Cap Crunch: How a Weak Canadian Dollar Will Put NHL Teams in a Tough Position

Going into the 2014 offseason, most teams were expecting a salary
cap north of $70M. However, due to a weaker than expected Canadian dollar, the
cap ended up at $69M. This caught many NHL executives scrambling and in the
aftermath team were forced to players like Linden Vey, Johnny Boychuk and Nick
Leddy available at fire sale prices in order to help teams become cap

With some economists projecting that the Canadian
dollar could fall as low as $0.82 U.S. next year, there
is a fair amount of uncertainty as to where the salary cap will land next
off season, as reported by Elliotte Friedman.

But what impact will this have on the NHL? Who could be
the next winners and losers? Find out after the jump.

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The Impact of Exchange Rates on HRR

June, the league set the cap at $69M, which means the league estimated 2014-15
hockey related revenues of to be $4.14B, up from an estimated $3.7B in 2013-14.
Part of this increase is due to the new deal between Rogers and the NHL, whereby Rogers will pay $300M Canadian per year for the majority of the Canadian market hockey rights

At the time the league set the cap
for 2014-15 in June, the Canadian dollar was trading at $0.92. However since
then the dollar has continued to decline down to $0.89, with further declines


seven Canadian franchises punch way above their weight when it comes to
contribution to total NHL revenue. Using the regular season attendance data from ESPN and the average ticket price data for each NHL team from TiqIQ, we can estimate both total regular season ticket revenue as well as the revenue contribution of US versus Canadian teams:  

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cdn us ticket rev

*Assume average ticket price equals
the average of TiqIQ’s beginning and ending prices. For conversion of Canadian
ticket sales to USD I’ve used the average exchange rate for the period covering
the regular season.

It’s interesting to note the significant increase in US
ticket revenue from the 2010-11 season to 2013-14, however the seven Canadian
teams still contribute approximately one-third of the regular season ticket
sale revenue.

So how much could a further decline of the Canadian dollar
impact the salary cap going into next season if the Canadian dollar continues
its decline? It’s impossible to answer this without knowing what Canadian exchange
rate the league assumed when they set the cap at $69M. However, if we assume
that the league forecasted based on the $0.92 rate, which was prevalent at the
time the cap was set, we can estimate the impact on hockey related revenue
(HRR) and therefore the salary cap as follows: 


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*Assume 2014-15 attendance trends
consistent with the year to date data provided at ESPN. Assume average ticket
prices for the year will be 15% lower than the beginning of season ticket
prices, consistent with 2013-14 where end of year prices were on average 30%
lower than beginning of year as per TiqIQ. Also includes impact of exchange from
$300M CDN/year Roger’s Canadian TV rights.

Now, while its not unlikely that the $0.82CDN/$1US rate may turn out
to be an appropriate rate for the league to budget the 2015-16 cap, we have to remember
that the decline in HRR driven by a declining Canadian dollar will likely be
offset somewhat by increased revenues from increased attendance and yes, ever
increasing ticket prices (yay!) as we’ve seen over the previous years. 

Effect on NHL Team Spending

Knowing this information, we can estimate how painful a declining salary cap would be for each NHL team. The following
information was pulled from


It’s interesting when you look at the list above. At face
value, you would think Philadelphia and Tampa Bay would be in for a world of pain
having to fill their remaining roster spots on NHL minimum contracts, however
most of their core is locked up in the 2015-16 season anyway. Chicago, on the other
hand, could be in for a very tough time having to re-sign core players like Brandon
Saad and Johnny Oduya. 

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Similarly, if Vlad Tarasenko continues on his white hot
pace, St. Louis may have to get pretty creative in finding room to re-sign the
RFA who looks to be up for a significant increase from his current $900,000
contract. All of a sudden, the near $5.5M spent on Steve Ott and Carl Gunnarsson is looking rather concerning.

The Canucks are relatively well positioned in
the event of declining cap, with the majority of the core locked up, with the exception of Chris Tanev, although
they definitely aren’t positioned to profit from the pain their peers may find
themselves in. In our worst case scenario, Vancouver will have to fill out their last 9 roster spots with players making an average of $1.3M per season, which is tough, but far from impossible.

Bo Horvat and Nicklas Jensen graduating to full-time NHL duty by next season should also provide some cost effective bottom-6 forwards, and if Nick Bonino can prove to even be a good 3rd line centre, his $1.9M per year salary will prove a massive bargain too. Still, the uncertainty posed by a declining Canadian dollar rules big free agent signings mostly out of the question.

