It’s been broadly hinted for months: After four straight years of growth since its implementation in 2005, the NHL’s salary cap is expected to lose ground for the 2010-11 season as a direct, albeit delayed, result of the worldwide economic meltdown.
We won’t know the actual damage until late next June, after the league and the NHLPA get together to hash out the numbers based on a complex algorithm of hockey-related revenues. But judging by the rumbles, things could get very ugly.
The NBA announced this week that its 2009-10 cap would drop approximately $1 million per team, from $58.68 million in 2008-09 to $57.7 million. That total is still slightly higher than the NHL’s recently announced $100,000 boost to $56.8 million.
At the same time, the NBA issued a memo to its teams, suggesting that the ship had only begun to make contact with the iceberg. Based on projections of declining income, the league speculated that next year’s cap could drop as low as $50.4 million.
We’ll pause here a moment to allow the post-apocalyptic dust to settle.
The NBA memo did include a disclaimer pointing out that the projections could “change based on economic conditions and as more information on league-wide business performance becomes available.” Still, even the NBA’s optimistic high-end estimate of $53.6 million represents a 10 percent slice carved out of this year’s pie. That’s a significant change of fortune. And it begs the question: Is the NHL in for a similar hit?
Nah. Why would they be?
The NBA’s national TV money, about $30 million per team, is safe. But ticket sales, advertising and marketing deals, arena signage, parking, luxury suite sales and the like are expected to take a significant hit. And these concerns have to be shared by the NHL, a league with a national TV deal (about $3 million per team, in addition to local arrangements) that foreces it to rely much more heavily on the very revenue streams that are so susceptible to cutbacks.
And then there’s the loonie. With 35 percent of league revenue generated north of the border, earnings are affected by the value of the Canadian dollar, a non-factor in the NBA’s cap projections. Overall, the Canadian economy has more successfully weathered the financial crisis. As a result, its dollar, which was trading around 82 cents U.S. back on Jan. 1 is closer to 86 today. That bodes well for next season, but tides can change. If the Canadian dollar swings even a few pennies, it can have a dramatic impact on the league’s overall fortunes.
Don’t expect a similar prognosticatory pronouncement to come from NHL headquarters . . . not that anyone would place much faith in the words of a commissioner who spent much of the last year misleading the public about the financial crisis in Phoenix. But even without one, you have to believe that the league’s eyes are wide open to what lies ahead.
Of course, it’s one thing to spend up to $50 million. It’ll be another thing entirely for some teams to cut back to that level. After all, there’s no wiggle room in hockey. No allowance for an NBA-style luxury tax if spending can’t be reined in. No re-negotiating contracts to create friendlier hits. If the cap drops and necessitates a personnel fire sale, then get to it quickly because your neighbor’s going to be running a clearance sale of his own.
And that makes me wonder if I was wrong about Dale Tallon and the wisdom of last week’s signing. Sure, it could still turn out to be a complete disaster. But maybe in recognizing the financial Armageddon he was facing next summer, Tallon decided to go all-in for the upcoming season and worry about tomorrow, well, tomorrow.
Truth is, Tallon could have a pretty tough time crossing that bridge. Consider that the Blackhawks have more than $43 million committed for 2010-11 to just 13 players . . . and that’s without one cent set aside for franchise cornerstones , and or the other half dozen players they’ll need to fill out the roster. Unless Tallon can find suckers willing to take the contracts of ($7.1 million) and ($5.6 million) off his hands (hope he has Bob Gainey‘s number on speed dial), a $50 million cap could crush the momentum of last season’s feel-good story in Chicago.
The Hawks aren’t alone in having painted themselves into a corner. The have contracted $41.5 million to 14 players in 2010-11 and may find themselves hoping that Nick Lidstrom, a UFA after next season, considers retirement or at least a massive home town discount. Hard to imagine them filling out a roster if he comes back for anything near his current $7.45 million hit. The Rangers have a similar amount committed to just 12 players. The Flyers are at nearly $46 million for just 13 players, not including a starting goalie. And the list goes on . . .
Next year’s math problems are still hypothetical for NHL GMs, but the NBA’s doom-saying memo brings them more sharply into focus.