Retrospectacus III: Parity Up in Here!

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A great man once told me “Ya’ll bout to make me lose my mind, up in here, up in here.” That great man went on to get arrested for impersonating a federal officer and…oh shit, I’m off track already. I’m sorry, it’s just that this topic is kind of dry and trying to wrap my head around it has been a test of sanity (but more a “running down main street naked with an ear of corn stuck in my ass” crazy than “old rapper releasing song after song which is the equivalent of telling young rappers to get off his lawn” like DMX crazy.)

Sara set the bar high a few days ago when she posted her thoughts on the league as a business and how much business decisions impact the sport. As a companion to that, I’ve been trying to learn the Collective Bargaining Agreement and what exactly it means to everybody involved. Not surprisingly, my findings pretty closely mirror what we all already know and the scope leaves big questions as to whether the framers of the current CBA are hopeful yet careful bastards or devious and cunning evil geniuses.

You see, Gary doesn’t actually want parity, at least not in the way we’ve said all along. Sara hinted at this in her post, but I think it bears saying in plain English. The Commish only wants parity among the teams with the largest fanbases. Gary wants the large markets competing year in and year out for the Cup; he doesn’t want a level playing field where teams like Carolina or Nashville have the same power to compete as Chicago or Los Angeles. So, how do you set it up to give a small, but important advantage to large market teams while getting the smaller guys to sign on? Well, you create a salary-capped system where revenue sharing brings the promise of everybody rolling in dough, but actually serves to create a system of two salary caps.

Still with me? Good. Everybody knows that there’s a maximum cap on spending, so when a team like Atlanta doesn’t nearly approach that, it must be their own damn fault for not having the commitment to spend enough to ice a winning squad. Those jerks are ruining the competitive spirit of our sport! Well, yeah, in a way they kind of are doing that, but I think you’d find it pretty convincing for the sole purpose of the integrity of the game.

The biggest myth going is that the CBA and salary cap is designed to keep teams from spending more than 57% of their revenues on players. It’s a small, but important distinction to point out that the reality is that it’s designed to keep the LEAGUE from spending more than 57% of their revenues on players. An individual small market team is more than welcome to bankrupt themselves spending on talent, but has very strong reasons to spend less (and therefore compete less).

Taking a quick detour here (sorry, I promise I’ll jailsex you with some exciting numbers and percentages in a bit where I explain the dual-cap), but there’s a counter here that I want to nip in the bud (the best of all possible places for nipping, except at a wet t-shirt contest). The argument is that you can’t tie payroll to success. Teams have tried that and it doesn’t work. My point is that the cap has created a very tight range for players’ and GMs’ choices are how to play around with the combinations, rather than how to get the best guys to come play for you. Before the cap, nobody had any idea what a top-level defenseman is worth. Now, everybody knows that $7.5M should land you a Norris Candidate (insert Brian Campbell schadenfreude joke here). Known talent is at a known salary plateau and therefore you have to spend near the cap for a better chance at winning. Sure, there are still overpaid guys, but the formula is the same for success throughout the league. You have to pay relatively big money for your core, about half that for 2nd-tier guys and get good performance out of criminally underpaid players who later move onto the 2nd-tier level pay.

Here’s where it gets goofy; the way the cap is set. You’d figure that if the league wants players’ salaries to be no more than 57% of revenues, then they’d set the cap at what they figured 57% of their revenues would be. Well, my friend, you fail tricky math. Instead, they set the cap $8 million over what they figure the league average revenue for a team will be and call the assumed revenue limit the salary midpoint. Detroit’s cap is $56.7 million because they figure the average club will only be able to spend $48.7 million on talent. This gives the Wings some leeway to approach spending up to their 57%. This seems pretty reasonable, and it is, until you look at what that means for a team that’s on the lower end of what the average assumed revenue will be and what revenue sharing gives them incentive to spend.