With players like Martin St. Louis, Derek Stepan, Nazem Kadri, Carl Soderberg, Jonathan Bernier, Gustav
Nyquist, and Dougie Hamilton all needing to be resigned before the 2015-16, and all currently playing for teams that may be in trouble thanks to a lower-than-forecasted salary cap, it’ll
be interesting to see what type of moves teams make as executives work their
way through the 2014-2015 season and summer with one watchful eye on the loonie. 

  • oilerjed

    The Canucks will be ok as far as re-signing the core.
    Worst case would be letting Sestito, Sbisa and Matthias go, and trading Markstrom for a pick.

    Then fill those spots with Horvat, Jensen and Corrado.

    The savings will let them give Tanev ~4 mil/ year and re-sign the other free agents at 10% raises.

    Nice to have multiple guys on entry level deals who are ready to contribute at the NHL level… Finally.

  • Mantastic

    you’re wrong about Linden Vey being caught in the cap crunch in the off season, he wasn’t traded because of his MASSIVE $735,000 cap hit in that if he was sent to the minors, it wouldn’t affect the Kings cap at all but the fact he was waiver eligible made him available and lack of roster spot on the Kings.

    • Mantastic

      To expand on my comments around Vey, the Kings currently have six of their 24 roster players with salaries below Vey’s $735k cap hit and they still have less than $15k in cap space. Even without the Voynov situation requiring them to pick up another league minimum defense salary, their cap space would have been only $565k.

      The $185k difference between Vey’s salary and a league minimum salary, like Andy Andreoff, may not seem significant, but when you’re this close to the cap every bit matters. Just ask the 2010 Calgary flames.

      It was clear that the Kings likely would not be able to resign Vey following this season because of the their cap issues. Combine this with the inability to send him to the minors (as you quite rightly point out), their strength at center, and his relative value (if only a 2nd round pick), and he was the clear choice to move.

      The Boychuk and Leddy dumps were obviously much more impactful and higher profile, but without the cap issue, I highly doubt they would have chosen to keep a player like Andreoff over Vey.

      • Mantastic

        Kings are clearly able to to send Vey to the minors, they only risk him on the waiver wire, but it doesn’t make them unable to do so.

        and for a 2nd round pick they made out with a steal as they only invested a 4th round pick for Vey.

        there would be no difference for Andreoff or Vey in the Kings system right now, as they would be playing 4th line minutes and on the wing. regardless there are many ways to navigate their salary cap issues at the moment with trades and other transactions, if arose, Lombardi would have made the adjustments accordingly.

        Vey is a very bad example of jettisoning personnel to fit the cap. I wouldn’t suggest stretching the truth to fit your narratives.

  • NM001

    This is a poorly written headline and not your best work Moneypuck.

    Even if a weak Canadian dollar puts SOME teams in a tough position, the flip side is that other teams will benefit from the redistribution of talent.

    To use the non-delusional part of your example, Boychuk and Leddy were redistributed to NYI and may very well help them reach the playoffs with an extra home game to boot.

    While I’m not particularly in favour of this business model, increased parity is what the NHL wants.

    Cap teams such as PHI, CHI & BOS do not always do a good job of managing their cap for the long term.

    Vancouver did this after the lockout by dedicating $12 million to Edler/Burrows/Higgins prior to solving the goaltending question and were forced to trade Schneider to remain cap compliant.

    Vancouver’s blunder was to the benefit of NJ even though they haven’t managed Schneider particularly well, either.

    The key takeaway is that big market cap teams are often poorly prepared for changes in the economic climate which allows lesser markets to be opportunistic…

      • Mantastic

        Very little of Moneypuck’s post is about Vancouver specifically.

        And the part about Vancouver is mildly delusional as well…

        While it’s true that Vancouver is relatively well positioned as the majority of its core is locked up, there’s little reason to believe the core is good enough to contend or that their ELC supplementation will do what it has for teams like St Louis, for example.

        Teams like Tampa, Boston & Chicago are better positioned than Vancouver because they have better talent than Vancouver.

        They may have to trim the fat a little.

        But they’ll never give up a Stamkos or Bergeron or Toews because of their cap predicaments…

        • NM001

          Great example using Chicago. They have two core players tied up to 10.5 million dollar contracts that kick in next year. They have 7 players to sign and already 66 million committed next year. Of those to sign, at least it’s no one important who would see a raise (Saad, Kruger, Runblad), and i’m sure Richards who scores at around .6 to .75 points per game will resign for less then 2 million.

          If the cap doesn’t go up significantly next year (like 10 million plus), then Chicago will have to have another fire sale. If you think the Sedins contracts are bad, wait till you look back on the Toews and Kane contracts. I’m not trying to say they aren’t worth that much, but when two players take the maximum amount possible and leave nothing on the table, core members of the team will need to be sold off, and they will need to have a lot of players on ELC contracts produce as they come in year after year after year.

