Salary cap

Sorry for the lack of posts, but the days are taken up by workshops here at this sports editors conference in Minneapolis.

So by now, this is fairly old news, but next season’s salary cap will be $56.7 million and the “floor” will be $40.7 million. Except the Kings to be much closer to the floor than the ceiling.

So the salary cap increases by six million. I saw one of the comments asking about whether this was a positive and a negative. I see it as a real negative, and the discussion around the NHL is trending this way. The sense is that it’s creating the type of class warfare that existed before the lockout, although to a lesser extent. The “haves” will be able to spend $56 million and the “have nots” won’t. You might ask, wasn’t the new collective-bargaining agreement supposed to prevent that? Yes, yes it was. It’s a good question for Gary Bettman and some of the owners…

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  • typicaljs

    Well, can someone give us the numbers of what the large market teams were spending pre-CBA vs post-CBA. How could this be looked at as a negative ? There’s actually a limit on what the large market teams can spend, and theres a floor for how low the small market teams can go. If this is such a problem, why doesn’t the floor just go up/down with the cap? At least this way there’s only a 16 million dollar difference between the extremes, I’m sure it was much worse than that pre-CBA.

  • Just wondering

    Rich, you’re the best, but I have to disagree with you on this one. I don’t see this as a negative at all. Hockey, like any business, is based on supply and demand. If the smaller markets can’t keep up with the bigger markets, so be it. I own and operate a small company, and I can’t keep up with the national giants. Does that mean some government agency (or the NHL Board of Governors) should step in and make things easier for me? In my dreams, maybe.

    Secondly, there is no way anybody should listen to AEG as it cries wolf over and over again. These guys have more money in their saddlebags than most anyone else in the world. If they don’t want to invest money into the Kings to make them a viable product, let them sell the franchise to somebody who does care. Arte Moreno already has proven that works with the Angels. Just because some of these other rich folks own teams doesn’t mean they operate them correctly.

    I never, ever will feel sorry for athletes or owners in pro sports. They make more money every year than most of us will earn in a lifetime – what’s so bad about that?

  • Mark

    @Just Wondering

    I agree with you that this is a positive for the NHL. As high as they make the salary cap if the league falls next year they have the same right to lower the cap to match the supply and demand. Also think about it this way if AEG is complaining that they’re losing so much money how are they able to lend $7 million dollars to Boots and why are the season ticket holders forking over more money so they can finance this loan? The Kings never spend to the cap and they hardly care about entertaining their fans so let them figure out how to deal with the cash flow issues.

  • anthony

    The way the salary cap is structured these days, (no matter whats done) unfortunately 3 or 4 players will be receiving about 33% – 50%
    Just look at the NY Rangers.
    Gomez, Jagr, & Drury received $25.5 Million of $50.4.
    These 3 players took more than 50% of the entire cap.

    The salary cap will continue to rise every season, from now on, in order to keep the players happy.

    Negative – it goes against what the collective bargaining agreement was designed to prevent.
    This probably means that another lock-out or strike is looming nearby.

    Positive – It keeps the players happy. And it gives the owners more flexibility with regards to signing players and building stanley cup contenders.

  • Matt George

    This league cap thing has come and gone for many pro sports teams.

    The logic behind it is simple and one that I agree with.

    Your job as a team owner is to “win the cup” , NOT “put the other guy outta business”.

  • Anonymous

    Some of you are missing the point.

  • Steve

    Wow.
    Anthony actually makes some sense.
    Good analysis.

    Personally, I have no problem to the increase.
    Its capitalsm in progress.

  • Chuck

    I think the Kings are going to be “pressed” to make the cap floor. I’ve heard the current salary commit is currently $25.5 million. I see this number as a negative. The lockout was a waste, except that owners got cost certainty, and small market teams got revenue sharing. Rob Blake may get his $6 million, just so LA can make the spending minimum. YEAH!!!!

