Revenue sharing could help small-market teams

The Predators are one team who will benefit from the league's revenue sharing program. (Jason Franson/CP)
December 11, 2013, 8:33 AM

PEBBLE BEACH, Calif. — The implementation of the salary cap in the NHL was supposed to help what’s commonly referred to as competitive balance.

In other words, allowing the small-market teams to swim in the same pool with the big-money ones. Rein in spending with the hope that parity keeps things interesting.

But what happens when the cap rises so quickly that the Florida Panthers and Nashville Predators of the league can’t keep up? The projected upper limit of US$71 million — and the floor between $52 and $53 million — for next season isn’t crazy, but the lucrative Canadian-rights TV deal could lead to sharp increases in the coming years.

The NHL’s past two work stoppages tried to level that out, but for the foreseeable future it’s up to the small-market teams to take on the challenge as the cap could surge well past $80 million.

“We’ve got to move with everybody else,” Predators general manager David Poile said. “There’s a lot of components in the way this whole thing’s been put together. There’s revenue sharing for teams like ourselves that it always works out.”

Revenue sharing is expected to help, along with a new way to calculate the cap and floor: determine the midpoint and go 15 per cent up and 15 per cent down. In theory, that should keep the disparity from getting out of control.

But if the C$5.2-billion, 12-year agreement with Rogers inflates revenues as much as it should and business continues to boom, the floor will soon be higher than the cap at its highest under the last collective bargaining agreement. That’s a difficult spot for teams with fixed budgets.

“I don’t think anyone is against paying for success,” New Jersey Devils GM Lou Lamoriello said. “But you have to be able to afford it first.”

Poile was right to point to revenue sharing as a way to assist teams that don’t make money hand over glove like the Toronto Maple Leafs and Montreal Canadiens, but Dallas Stars GM Jim Nill still has questions.

“Every business, every team has to sit back and look at their business model now and see where it fits in, where does the revenue sharing fit in? How does that come into the model? That’s a new entity too now,” Nill said. “That changed in the new CBA. We’ll all sit back and analyse it and go from there.”

Poile called revenue sharing “something that’s necessary” and something the Predators appreciate as a small-market team.

“If the cap goes up like it’s predicted to go up, then it’s contemplated that revenue sharing can go up,” Poile said. “The formula is working.”

Only the Panthers have a cap payroll under what’s expected to be next year’s floor, according to CapGeek. But the real uncertainty lies in what could happen two, three or four years from now.

It’s impossible to know if revenue sharing will keep up with a salary cap and floor that could skyrocket.

“How do I answer that?” Poile said. “I can’t tell you what the ratio’s going to be. … That’s a long way off.”

So is any opportunity to alter the system. That’s a good thing for the players, who ultimately benefited from the last CBA in the long term.

But paying more in the way of salaries means owners are making plenty of money, too. And labour stability isn’t something to be upset about.

“We love the fact that we’re on a strong foundation and we really have an opportunity to grow things even more and better than before,” commissioner Gary Bettman said. “I think the future of the game has never been brighter. We and everybody in the board room is excited about that.”

Even those who could see their chances for competitive balance decrease as the Leafs, New York Rangers and Philadelphia Flyers of the NHL are able to spend more and more.

“The fact of the matter is, our revenues are going up, so it’s all relative,” Carolina Hurricanes GM Jim Rutherford said. “Over time when you spend to the cap, you have an advantage. But not necessarily always.”

Rutherford said that as the Hurricanes get more revenue from the league, they have “a responsibility as a franchise” to generate more. If that starts happening in more non-traditional markets, the NHL is in for even better times.

Right now, things are looking up.

“If the cap increases that means revenue is increasing and the pie is getting bigger,” St. Louis Blues GM Doug Armstrong said. “I think we all have to be excited about that.”

Follow Stephen Whyno on Twitter at (at)SWhyno

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