The Upcoming Rise and Fall of the NHL Salary Cap.

The NHL salary cap is expected to rise, and fall, for next season. Read on to find out how, and why.

Lost in the hubbub over the upcoming NHL trade deadline was this report by ESPN.com and TSN insider Pierre LeBrun claiming NHL GMs will go into this summer with a higher, but temporary, salary cap.

That’s because the current collective bargaining agreement expires on September 15, 2012, meaning NHL teams will continue to operate under this CBA throughout the summer until that date. Hopefully, by then, a new CBA will be implemented, or failing that, teams cannot conduct any further business until it is.

LeBrun asked several NHL executives what the new salary cap figure would be – the current cap ceiling is $64.3 million – and by their estimates, it could come in between $68-$69 million.

Assuming it’s $69 million, that would mean the cap floor would be $53 million, with the cap midpoint being $61 million.

“Sweet zombie jeebus!”, I hear you exclaim. Or rather, I assume you’d exclaim, as that’s my favorite exclamation to eye-popping news. Yours, of course, may vary, perhaps a two-word bellow, in which the first word is “Holy”, followed by a four-letter expletive for fornication or excrement.

Regardless, following that exclamation, your first question will likely be, “How did the cap jump by nearly $5 million this year?”

Several factors account for that potential increase, but the two main ones are (1) a Canadian dollar remaining at par with the Yankee greenback throughout this season, and (2), the addition of another Canadian team, courtesy of last summer’s relocation of the Atlanta Thrashers to Winnipeg.

So what’s this “temporary salary cap” LeBrun was referring to?

It’s a figure each general manager will have to work out to determine how much they can comfortably afford until the new CBA is implemented, which could result in that potential $68-$69 million cap figure reduced.

That’s because it’s anticipated the league will push for a reduction in the players’ share of revenue, currently at 57 percent, down to around 50 percent. It could come in a little lower than that, maybe 48%, but the league will likely shoot for a 50-50 split.

The reason for that reduction is some teams have struggled in recent years to keep pace with the constantly rising cap, to the point where they are losing money trying to stay above the cap minimum. By reducing the players’ share, in conjunction with a likely widening of the cap between the cap ceiling and floor (currently $16 million), the league hopes to make it easier for struggling teams to keep pace, while maintaining competitive rosters.

So what could the lower figure be?

I approached this assuming that, if the league achieved their “Seven Percent Solution” (Sherlock Holmes fans should appreciate the pun; the rest of you, just move along, nothing to see here…), the salary cap would drop by the same percentage.

Following that theory, if the cap ceiling were at $69 million, a seven percent reduction would bring the ceiling down to $64.17 million, pretty much back to this season’s ceiling of $64.3 million.

That, however, didn’t look right to me, as I felt the league would certainly want a lower ceiling than that, let alone a lower cap floor, so I cast my bread upon the Twitter waters, by asking. “if the players share of revenue declined by seven percent in the next CBA, would the cap drop accordingly?”

Thankfully, James Mirtle of The Globe & Mail and David Johnson of Hockeyanalysis.com rode to my rescue.

Mirtle pointed out going from 57% to 50% is “about a 12 % drop in salaries available”, a bigger bite than 7 percent, while Johnson observed it would also depend on the spread between the cap ceiling and floor (assuming the latter is lowered beyond the current spread of $16 million from the ceiling).

Johnson also noted that a $69 million cap “implies $61 million midpoint” on around $107 million/team revenue. He concluded (and Mirtle concurred) a new mid-point would be $53.5 million, so the new cap ceiling would be $61.5 million.

Under the current $16 million distance between the cap ceiling and floor, the latter would be $45.5 million. Not much of a drop in the latter for those teams complaining they can’t keep up with the cap floor, so we can assume that could be lower. If the spread is widened to $20 million, that would put the floor for next season at $41.5 million.

None of this, however, is set in stone.

Mirtle reminded me “so much could change” in the next CBA, “including the definition of HRR (hockey-related revenue).”

Something which might change is how much the salary cap floor is lowered.

