PEBBLE BEACH — We’ve seen this cycle before, and it has never ended well for the National Hockey League.
Revenues come in, and the salary cap goes up. Revenues stay flat, and the NHLPA exercises its right under the collective bargaining agreement to ratchet the cap up.
As the numbers rise, more GMs from the rich teams make more poor decisions on blockbuster contracts, driving the player market up for all 30 teams. Eventually, the salary floor gets to the point where too many teams can’t even turn a profit by spending the minimum.
And then the inevitable lockout ensues, with the owners crying poor. And after a while with no hockey, they shake hands, it all happens all over again.
So, with NHL commissioner Gary Bettman predicting on Monday that the cap could jump nearly 12 percent after only the first year of the newest CBA, we ask the question: Why will the cycle be different this time?
“I said to the board, there shouldn't be any issue or consternation,” Bettman said at the end of Day 1 of these Board of Governors meetings. “If that's the cap level, it's because the revenues have gone up. And that's a good thing. We made a couple of adjustments to the range (in the new CBA) so there's more flexibility that clubs have. When the cap goes up, revenue sharing goes up, and the system works the way it's supposed to.”
The difference today — thanks in large part to the new TV deal with Rogers (which owns this website) — is that national revenues now make up as much as 18 percent of the NHL’s revenues, as opposed to five or six percent not so long ago. As such, revenue sharing has gone from less significant sums to the possibility of real money — perhaps as much as $30 million for some teams.
That’s the kind of money a small market team could actually survive on.
“It doesn’t effect us,” said Winnipeg Jets owner Mark Chipman of the rising cap. “It’s not as if these increases in revenue haven’t been talked about or contemplated. (This) CBA works for our market. Under the old agreement we were precluded from revenue sharing because of where we ranked revenue wise and that’s not the case anymore. It’s a very, very workable model.”
The sage New Jersey GM Lou Lamoriello has seen this cycle many times before. Even he is ready to look at this announcement with a fresh eye. “As long as we can afford it … I don’t think anyone is against paying for success. But you have to be able to afford it first.”
During reports from the NHL’s business side Monday, owners were apprised of various opportunities that could keep the cash rolling in. An eventual return of the World Cup of Hockey is one of those, as well as proposals on numerous other fronts.
More money to play with is good news for big markets like Vancouver, where GM Mike Gillis said, “It’s always nice to have more money.”
He’ll always operate a cap team, and the Canucks will always be profitable. What about San Jose though? The Sharks spend to the cap today, and according to Forbes magazine made $2 million last season, but lost upwards of $20 million the previous four seasons. That is not a very good return on a $147 million investment by owner Hasso Plattner, who has claimed to lose $10 to $20 million per season.
The Sharks have Joe Thornton, Patrick Marleau and Dan Boyle all becoming unrestricted free agents after this season. With a rising cap, San Jose fans will expect ownership to re-sign their stars. If ownership decides to use an influx of league money towards his bottom line, Sharks fans might revolt.
Same in any city where fans sense an owner putting profits ahead of winning.
“There’s spending money and spending it wisely,” said Boston GM Peter Chiarelli. “We’ll keep trying to spend it wisely, for the most part and try to ice a winner.”
It always starts out this way. But it always ends the same way too.
And if the Canadian dollar takes a plunge that will have serious effects on the NHL’s finances, with the seven Canadian teams ranking in among the Top 16 revenue teams in the league. That equates to Canadian teams stocking the revenue sharing pool, at the same time as Chipman is praising a system that would allow the Jets to take from that fund, rather than pay into it.
For a team like St. Louis that’s killin’ it on the ice, but never turns a profit, financial straits are never too far away.
“We have to be competitive on the ice,” Blues GM Doug Armstrong said. “We have to increase our fan base, we have to increase our corporate fan base. I think if we continue to do that we'll be able to keep pace with the cap.”
Words we’ve heard before.