Wednesday, June 08, 2005

The Globe and Mail: NHL and NHLPA Agree on Cap Formula

Disclaimer: Before you read this and get excited, remember what happened on Black Friday when The Hockey News and ESPN's E.J. Hradek told us that the sides agreed in principle to a $45 million dollar cap and the season would be un-cancelled. The next morning we woke up only to learn that the sources who leaked that story turned out to be totally wrong. It took me until just recently to recover from that weekend. Take a breath and read below: --------------------------------------------------------------------------------------------- According to The Globe and Mail, the NHL and NHLPA have agreed on a salary cap system that uses a formula for team-by-team revenue. After day-long negotiations the past two weeks, often without Gary Bettman and Bob Goodenow, it looks like the major hurdle before a new CBA has been cleared. Issues left to be agreed upon include arbitration, free agency, and what to do with current contracts and player rights. The Globe's league and player sources informed them that a salary floor and cap will be based on a percentage of each NHL team's revenue, in effect a variable cap that will avoid punishing teams like the Wings as much for their success. But it does limit the gap between small market teams and Hockeytown, so it's definitely a semi-controlled, semi-comunistic system. The salary cap would range from $22-24 million to $34-36 million in the first year, based on projections of team revenues. And this is what confuses me and apparently Bob McKenzie too:
"Say for argument's sake, one NHL team has revenues of $100 million and another team has revenues of $50 million. If, as an example, the teams are permitted to spend 54 per cent of revenues on salaries, one team would have a cap of $54 million, while the other team would have a cap of $27 million. That is a $27 million spread between the two teams' caps and you can rest assured it will be a frosty Friday in hell before NHL teams sign off on that type of discrepancy."
He's right. Sure, in the first year, the range might (I repeat, might) be from $22-36 million with revenues down and the league recovering. But what about down the road when profits increase steadily for some? Theoretically, the system could have no effect on the Wings if revenue is high enough. So buy some Red Wings jerseys and take the family down to Hockeytown Cafe! Such could mean the Wings' continued success. I think. And then I start to question how the cap could only range from $22-36 million. If it's really based on a percent of team revenues, I'd think the Wings would be more than $14 million above a team like the Columbus Blue Jackets in the cap. Unless it's a weighted system, a piecewise formula that would have teams in a range of revenues get X% as their cap and teams in another range of revenues get Y% as their cap. But surely it can't just be a straightforward, league-wide percent and produce such a small range for a cap (unless they really think profits will be equally down at the same level for all teams, which I doubt). And there's more. The system also includes a a dollar-for-dollar luxury tax that is triggered at the halfway mark between the lowest and highest caps in the league. For example, if the floor on the lowest team is $24 million and the cap on the highest team is $34 million then the tax level will be $29 million. Another control on how much teams like the Wings can spend. Just like what happened on Black Friday, the report is being denied by the NHLPA. Union spokesman Jonathan Weatherdon:
"The NHLPA and NHL discussions this week continue to cover a range of issues such as controls on team salaries, revenue sharing, Olympic participation, the amateur player draft and player retention rights. While the parties continue to have discussions to reach a common ground no agreements have been reached."
Sources told the Globe that there's a possibility a deal could be signed in the next three weeks. But before I get excited, I'm still really confused about how this cap system would work, and I'm left with more questions than anything. Another question is why the NHL would agree to such a system after all they've held out for: a hard cap at approx $36 million. This system is a soft, soft, cushy cap. It leaves room for teams like the Wings to spend relatively freely and is a victory for Mike Illitch after the NHL pushed for a hard cap for so long. And a victory for the NHLPA, if you really call a year-long negotiations stalemate a victory for anyone. I just don't buy this story at all. I had a feeling the sides were coming closer as they spent 10-12 hours a day together, but this just doesn't seem legit. Maybe parts of the leaked system are accurate, so hopefully more news will come out... UPDATE 6/9, 6:45 PM TSN has updated its story on the Globe and Mail report. Reports are mixed as to the accuracy of the Globe's story. The Toronto Sun, quoting an anonymous source, reported today that salary cap figures had yet to be finalized but progress was made. The Vancouver Province, on the other hand, reported that a general salary cap formula had been accepted for some time. Other than mysterious, unnamed sources leaking questionable information, the NHL and NHLPA have stayed quiet, with the latter group confirming that discussions were continuing this week (Tuesday through Thursday). Stayed tuned. UPDATE 6/10, 7:30 PM The NHL and NHLPA are set to meet again on Monday, according to TSN. Still, there has still been no official confirmation of reports that a salary cap system has been agreed on. According to NHLA senior director Ted Saskin:
"We spent the last four days in small group meetings continuing to review and negotiate various systemic and economic issues. The two sides will resume small group discussions on Monday in Toronto."
NHL Executive Vice President and Chief Legal Officer Bill Daly on the talks and progress:
"There was healthy dialogue, and progress continued to be made on many operational issues relating to a new collective bargaining agreement. We will resume meeting early next week [Monday]."
Revealing a bit more information than Ted. If you read into Daly's quote, it could mean that a cap system has been agreed on and only "operational issues" remain. Or not. Quoting an unidentified GM, the Toronto Sun had this exclusive dialogue:
"I asked him quite clearly is (the cap), in fact, true? He said: 'No.' I asked 'Is there any kind of team-by-team cap?' Again, he said 'No.'"
Even if the cap issue is behind us, the sides still have to agree on free agency, player rights, salary arbitration, drug testing, Olympic participation, proposed rule changes, etc. Hopefully they have a good start on those issues or will just call back on a previous proposal and agree to it for those points.


At 6/09/2005 01:13:00 AM, Blogger Ray said...

I think you're misunderstanding the cap proposal (at least, as it's been reported.) Not only is there no possibility of a $27 million variance in caps, but there really is close to no variance in caps at all. The range that is quoted is not from $22-$24 million to $34-$36 million for a CAP. That's the total range for allowable payrolls. $22 million would be a FLOOR -- meaning that a team is required to spend at least that much. The variance is that the poorest teams would have a floor of $22 and a cap of $34, while the richest teams would have a floor of $24 and a cap of $36. Everybody else would see both their high and low salary points each scaled between those "extremes" of $2 million variance on either end.

At 6/09/2005 08:03:00 AM, Blogger Brian List said...

Well, the facts are foggy right now, Ray, so we both could be misunderstanding it. Frankly, it's not really misunderstanding when there's little to even understand. It's just guessing.

What I read is that they said the range of the cap is projected to be between $22-$24 million to $34-$36 million based on revenues they think the teams will have in Year 1. The overall cap numbers are based on percent of team revenue. So my interpretation is that those numbers may rise as revenues steadily increase. And then the floor is a moving floor.


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