  • kyle

    Well said, Anthony. I’m not as certain though about a lockout or strike looming. Giving Bettman, et al the benefit of the doubt (I know it’s a stretch) they’ll not shut down the league again so soon after the 94 lockout–it’d be suicidal.

  • WhoThePuck

    source- wikipedia(couldn’t find anything more ‘reliable’)

    New Jersey, 02-03, 56M
    Rangers, 02-03, 76M
    Flyers, 02-03, 65M
    Toronto, 02-03, 65M
    Detroit, 02-03, 68M
    Colorado, 02-03, 62M
    Blues, 02-03, 68M
    Dallas, 02-03, 69M
    Kings, 02-03, 37M (for reference)

    Meanwhile the rest of league was between 20M (Wild) and 40M it seemed.

  • Ed

    Chuck said what I have been saying for a while.

    Rookies have entry level contracts. You must make the minimum cap, so you have to pay the “bridges” $$$. People will scream that we overpaid the over the hill free agents that don’t produce.

    Otherwise you are paying the rookies too much money, it’s like shooting yourself in the foot. Or like bidding against yourself on eBay.

  • SuperSonic420

    The salary floor does move up with the cap ceiling every year. The problem with that is, that in a few years the floor is going to be higher than almost half the NHL teams were spending as their self imposed ceiling caps before the lockout. These teams will be forced to spend up to that salary floor and some teams could collapse and relocate. Preds and Panthers come to mind, possibly Atlanta as well. I think the Kings will be fine because of the long term contracts coming to Johnson, Kopi and Sully. Once those guys are locked up and leading the team, the Kings will start to go after the higher priced free agents, so I dont see the cap floor being much of an issue in the future.

  • Bob Bobson

    One theory for the salary cap and revenue rising so much is the Canadian dollar is so much stronger now than in previous years. It is almost even with the American dollar and the Canadian teams have higher revenues because of it. If this is correct, once this canadian vs american dollar adjustment levels off, the salary cap should rise at a lower rate.

    I also see it is a positive b/c as Bettman says, a higher salary cap means higher revenues. The negative here is owners may not like being called out on these higher revenues by having to spend more b/c of it. Unfortunately, I am hearing rumblings of dis-satisfaction already. How dare Anschutz actually have to spend money on a hockey team he owns ? He has LA Live to worry about !

  • Daniel

    The negative is that revenue is rising but only for certain markets. I am not saying that AEG is telling the truth when they tell us they are losing tens of millions of dollar but I do believe that many teams, including the Kings, are having revenue stream problems. As Whothepuck just pointed out, the Kings spent more last year than they did pre-lockout. Next season they will be forced to pay $40 million for a youth movement. It doesnt matter how rich AEG is, if your revenue comes mostly from gate receipts and a share of merchandising profits, it will be hard to compete against others in the league.

    The biggest problem is the lack of television revenue. The NHL does not have a fair policy for all the leagues teams. 20 games on NBC are not going to make anyone rich. A Versus schedule of endless Flyers-Rangers matchups does nothing for the Kings, Sharks, etc. The league needs to figure this out or else they should let teams markets themselves and their merchandise on their own and not monopolize how teams make their money (see: NHLs crackdown on the Dolans.)

  • JDM

    I think you hit the nail on the head Daniel.

    This is really the heart of any money issues the NHL has. Football doesn’t make all their money of ticket sales, it’s advertisement, and TV ads pay the most… just not on Versus. Losing ESPN was a huge blow to the league.

    Someone really needs to step in and innovative the way games are presented on television. The easier access to coaches and players is a nice step, but not nearly enough. It need to be in the way they are filmed and analyzed for the public who can’t follow it when players are jumping on and off the ice off screen.

  • DellaNooch

    I need to brush up on the salary cap rules, but I do recall an “escrow account” to protect teams against payrolls being to high relative to the overal revenue and I’m not sure how the profit sharing works, but it would be nice to put a luxury tax in similiar to baseball so that teams spending high dollars will help make up for the smaller markets…

    As for positive or negative, the NHL is one business competing against other major leagues, and it’s franchises are it’s stores. Doesn’t it make sense to have all the stores be profitable and expand?

