25 replies to this topic

[Buppy]

If that's true, the question becomes... is it reasonable to expect that contracts will be honoured based on previous growth patterns?

I just checked using the NHLs 5% growth estimate, and my understanding of the "make whole" provision. Their math isn't consistent, or they're attempting some chicanery.

Details per: http://www.nhl.com/i...s.htm?id=643570

On one hand, when setting the cap, the league is estimating flat revenues for '12-13. $3.303B. In the "Make whole" provision they say 5% growth.

Using an assumed year-over-year growth rate of 5% for League-wide revenues, the new CBA could result in shortfalls from the current level of Players' Share dollars ($1.883 Billion in 2011/12) of up to $149 million in Year 1 and up to $62 million in Year 2, for which Players will be "made whole." (By Year 3 of the new CBA, Players' Share dollars should exceed the current level ($1.883 Billion for 2011/12) and no "make whole" will be required.)

But if starting year 1 revenue at $3.303B, the shortfalls they estimate would actually be year 2 and 3, and the year 1 shortfall would be $231M. Over six years, the deal falls short by $63M. ($442M lost in first 3 years, $379M gained in the last 3.)

And the actual share percentages, assuming everything over $1.883B is used to repay the shortfalls, are: 57, 54.3, 51.7, 49.2, 46.9, and 44.7. If the deal was extended for the 7th year, the total shortfall would be recouped, and the actual player's share in year 7 would be 48.6%.

Of course, actual growth probably won't be 5% (certainly not a consistent 5% each year), so the numbers would vary.

In any case, ~$400M is a big chunk of change, and I would expect the players to want that separate from their share in future years. Doing so would raise the average share% to around 51.5-52%.

edit: Important distinction: The shortfalls listed are from the $1.883B in compensation the players made last season; not from already-signed contracts for next year and beyond.

Edited by Buppy, 17 October 2012 - 06:01 PM.

[kylee]

they have to get a deal done....right?

[toby91_ca]

I just checked using the NHLs 5% growth estimate, and my understanding of the "make whole" provision. Their math isn't consistent, or they're attempting some chicanery.

Details per: http://www.nhl.com/i...s.htm?id=643570

On one hand, when setting the cap, the league is estimating flat revenues for '12-13. $3.303B. In the "Make whole" provision they say 5% growth.



But if starting year 1 revenue at $3.303B, the shortfalls they estimate would actually be year 2 and 3, and the year 1 shortfall would be $231M. Over six years, the deal falls short by $63M. ($442M lost in first 3 years, $379M gained in the last 3.)

And the actual share percentages, assuming everything over $1.883B is used to repay the shortfalls, are: 57, 54.3, 51.7, 49.2, 46.9, and 44.7. If the deal was extended for the 7th year, the total shortfall would be recouped, and the actual player's share in year 7 would be 48.6%.

Of course, actual growth probably won't be 5% (certainly not a consistent 5% each year), so the numbers would vary.

In any case, ~$400M is a big chunk of change, and I would expect the players to want that separate from their share in future years. Doing so would raise the average share% to around 51.5-52%.

edit: Important distinction: The shortfalls listed are from the $1.883B in compensation the players made last season; not from already-signed contracts for next year and beyond.

This is how the math works:

2011-12 revenue = $3.303B, therefore, using a 5% growth, the revenue for 2012-13 woudl be $3.468 billion, the players woudl be entitled to 50% = $1.734....$149 million less than the $1.883 billion the players rec'd last year. So, that assumes that salaries will be the same as last year (i.e. no rollback), but too simplified as some players would have gotten raises, etc. Doesn't really matter though, anyway you look at it, the players would be taking a 12.3% hit. Sure, they may be able to collect on their existing signed contracts if revenues continue to increase, but the current set up would cause the players salaries not to grow as league revenues grow...against the main partnership philosophy. Salaries will grow as revenues grow, but the players need to shave off the 12.3% hit first.

[Buppy]

This is how the math works:

2011-12 revenue = $3.303B, therefore, using a 5% growth, the revenue for 2012-13 woudl be $3.468 billion, the players woudl be entitled to 50% = $1.734....$149 million less than the $1.883 billion the players rec'd last year. So, that assumes that salaries will be the same as last year (i.e. no rollback), but too simplified as some players would have gotten raises, etc. Doesn't really matter though, anyway you look at it, the players would be taking a 12.3% hit. Sure, they may be able to collect on their existing signed contracts if revenues continue to increase, but the current set up would cause the players salaries not to grow as league revenues grow...against the main partnership philosophy. Salaries will grow as revenues grow, but the players need to shave off the 12.3% hit first.

I understand that, but also in their proposal is this:

the Payroll Range will be computed assuming HRR will remain flat year-over-year (2011/12 to 2012/13) at $3.303 Billion

It's inconsistent. They use one estimate for the cap, and a different, more favorable, estimate explaining the make whole provision. Using the cap estimate in the make whole provision produces the shortfalls I listed.

I know they are just estimates, and in the end actual revenue will be used. I was just pointing out the inconsistency and the fact that under the more conservative estimates, growth may not be enough to pay back what's lost at first.

[toby91_ca]

I understand that, but also in their proposal is this:

It's inconsistent. They use one estimate for the cap, and a different, more favorable, estimate explaining the make whole provision. Using the cap estimate in the make whole provision produces the shortfalls I listed.

I know they are just estimates, and in the end actual revenue will be used. I was just pointing out the inconsistency and the fact that under the more conservative estimates, growth may not be enough to pay back what's lost at first.

Cap would seem irrelevant for the first year anyway since the teams could go over it. The cap isn't what controls the players' salaries, that just allows teams to be competitive (i.e. one team can't overspend everyone). At the end of the day, if every team spent to the cap, the players would be giving money back at the end of the year.

[Buppy]

Cap would seem irrelevant for the first year anyway since the teams could go over it. The cap isn't what controls the players' salaries, that just allows teams to be competitive (i.e. one team can't overspend everyone). At the end of the day, if every team spent to the cap, the players would be giving money back at the end of the year.

Yes, but that doesn't change the fact that they used two different revenue estimates, and that under the more conservative of the two, the provision doesn't work. The provision is bad enough even under decent growth conditions. It becomes much worse if growth is low. Basically stagnates total compensation for 4-7 years, and if the cost of benefits goes up, salaries have to go down to compensate.