The Cap Should Be Over $100 Million Right Now. How Is The NHL going to handle the inevitable post-COVID cap rise?

[ToDavid]

They also added a year lag to the formula. It used to be based on the prior year’s revenue, now it’s two years prior. So it’s intentionally “behind” the current growth of the league to give them more flexibility.

Edit: didn’t see Op was already looking at two years prior.

 

[Lazlo Hollyfeld]

Expansion fees have never been a part of HRR, so that's nothing new.

The owners can't just hide that 6.43 billion, probably headed to 6.6 billion from last year's revenue is over 32% higher than HRR from 2019 (year pre-COVID, it was 4.86 billion or thereabouts that year I believe). Even Bettman states publicly the cap is going to rise a lot in the next few years.

As an aside the NHL is doing quite well revenue wise. 6.43 billion for 22-23 season, maybe even more than that for 23-24 is not too shabby. It's not NBA (10.93 billion) or MLB (11+ billion) level ... but being in the mid 6 billions is not bad for a league that just got an OK US TV deal, nothing on the level of what the NBA has.

People who are saying the WNBA is going to be a threat to the NHL maybe need to chill, WNBA revenue is expected to rise to $200 million even with Caitlyn Clark, that's miles behind 6.4 billion. MLS (North American soccer) is a bit under $2 billion.

I wasn't arguing expansion fees not being HRR was new. It was just an example of over a half billion dollars in revenue that is not included in HRR.

It is impressive though how the NHL pulled off that adding a new team to the National Hockey League is not hockey-related.

 

[Soundwave]

They also added a year lag to the formula. It used to be based on the prior year’s revenue, now it’s two years prior. So it’s intentionally “behind” the current growth of the league to give them more flexibility.

That only applies for next season though, it could have been extended another year past that but only if the players failed to pay back the COVID losses to owners.

But revenue has exploded well past that, COVID losses were completely paid off like a year ahead of schedule.

So the lag formula will only be for next season, and even next season it will push the cap to over $92 million. Should be another 4.5 million rise, maybe the NHL will even allow a little more than that.

After that though all bets are off. There's nothing that says the cap can't just go straight to like $105+ million if that's where players draw the line in the sand.

 

[StreetHawk]

Could be wrong here, but wasn't there some sentiment among the players that they didn't want the cap to spike and then potentially have to deal with higher escrows? Has the escrow debt been fully settled? Maybe we've blown past that.

I'd be pretty shocked if the cap jumped next CBA, because I think the owners would want to offset with stricter escrow rules. But maybe the players could get friendlier terms on annual increases to stair-step the cap up over time.

PA per the player's instructions is to keep the escrow amounts low. The PA rejected the NHL's offer to increase the cap last season which also would have increased the escrow % from 6% comensurately. PA declined the offer, so they played at the $83.5 mill cap.

Maybe that does change, as the PA exits the $1 billion that they owed the NHL for getting paid in full during Covid. And they do decide to increase the cap ceiling by more than the stated 5%. $92.5 and $97.2 mill are the amounts of a 5% increase over the next 2 seasons.

 

[Soundwave]

PA per the player's instructions is to keep the escrow amounts low. The PA rejected the NHL's offer to increase the cap last season which also would have increased the escrow % from 6% comensurately. PA declined the offer, so they played at the $83.5 mill cap.

Maybe that does change, as the PA exits the $1 billion that they owed the NHL for getting paid in full during Covid. And they do decide to increase the cap ceiling by more than the stated 5%. $92.5 and $97.2 mill are the amounts of a 5% increase over the next 2 seasons.

They did that because they still owed the NHL owners money for COVID losses at that time. They've now fully paid off the debt I believe, so the strategy on the PA was to pay off the debt as quickly as possible, which is smart, because if they didn't they would be stuck with an extra year of an artificial 5%-ish cap rise maximum. They have paid it off well before 2026, that lower "lagging" cap total is basically gone after next season.

92.5 mill I could see for next season, but I don't think the players will agree to 97 the following year. They paid off the debt and agreed to a tiny cap rise (83.5 mill as you stated) in the past, once the 5% rule is gone, they are correct to expect more since they sacrificed in the past.

That's gonna have to be over $100 million and that's probably just the floor.

