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

compliant.

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

In

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

expected.

The

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.

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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

sale revenue.

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.

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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.





