Sep 272012
 

It looks like the NHL and the NHLPA are in a stale mate in terms of the CBA negotiations.  As of right now the NHL is holding firm on its stand of limiting players to 47% of revenue and the players are holding firm on its stand of not wanting to see any roll back of salaries either through a negotiated roll back or through escrow though the players are willing to scale back the growth of player salaries.

When the CBA negotiations started outside observers believed a final resolution to the CBA would see the owners and the players split revenues more or less along the 50% line, not unlike the NBA.  The question is when and how long it will take for both sides to capitulate to those numbers.  While driving around in my car yesterday I thought up a more innovative solution that might appease both the owners and the players and it has aspects within the system that both the owners and the players could view as a “win”.

Under the old CBA players got a fixed 57% of revenue.  It really didn’t matter what was written on their contracts because their salaries fluctuated depending on revenues.  A portion of the players salaries as written on their contracts were withheld every year (the dreaded “escrow”) by the NHL and once final revenue numbers were calculated the NHL would distribute from escrow whatever money the players still deserved to collect according to the 57% revenue rule.  Players hated this, even if there was potential to earn more than what was written on their contracts in the event of significant revenue growth.

Under the old CBA the salary cap and floor was calculated as being $8M above and $8M below the “midpoint” which was calculated as 57% of the average team revenues.  So, if the league had a projected revenue of $3B for 30 teams (I am using $3B to make calculations easy, actual projected revenue for next year was closer to $3.3B), it would be an average of $100M per team and the players share, or midpoint, would be 57% of that or $57M.  This would make the salary cap $65M and the salary floor $49M.

The system I am proposing is quite simple and revolves around adjusting how the salary cap and floor are calculated.  Instead of having the midpoint at 57% of average team revenue we set the salary cap at 57% and the salary floor at 43% (as an example I’ll use the owners initial offer).  This would make the salary cap $57M and the salary floor $43M.  Teams sign players according to those constraints and the numbers written on the players contracts are their actual cap hits.  If every team spends to the cap, which they won’t, the players could theoretically earn a 57% share of the revenue.  If teams individually choose to spend less, they can.  The more teams that choose to spend below the cap, or even right down to the floor, the players share of revenue will drop accordingly.  If every team chose to spend only to the floor, the players would earn just a 43% share of revenue.   In reality the players share will probably end up somewhere in the middle, in the 50% range, sometimes more, which the players might see as a “win” and sometimes less, which the owners might see as a “win”.

Under this system, escrow is not needed as players salaries aren’t explicitly tied to revenues, only the salary cap and floor are.  A player with a contract that will pay him $6M will have a salary cap hit of $6M and will get paid $6M, no more, no less.  Eliminating escrow is a win for the players.  Linking the players actual salary, and not their cap hit manipulated front loaded contracts, to their salary cap hit improves competitive balance which is a win for the owners, and the fans.

Under this system there will be no more long term front loaded contracts because the players actual salary in a given year is what is used as the cap hit, not the average salary over the term of the contract.  There would be no benefit to tacking on several years of $1M salaries as it won’t reduce the players cap hit in the early years.  This is a win for the owners, particularly the small market owners who couldn’t play that game.

I’ll also propose that every player earning an NHL salary (i.e. playing in the NHL or are on NHL one-way contracts) will count against the salary cap.  This includes players that have been demoted to the AHL like Wade Redden.  This also eliminates some of the big market advantage which improves competitive balance.

I’ll also propose significantly more revenue sharing, more along the lines of the players proposal.  If the owners are serious about competitive balance and 30 financially viable franchises significantly increased revenue sharing is the only solution to that.

There are a number of transition issues that will need to be resolved like how to transition from a $70.7M cap system to a 62.7M cap system and what to do with existing players on heavily front loaded contracts who will now see their salary cap hits rise dramatically as their front loaded salaries will now become their salary cap hits.  These can be negotiated and can probably be achieved through a 2-year transition period where escrow still exists but there is enhanced flexibility with regards to the salary cap.  Some of the teams that have significant numbers of front loaded contracts (i.e. the Flyers) may still have long term cap issues (that they will be forced to resolve) but too bad for them.  It’s their own fault for manipulating the system like they did.