 

[Chainshot]

View attachment 910982

Almost every GM on July 1st.

 

[Soundwave]

Just for historical context, I believe the largest the cap has risen in any one 1 year would be about 6.4 million from 07-08 to 08-09, however with inflation that would be more like 9.4 million today for a single season rise.

The NHL will have a hard time arguing the cap can't rise at least 9.4 million I think when there is already established precedent for it.

We may be looking at

24-25 season cap - 88 mill (already established)

25-26 season - 92.7 million (using the same 5.38% escalator the NHL used the previous year)

26-27 season - 92.7 + 9.4 million = 102 million cap approx

The players could honestly ask for more than that as that would still be likely well below where revenue is at by then.

 

[Golden_Jet]

Expansion fees have never been a part of HRR, so that's nothing new.

The owners can't just hide that 6.43 billion, probably headed to 6.6 billion from last year's revenue is over 32% higher than HRR from 2019 (year pre-COVID, it was 4.86 billion or thereabouts that year I believe). Even Bettman states publicly the cap is going to rise a lot in the next few years.

As an aside the NHL is doing quite well revenue wise. 6.43 billion for 22-23 season, maybe even more than that for 23-24 is not too shabby. It's not NBA (10.93 billion) or MLB (11+ billion) level ... but being in the mid 6 billions is not bad for a league that just got an OK US TV deal, nothing on the level of what the NBA has.

People who are saying the WNBA is going to be a threat to the NHL maybe need to chill, WNBA revenue is expected to rise to $200 million even with Caitlyn Clark, that's miles behind 6.4 billion. MLS (North American soccer) is a bit under $2 billion.

In post 12, I listed a bunch of items that are not included in cap calculation, that Reddit guy missed or didn’t realize. I listed items I thought of. I’m sure I’m missing a bunch as well. It’s not just a simple calculation.
They can all be found in MOU and CBA,

 

[Soundwave]

In post 12, I listed a bunch of items that are not included in cap calculation, that Reddit guy missed or didn’t realize. I listed items I thought of. I’m sure I’m missing a bunch as well. It’s not just a simple calculation.
They can all be found in MOU and CBA,

He cites that in his post:

The calculation of the salary cap is a complex formula based on revenues, less expenses, divided by the number of franchises. That calculation sets the salary midpoint. The salary cap is 15% above the midpoint and the salary floor is 15% below it. Using the salary cap as a percent of HRR isn't a perfect formula to determine what the salary cap will be, but it's a good approximation. During the years preceding COVID since the 50/50 split was established, the percentage was always around 50-55%.

He also shows past HRR and what the cap was in previous years, it's impossible to argue that revenue isn't 30%+ higher today than it was in the 18-19 season. There may be some variance, but it's not going to magically take a cap that should be like $110 million and make it $95 million or something.

 

[FriendlyGhost92]

Maybe one way to do it is to allow the cap to rise a little more than 5% for next season. They did allow for last year, going from 83.5 to 88 mill is technically 5.38% increase so it seems like some discretion is allowed.

By that same amount the cap should be 92.7 million next season, which is what Elliot Friedman is saying (just below 93 mill). Maybe the NHL can allow the cap to go to 94 million (say) instead as a concession to players.

Then after the 25-26 season (the following year) we have an even larger rise say from 94 to 101-103 million, followed by another jump to 109-110 million the next season.

I think players will have a little patience, but not as much as people think, they're entitled to that money and I don't think they're going to wait like 5-6 years for the cap to catch up to what revenue is. NHL owners are the ones that killed an entire season (2005) to get a 50-50 HRR split, they can't cry now that players should take far less than 50-50 for many more years when the COVID debt has been paid off like 2 years ahead of schedule.

I expect they'll go a little higher than 5%, but I don't think they'll do it all at once. Just stagger it at a quicker rate like you said.

 

[Soundwave]

I expect they'll go a little higher than 5%, but I don't think they'll do it all at once. Just stagger it at a quicker rate like you said.

I think it may be like 93 (25-26) to 102 (26-27) to 110 (27-28). And even then they probably won't be caught up to what they're owed because by then you're probably talking HRR being over 7 billion.

They'll allow it to be a little slower, but players have only a certain amount of patience.

