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From ESPN Insider:
BOCA RATON, Fla. -- Following the trade deadline, Los Angeles Kings GM Dean Lombardi was chatting with the local media and mentioned that the slumping Canadian dollar might shift next year’s salary cap to $68 million, down from earlier estimates.
That would be a pretty dramatic drop from the $71.1 million that the NHL originally projected at the NHL’s board of governors meeting in December, but when that projection came out, the Canadian dollar was at $0.94. Today it’s at $0.90.
With so much of the league’s revenue driven by Canadian teams like the Maple Leafs, that calculation made sense.
Still, it might be a little extreme.
On Tuesday, following the GM meetings, Lombardi agreed to sit for a chat to explore this projection for a few minutes.
Lombardi is one of the NHL’s most fascinating minds, a general manager constantly calculating and planning for the next step in building his Kings dynasty. I was curious as to how he arrived at that $68 million projection, anticipating a formula that only he understood; maybe I'd even learn a new word in the process.
“Quite frankly, the only reason it came up was an odd situation where we were negotiating [a contract],” Lombardi said Tuesday afternoon. “We were operating under what the league had told us [$71.1 million]. Over the course of the negotiation, the agent mentioned $68 or $69 [million]. ... I’m like, ‘Whoa, whoa, whoa. Timeout. What did you say?’”
Like any good negotiator, Lombardi was more than willing to embrace that new projection. Anything to get a sliver of leverage and find a reason to squeeze another dollar or two in the club’s direction during contract talks.
“We called the league. They said, 'Yeah, could be,'” Lombardi said.
Could be, but unlikely.
On the final day of the GM meetings in Florida, the expectation was that the general managers will get an update on which way the salary cap is heading following the initial projections, but NHL deputy commissioner Bill Daly hinted Tuesday that the league didn’t anticipate a sizable drop to $68 million.
“Uh, no. First of all, I’d tell you we have not done projections since December, so we haven’t even looked at the effect of the Canadian dollar,” Daly said. “Obviously, the value of the Canadian dollar has an effect on the cap, ultimately. It’s probably not as large an effect as people might think. But depending on what happens with the dollar between now and June at the time we have to set the cap and what that does to year-end revenues and projections for next year -- it’ll have an effect. It shouldn’t be that major, though.”
His conclusion?( “I don’t think it has an effect of more than $1 or 2 million, tops,” he said.
One possibility on where the $68 million number comes from is a simple projection that looks at the historic growth of the salary cap. One agent estimated that the cap has grown about 6 percent each year since the previous collective bargaining agreement, so using that math and adding 6 percent to this year’s cap of $64.3 million, you get $68.2 million.
Without access to updated revenue reporting, there’s no way for someone outside the league to come up with an entirely accurate projection, so estimates like that make sense. According to one agent, the NHLPA will get another round of preliminary revenue numbers May 15, which will help with cap projections, but there are still a few factors that will come into play regarding the new cap.
Besides the strength of the Canadian dollar, there needs to be a decision made on the 5 percent growth factor the players can implement, something they have done every year except for the 2006-07 season. The CBA also has language that allows for money from the new Canadian television deal to be included in the hockey-related revenue a year early if both sides agree. That’s a decision that has yet to be made.
“Long story short, things up in the air and won’t know for a few months,” wrote an agent in a text.
The other factor that helps minimize the impact the Canadian dollar has on the salary cap for the coming year is that it is averaged out over the course of the season before being converted into U.S. dollars.
Article 50 of the CBA breaks it down like this: “For purposes of a particular League Year, all revenues described herein shall be based on U.S. dollars, or U.S. dollar equivalents, converted at the average Canadian dollar to U.S. dollar exchange rate for that League Year, as determined by the Bank of Canada.”
So even if the Canadian dollar continues to fall, averaging it out over the course of the season makes the impact less dramatic. On Oct. 1, the Canadian dollar was at $0.97, so the conversion rate won’t be as severe as you might think. The impact truly might not be felt until the 2015-16 season if the plunge continues.
Yes, it’s all a bit wonky and hockey fans probably reached their max of hockey-related-revenue discussion during the lockout, but every dollar in the cap becomes important, especially for the best teams in the league, which look for ways daily to save a dollar or two against the cap.