When all is said and done, I think this system is a good one for both the players and the owners and the fans.  The players still definitely see a hit to their share of the revenues (they certainly won’t be earning 57% any more) but they get rid of escrow and there is still some upside potential to earn more than a 50% share if the league is able to develop 30 financially viable franchises.  The owners see the players share of revenue fall (if they so choose) possibly even down to the levels they have asked from the players.  With greater revenue sharing and eliminating the benefits front loaded long term contracts the small market owners will be the big winners which improves competitive balance which is something the league has identified as being good for the game.  The fans win because of the greater competitive balance, but also because I think the system is something that could work long term for the league and the players and hopefully eliminate the need for any future work stoppages.

It sounds like a win-win-win to me.  Now lets get it done and lets get back to hockey.

 

Apr 152011
 

Before I get into the main subject of this post let me first point out that I have updated stats.hockeyanalysis.com to include all 1, 2, 3 and 4 year player ratings that can be calculated using the last 4 years of NHL data.  For more information on my player ratings read this.

I generate offense, defense and overall ratings for each and every player in the NHL and I wanted to get an idea of how much each position contributes to the performance of the team.  To accomplish this I multiplied each players offensive and defensive ratings (HARO+, HARD+) by their ice time (5v5 ratings and ice time used) and summed them up by position and then compared the positions total to the overall total.  I did this using the ratings calculated for the past 4 seasons combined as well as for each of the past 4 individual seasons.  This is the result I came up with :

Offense:

Season(s) Center RW LW D D
2007-11 24.64% 18.04% 17.14% 20.09% 20.09%
2007-08 26.91% 16.22% 16.47% 20.20% 20.20%
2008-09 25.23% 18.01% 16.66% 20.05% 20.05%
2009-10 23.93% 18.47% 17.49% 20.06% 20.06%
2010-11 25.13% 18.02% 16.76% 20.04% 20.04%

Defense:

Season(s) Center RW LW D D G
2007-11 20.67% 15.08% 14.27% 16.72% 16.72% 16.55%
2007-08 22.46% 13.83% 13.81% 16.75% 16.75% 16.39%
2008-09 21.06% 15.49% 13.76% 16.67% 16.67% 16.35%
2009-10 19.98% 15.46% 14.79% 16.73% 16.73% 16.30%
2010-11 21.35% 15.08% 14.21% 16.51% 16.51% 16.35%

Average of Offense + Defense:

Season(s) Center RW LW D D G
2007-11 22.65% 16.56% 15.71% 18.40% 18.40% 8.28%
2007-08 24.69% 15.03% 15.14% 18.48% 18.48% 8.19%
2008-09 23.14% 16.75% 15.21% 18.36% 18.36% 8.17%
2009-10 21.95% 16.96% 16.14% 18.39% 18.39% 8.15%
2010-11 23.24% 16.55% 15.48% 18.27% 18.27% 8.17%

Note:  I split the defense contribution over 2 positions.

Now, the first thing I noticed with these numbers is how surprisingly consistent they are from season to season, especially for defense and goaltending.  Up front players frequently shift from center to wing and from left wing to right wing so that may account for some of the (still relatively small) seasonal fluctuations.  Maybe I shouldn’t be surprised at this consistency but it does give me some confidence in my rating system that it is consistent across seasons as well as with multiple season ratings.

The second thing that caught my attention was the importance of defensive contribution to the offense.  Approximately 40% of offensive production can be attributed to the two defensemen on the ice and the defensemen are more important than the wingers. Part of this is simply that defensemen get more ice time than forwards since there are only 3 defense pairs versus 4 forward lines.  The other part is probably that they play an integral part of collecting rebounds and transitioning the team from defense to offense so they may have greater influence in the percentage of time played in the offensive zone.

Of the three forward positions, the center position is clearly the most important but we probably figured that.  Face offs might be a contributing factor but also we might just find that the most talented players end up playing center.  Right wings are slightly more important than left wings but the difference is not substantial.