The whole "maybe the players will accept another 5% rise only in 26-27 is probably crazy. They're entitled to way more than that and the Return to Play stipulations that artificially hold the the cap rises down are null and void.

 

[FriendlyGhost92]

I think it may be like 93 (25-26) to 102 (26-27) to 110 (27-28). And even then they probably won't be caught up to what they're owed because by then you're probably talking HRR being over 7 billion.

They'll allow it to be a little slower, but players have only a certain amount of patience.

The whole "maybe the players will accept another 5% rise only in 26-27 is probably crazy. They're entitled to way more than that and the Return to Play stipulations that artificially hold the the cap rises down are null and void.

I doubt you see that big of jumps in 26-27/27-28.

But yeah, as a rule just assume revenue goes up $250M/year. Sometimes it's more, sometimes it's less. New TV deal years it usually goes up more. It went up big a few years ago because of all the sports gambling sponsorships they grabbed.

 

[PaulD]

I think more hockey fans don't care about the business side of how NHL handles the boring monetary details. I know I have my own business and extensions of that to devote my time to.
Players , teams, favourites , underdogs , losers are worthy of fan discussion for sure....drop the puck and game on!

 

[Soundwave]

I doubt you see that big of jumps in 26-27/27-28.

But yeah, as a rule just assume revenue goes up $250M/year. Sometimes it's more, sometimes it's less. New TV deal years it usually goes up more. It went up big a few years ago because of all the sports gambling sponsorships they grabbed.

I don't think the NHL can get away with giving the players at least over $100 mill for 26-27 season.

What would even be the argument exactly?

The players sacrificed in 22-23 by only accepting a 83.5 mill (1 mill only increase) when they could have gotten more in order to pay back the owners faster.

The owners now owe the players.

There's no chance IMO the NHL is going to be able to sell a sub $100 mill cap for 26-27. There's *a lot* of players who's contract is up in the next 2-3 years who's next deal depends on where the cap is at.

 

[FriendlyGhost92]

I don't think the NHL can get away with giving the players at least over $100 mill for 26-27 season.

What would even be the argument exactly?

The players sacrificed in 22-23 by only accepting a 83.5 mill (1 mill only increase) when they could have gotten more in order to pay back the owners faster.

The owners now owe the players.

There's no chance IMO the NHL is going to be able to sell a sub $100 mill cap for 26-27. There's *a lot* of players who's contract is up in the next 2-3 years who's next deal depends on where the cap is at.

The problem is that kind of absurd increase only really benefits the players who are free agents that year.

GMs will spend that money and then players the following years are back to negotiating with less cap space available.

 

[Soundwave]

The problem is that kind of absurd increase only really benefits the players who are free agents that year.

GMs will spend that money and then players the following years are back to negotiating with less cap space available.

It would be large increases for multiple years not just one.

The cap has risen by over $9 million+ in a year (inflation adjusted) in the past, it's hard to make an argument why it can't now if the revenue is there.

I don't know what the exact ratio is, but I'd imagine probably like 30-40%+ of the NHLPA body has a contract coming up for a renegotiation in the next 2-4 years. It may actually be more than 50%, I'd have to take a look.

If I'm an Auston Matthews, I'd be furious at the PA for example if they're not giving me at least a $110 mill cap or so provided the revenue is around 7 billion for the league. If I've purposefully taken less on my current deal to cash in at a future date, I'm well within my rights to expect a normalized cap when COVID debt has been paid off for years by that point.

That's fair, the NHL (no the PA) is the one that argued tooth and nail for 50-50 HRR split.

 

[Golden_Jet]

Something else I forgot to mention along with expenses that aren’t included in cap calculation is.

How much will the collapse of a lot of the regional networks and some renegotiated to a smaller number, affect things.

 

[Soundwave]

Something else I forgot to mention along with expenses that aren’t included in cap calculation is.

How much will the collapse of a lot of the regional networks and some renegotiated to a smaller number, affect things.

It may slow increase, but the NHL is also getting a new Canadian TV deal and then a new US TV deal even a few years after that. That will bring in revenue.

The fact is, I don't think revenue is ever going back below 6.5 billion unless there is some kind of new pandemic and those things tend to happen only every 100 years.

7 billion even I think is inevitable, even if the cap never makes a dime more than that ever, that means the cap should be around $110-$113 million.

