Report says cap will drop substantially next year
In the Globe and Mail today, it was reported that because of the relative lack of strength of the Canadian dollar and decreased revenues, the salary cap is likely to take a serious dive next season. Well, kind of.
As I understand it (and being a hockey fan with an internet connection instantly qualifies me as an expert in both the economy and the NHL’s collective bargaining agreement), the actual salary cap itself will only drop about $1.5 million, but because revenues will decrease as the season goes on and the global economic crisis deepens, the players will have about $9 million in salary per team placed in escrow to make up the difference in revenues.
The amount of money the players put in escrow is determined at the start of every season by the NHLPA. In October, given the worsening state of the economy, the union decided every player should put 13.5 per cent of his salary in escrow, the largest amount yet. The amount is re-evaluated three more times before the end of the season, so the final percentage could be higher or lower.
On a few message boards, people are already tapdancing over their rival teams’ bad contracts and fretting about their own, but the reality is that this isn’t really that huge of a deal. The actual cap drops by between one and two million dollars, it’s what the players actually receive that will be taking the hit. No one’s going to have to offload two of their major stars, those stars will just see less money while their salaries remain the same because a higher percentage of their paycheck is put into said escrow funds.
Feel free to correct me if I’m wrong by the way. Econ wasn’t my thing in school. If I’m right, however, feel free to lavish me with praise and gifts.
November 20th, 2008 at 6:37 pm
Well one of the motivating factors for teams to sign guys to 7+ year deals was that the cap would continue to increase. So while it may be a slight overpayment for aging players this year, by the time he reaches the last year of the deal his skills will surely have diminished, but the cap is 20% higher than when he signed the deal so it isn’t that painful. However, if revenues have stalled some teams may have trouble resigning RFA players and will be vulnerable to offer sheets. July 1 will also be extremely interesting as the top free agents have commanded salaries that kept pace with the increase in the cap. Will this trend continue? Will Marian Gaborik or Marian Hossa receive those “10 year 80M” type contract offers? Will they take longer to sign than usual? The Penguins have 41.8M tied up in 12 players next year which doesn’t include the sure to be overpaid Jordan Staal. The Rangers have 41.2M committed to just ten players. Detroit has 14 players signed for 41.2M but none of those players are Henrik Zetterberg. How is Chicago going to deal with resigning Kane, Toews, and Duncan Keith after next season? Most teams are going to be in a cap crunch. A reduction in the cap by 1.5M would put 17 teams this year either over or within 1.5M of the cap. This economic slowdown could become a boon for teams like Los Angeles, Toronto, Vancouver, and Phoenix who all have good youth, loads of cap space for next year, and possibly the ownership to make some major moves this summer.