Wednesday, November 14, 2007

Revenue sharing and the Canadian Dollar

A great article by ALLAN MAKI AND ERIC DUHATSCHEK from the Globe and Mail, on the issue of revenue sharing and the appreciating Canadian dollar.

Below are some interesting excerpts from the article.

The Atlanta Thrashers, Nashville Predators, Phoenix Coyotes and Florida Panthers will soon feel the strain of a robust Canadian hockey economy, which is generating money for the NHL and increasing its hockey-related revenue. In turn, that could raise the NHL's salary cap. The high end of the cap, $50.3-million (all currency U.S. unless otherwise noted), isn't the issue. It's the low end, which is $34.3-million and could go up. For this season, the Predators and Washington Capitals had to spend upward of $4-million to $6-million just to reach the cap minimum. Now, there are questions surrounding the revenue-sharing aspects of the NHL's collective labour agreement.

According to published reports, the bottom-ranked clubs that receive revenue sharing "must generate a year-to-year growth rate in excess of the league average revenue growth rate." With the financial success of the Toronto Maple Leafs and New York Rangers, the NHL's weakest clubs may not be able to better the league average in revenue growth, and that would mean a deduction in the money they'd get from their partners.

In other words, the weak clubs would be weakened a little more, which wasn't supposed to happen in the new NHL. Of all the loopholes the league tried to close with its new collective agreement, this one was left unsecured.

"It's possible," Cal Nichols, the head of the Edmonton Oilers' Investors Group, said when asked whether small-market U.S. clubs could be damaged. "I can say that as our revenues grow, so increases what we pay into revenue sharing. I'm not going to say everything's wonderful [in Edmonton] until we find out what we have to pay. We don't know yet."

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