The NHL is making bank at the gate I believe, they make a shit ton from ticket + parking + concession + merchandise (jersey) revenue, the fact that they're about 65% of NBA revenue without a huge TV deal in the US is pretty damn good honestly.

 

[Djp]

There's a good thread on Reddit posted by a user named tkecanuck341 that discusses the fact that at 6.43 billion in NHL revenue for 22-23, the NHL is millions behind what the cap actually should be based on a 50-50 HRR split:



He goes into big detail on it, but more or less I believe he is correct. 6.43 billion in HRR is 32% higher than the 4.86 billion it was in 18-19, the last year before COVID hit, when the cap used to be 79.5 million. An increase of 32% over 79.5 mill cap (as it was in 18-19) would be 105 million almost. Now granted there's an extra team in Seattle (32 teams instead of 31), but still the cap should probably be over $100 million based on revenue already.

This has been held back because the players had to pay back the owners for losses during COVID, but that was fully paid off last season already I believe, two years ahead of schedule.

Now I believe the NHL has a mechanism where the cap can only rise so much the next two years (6%?) because of COVID conditions, but after that, that stipulation goes away.

I wonder how the NHL will handle this? Maybe they allow the cap to hit 100 mill for the 25-26 season to prevent a massive spike the following year? Revenue is headed towards 7 billion in 2 years, on a 7 billion HRR 50-50 split between owners and players, the cap should be a whopping $110+ million approximately.

How much longer do we think the players/PA will accept far less than 50% of HRR that they're entitled to now that the COVID debt is paid off?

Good OL fuzzy math..

Forgot teams lost money still paying players during Covid but not selling tickets..

Players do not get new franchise revenue. This covers owners losses in future tv and national revenue.

You don’t want a sudden cap increase because that just rewards those lucky to be a RFA or ufa

 

[Soundwave]

Good OL fuzzy math..

Forgot teams lost money still paying players during Covid but not selling tickets..

Players do not get new franchise revenue. This covers owners losses in future tv and national revenue.

You don’t want a sudden cap increase because that just rewards those lucky to be a RFA or ufa

Bettman himself has said the players have paid off the COVID debt to owners (like 2 years ahead of schedule at that).

So that excuse doesn't fly anymore.

The players are honestly in the right on this one. They're entitled to that money, the NHL is the one that flushed an entire year down the toilet to get 50-50 HRR split gaurunteed for both sides (roughly).

With regards to franchise revenue that's also not a given in the future. The PA can 100% argue some portion of expansion revenue is HRR (I mean if it's not "hockey related" exactly what is it? Who if not the players are consumers coming to see for these expansion teams). But that's another can of worms, I suspect though it will become a hot button topic in the next CBA negotiation.

 

[Tawnos]

They did that because they still owed the NHL owners money for COVID losses at that time. They've now fully paid off the debt I believe, so the strategy on the PA was to pay off the debt as quickly as possible, which is smart, because if they didn't they would be stuck with an extra year of an artificial 5%-ish cap rise maximum. They have paid it off well before 2026, that lower "lagging" cap total is basically gone after next season.

92.5 mill I could see for next season, but I don't think the players will agree to 97 the following year. They paid off the debt and agreed to a tiny cap rise (83.5 mill as you stated) in the past, once the 5% rule is gone, they are correct to expect more since they sacrificed in the past.

That's gonna have to be over $100 million and that's probably just the floor.

This is false. The debt was paid out early last season. The artificial cap numbers were $1m rises per year. The 5% increases only kicked in after the debt was paid off.

Something else you don't seem to realize based on your posts in this thread. The players get 50% of HRR no matter what the floor/midpoint/cap itself actually is. Just like the players give money back to the owners in the event that salaries were over 50% of HRR (held back in the form of escrow), the players also get money back from the owners in the event salaries end up under 50% of HRR for that season. The floor/midpoint/cap is essentially a way to keep salaries in the right range so this give and take doesn't get too crazy.

 

[Soundwave]

This is false. The debt was paid out early last season. The artificial cap numbers were $1m rises per year. The 5% increases only kicked in after the debt was paid off.

