Sunday, February 05, 2006

NHLPA Wants Salary Cap Reduced

The NHLPA is not doing well. While most players ignore politics and blindly follow its recommendations, those thaty are politically active are divided.

By accepting the new CBA, the NHLPA stopped standing up for the players and gave many concessions to help the owners at the expense of the players. It has made some wonder why the NHLPA exists.

At first it looked like their big concession was the salary cap, but in fact it was actually escrow. With escrow, if the owners agree to pay out greater than a given percentage of defined revenues in contract negotiations then the players get the excess deducted from their paycheques and given back to the owners. Effectively, this can make the dollar figure in the salary cap meaningless and the dollar figure in a player's contract meaningless. A player negotiates for a given figure in his contract, but never receives that amount of money because ownership knows in advance he will have to pay some of it back in escrow.

If the salary cap rises faster than revenue (which is quite possible since it is negotiated that it will be assumed that revenues increase by 5% annually) then salaries won't actually rise. Escrow will rise. The players will wind up giving back more of their negotiated salaries and this will lead to unhappiness with union head Ted Saskin.

In an attempt to reduce escrow payments (and not increase player salaries), Ted Saskin (the union head) is proposing that the salary cap get reduced in the future. This is done in order to try to keep Ted Saskin's job. This is a public relations game. Players are more upset with large escrow payments then they are by limits in how much money they can make. If escrow payments are large, then players tend to get upset with the union.

The salary cap calculation is ridiculously complex and the information is well hidden from most fans. For the current season, revenues were estimated at $1.8 billion. The player's share was 54% (this number is negoatiated and revenue dependent). That means that each team can pay out $32.4 million ($1.8 billion * .54 divided by 30 teams) to the players. But that is not the salary cap. There is a salary range. Teams can exceed the middle value by a given amount or be below it by a given amount. In the future, these amounts will become the same, but in order to allow the teams with lower payrolls to slowly bring up their payrolls, the current salary floor is lower from the "middle value of $32.4 million" then the cap is above it. This season the cap is $39 million ($8 million higher than the average value). The current salary floor is $21.5 million this year. Here is an explanation of how the salary cap works in the NHL.

Inevitably, most teams will pay more in salary than the "middle value" and come closer to the salary cap. Thus, under most circumstances, players will give back significant amounts of money in escrow payments. That is not happening this season because the revenue prediction was lowballed. The actual NHL revenue is about $200,000 higher than projections. Thus escrow payments are small. In the future (as soon as next year), the revenue projections will be based upon current ones so it is impossible for them to be as lowballed as they were this year. According to current revenue projections, the salary cap will be around $46 million next season. The middle value will be $38 million. The salary floor will be $30 million. Most likely escrow payments will be large as well.

Since the large escrow payments will make players unhappy, Ted Saskin wants the salary cap reduced. Instead of the cap and floor being $8 million above and below the middle value,, one proposition is that the range be only $5 million above and below the middle value. This would make a salary cap of $43 million and a floor of $33 million. He hopes this would prevent teams that pay close to the salary cap from overpaying the "player's share" by as much and thus reducing escrow payments. It looks like Saskin is also proposing that the salary floor be lowered as while as the salary cap. He is proposing floor figures well below its currently expected value of $30 million. This would further reduce escrow payments.

Thats right. The union wants the salary cap *REDUCED*. The ridiculous union is in the position of asking to lower the salary cap. Is that really the best the union can do? Are they really that impotent? The current union is weak - which is situation normal in history of the NHLPA.

The players don't need a union like this. It doesn't do them any good. It is merely looking out for the union head by reducing the anticipated public relations problems they will have in the future.

Here is a TSN story on this article with a very different slant on the issue.

Comments:
Should there be a Salary Cap in Football?
Personally I think there should be! It’s just getting to be stupid money in football at the top of the premiership!
It’s always the same teams at the top proving that football success is based purely on money which ruins the idea of it being a sport! They’ve done it in rugby, basketball, hockey and American football and it makes the sports more competitive and better to watch!
I do a little Spread Betting from time to time and most matches don’t hold much surprise who is going to win, its boring! I want to see a team at the bottom pulling off an amazing season beating last seasons winners in a close fought battle!
Make things fair! It shouldn’t be about money!
Plus!
All there is all that money in the premiership and barely any of it stays in the UK so it’s not even helping the economy!
From my Spread Betting, if I ever win big (which is never, I’m unlucky) it’s still nothing compared to the average premiership players weekly wage!
This Rant was brought to you by Spread Betting Spike. 
 
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