BOCA RATON, Fla. -- Following the trade deadline, Los Angeles Kings GM Dean Lombardi was chatting with the local media and mentioned that the slumping Canadian dollar might shift next year’s salary cap to $68 million, down from earlier estimates.
That would be a pretty dramatic drop from the $71.1 million that the NHL originally projected at the NHL’s board of governors meeting in December, but when that projection came out, the Canadian dollar was at $0.94. Today it’s at $0.90.
With so much of the league’s revenue driven by Canadian teams like the Maple Leafs, that calculation made sense.
Still, it might be a little extreme.
On Tuesday, following the GM meetings, Lombardi agreed to sit for a chat to explore this projection for a few minutes.
Lombardi is one of the NHL’s most fascinating minds, a general manager constantly calculating and planning for the next step in building his Kings dynasty. I was curious as to how he arrived at that $68 million projection, anticipating a formula that only he understood; maybe I'd even learn a new word in the process.
“Quite frankly, the only reason it came up was an odd situation where we were negotiating [a contract],” Lombardi said Tuesday afternoon. “We were operating under what the league had told us [$71.1 million]. Over the course of the negotiation, the agent mentioned $68 or $69 [million]. ... I’m like, ‘Whoa, whoa, whoa. Timeout. What did you say?’”
Like any good negotiator, Lombardi was more than willing to embrace that new projection. Anything to get a sliver of leverage and find a reason to squeeze another dollar or two in the club’s direction during contract talks.
“We called the league. They said, 'Yeah, could be,'” Lombardi said.
Could be, but unlikely.
On the final day of the GM meetings in Florida, the expectation was that the general managers will get an update on which way the salary cap is heading following the initial projections, but NHL deputy commissioner Bill Daly hinted Tuesday that the league didn’t anticipate a sizable drop to $68 million.
“Uh, no. First of all, I’d tell you we have not done projections since December, so we haven’t even looked at the effect of the Canadian dollar,” Daly said. “Obviously, the value of the Canadian dollar has an effect on the cap, ultimately. It’s probably not as large an effect as people might think. But depending on what happens with the dollar between now and June at the time we have to set the cap and what that does to year-end revenues and projections for next year -- it’ll have an effect. It shouldn’t be that major, though.”
His conclusion?( “I don’t think it has an effect of more than $1 or 2 million, tops,” he said.
One possibility on where the $68 million number comes from is a simple projection that looks at the historic growth of the salary cap. One agent estimated that the cap has grown about 6 percent each year since the previous collective bargaining agreement, so using that math and adding 6 percent to this year’s cap of $64.3 million, you get $68.2 million.
Without access to updated revenue reporting, there’s no way for someone outside the league to come up with an entirely accurate projection, so estimates like that make sense. According to one agent, the NHLPA will get another round of preliminary revenue numbers May 15, which will help with cap projections, but there are still a few factors that will come into play regarding the new cap.
Besides the strength of the Canadian dollar, there needs to be a decision made on the 5 percent growth factor the players can implement, something they have done every year except for the 2006-07 season. The CBA also has language that allows for money from the new Canadian television deal to be included in the hockey-related revenue a year early if both sides agree. That’s a decision that has yet to be made.
“Long story short, things up in the air and won’t know for a few months,” wrote an agent in a text.
The other factor that helps minimize the impact the Canadian dollar has on the salary cap for the coming year is that it is averaged out over the course of the season before being converted into U.S. dollars.
Article 50 of the CBA breaks it down like this: “For purposes of a particular League Year, all revenues described herein shall be based on U.S. dollars, or U.S. dollar equivalents, converted at the average Canadian dollar to U.S. dollar exchange rate for that League Year, as determined by the Bank of Canada.”
So even if the Canadian dollar continues to fall, averaging it out over the course of the season makes the impact less dramatic. On Oct. 1, the Canadian dollar was at $0.97, so the conversion rate won’t be as severe as you might think. The impact truly might not be felt until the 2015-16 season if the plunge continues.
Yes, it’s all a bit wonky and hockey fans probably reached their max of hockey-related-revenue discussion during the lockout, but every dollar in the cap becomes important, especially for the best teams in the league, which look for ways daily to save a dollar or two against the cap.
