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

[Tawnos]

It's very different I would argue.

In the past you were hoping for/projecting for great revenue with no gauruntee.

This is a bizarre situation where because of a freak occurence (COVID, global pandemic, first in 100+ years) you have a cap that had to be restricted and money had to be paid back, but at the same time revenue and inflation has increased massively.

Not "maybe", 6.43 billion is cleary as day 32% higher than pre COVID.

That changes the dynamic entirely, if you're an agent and you're not telling your client that they have to be extremely careful about signing a long term deal now because the cap could very well be 20-25% higher in 2 years, you're not doing your job.

You have to price in a player's long term extension at this point against the basis of a 105-110 million cap, not 88 million with wishful dreams of maybe increasing to 110 in 5 years. The revenue is already there to support 100+ million, today, now.

I get all that, but here the thing: If the revenue were already there to support 100+ million, then the players wouldn't have had to give the owners 3% of their salary this past season. Despite the amount revenue growth has outstripped the cap increases, players are still receiving more than 50% of HRR across the whole season.

Under a standard calculation, you're right the revenue is there for that. In practice, things are in a really good spot at the moment. Very close to a legitimate 50/50 split.

 

[Soundwave]

What the f*** do you not get about a CBA impasse could cause a lockout?

Yes. They are risking their salary to fight an issue they don't benefit from.

This isn't difficult to understand.

The NHLPA would have to be the biggest suckers of a PA in pro sports to get scared by that.

10.6% increase in cap versus a 32+% rise in salary cap is hilariously bad to begin with, I don't think that would fly in any of the other major pro sports.

No one in the NHLPA believes the NHL is going to risk a lock out over that. They have no ground to stand on whatsoever, it's a complete paper threat.

If business in the NHL was terrible and revenue was down pre-COVID and COVID somehow devastated the league, OK, but we are MILES away from that, the reality is the complete opposite actually, I think the NHL has higher revenue increase than both the NBA and MLB.

The players deserve a (big) bone being thrown their way, even the owners and Bettman know that.

 

[Soundwave]

Until the next CBA yes,
Players aren’t losing any money and won’t be losing any money chicken little.

The players have done their part, they deserve a much larger cap.

You can't hide 32% rising revenue and growing (might over 40% or more by the time the new CBA is even up).

It's not a matter of chicken little, I'm not sure why people are so scared of this anyway. The players deserve it 100%. If your business is up that much and the players are the only reason it's worth anything at all, why shouldn't they see the benefit of a cap rise that NBA and NFL and MLB are enjoying.

The cap was supposed to reward players with a higher cap based on higher revenue. Wasn't that the whole point? Owners get some cost certainty, but based on revenue, players get rewarded if the league grows with a higher salary cap and higher salaries subsequent. So why is it so many people are uncomfortable with the idea of players getting their due.

88, even 92 million dollar cap is a joke relative to the money the NHL makes today.

 

[Ciao]

@Soundwave and any others who seem to think the players get some kind of bonus if the cap goes up -- they don't.

No matter how high or low the cap is, the players collectively still get 50% of HRR.

The thing is, the higher the cap, the more escrow that's deducted from their individual earnings, which I'm sure burns their ass.

I'm sure most players prefer to keep the cap and escrow low, unless they don't already have a contract.

$775,000 doesn't go as far as it used to, with agents' commissions, escrow and taxes.

There are a whole lot more players near the bottom of the pay scale than near the top. Helping the $5-million+plus players get an extra million probably isn't nearly as popular within the PA as helping the $5-million-minus players keep more of their hard-earned dough. There are a lot more of the unders than the overs on every team and throughout the league.

 

[Soundwave]

@Soundwave and any others who seem to think the players get some kind of bonus if the cap goes up -- they don't.

No matter how high or low the cap is, the players collectively still get 50% of HRR.

The thing is, the higher the cap, the more escrow that's deducted from their individual earnings, which I'm sure burns their ass.

I'm sure most players prefer to keep the cap and escrow low, unless they don't already have a contract.

$775,000 doesn't go as far as it used to, with agents' commissions, escrow and taxes.

There are a whole lot more players near the bottom of the pay scale than near the top. Helping the $5-million+plus players get an extra million probably isn't nearly as popular within the PA as helping the $5-million-minus players keep more of their hard-earned dough. There are a lot more of the unders than the overs on every team and throughout the league.

They get higher salaries if the cap goes up over time.

Otherwise I'm sure the NHL would love to make the case that the cap should stay at 88 million indefinitely.

Every NBA, NFL, MLB player would laugh at NHL players for taking that deal, escrow or not.

 

[Pablo El Perro]

I think these numbers originate from Forbes, But they aslo state. "incuding arena proceeds from non NHL events"
So who knows how much that is?

With some Southern teams, that can be a big chunk of revenue. In the dark times for the Panthers, non-nhl revenue was why a certain owner didn't care much about icing a competitive team for years. I'd guess concerts don't for revenue sharing.

 

[mouser]

It'll never happen but in theory if the overall salaries were less than the mid point between the cap floor/ceiling then it should revert to reverse escrow where players get more than their contract amount.

It already has happened at least twice, maybe three times now as I’m suspecting the players received a boost for 2023-24. Haven’t seen final figures yet though.

 

[mouser]

How does the escrow work when it goes the other way? Say pure HRR means it should have been a cap of 90 mil, does the NHL then pay the players the difference?

Yes. The players get an extra x% of their contract paid to them by the teams to keep the 50/50 split.

 

[Larry Hanson]

It already has happened at least twice, probably three times now as I’m expecting the players receive a boost for 2023-24.

Really? what years?
Most of the teams are at or near the cap every year, the average would have to be closer to the floor than the ceiling.

 

[mouser]

Really? what years?
Most of the teams are at or near the cap every year, the average would have to be closer to the floor than the ceiling.

I don’t have my financial spreadsheet handy right now, but it happened twice between 2005 and 2011. May have been 2005 and 2008 iirc.

 

[mouser]

Compare to the NHL. Revenue has gone up 32% from 18-19 to 22-23 (pre/post COVID) in only 4 years. Yet the NHL cap has only gone up about 10.6%, versus 28% for the NBA. Even though the NHL has a higher increase in revenue.

The NFL cap has similarly increased by almost 29% in the same period of time (2020 versus today) including a record $35 million surge in the cap in the last season.

I'm sorry I know some people are going to twist themselves into a pretzel to say why this isn't a big deal, but I can't look at that and not feel like NHL players aren't getting totally hosed. NHL revenue is growing faster than the NBA, but the cap which is supposed to be tied to revenue is growing at about 1/3 the rate, lol.

At some point you are just abusing the "COVID emergency" excuse if you're the NHL.

Several important factors you may be overlooking:

A) The # of NHL teams increased from 31 to 32. Assuming an average revenue for Seattle that’s an “artificial 3.2%” revenue bump which doesn’t change the cap.

B) The players were routinely losing 10-12% of their paychecks to Escrow prior to Covid. The MOU instituted the cap lag formula to reduce Escrow. If the NHL and PA are successful in their goal to effectively eliminate Escrow that would essentially “remove” 10-12% of the revenue growth from the cap, instead purposing it to fix Escrow.

C) The non-salary benefits players receive has increased substantially with the 2020 MOU. The exact numbers aren’t public but I’d estimate 2-3% of additional HRR is now going towards those benefits vs pre-2020. Theses benefits count towards the players’ 50% share of HRR.

Those three categories tally up to 15-18% of the 32% NHL revenue growth you cite being eaten up, leaving a net 14-17% of revenue growth to increase the salary cap.