Next I wondered what this data would mean to what teams should allocate for salaries.  For a 60 million payroll the average salary for position should work out to the following:

Pos Salary (Million$)
Center 13.6
RW 9.9
LW 9.4
D 11.0
D 11.0
G 5.0

Of course elite players skew the team payroll structure a fair bit.  As a LW earning over $9.5M Alexander Ovechkin is eating up the entire Capitals allotment for LWs and Crosby, Malkin and Staal are way over budget for the Penguins but you have to work around the talent you have.  A couple months ago Behind the Net Hockey Blog had a post outlining the salary allocated to players by position (split between forwards, defense, and goaltending).  Forwards were allocated 59.1% of a teams payroll, defense 32.2% and goaltending 8.7% over the past 4 seasons which compares to 54.9%, 36.8% and 8.3% for my ratings.  That would mean that forwards are overpaid (relative to their contribution) by about 4.1%, defense under paid by 4.6% and goalies over paid by about 0.4%.

For interest sake I decided to take a look at the Vancouver Canucks performance distribution since they have a fairly well balanced team and are a serious cup contender.  Here is what I found:

2007-11 2010-11
Position Offense Defense Average Offense Defense Average
Center 23.44% 19.96% 21.70% 21.04% 17.15% 19.10%
RW 11.44% 9.88% 10.66% 9.97% 10.34% 10.15%
LW 25.14% 21.88% 23.51% 31.12% 25.11% 28.11%
D 19.99% 17.21% 18.60% 18.94% 15.92% 17.43%
D 19.99% 17.21% 18.60% 18.94% 15.92% 17.43%
G 0.00% 13.86% 6.93% 0.00% 15.55% 7.77%

(Note:  The above is calculated using the current roster using the ratings and ice time over the past season or four seasons regardless of whether that ice time was with the Canucks.  This is an evaluation of the team ending the 2010-11 season with the Canucks, not the Canucks team performance over past seasons.  Also four season ratings should give a better player evaluation than single season ratings due to the larger sample size so I would consider them closer to true value.)

The Canucks are definitely a team driven by a group of quality left wingers or at least players listed as playing LW such as D. Sedin, Burrows, Raymond, Torres but I suspect some get shifted to RW from time to time.  Also, as good as Luongo is the quality and depth of the team in front of him reduces his relative contribution to his team to below average levels.  In the future I’ll take a look at some other teams as it’ll be interesting to see how goalie contribution changes from good teams with subpar  goalies (Detroit maybe) to bad teams with good goalies (Florida – Vokoun!! Though my ratings don’t value him as highly as many others do).

Jan 222009
 

Over the past several weeks we have had several tidbits of information come out giving indication to the general state of the NHL economy.

Dec. 22: NHL defies economy, projects rise in revenue

The NHL projects a 2 percent increase in league revenue for the 2008-09 season despite facing one of the worst economic crises to hit North America since the league contracted from 10 to six franchises around the time of the Great Depression

Dec. 24: Report: Coyotes receiving financial assistance from NHL

According to The Globe and Mail, the Coyotes are receiving financial assistance from the National Hockey League to keep the team afloat. The report indicates the team is receiving advances on their share of league revenue.

Jan 18: Paul Kelly Admits Escrow Payments to Rise”

Last night between games on HNIC, NHLPA executive director Paul Kelly was interviewed by Ron MacLean (link to HD video of the entire interview). The first thing they discussed was the rumor that escrow payments made by the players would be rising from 13% of their pay to 17-20%. Kelly wouldn’t say exactly how much the payment would rise, but he did answer in the affirmative that the 17-20% range was accurate.

Jan. 22: Report: Predators may buy own tickets to ensure NHL funds

According to the Tennessean, Predators officials have discussed the option of buying up unsold tickets to ensure they collect the maximum revenue-sharing from the league. Earlier this month, an ESPN.com report indicated the Coyotes forfeited 25% of their full share for failing to meet specific targets.

So, what can we conclude from all of this. First off, not everything is all rosey in all NHL locations despite what Gary Bettman would want you to believe. Clearly the Coyotes and Predators continue to struggle financially and I am sure Tampa, Florida, Atlanta, the Islanders and a few others are not that much better off.

