Gary Bettman and Bill Daly have been preaching that the NHL CBA needs to be tweaked to ensure the health of the league. This is why the players and fans have been locked out of NHL hockey for a month now. However, it is curious that out of all the reports that have been coming out on the negotiations that we do not hear more about the salary cap floor or revenue sharing.
The NHL’s argument back in 2004 was that the league was paying too much in player salaries and that they needed “cost certainty”. By getting the salary cap they wanted and tying it to league revenues, the league was successful in getting the cost certainty they were looking for. Not only did the league enlist a salary cap, they also instituted a salary floor, which meant that all teams had to spend a minimum amount. The reasoning was to try and ensure competitive balance in the league by minimizing the disparity between team salaries. This however was a miscalculation on the league’s part. By not foreseeing the growth of the league after the lockout, the NHL and its owners have put their small revenue clubs in peril.
In 2005 the salary cap was set at $39 million; 54% of league revenues. That same season the salary floor was only $23 million. The floor is fixed at approximately $16 million below the salary cap. In 2008, with league revenues growing, in part due to the rising Canadian dollar, the salary floor had exceeded the original salary cap of $39 million and last season the salary floor was up to $48 million.
This time around, the negotiations between the NHL and NHLPA have been focused on the split of hockey related revenue (HRR). The NHL is arguing again that the league is paying out too much in player salaries and would like to reduce the player’s share of HRR. Surely reducing the salary expense for clubs will help their bottom line, but does it solve the problem for small revenue clubs?
When the NHL and NHLPA agree on the new CBA there will surely be a reduction in the player’s share of HRR. If we come out of these negotiations with a 50-50 split of HRR, as many people expect the final split to be, it will only take three seasons of 5% revenue growth for the cap and floor to be right back where they are today.
So what’s the solution? Well that is for Gary Bettman, Donald Fehr and their groups to figure out. Cam Charron at the Backhand Shelf Blog does a nice job in proposing some different ideas to solve this problem and it is worth checking out. But without an adjustment to the salary floor or significant revenue sharing, we will be right back in the same position when this next CBA expires.
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