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.
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:
*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
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:
*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 Capgeek.com:
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.
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.