Second, the players are going to have to give back a huge chunk of money because their salaries will far exceed the percentage of revenue they are allotted. This, I believe, will be a first for the players under the new CBA and it will be interesting to see how the players react to not getting as much money as they contracts stipulate. We can be pretty certain that the players will decide not to opt out of the current CBA (a smart thing to do in tough economic times) but when it expires for real in a couple of years when hopefully the economy has turned around and they might be in a better bargaining position, lets see how much of an issue this becomes.

Finally, the 2% revenue increase should give us some insight into what next years salary cap could be. When the salary cap gets set it is based on the previous years revenue and then the players can opt to boost it by up to 5% pending revenue growth projections. The players have always opted to do this including for this season. But, revenue growth has not grown by 5% and thus the cap is essentially higher, by about 3%, that it should be based on this years revenues and this will be reflected in next years salary cap numbers.

A few months ago <a href=”http://www.hockeyanalysis.com/?p=804″I discussed a variety of scenarios of revenue growth and the falling Canadian dollar and the impact they will have on the salary cap next season. I can now refine that projection using the 2% revenue growth number.

2007-08 Revenue: $2.62 billion
2008-09 Revenue: $2.67 billion (estimated based on 2% growth)

With revenue of $2.67 billion next years salary cap will be approximately $55.8 million with the players having the option to increase it to $58.2 million. So far the players have always opted to increase the salary cap the maximum amount they are allowed to but with projections being next years revenue will drop, not increase, it is quite likely they will not opt to implement the salary cap increase.

The NHL probably has fairly good projections for the remainder of this years regular season as many teams have sold a significant portion of their tickets and advertising revenues are all pretty much booked and accounted for. Playoff revenue is a different story as not a single playoff ticket has been sold yet and if the economy is still in the dumpers as many people expect, will NHL teams be able to jack up playoff ticket prices as much this year as they have in the past? If they can’t, that 2% revenue growth could be an optimistic number. Only time will tell but everything seems to be pointing to a drop in the salary cap of $1-2 million next season and quite possibly stagnant or dropping further the following season.

Oct 292008
 

On Monday NHL Players Associations Executive Director Paul Kelly was on Prime Time Sports with Bob McCown discussing several topics but of particular interest was the light he shed on NHL revenues, the contribution of Canadian teams to those revenues, and the impact of the Canadian dollar on those revenues. You can listen to the complete interview but let me summarize.

He stated that 27% of all league revenues are generated by the 6 Canadian NHL franchises and that of the 12% revenue growth the league saw last season, one quarter, or approximately 3% growth, was attributed to the rise in the Canadian dollar. This to me was the clearest statement I have heard from anyone in regards to the percentage of league revenues generated by Canadian teams and the extent of impact it had on the league wide revenue. He went on to say that the rise in the Canadian dollar contributed approximately $75 million to league revenue increase in 2007-08 over 2006-07.

From these numbers, which I believe are pretty accurate, and with the salary cap numbers, which we know exactly, we can estimate what actual league revenues over the past two seasons.

The 2008-09 salary cap was set at $56.7 million which according to the CBA is $8 million above the ‘midpoint’ which is what is calculated from 2007-08 league revenues plus 5%. Crunching the numbers we get $56.7 million less $8 million less 5% multiplied by 30 teams gives us $1391 million, which is what the 2007-08 players share of revenue should have been. This would then put the total league revenues at approximately $2.62 billion. Doing the same calculations for the 2006-07 season I have calculated the 2006-07 total league revenue to be $2.32 billion.

From those numbers we can determine that league revenues rose $300 million from 2006-07 to 2007-08 which is a 12.9% increase in revenues which seems a bit higher than Paul Kelly’s statement of 12% revenue increase but the rise of $300 million matches exactly with his claim that the rise in the Canadian dollar accounted for 25% of the increase in revenue as 25% of $300 million is $75 million. I haven’t seen or heard any firm numbers but rumours were that last years revenue was in the $2.6 billion range so my numbers seem reasonable.

