League Revenues, the Loonie and the Salary Cap

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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.

some interesting numbers looking at the impact of canadian dollar value on the cap. No idea how accurate they are, but at first reading, I think he’s done a good job on putting this together.

the one thing that I’d raise as an issue is that I think the phrase “as long as the league can increase revenues” is an issue. there’s softness in a number of markets (Columbus, Atlanta) and I’ve seen some comments by Bettman about softness in sponsorship, which I expect will likely accelerate somewhat. A flat revenue growth is more likely than continued growth, if you ask me (and honestly, there was a lot of growth to grab coming out of the lockout, and I was expecting growth to flatten, if not completely go flat, before the economic crisis hit. Now that it has, ratchet the numbers down further, folks).

I was betting the cap would only go up minimally next year; now, I’m not only betting flat, maybe down a bit, but I’m also wondering if the players are going to see money lost to the escrow.

So far, Bettman’s said that the economy hasn’t really impacted revenues. I believe him. What he isn’t saying is that something like 80% of the league revenues are locked in before the puck drops to open the season, so there’s not a lot of wiggle room (good OR bad), barring some major catastrophe like a team owner going broke.

But next year? We’ll have to wait and see — when sponsorships and other deals are renegtiated next year? We’re seeing companies walk to the sidelines in other areas of sponsorships. Will teams find the economic weakness leads to reduced ticket sales, or price reductions to manage reduced demand?

None of this is (a) bad, or (b) the CBA’s “fault”, or (c) bettman’s fault. It’s part of the economic reality of life. Are some teams in deep trouble if the cap flattens or goes down? Definitely. But that’s because some teams are lousy at planning and budgeting, not because the system is flawed. ANY system you put in place, some teams (hello, Toronto) will find ways to screw it up, while other teams never seem to run into those problems and find ways to prosper (hello, Detroit and San Jose). And then there are teams like Anaheim, which sometimes guess wrong and sometimes run into surprises, but figure out a way to make it happen.

Hey, if you ask me, any team that insists on spending to the cap, committing too much salary for too many years and is depending on the cap continuing to go up gets exactly what it deserves. Don’t “fix” the system, get better management.

The good teams seem to be able to navigate this pretty well, even though we’re still in the learning curve for the CPA and the cap.