First came the optimism.
Now here’s the realism.
The players will not be accepting the league’s 50-50 proposal that was released in full on Wednesday morning.
And it’s not so much the final number they’re opposed to.
Instead, it comes back to a familiar topic: escrow.
As we’ve heard all along, players want to receive the full value for their 2012-13 (and presumably 2013-14) salaries, something that will not be possible under a 50-50 split.
According to the league, players earned roughly $1.883-billion as their share last season. In order to maintain that level of salary, they would need to receive 54.3 per cent of revenues (after accounting for 5 per cent revenue growth leaguewide).
There are two things of vital importance here, however:
1) Teams have already spent more than $1.883-billion on player salaries for next season, with TSN’s Bob McKenzie putting the figure at $1.95-billion. That means that even if the league guarantees players will get that $1.883-billion (which it hasn’t) players would lose money to escrow (roughly 4 per cent, depending on how league revenues grow, as always).
2) What the league has proposed is that the difference between that $1.883-billion and the players’ share at 50-50 will be paid back to players over time in a “make whole” offer you can read about in full on NHL.com.
The basics are that if league revenues rise to $3.5-billion next season and the players get half of that (or $1.75-billion), the $133-million difference between that and $1.883-billion will be returned to players in later years.
But here’s the killer from the PA’s perspective: “Player ‘make whole’ payments will be accrued and paid for by the League, and will be chargeable against Players’ Share amounts in future years as Preliminary Benefits.”
Which would mean a chunk of money taken out of the players’ share, even as the cap rose each year along with revenues.
In other words: More escrow in Year 3 and beyond in their offer.
This is horribly complicated stuff to attach a dollar figure to, especially because we don’t know what teams will spend on players, but here’s the simplest illustration possible to highlight what might happen to a player making $2-million a season.
Let’s assume revenues rise at 5 per cent, which in turn will push the salary floor ($43.9-million in the league’s proposal) and cap ($59.9-million) up each year. Relying on estimates for player spending that use the current $1.95-billion figure and the system in place previously for calculating the salary cap, we get:
$2-mil salary after escrow
$1.91-bil minus $53-mil
$2.01-bil minus $53-mil
$2.11-bil minus $53-mil
$2.21-bil minus $53-mil
Ultimately, players would get back a large chunk of what they lost in escrow in Years 1 and 2, but it would ultimately be coming out of their share in Years 3 through 6.
Essentially, as we’ve heard PA sources already grumbling, taking from some players to pay others.
What we really don’t yet know is how the cap increases would be calculated. It’s certainly plausible it will rise at a slower rate than I’ve shown, as I included the 5 per cent inflator that was built into the past agreement and may not be held over.
If so, then the player spending figure drops and eases the escrow burden a little.
But what the NHL’s proposal fully explains is that the $149-million and $62-million “make whole” figures would come out of the players’ share in subsequent years, which I’ve worked out to an average of $53-million over the next four years.
That give back to other players alone probably averages 2.5 to 3 per cent in escrow a season on top of whatever other shortfalls there may be.
There are more issues with this proposal beyond simply the “make whole” provision, as the players side does not like pushing back arbitration and taking away restricted free agent rights.
This escrow business, however, is what threatens the deal more than anything else.