          • Spiel

            Chicago will do what it did after winning the first cup.

            Sell off some important, but not vital, pieces for draft picks and more affordable players and plug holes with vets who take less than market contracts or young players they have developed.

            The Blackhawks actually have some depth in their system. The lowered cap tests their depth, but the fire sale will also let them rebuild that depth.

        • Mantastic

          In a salary cap world, teams have to be managed in a way so that they are able to exploit any potential advantage they can get. The point of the article was to highlight that the changing dollar could expose some teams significantly. While the Canucks aren’t as highly exposed as other teams, unfortunately they’re not positioned to exploit this opportunity either.

          Of course Tampa, Boston, and Chicago won’t be forced to dish off players like Stamkos, Bergeron, or Toews, but I do think the risk of them having to dish of a Namestikov, Soderberg, or Saad is noteworthy.

          • Mantastic

            “In a salary cap world, teams have to be managed in a way so that they are able to exploit any potential advantage they can get.”

            What you say is true in any economic system.

            “The point of the article was to highlight that the changing dollar could expose some teams significantly.”

            You haven’t quantified to what degree a smaller increase in the cap is related to the Canadian dollar losing strength relative to the American dollar.

            Even if the Canadian dollar wasn’t an issue – and I’m still not sure how much it will be an issue next year – the Hawks were always going to be in some trouble barring an unprecedented cap increase…

            I think you’ve been a great addition to CA and hope to see more of your posts in the future.

            But have this headline fixed as it reeks of big market parochial delusion…

        • NM001

          What he said about vancouver:
          “The Canucks are relatively well positioned in the event of declining cap, with the majority of the core locked up, with the exception of Chris Tanev, although they definitely aren’t positioned to profit from the pain their peers may find themselves in.

          Bo Horvat and Nicklas Jensen graduating to full-time NHL duty by next season should also provide some cost effective bottom-6 forwards, and if Nick Bonino can prove to even be a good 3rd line centre, his $1.9M per year salary will prove a massive bargain too. Still, the uncertainty posed by a declining Canadian dollar rules big free agent signings mostly out of the question.”

          Where’s the delusion? All he said was the cap wouldn’t force us to lose valuable players and some of our prospects should be in our bottom 6 next season.

          He also clearly acknowledges that other teams will benefit from a low cap. (Your 1st comment).

          He never claimed that we were in a better position to contend for the cup – just that we wouldn’t have any trouble staying under the cap and other teams might.

          You’ve basically invented a bunch of problems to take issue with here.

          • Mantastic

            Yes but by that logic Buffalo, Florida, and Winnipeg are awesome because they never have to flirt with the cap. There are all kinds of terrible teams and all kinds of mediocre teams that don’t have to worry about cap space because they don’t really have any good players. Well, I suppose you could be TO and hand out contracts to Clarkson and be mediocre and also up against the cap, but in any event the idea that the Canucks are going to be all fine because of salary management seems…hopeful at best.

            The comment that we are going to look next year at the Toews/Kane contracts as terrible in comparison to the Sedins — really? We are going to say that two 26 and 27 year old superstars going into their primes and signed to max contracts are worse than two aging superstars in their twilight years? I’m not saying that the Blackhawks are in a good position in that they will still have to round out their team likely with some plugs, but let’s face it, the weakness of the Canadian dollar and the fact that the cap isn’t simply going to magically rise every year caught a lot of teams off-guard. Of course the Bruins and Blackhawks didn’t want to have to dump Boychuck and Leddy (especially with the B’s injury troubles this year) but this wasn’t something to be able to predict.

            The likelihood is that all those UFAs and RFAs coming up this offseason are not going to find it as lucrative as in the immediate years past. Or we are going to end up with a two-tier system that’s as unbalanced as the NBA with a number of max-contract players on one end and a number of journeymen making league minimum at the other.

          • NM001

            I suggest you first read PBs well thought out post.

            The delusion is here “The Canucks are relatively well positioned in the event of declining cap, with the majority of the core locked up”

            As I said earlier, the issue is that the Canucks talent pales in comparison to teams such as the Hawks.

            Losing someone like Saad for picks/prospects – as happened before with Buff & ladd – might force them to retool for a year or two.

            But the organization will be in a much better short and long term situation than Vancouver…

            “He never claimed that we were in a better position to contend for the cup – just that we wouldn’t have any trouble staying under the cap and other teams might.”

            No team has trouble staying under the cap.

            Each and every team has been cap compliant during the regular season (when it matters) each and every year since the full season lockout.

            The trouble is keeping as much talent as possible under the cap.