    Look at it from another angle, if Nashville goes under, how many NY fans will not attend a NHL game? How many Nashville fans stop watching hockey and start watching another sport instead?

    I guess my point is, this is bad business for the NHL

  • Damen

    anthony you’re partly right, your numbers are a bit off.

    There can be a difference between cap hit & what a player actually makes. When a player signs a multi & it’s not the same amount every year then the cap hit is an average of the total salary divided by the number of years. Let’s take Gomez for instance, he signed a seven year deal making 10 million in 07-08, then 8 million each of the next 3 seasons, then 7.5 million, 5.5 million & finally 4.5 million in year 7. So his cap hit last year was not 10 million, but an average of all that which comes out to a bit over 7.3 million. The cap hit of Jagr, Gomez & Drury was actually a little under 20 million (if nhlnumbers.com has it right). And the Rangers are a bit rare, most teams have 3 players cap hitting between 14-18 million, in fact only 3 others (ANA, DET & CAL) broke $18 million with 3 players.

    Iginla stayed in Calgary.
    Phoenix gave big bucks to Jovo.
    And the Caps gave Ovechkin a 400 year deal

    …so I don’t see how the cap can be a bad thing. That stuff wouldn’t have happened BC (before cap). If Nashville & some teams in the Deliverance division can’t survive it’s not automatically the caps fault. I don’t think the cap was going to be a cure all where any city in North America with more than one area code would be able to support an NHL team. I think the idea was to make everyone competitive. $40 million is a hell of a lot closer to $56 million than it is to $76 million, as WhoThePuck researched for us.

  • Damen

    * what I meant to say was only three other teams FINISHED the season with 3 players making over $18 million. Tampa did have a bit over 18 tied up in three players until Richards was shipped. And I picked 3 players & 18 million as a measuring stick since that’s less than what the Rangers had tied up in Jagr, Gomez & Drury.

  • nykingfan

    wow. Anthony, we finally agree. I also believe another lockout is looming. If the cap continues to go up at the rate it has, salaries will be back to the pre lockout levels..the have’s (Rangers, Wings)& Have nots (canadian teams)

    I also agree weith Super Sonic the Kings don’t need to worry because the young guys like Kopitar, Johnson are going to be getting large contracts bringing the Kings up to a respectable level in terms of salary cap. They will also be positioned to sign free agents at that time and still have cap space available. Now whether AEG wishes to spend the $ is another story.

  • PSP

    Daniel, your concern about revenue streams is misplaced.

    BY DEFINITION within the CBA, the salary cap floor and ceiling are set based on a floating percentage between 55% and 57% of AVERAGE hockey related revenue of ALL clubs.

    AEG’s claims of losing tens of millions of dollars on the Kings are ludicrous.

  • brianguy

    this is going to be one year the Kings are thankful they’re paying Dan Cloutier, Michal Handzus, and Rob Blake all that money …

  • Baroque

    The players actually PROPOSED a hard cap (not linked to revenues) with a luxury tax early in the moves toward a lockout, and the owners said no.

    This is the CBA they wanted to get cost certainty and ensure that the values of the franchises would keep going up. As the ticket prices go up (which they are doing pretty much everywhere), the league revenues go up and so does the salary cap. The Canadian teams are all doing very well and driving up the revenues for the entire league – if Nashville or Florida can’t compete, then too bad. This is the deal the owners insisted they had to have for survival, and they cost the players and the fans a year of hockey to get it. They made this bed and now must lie in it.

  • Lars H

    You might ask, wasn’t the new collective-bargaining agreement supposed to prevent that? Yes, yes it was. It’s a good question for Gary Bettman and some of the owners…

    It was easy for the owners to hang together and dump on the players. It wasn’t easy for the owners to hang together and come up with an effective revenue sharing plan.

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    This is unbelievable. I’m going to go home and talk with my fiancee about this. I will follow up later and let you know what she thinks.