FanHouse CBA

Following up on my post from last week about the US Dollar's rise potentially affecting the salary cap, Tom Benjamin had a short post today about this issue. On the subject of revenues vs. the cap Tom B. has this to say:

If revenues actually do fall we are into uncharted waters, but the cap formula includes an automatic 5% increase. As a result revenues have to fall a lot to actually drop the salary cap. A zero increase in the cap is probably my worst case scenario. I don't think that would cause significant problems. It would, however, help the Russian league compete for players.

His point about the Russian competition is an excellent one, especially in light of Alexander Radulov's recent statements. Given that I believe there is a paradigm shift in world finance underway with the power-base shifting eastward towards Russia, China and the Arab world any drop in revenues for the NHL would be yet another data point in favor of that analysis, a potential nail in the coffin of the NHL's dominance over the hockey world.

But, that said, I have to take umbrage with Tom's assertion that it would take a large drop in revenues to drop the cap. On the contrary, given what we know about the league's revenues last year, the $56.7 million salary cap for this season includes the 5% kicker, so any drop in revenue would cause the cap to drop. Unless the numbers being bandied about are way off ($2.56 billion), the only way for the cap to be $56.7 million was if the 5% kicker was added to the cap for 2008-09. If the NHLPA waived the 5% increase, then the cap would have been set at approximately $54 million. If I'm wrong about this, please someone correct me.

Now, the likelihood of league revenues contracting is subject to much debate, and the more I discuss this the less convinced I am that revenues are likely to drop a lot. As I pointed out last week, even in a revenue neutral setting the current spending on salaries means that the escrow payments would stay with the teams as that equals ~59% of revenues where the players are due only 56.53%. This does not bode well for next year's extension of the CBA.

Most NHL players would probably tell you that while Training Camp(!) fills them with some excitement of the season to come, the grueling two-a-day workouts, bag skates, and defensive drills are about as fun as driving through rush hour traffic. Just get the games going!

Canucks players will be happy to know, then, that their training camp will be a nice, compact TWO days long. Sure, there are still practices to be had between meaningless pre-season games, but the Canucks' vets won't have to put up with too many monotonous workouts before getting some in-game action.

Is this coach Alain Vigneault being nice? Nope, it's the CBA.

According to the CBA, training camp (preseason) can be no longer than 20 days for veteran players. Still, the Canucks are returning to Whistler for their NHL training camp this year, but the on-ice portion there will be two days -- down from three last year at Bear Mountain Resort, near Victoria.

"That's just the way it is," said Vigneault. "In those 20 days we have to get the team ready for the regular season. We have 12 days to practice and we play seven (preseason) games."

Quite honestly, I've never understood why the preseason has to be as long as it is. Today's players, with the exception of a few Kyle Wellwood-types, are in peak condition thanks to grueling off-season training regimens. Do the players really need to spend almost a month playing meaningless pre-season games and practicing the same stuff they've been doing for decades?

Given how short the off-season is for some clubs, especially those teams that go deep into the playoffs, I'm sure many players would appreciate an even shorter preseason. Scrap a couple of exhibition games, especially the ones where it's mostly prospects that won't even make the opening night lineup, and start the actual season a bit sooner.

Of course, that just makes TOO much sense for the NHL to consider, and we can't have them losing precious preseason ticket revenue, can we?

For those who follow the goings on in the financial markets closely, the recent rally in the US Dollar in terms of the trade-weighted index was quite an event, considering the extreme weakness of world's reserve currency over the past 7 years. The blast upwards to 76 on the index has some people proclaiming (and I'm not one of them, mind you) that the Bear Market in the dollar is over:

"This is the watershed week for the US dollar," said Marc Chandler, currency strategist at Brown Brothers Harriman. "The magnitude of the dollar's moves and the breaking of key technical levels suggest that a major shift in the outlook towards the dollar is occurring as massive positions are adjusted." Other analysts described the widespread buying of dollars as "capitulation"

One might be wondering what this has to do with the NHL, and, as the title of this post suggests, the salary cap? Allow me to build my case slowly if you would. Considering that according to this article in the Toronto Star I found at this post by my old blogging buddy the EclectEcon over at the Sportseconomist.com, the driving force behind the >10% rise in the salary cap for each of the past two seasons was the strengthening Canadian Dollar:

The increase in the value of the Canadian dollar may be responsible for as much as half of the league's revenue gains since the NHL went through the lockout of 2004-05, say several sources familiar with NHL finances.

"If you take out the Canadian teams, which have done so well since the lockout largely because of the Canadian dollar, the league's revenues are actually only growing at a 2 per cent clip per year," says an executive with a U.S.-based NHL team, who requested anonymity.

With the Loonie averaging near parity with the $USD over the past year and having broken down out of the box formation that held it in check between $1.02 and $0.97US for the past 9 months to its closing price as of this writing to $0.938, there is a real possibility of a contraction in league revenues due to this breakdown of the exchange rate.

While the news of the morning is Anaheim punching their ticket to the finals, my fellow Buffalo Sabres blogger Kevin at Bfloblog had a great introductory post for the off-season yesterday, which followed a wondrous recap of the Sabres season from a fan perspective the day previous. In his off-season primer he lays out some details which are going to play a large role in how teams position themselves for next season.

1. The NHL's revenue is going to exceed $2.2Billion US, which will push the salary cap to around $48 million dollars. There had been rumors about this move previously, but now it looks like this can be considered fact.
   
2. With revenue moving that high that means the players are in line for a raise from 54% of revenues to 55-56% thereof.
   
3. As has been reported on widely, and favorably, by the hockey blogosphere, it was the NHL's decision to leverage digital media and the internet which helped to grow revenues by that much, as paid attendance was nearly flat and it was only a rise in ticket prices which allowed for a rise in league revenue.

It behooves us, as well, to reiterate the Restricted Free Agent Compensation Rules under this CBA at this time. With 28 teams not playing and a slew of RFA's to consider signing a few high profile ones may be in line for the-dreaded-poaching via Offer Sheet Signing that fill message boards and even some dead-tree media column inches with dread. Can anyone say Thomas Vanek?