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NHL labour pains reborn
Players might have to pay back much more than they bargained for
By AL STRACHAN
Wed, August 30, 2006

After shutting down for a full season, the National Hockey League managed to avoid any serious labour unrest last year.

But some player agents see the storm brewing once again.

In theory, it's the duty of the NHL Players Association to crunch numbers, but these days, the PA doesn't do much unless it first gets the approval of NHL deputy commissioner Bill Daly.
So the agents did it. And they don't foresee the kind of escrow payments Daly would want to bring to the fore.

The escrow payments, for those who didn't memorize all 15 volumes of the collective bargaining agreement, are the amounts deducted from the players' salaries to cover the owners' over-spending.

Last year, the escrow payments were 12%, but because the PA allowed the league to plug in an almost-random number which was easily surpassed, those payments were refunded.

This year the agents are convinced there will be no refunds. And the amount the players can expect to pay is how much?

"According to our calculations, it's going to be 17.5%," one agent said.

"That might be a bit high," another said, "but it's definitely going to be in double digits. There's no way to know exactly until the season opens, but it looks like somewhere between 12% and 14%."

Most fans don't care a lot. They see projections like this and they shrug their shoulders. They feel that the players are well paid and if they have to give some of it back, so what?

Also, after a full year of reading about labour negotiations instead of hockey, they're sick of the turmoil.

But the fact remains that if this season turns out to be the kind of economic kick in the tender parts that the agents predict, there will be even more trouble on the labour front.

This is the second year of the deal and after three years, the players have the right to terminate it.

A lot of fans -- and a lot of players and their agents for that matter -- still don't understand the ramifications of the CBA.

Fans see all the big-dollar free-agent signings and the whopping arbitration awards and they think that the owners are overspending again.

They are. But they're spending the players' money. Once the salaries exceed 54% of league revenues, the players have to make up the shortfall. That's where the escrow comes in.

Salaries have moved up across the board on a league-wide basis. Way up. But percentage-wise, "reported revenues" haven't kept pace in relation to the salary cap.

There was no reason to expect that they would. During Gary Bettman's tenure as commissioner, the only serious revenue increases were brought about by expansion.

With no more expansion on the radar screen, there will be no major increases in revenues. It's not going to come from television, and even though some markets are raising their ticket prices, those increases won't come close to matching the increase in salaries.

In Los Angeles, the Times has designated hockey as a "niche sport" and will not cover road games of the Kings or Anaheim Mighty Ducks.

Already, there are rumblings of player discontent. If, for instance, you signed a $5-million post-lockout deal thinking you'd be on the high end, you're going to find yourself earning somewhere in the range of $4.25 million after escrow.

That means you're probably earning half of what you earned before the lockout. And taxes are liable to chop another 50%.

To the average person, that's still a high salary. But hockey players are not average people. They're skilled entertainers who, not long ago, commanded a lot more than they're getting now.
They are seeing a harsh new reality that is hard to stomach. The controls they accepted are certainly not the kind of controls the owners would have agreed to impose on themselves.

So what happens next? Let's just say it's not in the players' nature to capitulate meekly.

Explanations are by individual's like you and me!!

EXPLANATION:

Teams can technically spend over the cap limit.

You see, it's the average salary that the player makes over the term of the contract that counts toward the cap, not the actual salary. For example, Bryan McCabe makes $7.15 million this season, but his cap number is $5.25 million.

Because of that, teams can technically spend as much as they want, just as long as their salary cap figures don't exceed the upper-limit of the cap.

However, escrow is calculated involving the actual salary figures (not the cap numbers) against league revenues to determine how much the players have to give back, if anything at all.

That's how teams can spend more that 54% without technically spending over the cap.

ANOTHER EXPLANATION:

The NHL Salary Cap for the upcoming season is $44 million per team. If all 32 teams spent to the cap threshold that would translate to player salaries of $1.408 billion. Considering the current projection of revenues for the league are less than $2.2 billion that would mean the players are recieving 64% of the league's revenue. Since the CBA mandates that players are only entitled to 54% of league revenue at less than $2.2 billion, 55% of league revenue when it's between $2.2 and $2.4 billion, 56% when it's between $2.4 and $2.7 billion, and 57% once it's over $2.7 billion - Under no circumstances could every team in the league spend to the cap. For the players to keep every dollar they get through contracts without the escrow issue the average team salary would have to be around $37.1 million dollars. Basically where the cap was LAST season.

What we're seeing is the players being lured into the idea that they can make more money with a higher cap, when really it's just penalizing the lower echelon by taking away part of EVERYONE's salary for the benefit of a few of the top end players.

The NHL had no reason to raise the salary cap beyond public perceptions of it's desire to continue it's "partnership" with the players. Frankly this is a joke as the league gave up NOTHING by increasing the cap according to the CBA. They'll get their guaranteed 46% of revenue and the cap is virtually meaningless to them. The unfortunate issue is the agents and higher priced players have no interest in the well being of the lower end players by allowing them to earn full value on their salaries. If I was a young kid trying to make the cut I'd be gunning for the top guys every chance I could get. What a screw job.

By the by, If the NHL has visions of raising the cap again next season they should think twice. The public perception of fiscal responsibility earned through the last labour war could be replaced by one of player stupidity - which really shouldn't be encouraged if they're your marketable asset. The escrow accounts will actually be used this season and the players aren't going to like it. Especially the lower tier guys.

The players are the "stupid" ones for accepting the increased salary cap. The owners gave up NOTHING by increasing it, and gained improved optics. They - and the wealthier players - are the ones manipulating the system. It's the lower tier players that are losing.
 
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