The NHL’s new 12-year, $5.2 billion TV contract with Canadian cable giant Rogers Communications will have a significant impact upon the league’s salary cap over the course of the current collective bargaining agreement, which expires at the end of 2021-22.
James Mirtle of The Globe & Mail recently broke down the numbers, observing by conservative estimates (assuming annual revenue growth at five percent) the impact upon the salary cap in 2015-16 - the first season the new contract will affect league revenue – would push the cap ceiling to $74.8 million, with a cap minimum of $55.3 million. That’s a significant increase over Mirtle’s projected cap ceiling for next season (2014-15) of $67.7 million with a cap floor of $50 million.
As an aside, I anticipate next season’s numbers will be higher. Considering the revenue generated by the plethora of outdoor games this season (which Mirtle duly notes), the ongoing strength of the Canadian dollar and the league’s growing popularity in the American sports market, I anticipate the cap returning to $70 million for next season.
Mirtle also predicts the NHL salary cap will reach $80 million by 2016-17, and $100 million (with a cap floor at more than $75 million) by the time the CBA expires in 2022.
For big market clubs willing to spend, this is great news. It will provide them increased cap space to invest more in retaining their best players while bidding competitively for the top unrestricted free agent talent.
It’s also great news for the players (especially the superstars), guaranteeing they’ll see steady and significant increases in their salaries over that period.
The new contract is a good news/bad news proposition for struggling clubs in non-traditional hockey markets, such as Florida, Phoenix, Carolina, Tampa Bay and Nashville.
The good news is they’ll receive an estimated 7 million each per season from the deal. The bad news is it won’t be enough to help them keep pace with a steadily rising salary cap, especially the cap floor.
NHL deputy commissioner Bill Daly said the league isn’t concerned about the cap rising too high, pointing out it’s “a function of revenues”, but what did you expect him to say? If the league brain trust is concerned about the effects a rapidly rising cap will have on its struggling or smaller markets, they won’t publicly admit it. They’re undoubtedly aware of it, but without concurrence from the NHLPA there’s nothing they can do over the course of this CBA to address those potential issues.
When the current CBA was ratified earlier this year I noted it did little to help the struggling markets, would widen the gulf between the big and smaller markets, while the league essentially kicking the can down the road. A salary cap of $100 million with a cap floor of $75 million by 2022 will be a problem the league can’t avoid.
It’s possible, of course, such growth could be slowed by a decline in the Canadian dollar over that period. Barring a catastrophic economic collapse, the most conservative estimate would put the cap by 2022 at over $90 million, with the cap floor around $65 million.
It won’t just be those in non-traditional markets which feel the pinch. The Ottawa Senators are going through their own well-documented financial troubles, which is why its owner made an unsuccessful attempt to have a casino constructed near his arena. The Winnipeg Jets, despite its billionaire ownership, plays in the smallest arena in the league’s smallest media market, making it potentially difficult to keep pace with a rapidly rising cap. The New York Islanders are moving to Barclays Center in 2015, which will also be among the smallest venues in the league. They’ve traditionally stuck close to the cap floor, but could find it difficult to keep pace as it rises beyond $60 million.
By 2022 this could also be bad news for hockey fans. The league will undoubtedly go to its usual game plan of threatening a lockout by attempting to squeeze the players to give up more revenue, rather than engage in the improved revenue-sharing necessary for the long-term survival of their weaker franchises.