C-7 impacting NHL dollars and sense
I’m neither a math nor economics major – and there are those puck pundits with far more insight into the specifics of what might unravel with regard to the NHL and its evolving plight.
Overall, however, and in simple speak, the League is likely facing some serious issues, beginning with the February 29 trade deadline, expansion, the next salary cap, and finally free agency that begins July 1.
Why? Well, let’s look at it this way — again in simple terms. Your family income is $100,000.00 and over a short period of a few years, it is only worth $65,000.00 in spending power in the U.S. Conversely, you move to Canada making that $100,000.00, but quickly realize you need $135,000.00 to have the comparable lifestyle you had in the states.
How’s that you say? The Canadian dollar (let’s round off) is now worth only 65 cents on the American. There is much scuttlebutt it will plummet to about 60 cents. Why? Two major reasons are the slowdown in the world economy and the precipitous drop in oil prices worldwide. Mostly, because the US and Iran have joined the world producers of the black gold pushing it down from over 100 dollars a barrel to 30.
That spelled disaster for Canada that puts a big chunk of its future economy on producing more oil – and at a much higher production cost – from shale. Again, simply put, Canada’s anticipated oil production was to be a boon for the country’s economy. Instead, it is producing — and shipping — oil at a higher cost and significantly less profit that has deeply impacted corporate and family income.
The NHL and its seven Canadian franchises (we’ll call them the “C-7”) are now reeling from this economic meltdown. The C-7 include Montreal, Ottawa, Toronto, Winnipeg, Edmonton, Calgary and Vancouver.
Here’s a layman’s look at the major issues facing the C-7 and the NHL in the next several months — and years.
The C-7 has implemented deep spending freezes on new hires, travel and all non-essential needs within its corporate offices. That means fewer new jobs and less personnel flying on planes and staying at hotels and dining in restaurants. That ultimately affects all 30 teams.
The trade deadline
None of the C-7 are currently in a playoff position. Come February 29, look for fewer trades by the C-7 to bring in any players with high-end contracts. None will shop for impact players for a playoff run, and all will be looking to unload overpriced players. Overall, it means fewer trades before February 29.
Expansion to Quebec and Las Vegas
In September, it was all but a done deal that NHL expansion to Quebec and Las Vegas would be announced by Christmas. Until that Canadian loonie went, well, looney.
The expansion tag for Minnesota and Columbus in 2000 was $80 million. Quebec and Las Vegas were in the minimum neighborhood of 300 million in U.S. dollars. That means some $450 million for Quebec in Canadian dollars. No way Quebec accepts that.
A possible scenario for Quebec might be three installments of say $100 million U.S. now; $100 million in three years and $100 million in five years — all banking on the Canadian dollar rebounding. If not, an agreement among the current 30 owners who share that entry fee to accept some fractional amounts in Canadian dollars along that five-year timeline.
The 2016-17 salary cap
The current salary cap is $71.4 million with players and owners basically splitting team profits. All NHL player salaries are computed in American dollars. Again, that means any of the C-7 are spending some 95-100 million Canadian dollars to run their teams with most running toward red. Look for Commissioner Gary Bettman to announce this spring that the cap will be frozen for next year or even reduced.
My esteemed colleague, James Murphy, is projecting a cap in the neighborhood of 66 million for next year. It all adds up to lower player salaries while wreaking havoc on teams that have little or no cap space while committed to high-end guaranteed contracts that leave little room to sign new players with a frozen or reduced cap.
Free agency July 1 — and rosters thereafter
The last major fallout of the C-7’s — and NHL — plight will be free agency period for all Unrestricted Free Agents. Not likely any of the C-7 will be shopping for big-name UFA’s, not to mention paying big contracts to RFA’s — restricted free agents.
The Entry Draft in June will be stocked again with a long list of names with a better shot of making the NHL earlier because of the rookie contracts that average about $800,000.00 a year for the first three years. That also means older players looking for the usual 1-3 million in their last contract will be facing early retirement.
Not a pretty sight behind the NHL curtains. But the game will go on, and the league will survive. Stay tuned for likely speed bumps along the way these upcoming weeks and months.