Skyrocket of Cap Floor Could Doom NHL
Just 7 years removed from their last lockout in 2004-2005, the NHL could soon find themselves heading down a very similar path. For the first time since the introduction of the salary cap, and with it the cap floor, in 2005, multiple teams are having issues reaching the lower limit. When the salary cap was introduced to the NHL in 2005, the upper limit was set at 39 million dollars per team. Now, as we enter the 2011 season, the cap has been set at 64.3 million dollars. That is an increase of 64.9% in just the past 7 years.
As the upper limit rises, so must the cap floor. Originally, the floor was set to be 55% of the salary cap. In 2005, it was just 21.5 million dollars. The floor has since been amended to be 16 million dollars below the upper limit. That means that the current floor in the NHL is 48.3 million dollars. That is an astounding 125% increase over 7 years. I understand that the cap is based completely off NHL revenues, but due to the floor increasing at a non-percentage rate, it is now raising at an unfair amount. If the rate was still based off the original 55%, the floor would be 13 million dollars lower at 35.4 million. For reference, the 2005 salary bridge was 18 million dollars.
I’m all for parody, but not if it runs small market teams out of business. Teams with inflated revenues like Toronto, Montreal, New York and Detroit push the cap higher than the Islanders and Coyotes of the league can handle. What happens when the cap pushes to 75 million? Can teams like Florida, New York, Phoenix, Nashville, Columbus, Carolina, Winnipeg and St. Louis handle a cap floor of 59 million without losing boatloads of money?
Players are getting the best of the owners right now, and I fear that soon the NHL will want to get the money flowing a bit more in their direction. All teams should benefit greatly from the monster ten year, 2 billion dollar TV deal the league signed with NBC earlier this year. The question is, will that be enough to make most, if not all teams solvent. My guess is no. Divided evenly and spread out over 10 years, it amounts to just 6.67 million per team. Meanwhile, the city of Glendale, Arizona just pumped in 25 million dollars for the 2nd straight year, to keep the team in Phoenix. As the cap floor rises, it will be increasingly difficult for Glendale to keep the support for continuing to bail their hockey team out.
Over the next few years, more and more teams will struggle. As we reach the end of the current CBA, small market teams could become increasing frustrated with the lack of profits flowing into their organizations. We could be headed right down the same road the NFL and NBA are currently driving on: Lockout. Maybe I’m just being pessimistic. Maybe owners like losing money, maybe the players don’t want a lockout and will give some ground in the next CBA. I can’t see that happening, when the players see teams like Toronto recording monster profits year after year.
I believe, that in order to protect the NHL’s gains on it’s path back to respectability, a simple change in the cap floor is all that is needed. Maybe parody takes a hit, but that has to be better than multiple teams running out of money and moving to other markets that would have the same exact issues. Move the floor back to a percentage of the cap, because at the current agreement, the floor rises proportionately to the cap. As the years go by, the floor becomes even more unfair every year. When the floor rises, average players make way too much money. What’s next, a 50 point player making 6 million a year? Paul Gaustad making over 3 million a year to win faceoffs? The current contracts will look like nothing compared to what’s coming next.