product is overpriced, they wouldn't be selling out every night. Classic supply and demand. Just like other markets can't sellout with the same price structure. The demand isn't there - at that price point. But that doesn't mean that they're not viable markets... you just can't compare and expect them to compete against the big markets without mechanisms in place to level the playing field (cap/RS). If the cap was 5m you could have 40-50 teams (assuming talent was there). Because the expenses would be a lot lower and thus ticket prices wouldn't have to be as expensive to cover costs.

As for teams relocating, it's possible a team might. However with the exception of Phoenix, every team is locked into long term leases and the odds of any of them moving are pretty slim (other than perhaps Phoenix).

And lastly, I don't see the NHL going to western Europe. 4-6 new/relocated teams there? They don't have a single league that pays close to what the NHL does in salaries. To my knowledge they don't have rinks as big as the NHL (or at least not enough of them). And even if they did have the rinks, would there really be the demand to pay NHL ticket prices long term? Not to mention that the travel/game schedule would pretty different. Either most of their games are inter-division (vs the current schedule) or they take multiple crazy long road trips to North America. And vice versa... current teams would have to make those same trips to Europe... long flights, jet lag, etc.

I honestly just do not see it as a truly viable setup (at least with the existing schedule - if they decreased the number of games then maybe). Also, the way the KHL is setup (cap wise) it's a lot more affordable to play in that league than in the NHL.

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