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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.

Brooks claims PA will not use escalator, expect flat cap for 2017-18 (upd: $75m cap)

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06-11-2017, 02:16 PM
  #1
mouser
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Brooks claims PA will not use escalator, expect flat cap for 2017-18 (upd: $75m cap)

http://nypost.com/2017/06/11/nhl-los...-a-hard-place/

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The expectation, affirmed in conversations within the past three days by essentially everyone on the NHL players’ side of the aisle, is that the union will decline to trigger the escalator for next season, thus creating a flat salary cap right around the current $73 million for 2017-18.

Well, not exactly. The NHLPA is not going to create the flat cap. The NHL will have done that by generating essentially no revenue growth over the past year. The players are picking their poison, choosing to go with a flat cap that restricts choices for free agents rather than creating a scenario under which escrow losses escalate.

We are told by individuals who traditionally have advocated pumping the maximum amount of dollars into the system that the infusion of dollars generated by the addition of the expansion Vegas Golden Knights has altered the equation for at least this time around.
IMO the introduction of Vegas provides the PA with the perfect opportunity to shift from always using the escalator to never using the escalator for at least the remainder of the current CBA.

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06-11-2017, 02:19 PM
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Quote:
Originally Posted by mouser View Post
http://nypost.com/2017/06/11/nhl-los...-a-hard-place/



IMO the introduction of Vegas provides the PA with the perfect opportunity to shift from always using the escalator to never using the escalator for at least the remainder of the current CBA.
Why does the introduction of Vegas offer said opportunity? Not arguing, I just need more detail to follow the reasoning.

Thanks.

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06-11-2017, 02:23 PM
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Originally Posted by MNNumbers View Post
Why does the introduction of Vegas offer said opportunity? Not arguing, I just need more detail to follow the reasoning.

Thanks.
The primary argument the PA has made in continuing to use the escalator is that it makes more $'s available to FA's and wouldn't be fair to stop using it now when past players have benefited.

Adding Vegas introduces an entirely new team full of paychecks for the players. Increasing the total payrolls by 3.x%. Yes, Vegas will take some players on existing contracts, but that just means their prior teams will have dollars freed up to spend. Yes, there will be more players added to the NHL, however you'd expect the majority of that new money is going to end up in the hands of existing PA members.

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06-11-2017, 02:30 PM
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The primary argument the PA has made in continuing to use the escalator is that it makes more $'s available to FA's and wouldn't be fair to stop using it now when past players have benefited.

Adding Vegas introduces an entirely new team full of paychecks for the players. Increasing the total payrolls by 3.x%. Yes, Vegas will take some players on existing contracts, but that just means their prior teams will have dollars freed up to spend. Yes, there will be more players added to the NHL, however you'd expect the majority of that new money is going to end up in the hands of existing PA members.
I see. So rather than the 5% escalator being the source of new $$, and thus competition that gives this year's FAs better contracts, the entire Vegas payroll is used for that....

And then, we quit with the escalator because it really isn't helping us, due to escrow anyway....

Right?

Interesting line in that article describing Bettmann as a 'short sighted commissioner'. And one who works to 'keep the salary floor down'. That's exactly what he has to do to keep the lower revenue trans close to solvent.....

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06-11-2017, 02:40 PM
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Originally Posted by MNNumbers View Post
Right?
Sums it up well for me.

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06-11-2017, 02:45 PM
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Here is the part that I found interesting:

Quote:
The NHL will have done that by generating essentially no revenue growth over the past year.
It would seem that this represents a misunderstanding of what the escalator is. Even with a modest drop in the $CDN it would seem that the NHL did in fact generate roughly 5% more revenue. Organic growth over the last 4 years has probably averaged between 6-7% with the drop in the $CDN taking a fair bit of steam out of this. Does Brooks think that it would be within the NHL's power to actually reverse the $CDN loss if they were just bigger thinkers. I mean it is very difficult to support the NHL administration on much but this article is a bit much.

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06-11-2017, 10:23 PM
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Quote:
Originally Posted by Fourier View Post
Here is the part that I found interesting:



It would seem that this represents a misunderstanding of what the escalator is. Even with a modest drop in the $CDN it would seem that the NHL did in fact generate roughly 5% more revenue. Organic growth over the last 4 years has probably averaged between 6-7% with the drop in the $CDN taking a fair bit of steam out of this. Does Brooks think that it would be within the NHL's power to actually reverse the $CDN loss if they were just bigger thinkers. I mean it is very difficult to support the NHL administration on much but this article is a bit much.
I agree with you. Brooks failed to mention this in the article and instead used the flat cap to bash Bettman and the NHL. Brooks' real problem is he wants the NYR to be allowed to outspend every other team other than Toronto by $30M.

Too bad. The NHL has been a much better league since the hard salary cap was instituted.

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06-11-2017, 10:59 PM
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Quote:
Originally Posted by KINGS17 View Post
I agree with you. Brooks failed to mention this in the article and instead used the flat cap to bash Bettman and the NHL. Brooks' real problem is he wants the NYR to be allowed to outspend every other team other than Toronto by $30M.

Too bad. The NHL has been a much better league since the hard salary cap was instituted.
Give it up. The league has 10 teams still losing money. That's the real issue.

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06-11-2017, 11:18 PM
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Give it up. The league has 10 teams still losing money. That's the real issue.
The NHL should have just waited and eventually contracted or relocated rather than expanded...those teams that are losing money now have been losing money for over a decade now and will continue to lose money and they'll have to be dealt with eventually when the owners don't want to keep their teams anymore.

