The NHL's projected $74.5 million salary cap ceiling for 2016-17 and expansion plans are jeopardized by the fall of the Canadian dollar.
A few thoughts on what we learned from Monday’s session of the NHL Board of Governors meeting, which wraps up today in Pebble Beach, California:
With unbridled optimism in his heart, NHL Commissioner Gary Bettman announced that the salary cap ceiling could be as high as $74.5 million for the 2016-17 season.
“I gave [the governors] a very, very, very rough projection on what the cap could conceivably be next season, which will be somewhere between where it is now and up $3 million,” Bettman told the assembled media on Monday. “That will depend on a variety of factors, including how good the preliminary projections are and discussions that we have to have with the Players’ Association in terms of what the right increase is.”
By “right increase” he is referring to the one element of the cap that the PA controls: the so-called “inflator” that can bump the cap ceiling up by as much as five percent at their request. It's a lever that the union has pulled in the past because it creates space that allows high-spending teams to sign players to more lucrative deals. But since the final cap is reliant on actual revenues, it also exposes the players to larger clawbacks through escrow, and that's something many of them have privately railed against in the past.
Bettman, though, seemed fairly confident about the numbers. Defensive, even.
“It tells you the league’s revenues continue to grow, and that while there’s a lot of speculation as to what the declining Canadian dollar relative to the U.S. dollar means, most of that commentary and speculation is a little off of the mark,” he said.
“[Revenues] are obviously up,” he added. “We project them to be up, notwithstanding the decline in the Canadian dollar.”
That may end up being true, although there are reasons to be skeptical.
Do the math. Take the current cap of $71.4M and simply multiply it by the five percent inflator and you get $74.97 million. That's higher than Bettman's blue-sky estimate of $74.5 million, and suggests revenue is flat, if not down slightly.
And despite his protestations, there is real concern around the league about the state of the loonie. With oil prices tumbling, the Canadian dollar hit an 11-year low on Monday, dropping below 74 cents U.S. for the first time since 2004. Given how heavily the league relies on revenue generated within Canada (particularly that massive TV deal it signed with Rogers Communications last year), it’s hard to see how exactly that concern is “off the mark.”
It’s also worth noting that Bettman’s estimate at this time last year was $73 million, about $1.6 million higher than the eventual cap. In other words, don’t be surprised if the league’s GMs are taking the 2016-17 early estimate with a rather large grain of salt.
Bettman also addressed the issue of expansion on Monday, saying that there is no timetable for the league to decide on pending applications from Las Vegas and Quebec City.
“The board will meet to vote when we decide there’s something to be put to a vote,” he said. “That will really be after the executive committee begins and finishes deliberations and are prepared to make a recommendation.
“When I say there’s no timeline, I know the steps we have to go through to get there. Could they be done in time for ’17-18 start? Yes. Will they be? Maybe. Maybe not.”
While it appears that he’s saying a whole lot of nothing, Bettman’s actually being very clear. There’s obviously no pressing demand from the board to get this done. In fact, there are probably serious reservations from some corners as to the viability of Las Vegas as a hockey market, and Quebec’s ability to survive as a small market with the Canadian dollar in such miserable shape. And with those factors in mind, along with the lingering hope that “the golden city” of Seattle might eventually get its act together, there’s no reason for the board to rush into a decision it may regret down the road.
The most compelling topic on the docket for Tuesday might be the executive compensation experiment. While it was a good idea in principle—recognizing key off-ice personnel as valuable assets to the club that developed them—it has been misused by teams that are seeking high draft picks in exchange for fired coaches and managers who they still have under contract. No shock that it will be wiped off the books on January 1.
The numbers game
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