It should be noted that in calculating the salary cap the formula takes into account player benefit costs. I do not know what the player benefit costs are but I estimated them based on a sample formula found in the CBA and scaled it at the same rate of increase as player compensation which may or may not be correct and may lead to some of the disparity with the numbers.

So, what does all this mean looking forward and how much the salary cap be affected? Lets take a few scenarios while assuming that the Canadian-US dollar exchange rate for the 2007-08 season was parity (i.e. one Canadian dollar equals one U.S. dollar) and that the players choose to adjust upward the salary cap by 5% for the 2009-10 season.

Scenario: The Canadian dollar drops to an average of $0.80 US while there is an across the board revenue increase of 5% not accounting for the exchange rate. Based on this scenario, the Canadian portion of revenue would be cut by 20% from the dollar and then increased by 5% for estimated revenue growth while the U.S. revenues would simply increase by 5%. Under this scenario total league revenues would be $2.602 billion or a drop of about .67%. This would result in the salary cap dropping slightly to $56.5 million per team.

Here are some other scenarios.

Exchange
Rate
Revenue
Growth
Estimated
Revenue
Estimated
Salary Cap
0.75 3% 2.516 54.5
0.75 5% 2.565 55.6
0.75 7% 2.614 56.7
0.75 9% 2.663 57.9
0.80 3% 2.553 55.3
0.80 5% 2.602 56.5
0.80 7% 2.652 57.6
0.80 9% 2.702 58.7
0.85 3% 2.589 56.2
0.85 5% 2.64 57.3
0.85 7% 2.69 58.5
0.85 9% 2.74 59.5
0.90 3% 2.626 57
0.90 5% 2.676 58.2
0.90 7% 2.728 59.3
0.90 9% 2.779 60.3

Revenues are in Billions of dollars and salary cap is in Millions of dollars.

If my projections are accurate, so long as the league can increase revenues (not including currency factors) then the salary cap isn’t likely to be impacted negatively in any significant way and could increase by a couple million dollars if the Canadian dollar rebounds measurably (it has jumped a couple of cents today). But in a worst case scenario where the league cannot grow at the same pace as it has and the Canadian dollar remains where it is today the salary cap is likely to fall by up to a couple million dollars.

In the Paul Kelly interview there were a couple of other tidbits that I found interesting and might signal the direction the players want to go in future CBA negations. When asked if he thought the NHL-NHLPA is really in a partnership he responded “I think it is clear the answer to that is no.” He went on to say “It would be a fallacy to call it a partnership because we don’t have an equal voice on a number of issues.” He mentioned expansion and re-location of franchises as a couple of examples where the players have no input. Expect this to be a bargaining point or a bargaining chip during the next CBA negotiation.

When discussing expansion and relocation he praised RIM CEO Jim Balsillie and stated that having someone like him and his wealth in the NHL would be a positive but also mentioned that he believes that there are people within the NHL that do not want him to be a part of the league. Paul Kelly was also very positive and receptive to the idea of having another NHL team in Toronto or southern Ontario and eluded to the fact that he thinks the Toronto area could probably support 3 teams.

It’ll be interesting to see how the NHL-NHLPA relationship develops over the next year or two but it is becoming clear to me that the next great battle might the players to push for expanding the ‘partnership’ beyond just revenue sharing but into all areas of revenue development including franchise relocation and expansion.

Sep 192008
 

While browsing through each teams salary cap commitments I decided to take a look at which teams have locked up which players long term. Below is a list of all players on each team that are under contract for 4 or more years (i.e. at least through the 2011-12 season). In terms of dollars committed, the New York Rangers top the list by committing 32.8 million to 5 players. Several other teams have locked up six players for four or more years but none have spent more than the Rangers have on 5. One has to wonder if the Rangers money is well spent on Gomez, Drury, Lundqvist, Redden and Rozsival. Two teams, the Canadiens and Canucks, have no one signed for more than 3 seasons while Atlanta and Boston have just one players signed each.

