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?”
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.