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06-11-2017, 11:26 PM
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The Vegas answer its an excuse not an answer 3.3 % player position growth ok fine except many of those players are already salaried ...Non NHL players dont matter there is always an influx .... while i dont blame them for using that explanation ..... the concerns are long term

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06-12-2017, 12:19 AM
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I've been pretty strongly against the escalator for awhile so I hope it finally happens. A flat cap is not the end of the world and the current escrow rate and artificially inflated cap are unsustainable.

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06-12-2017, 12:57 AM
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Sharks lose $$, but by choice. They could reduce player cost and break even, or even make $$.

But owner willing to lose a few million/year to ice more competitive team, near cap.

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06-12-2017, 01:37 AM
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Huh, I wasn't sure if it would happen or not but kind of surprised to see it play out exactly like I suggested. I mean it makes a lot of sense, the PA hates paying escrow but is addicted to big UFA contracts, so now the Vegas expansion gives them the opportunity to cover both. Wasn't sure they'd actually take it though.

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06-12-2017, 01:42 AM
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Quote:
Originally Posted by ottawa View Post
The NHL should have just waited and eventually contracted or relocated rather than expanded...those teams that are losing money now have been losing money for over a decade now and will continue to lose money and they'll have to be dealt with eventually when the owners don't want to keep their teams anymore.
I don't think it would really work like you expect here. The salary cap is tied to overall league revenues, but individual team revenues are nowhere close to being even. So if you cut the bottom 5 revenue teams it would mean the salary cap shoots up, easy to manage for the top teams but now the former 6-10 teams will likely be in the same position losing money as the previous bottom 5 were.

Basically if you cut the poorest teams, the salary cap will go up and you'll get a new set of poor teams replacing them. And Ottawa would be a likely candidate.

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06-12-2017, 06:03 AM
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Quote:
Originally Posted by RandV View Post
I don't think it would really work like you expect here. The salary cap is tied to overall league revenues, but individual team revenues are nowhere close to being even. So if you cut the bottom 5 revenue teams it would mean the salary cap shoots up, easy to manage for the top teams but now the former 6-10 teams will likely be in the same position losing money as the previous bottom 5 were.

Basically if you cut the poorest teams, the salary cap will go up and you'll get a new set of poor teams replacing them. And Ottawa would be a likely candidate.
Good point, I hadn't thought of it that way.

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06-12-2017, 06:03 AM
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Quote:
Originally Posted by LadyStanley View Post
Sharks lose $$, but by choice. They could reduce player cost and break even, or even make $$.

But owner willing to lose a few million/year to ice more competitive team, near cap.
TV deal also isn't helping

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06-12-2017, 08:17 AM
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Makes things a bit more uncomfortable in CHI this off season.

Moves to be made for sure.

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06-12-2017, 10:14 AM
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Bob McKenzie said this on twitter yesterday. It's never over til the fat lady sings.

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06-12-2017, 12:31 PM
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Bob McKenzie said this on twitter yesterday. It's never over til the fat lady sings.

I think Bob may be making a mistake assuming a 0% escalator would mean a flat $73m cap. Using his math a full 5% escalator would mean a cap of $76.6m. Higher then the $75.5m to $76m estimated by Daly a few months ago.

A $75.5m cap would mean HRR grew 3.3% year over year. While a $76.0m cap would be HRR growth of 4.0%.

An escalator >0% would be necessary just to keep the cap from shrinking.

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06-12-2017, 12:45 PM
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There's another aspect to this. While Vegas will add to salary growth, it's pretty questionable that they'll be able to generate the roughly $140m that would be required to contribute a full share to HRR. So that could drive up escrow even further in the coming year.

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06-12-2017, 12:53 PM
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There's another aspect to this. While Vegas will add to salary growth, it's pretty questionable that they'll be able to generate the roughly $140m that would be required to contribute a full share to HRR. So that could drive up escrow even further in the coming year.
The NHL and PA cut a special deal on Vegas that the new team won't impact finances negatively. Unfortunately I've never seen the precise details of what that means published.

One possibility of many for example is the NHL may have agreed to treat Vegas' HRR contribution as league-average for the first X years, even if the actual number is below that.

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06-12-2017, 12:58 PM
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Quote:
Originally Posted by mouser View Post
The NHL and PA cut a special deal on Vegas that the new team won't impact finances negatively. Unfortunately I've never seen the precise details of what that means published.

One possibility of many for example is the NHL may have agreed to treat Vegas' HRR contribution as league-average for the first X years, even if the actual number is below that.
In terms of actual payout to players? ie the players will be receiving greater than 50% of HRR if Vegas doesn't contribute enough revenue?

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06-12-2017, 01:03 PM
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Quote:
Originally Posted by mouser View Post
The NHL and PA cut a special deal on Vegas that the new team won't impact finances negatively. Unfortunately I've never seen the precise details of what that means published.

One possibility of many for example is the NHL may have agreed to treat Vegas' HRR contribution as league-average for the first X years, even if the actual number is below that.
Do you have more info on this?

That's quite surprising, as it will start eating away at the expansion fee quite quickly. Add to that any revenue sharing that the franchise will receive.

No wonder the league was so wary to move into Quebec right now.

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06-12-2017, 01:20 PM
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This could add even greater parity to the league, particularly if they opt not to escalate for multiple years. Capped out teams have been receiving a reprieve with artificial growth the last few seasons, especially helping on bonus carry overs.

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06-12-2017, 01:29 PM
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This could add even greater parity to the league, particularly if they opt not to escalate for multiple years. Capped out teams have been receiving a reprieve with artificial growth the last few seasons, especially helping on bonus carry overs.
Has the salary cap really brought in parity? 4 different teams have won the last 9 Stanley cups. 6 different teams won the 9 prior to the salary cap.

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