Quote:
Originally Posted by kermitology
It's not counterintuitive. The higher the cap floor goes, the more teams are required to spend, but if gate revenues don't increase, teams are needing more of revenue sharing
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Not necessarily. If revenue is going up by 2B to 5B to reach that 70M we need to first find out where that additional 2B is coming from before we can make any judgement at all.
A portion will be increased ticket prices in the big 3, along with increased concessions but unless the ACC starts selling hot dogs for $2000.00 it's not likely that all 2B will be coming from the individual team portions. It's more likely, and actually confirmed, that a large portion will be increased merchandising, sponsorships and TV deals. So Phoenix today has increased their revenue without selling a single ticket just thanks to the new TV deal the board of governors signed. This isn't the same as revenue sharing, this is simply how the NHL deals with revenue. For merchandising sold through the NHL every teams gets 1/30, merchandising licensed to other companies (say Walmart), every teams gets 1/30, the only time a team sees a different share is when they sell it through themselves (Fanattic). When there's a national televised game all teams are getting 1/30th but I think there's a bit more to that.
So now if each team is seeing an additional 20M from those revenue streams and the 50-50 split (again can't underestimate this, it's why there was a lockout) and the cap goes up it might not change the dynamic of the teams at all. However if the average cap goes up 30M and small market team is bringing in an additional 40M from those revenue streams and revenue sharing all of a sudden that's better for these small-market teams because they've got more money to spend and now their gate revenue makes up a less percentage of their total revenue. And also there's simply other static costs that goes beyond player salaries, arena costs being a big one, but other employees, transportation, electricity, etc etc. that means if you're bringing in a lot more money, even if a lot of it has to go to players, that's less a percentage going to those other costs.
For a very simple example, let's say a team that relies heavily on the revenue sharing (15M), paying the cap floor, and is still losing money today. They have 50M in player salary, an additional 20M in other costs, and the cap floor in a couple years will force them to pay 70M, a 20M increase. Seems like that's the end of that franchise. Well not if they are making 15M more from league revenues (hence why the cap is skyrocketting) and the revenue sharing goes up by the same percentage as HRR.
Player salary: 50M-70M
Other costs: 20M-20M
Team revenue: 30M-30M
League revenue: 20M-35M
Revenue sharing: 15M-21M
Net Gain:
-5M-
-4M
They're in near identical situation as today, paying the league minimum (73% what New York is spending on their players) and losing money but in this case a little bit less. You can fudge all those numbers around to put them in a better or worse position, the point is you got to know what those numbers are before making judgement. Yeah it might be a bit more realistic that the super havenot teams will lose a bit more with the increased salary cap but it's not to the extent that it would automatically mean they have to pack it in. If it is it probably means it's about time anyways.
The biggest question you have to ask, is would these NHL multimillionaire and billionaire owners put themselves in a position where they would be in a losing situation if the NHL made more money?
Also not sure why I always want to type HRRR