If the salary cap remains tied to league revenues, the league might try to implement some “drags” to slow the increase of the cap floor.

Of course, this is all speculation on my part. I have no idea what changes the league hopes to implement in the next CBA, and if they’re willing to risk potentially killing another season to achieve them.

I will suggest, however, that if they continue to keep salary tied to revenue fluctuations, any reduction in the cap as a result of reducing the players’ share of revenue will only provide a temporary solution for those franchises claiming to be struggling financially, and won’t rectify their problems over the long run.

10 Comments

  1. Why not just have a soft cap like the MLB? Tampa Bay Rays are no where near the cap ceiling, but are in the playoffs on a pretty regular bases

  2. “Why not just have a soft cap like the MLB? Tampa Bay Rays are no where near the cap ceiling, but are in the playoffs on a pretty regular bases”

    I don’t know if I’d call it a regular basis yet, and quite frankly, if you want to argue for a soft cap, the AL East is a HORRIBLE division to use as an example, as the Yankess and the Red Sox are spending astronomical amounts of money on their teams. I suspect that the NHL is worried that some teams might try the same sort of thing (not that it bothers me much; if you’ve got it, spend it, though I’m sure Bettman doesn’t like the idea of his horrible southern franchises losing their talent to teams that actually turn a profit…)

  3. Does the NHL have a revenue sharing gig like the NFL does?

  4. Sheepdogged: They do, but it’s so convoluted, and has such a minimal impact upon the teams which qualify, that it does very little to aid struggling teams.

  5. Any idea if there’d also be a corresponding rollback on salaries if they drop the cap and lower the floor? If not, it seems many teams would end up getting in hot water using a temporary cap of $68-69 million.

  6. With about 10 to 12M going to teams that qualify for full revenue, that’s not an insignificant amount of money, about 25% of a cap floor teams budget. What I think might be a viable idea is to have both a soft and hard cap. For example, using the 69M cap ceiling example, if a team spent above that amount they would be subject to a luxury tax, with a hard cap of, let’s say, 79M which a team can’t exceed in any way (i.e. no more hiding salaries in the AHL). This would allow the big spenders to go all in if they wanted but would also funnel some money to the lower spending teams as well.

  7. How about just admitting that hockey does not work in the Southern US. It’s a hard enough game to sell in the Northern US. The NHL cannot compete with Pro/College Football, Pro/College Basketball, various forms of auto racing, golf, etc. Bowling is bigger in the south than Hockey. Bettmans attempts to sell the game down there are nothing short of comical. The Phoenix situation alone is absurd, talk about a bone headed play. Two teams in Florida, ridiculous. The league may well have to look at eliminating a few teams from the mix (about 6 come to mind) & then eliminate the profit sharing, I would rather see no cap but restrictions on free agency increased.

  8. Seems like a real piss poor way to manage a league of professionals. In a perfect world all hockey personel would see the need to come to the same page for the survival of the NHL as a whole. First and foremost the NHL, as the mother ship, needs to be kept healthy. As the National Hockey League goes, so does every one else involved. With everyone in belief of that one concept all other issues would be petty. But, if the league keeps letting salary grow just to recind it a few years later, it’s not going to end well. A dog may tolerate the constant tug and from his amused owner, but especially where money and egos flow sports players will definitely not. But, I still believe these CBAs are driven more by ego than they are by money and unfortunately it’s just a few individuals doing battle for all the players and the league.

  9. Alright, this is horse excrement (thanks for the word Lyle).

    If ‘the league’ really wanted to help the low budget teams suffering with their suffering, they would not, in a million years, raise the cap – again and again and again.

    Forget everything they are saying about “hockey related revenue” and a fair “50/50″ split.

    To the best of my knowledge, it is THE LEAGUE that is choosing to raise their cap yearly and thus strain the smaller market’s budgets.

    So, I repeat, somewhat angrily, that’s horse excrement.

    Those are some very disappointing negotiating tactics.

  10. Hey, ssdd, have you checked what the Predators attendence has been like this season? Pretty good numbers, eh? Hockey works in the south as long as the hockey is good.