(Numbers are millions of dollars rounded to the nearest $100,000)

32.8 NY Rangers
7.4 Scott Gomez
7.1 Chris Drury
6.9 Henrik Lundqvist
6.5 Wade Redden
5.0 Michal Rozsival

31.4 Calgary
7.0 Jarome Iginla
6.5 Dion Phaneuf
5.8 Miikka Kiprusoff
4.5 Daymond Langkow
4.0 Robyn Regehr
3.6 Cory Sarich

30.2 Pittsburgh
8.7 Sidney Crosby
8.7 Evgeni Malkin
5.0 Marc-Andre Fleury
4.0 Ryan Whitney
3.8 Brooks Orpik

28.9 Edmonton
5.7 Lubomir Visnovsky
5.5 Shawn Horcoff
5.4 Sheldon Souray
4.3 Dustin Penner
4.1 Ales Hemsky
4.0 Tom Gilbert

28.5 Buffalo
7.1 Thomas Vanek
6.3 Ryan Miller
5.3 Jason Pominville
4.0 Derek Roy
3.5 Jochen Hecht
2.3 Paul Gaustad

27.0 Philadelphia
6.5 Daniel Briere
6.3 Kimmo Timonen
5.8 Mike Richards
4.3 Joffrey Lupul
4.2 Scott Hartnell

25.6 New Jersey
6.0 Patrik Elias
5.2 Martin Brodeur
5.1 Brian Rolston
3.4 Dainius Zubrus
3.0 Colin White
2.9 Bryce Salvador

25.3 Detroit
6.7 Pavel Datsyuk
6.0 Brian Rafalski
3.8 Brad Stuart
3.0 Niklas Kronwall
3.0 Valtteri Flippula
2.8 Dan Cleary

23.2 Tampa
7.7 Vincent Lecavalier
4.5 Ryan Malone
4.0 Andrej Meszaros
3.5 Vaclav Prospal
3.4 Matt Carle

20.8 Ottawa
7.5 Dany Heatley
7.0 Jason Spezza
4.2 Mike Fisher
2.1 Chris Kelly

17.3 Florida
4.2 Keith Ballard
4.0 Nathan Horton
3.1 Rostislav Olesz
3.1 Stephen Weiss
2.9 Bryan Allen

17.0 Columbus
4.8 Kristian Huselius
3.8 Mike Commodore
3.8 R.J. Umberger
2.8 Fedor Tyutin
1.9 Jason Chimera

16.5 Nashville
4.5 David Legwand
4.5 Martin Erat
4.0 Jean-Pierre Dumont
3.5 Ryan Suter

15.2 Chicago
7.1 Brian Campbell
4.2 Cristobal Huet
3.9 Patrick Sharp

14.8 Washington
9.5 Alex Ovechkin
5.3 Mike Green

14.4 Anaheim
5.3 Ryan Getzlaf
5.3 Corey Perry
3.7 Chris Kunitz

14.1 San Jose
6.7 Dan Boyle
4.3 Milan Michalek
3.1 Marc-Edourd Vlasic

13.0 Dallas
5.0 Mike Ribiero
4.1 Brendan Morrow
3.9 Sean Avery

11.2 New York Islanders
4.5 Rick DiPietro
4.1 Mark Streit
2.0 Trent Hunter
0.5 Frans Nielson

11.1 Minnesota
4.1 Pierre-Marc Bouchard
3.6 Brent Burns
3.5 Nick Shultz

11.0 Carolina
8.3 Eric Staal
2.8 Tim Gleason

10.3 Colorado
6.3 Ryan Smyth
4.0 John-Michael Liles

10.5 Toronto
4.0 Jason Blake
3.5 Jeff Finger
3.0 Niklas Hagman

7.6 St. Louis
4.0 Brad Boyes
3.6 Barret Jackman

6.7 Los Angeles
3.5 Jarret Stoll
3.2 Dustin Brown

6.3 Phoenix
4.5 Shane Doan
1.8 Kurt Sauer

4.5 Atlanta
4.5 Ron Hainsey

4.0 Boston
4.0 Dennis Wideman

0 Montreal
0 Vancouver

(Note: If you find any mistakes let me know)