            Since the Hawks are working from a position of strength relative to Vancouver, they can afford to lose a middle of the roster player or two and still be closer to contention than the Canucks…

          • NM001

            If the cap is between 68-71 million as some are projecting ( and this was before the Canadian dollar dipped even further then some had projected at the time, it means that Chicago will have 2-5 million to sign 7 players. The 7 players they have to sign for that 2-5 million (Richards, Kruger, Saad, Carcillo, Oduya, Rozsival, Runblad). Now if the cap remains at 69 million for example that leaves 3 million to sign 7 players. that’s not even possible with 7 entry level contracts (550,000). That means not only will they lose the 7 players above but they will also need to lose one more roster player.

            If you think Chicago will be a contender having sold off those 7 players listed above, 1 more roster player, and replacing those 8 players with ELC and veteran contracts all making the bare minimum 550,000 and Chicago will still be a top tier team and SC contenders, then I pity you. There is no way that Chicago is not in a heap of trouble after this season unless the cap goes way up.

            The last fire sale for Chicago went fine. They won a Stanley Cup so their players were at the maximum sale value. They sold off their players and recouped a lot of picks and prospects. Those picks and prospects had some homeruns within them like Saad. If you think this is a sustainable model, then you are probably still the type of person that believes Detroit is still drafting hall of fame worthy players in the later rounds.

            The reason I singled out Chicago is cause they are not in the same boat as say Tampa Bay. TB has 63.5 million to sign 4 players. If cap remains at 69 they have 5.5 to sign 4 players which can be done without dropping anyone from the core. Of those to resign many are due pay decreases like Brewer (will be 36 and currently makes just shy of 4 million). Replacing brewer alone will give them 9.5 million for 4 players. If Ohlund remains on IR that gives them an additional 3.5 million bringing that total to 13 million for 5 players (one more to replace Ohlund). TB is not like Chicago in any way, and Stamkos while one of the best players in the world has not saddled his team yet with a max contract, which leaves money on the table to bring in other players.

            Also keep in Mind that Toews and Kane will be 34 and 35 years old respectively at the end of their contracts. So not only will they limit how competitive the team will be over the next couple of years by eating up a large percentage of the cap, but even if the cap goes up over the coming years they will still eat up 21 million combined as they decline in their early to mid 30’s.

          • Mantastic

            Look, there’s no denying that it’s going to be tough for the Blackhawks next year but you could also look at this as a process of getting rid of some arguably poor contracts — Bickell at $4 million is a waste no matter what he does in the playoffs and you could make the argument that Leddy wasn’t worth that price for what Quenneville used him for (5D).

            But the idea that Toews and Kane are not worth it because of what they eat up as a proportion of the contract is ludicrous. When we signed the twins didn’t people say similar things? Oh no, these huge contracts will hamper our ability to…what? Compete? Have a killer first line? What in god’s name is a team supposed to build around (and pay accordingly) than superstars?

            Rather than just looking at money and roster positions I think it makes a lot more sense to look at what money is committed to — judging by salary and cap are the commitments to the right (core) players? If I’m TB Stamkos makes sense but Callahan, Carle, Filpulla and Garrison as the next highest? For the Pens Malkin, Crosby, Letang, Fleury, all ok, but for TO Kessel (ok) then Clarkson, Lupul, Phaneuf? Again it’s not just about the money but where it’s going.

            For the Canucks the Sedins, Vrbata, Edler, Miller speaks to one player potentially in their prime (Edler), 3 x forwards in their mid-30s, and a goalie in his mid-30s. So comparing our cap expenditures versus the truly top teams in the league what does our salary management yield, not for the first 20 games of this year, but for the next three years? What flexibility do we have for Yrs 2-3 of Sedin/Vrbata/Miller decline, which is not a knock on them but a comment on most NHL players not named Chelios, Brodeur or Lidstrom? I actually think the Sedins can be very effective 2nd line players probably into their late 30s but it still begs the question of who replaces them and with what money.

  • Mantastic

    Move the Panthers out of south Florida please. Their average home attendance is approximately 9000. Similarly the debacle in Arizona that Bettman has been trying to save in the last decade.

    How about?
    – move Florida to Hartford
    – move Arizona to Vegas
    – move Winnipeg to Hamilton
    – move Edmonton to Seattle…just kidding Oilers fans 😉

    Seriously contract by two teams (Florida and Arizona) and relocate one team to the West. Done.

  • Mantastic

    Jensen and Horvat…. There is also Hunter Shinkaruk down in Utican and something tells me he won’t be a Schroeder and spend years in the minors.

    Also Millers contract is tradable next year if Lack plays well. 6 mil a yr, but a short term two yrs. Hanson or Higgins could be traded along w Miller….

    All speculation, but having 3 forward on the brink and guys that are tradeable, gives Benning Flexibilty.