A team on the lower end of the earnings scale (provided they’re not in a large market like L.A., Chicago, or Anaheim) can qualify for revenue sharing which will cover their salary spending, but not their earnings defecit, up to the midpoint, which is still one Norris Trophy candidate defenseman under the cap (or three 2nd-tier players, an entire line). After they’re revenue-shared to the midpoint, the rest of the league sharing is split among all the teams. The dollars go to the teams whether they spent the  money or not, so there’s not proper incentive to actually spend it. The only way a small-market team can spend to the cap and still make profit is if the league has an insanely high-earning year where the early share gets them to the midpoint and the league share makes up the rest of the difference. Of course, this would mean that the cap would also go up an insane amount the next year and put that team right back where they started relative to the rest of the league. Of course, there’s also a part of the CBA where 50% of every dollar that the league makes over $300 million goes into the revenue sharing pool (as a note, the league has not once made this threshold… they need a large and lucrative national television contract to make this possible… big television markets demand large and and lucrative television contracts).

On top of that, if the league makes less money than expected, the big-market teams catch a break. They’ve spent over 57% of the league average, but not necessarily over 57% of their own profits, but they’re not the ones who foot the bill for revenue sharing that the smaller teams demand. In rare cases like that (you know, like last year), the players’ escrow covers most of that. Yes, you read that right, the players are the ones who prop up small-market struggling teams. On a long enough timeline of this, the players get tired of footing the bill, the small-market owners get tired of not making profits, and the league is maybe forced to relocate to a market that makes sense, just to appease all of the whiners who aren’t rolling in more dough than the Pilsbury spokesman during an orgy. The league can slyly force these bottom-feeders and profit anchors into relocation and it won’t be the league’s fault, it will be their own for not having the desire to field a winning team (despite that they can’t realistically afford one) for long enough to drive off their fanbase. This is basically the line that Nashville Predators ownership toes. If you moved that same franchise to Los Angeles or Anaheim, I guarantee you that with management and coaching in place there, that team would have a cup by now and I’d be happier for them than I am for th shitsacks in Chicago.

“But Nashville would possibly stand to increase their market share and make enough profits to actually spend tot he cap if they had playoff success, so they should spend to the cap” you say? Well, that’s a long sentence and oddly fits perfectly Mr. Straw Man, and you might be right. It’s possible that Nashville with some long playoff runs would make a ton of money AND not need to rely on big club handouts, but why the hell should they? Thanks to the big clubs (Detroit being one of them) who wanted to make it so they didn’t have to rely on long playoff runs for financial success, playoff games are worth less to a club than they used to be. A big part of what goes into the revenue sharing pot is taken from a tax on all playoff tickets sold. Large-earning clubs pay 50%, middle clubs pay 40%, and small clubs pay 30% into the revenue-sharing pool. So, the Preds now keep only 70% of the money from long playoff runs that they otherwise would have and would disqualify themselves from a portion of their revenue-sharing dollars. For that to work, they have to cap their overhead, which is exactly what they do.

This whole system in place gives the big market guys the means to buy what is now generally known quantities of talent in ways that their smaller competitors can’t. Random fluctuations among players, bad coaching, management decisions, and the generally unpredictable nature of sports creates for some unique results, but on the average, it means that parity will exist where the league wants it to and will not bother the large clubs where the league doesn’t want it to. The salary cap creates smaller salaries and salary ranges for a wide range of skills, while the escrow makes the players a de facto insurance policy against falling league profits. My favorite part of the revenue sharing wording is that, in trying to create a system significantly different from MLB’s system where a team can intentionally tank and still remain profitable, they’ve enacted rules that take away dollars from small-market teams who don’t outpace the NHL average for revenue growth (which must be really easy to do as the bandwagon of the 3rd largest city in America fills up) or who can’t sell enough seats in their arena. Unfortunately, in punishing the ones who aren’t trying, you’re also unfairly punishing those who are trying but failing thanks to the unfair limitations you’ve set on them. They shouldn’t even call it revenue sharing, they should call it No Team Left Behind.

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To get a dose of J.J. from Kansas more often, following him on Twitter by following this link. Thursday, the second half of his manifesto will be up gracing TPL’s pages.