Tuesday, November 18, 2014

"Loonie" Will Determine Cap?

1) The dirty little secret that few, if any were talking about until recently is the direct and significant tie the NHL revenue windfall had to do with the elevation of the Canadian dollar.  We at Fauxrumrs have been WAY out in front of this for years! Here is a post SIX YEARS ago on this very subject:

2) Although that 'shrinkage was only minimal and temporary, and largely mitigated by other "revenue  enhancements" like 50 out door games a season. The current downward tregectary of the 'Loonie' appears to be a more permanent situation, and as a recent article sited here suggests:--->
it could go back to where it traditionally has been, in the 80% range. FAR from its al time high of $1.10 from 7 years ago.  It could even plummet to .70 or lower!!

3) So I'm sure more than one of you are asking, "why should we care about Canada's currency value"?  Simple.  If teams north of the border are getting revenues locally with a depressed currency, BUT have to pay players in US dollars they are at a 10-20% disadvantage over their US counterparts and that translates into LESS revenue. Less revenue= smaller salary cap/payroll!  For the past 18 months we were hearing that the new TV deals along with out door games, etc would help to sky rocket the cap ceiling to as high as 80 or even 90 million in 3-4 seasons or less  The current cap is 69 mil. Which is already less than most thought it was going to be only 6 months prior! 

4) Our sources within the league and elsewhere tell us its very likely that due to the CN dollar plunge that the cap will remain  essentially stagnant for the next season or two.  A FAR cry from what we were hearing only a short 12 months ago. GM's across the league felt that the belt tightening they had to endure post Bettman lockout #3 would ease and they could start to spend more easily. I'm sure big spending teams like Chicago, NY and Philly are none too happy. With the Towes/Kane insane deals (10.5 mil each) set to commence next year its possible the Hawks will again have to shed payroll, ala the Leddy trade earlier this fall.  They aren't alone there!

5) The other potential fallout is expansion. We wrote recently that Quebec would be a no brainer to expand to. They have a ready made arena soon to be ready and a rabid fan base eager for a return of NHL hockey. BUT, a plunging loonie would make that less profitable, and less attractive to the league in general. Would the expansion fee be in CN or US dollars?  You can bet it would be in green backs, so the potential owners would be defacto penalized 10-20% on a franchise fee, as opposed to a Vegas or Seattle franchise.  Also existing smaller market teams, already struggling, like the Oilers, Jets, and Flames would have their bottom lines cut by the continued exchange rate disrepency. Might we see a return of The NHL's small market assistance plan, known as the
Canadian Assistance Plan [CAP]? If that happens, one insider told us, you can bet things are getting very bad and contraction, NOT expansion might be necessary. We are NOT anywhere near that....yet!

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