The impact of the global recession upon the North American economy led to expectations it would have an adverse impact upon the National Hockey League’s salary cap.
Consensus amongst league officials, pundits and fans was the recession would bite deeply into the league’s revenues and, since the salary cap was tied to those revenues, could result in a significant decline of the cap ceiling.
The impact was apparent upon the 2009-10 salary cap which the league announced would be $56.8 million, a miniscule rise over last season’s ceiling of $56.7 million and a far cry from the average increases of $6 million per season since 2006.
Some fans expressed surprise over the cap essentially remaining the same but there were two reasons for this. One was much of the league’s revenues were collected before the recession struck last fall thanks to season ticket sales, which are the lifeblood of a gate-driven league like the NHL.
While league revenue declined by five percent, the fact most of the revenue was collected prior to the recession ensured the decline wasn’t much worse.
Another was the NHL Players Association voted to trigger a five-percent salary escalator, pushing the cap to its current level.
The real concern, however, was revenue collected this summer and into next season, leading to anticipation the league would truly feel the recession’s impact next season, especially in NHL cities hit hard by economic hard times or where NHL franchises were struggling before the recession.
It’s been suggested the cap for the 2010-11 season could decline to between $50-$52 million, significantly squeezing teams with more than $40 million already committed to their ’10-’11 payrolls.
Currently 13 teams, almost half the league, are in that category. If the cap were to decline substantially those clubs could be forced to dump salaries thus potentially tearing apart successful or rebuilding rosters.
Some teams could be hurt more that others under that scenario.
The Chicago Blackhawks could face dealing away players like Patrick Sharp, Kris Versteeg or Cam Barker to free up space to re-sign Patrick Kane, Jonathan Toews and Duncan Keith.
The Philadelphia Flyers could be forced to sacrifice Scott Hartnell or Matt Carle to make room for Braydon Coburn and Ryan Parent.
Players who could end up hitting the free-agent market next summer if the salary cap declines include: Boston’s Marc Savard, Calgary’s Olli Jokinen, Detroit’s Tomas Holmstrom (Nicklas Lidstrom will likely accept a pay cut to remain a Red Wing), L.A.’s Alex Frolov, Montreal’s Tomas Plekanec, New Jersey’s Paul Martin, Ottawa’s Anton Volchenkov, Pittsburgh’s Sergei Gonchar and San Jose’s Evgeni Nabokov.
Certainly that’s a scary scenario, but while season-ticket sales have yet to be determined, there are some positive signs which suggest the anticipated downturn in the 2010-11 cap may not be that bad. It’s even possible the cap could remain at its current level or even slightly increase.
Toronto Globe & Mail hockey columnist Eric Duhatschek reported earlier this month there was a “new emerging sense that the NHL has been spared the larger effects of the slumping economy and that next year’s cap — if it shrinks at all — won’t be nearly as bad as originally thought.”
Duhatschek pointed to good playoff ticket sales this past spring and season ticket sales reportedly going well in most of the traditional markets.
Paid attendance was down last season in once-solid markets like Colorado and Tampa Bay, a result of poor on-ice performance in recent years, while Atlanta, Florida and Nashville continue to struggle and, in Phoenix, the Coyotes reportedly lost $60 million last season.
However, other NHL cities have shown significant improvement at the gate. Teams like the Chicago Blackhawks, Washington Capitals and Boston Bruins — which three years ago struggled at the gate — have seen notable increases in attendance. The St. Louis Blues three years ago were at the bottom of the league in attendance, but over the past two seasons have steadily climbed back into the top 10.
One city struggling through tough economic times before the recession was Buffalo, yet the Sabres announced in mid-July they’d reached their season ticket mark of 14,800, a notable achievement for a club which also missed the playoffs the past two years.
Another factor which adversely affected league revenue was the decline in the Canadian dollar, which last summer was at par with the U.S. dollar, but dropped to as low last winter as .78 cents U.S.
Since then however, the Canadian dollar has rallied and as of this writing is worth over .92 cents U.S. While most economists suggests that’s unsustainable and the Canuck buck could decline, it’s possible it could settle in between .85-.90 cents U.S. throughout next season.
With Canadian teams reportedly accounting for over 30 percent of league revenues and having no problems selling out their respective arenas, the improved value of the “loonie” throughout the coming season could have a positive impact upon league revenues.
Of course there are other variables which could adversely affect revenues. Concessions, souvenirs, advertisement and broadcast revenues have yet to be collected for the upcoming season and the current volatility of the economy could still take its toll.
It’s difficult for the league’s general managers and their “capologists” to gauge what the immediate future will bring, and combined with the flat-lining of this coming season’s salary cap makes it difficult to plan out long-term roster building forecasts this summer.
A significant decrease in the 2010-11 salary cap is still a possibility and any general manger worth his salt has to anticipate this, but it’s also possible it may not be a certainty.