Something else you don't seem to realize based on your posts in this thread. The players get 50% of HRR no matter what the floor/midpoint/cap itself actually is. Just like the players give money back to the owners in the event that salaries were over 50% of HRR (held back in the form of escrow), the players also get money back from the owners in the event salaries end up under 50% of HRR for that season. The floor/midpoint/cap is essentially a way to keep salaries in the right range so this give and take doesn't get too crazy.

I believe the NHLPA was given a choice of a higher cap in the season it went to 83.5 million (only a 1 mill rise) or to accept the 1 mill rise, but that would enable them to pay back their debt faster. They chose the lower raise to pay back the cap faster.

Actually this was probably a ploy by the owners to get the PA to take the bait, take a cap raise for one year and hopefully not pay off the debt quickly, because if that had happened the Return to Play rules stipulate that the 5% increase escalator would automatically renew itself for an extra season.

The PA was smart and didn't take the bait as such they paid off the debt way earlier and thus avoiding that extra year penalty (effectively).

The players have been taking more like 41% of HRR in recent years to pay off the debt.

They've held up their end of the bargain, you can't expect them to just take 5% more a season "just because it's a nice number" indefinitely.

 

[Djp]

Bettman himself has said the players have paid off the COVID debt to owners (like 2 years ahead of schedule at that).

So that excuse doesn't fly anymore.

The players are honestly in the right on this one. They're entitled to that money, the NHL is the one that flushed an entire year down the toilet to get 50-50 HRR split gaurunteed for both sides (roughly).

With regards to franchise revenue that's also not a given in the future. The PA can 100% argue some portion of expansion revenue is HRR (I mean if it's not "hockey related" exactly what is it? Who if not the players are consumers coming to see for these expansion teams). But that's another can of worms, I suspect though it will become a hot button topic in the next CBA negotiation.

That payback delayed cap growth.

That still dliws the cap growth so it's not a spike.

You also have other expenses such as p ln ayer pensions and health insurance gosts in thus. Thst assumes the calculation li actions is accurate.

Many owners own more than one team so are NV a revenur and administrative costs can vr miscalculated because an owner with multiple teams 'thus they might have reports on total revenue, not nhl specific

They likely also set up a rainy day fund for the next Covid event that also factors into revenue formula

Added issue ud thr death of local broadcsdting/RSNs and lost revenue for teams.

 

[Soundwave]

That payback delayed cap growth.

That still dliws the cap growth so it's not a spike.

You also have other expenses such as p ln ayer pensions and health insurance gosts in thus. Thst assumes the calculation li actions is accurate.

Many owners own more than one team so are NV a revenur and administrative costs can vr miscalculated because an owner with multiple teams 'thus they might have reports on total revenue, not nhl specific

They likely also set up a rainy day fund for the next Covid event that also factors into revenue formula

Still you can't hide a whopping 32% increase in revenue from pre-COVID (18-19) to 22-23 season, an amount that's likely rising more every year that passes.

I can totally understand why guys like Swayman and Shesterkin aren't willing to take pennies on the dollar even though they're getting dragged through the mud in public over it. The 88 million cap is basically a phony mirage, any top agent with any basic math skills could quickly figure out the salary cap should be at least $10 million higher than where it is even with all the little variance you want to throw in there.

That money has to come back onto the cap, it's owed to the players, sooner likely than later given that the current CBA is up soon and the PA isn't just going to bend over.

 

[FriendlyGhost92]

It would be large increases for multiple years not just one.

The cap has risen by over $9 million+ in a year (inflation adjusted) in the past, it's hard to make an argument why it can't now if the revenue is there.

I don't know what the exact ratio is, but I'd imagine probably like 30-40%+ of the NHLPA body has a contract coming up for a renegotiation in the next 2-4 years. It may actually be more than 50%, I'd have to take a look.

If I'm an Auston Matthews, I'd be furious at the PA for example if they're not giving me at least a $110 mill cap or so provided the revenue is around 7 billion for the league. If I've purposefully taken less on my current deal to cash in at a future date, I'm well within my rights to expect a normalized cap when COVID debt has been paid off for years by that point.

That's fair, the NHL (no the PA) is the one that argued tooth and nail for 50-50 HRR split.

It's an increase over two years instead of one...

And then in 28-29 GMs are back to having $3M - $4M extra to work with and FAs get squeezed again.