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The Economy, The Cap, & Some Guy Named Vinny

by Mike Chen on 01/15/09 at 01:01 PM ET
Comments (2)

Most economists are predicting that the current recession, which we’ve been in for more than a year, will start to see some recovery after the second quarter of 2009. If that’s true, and if jobs are created instead of lost and spending is up by consumers, then we’ll have some return to normalcy in about two years—though it’ll be a trickle-down effect, at least when it comes to sports.

(Thank you, two quarters of economics in college.)

Look, I’m no financial expert but I try to stay abreast of big-picture issues enough to know whether things are getting better or worse. And assuming the timeline for getting better fits those predictions, then I think we’ll actually see a two-year span where the salary cap stays around the same area within a $3 million tolerance (most likely in the negative). However, slash-and-burn thoughts of the cap dropping to $40 million overnight are impossible. Think of it this way:

-Revenues for October 2007 to June 2008 pushed the cap to $56.7 million
-The recession began in the last quarter of 2007
-Bettman and co. predict that cap for 09-10 will remain roughly in the same area, if not drop a little bit
-2008’s sales numbers hit record lows
-Some economists say that the worst of recession may be over as 2008 closes, beginning of recovery in second half of 2009

Assuming there’s a bit of a lag effect on the recovery’s effect on the NHL, then we should see the cap for 10-11 go into a similar “same range or slightly worse” prediction as consumer spending should gradually pick up in Q3 2009 and hopefully the holiday season. This type of spending starts with necessities, then trickles into the entertainment dollar.

My point with all this—and yes, there is one—centers around one Vincent Lecavalier, he of the non-stop trade rumors and monster salary.

Let’s say that conservatively, the cap loses about $4 million over the next two seasons but the global economy shows signs of growth and a cap raise in 11-12 appears likely. Going into the valley of this (10-11), this theoretical cap would be about $49 million. At that point, the maximum player salary (20% of the cap) would be $9.8 million. Cap hits are averaged out over the life of the contract; in Lecavalier’s case, his cap hit would be $7.73 million, or about 20% less than the cap maximum.

With all that in mind, I don’t think it’s impossible to take on the type of cap hit or commitment Lecavalier commands. With some simple cap maneuvering, the whole becomes feasible and not terribly unreasonable from a dollars and cents perspective. Whether a team would actually want to do that from a talent perspective is up to them.

If there’s any money that would restrict a Lecavalier move, it’s the total loss that the morons running the show in Tampa Bay would incur. For them to even think about moving Vinny after the way they’ve alienated what had grown into a strong fan base, well, that’s just stupid. He’s the face of the franchise, the most popular athlete (not just hockey player) in the region, and a known part of the community. Moving him, for whatever reason, is the ultimate cut-your-nose-to-spite-your-face gesture, unless they get Sidney Crosby or Alex Ovechkin in return. The amount of money the team would lose in ticket sales, merchandise sales, and sponsorships would sting in the short-term but the long-term damage to the team’s reputation and fan relations would compound the losses exponentially.

Are they dumb enough to do it? Yep. They lied to Dan Boyle so why wouldn’t they lie to Vinny Lecavalier?

No, what this team needs right now is stability. On the ice, Rick Tocchet appears to be gaining some measure of that. Off the ice, well, there’s nothing more suicidal to the organization than jettisoning Vinny.

So in short—is it feasible from a cap perspective? Yes, even considering the big picture of recession and recovery. Would any sane person do that to their marketplace? No, but no one ever claimed that Oren Koules and Len Barrie ran their team like a sane person.

(And if any financial experts out there want to chime in on my cap reasoning, either to support it or debunk it, go for it in the comments.)

Filed in: Salary Cap | Mike Chen's Hockey Blog | Permalink
Tags: Vincent+Lecavalier,

Comments

Some economists say that the worst of recession may be over as 2008 closes, beginning of recovery in second half of 2009

I find your assumptions to be extremely optomistic. The only economists that I have heard say anything like this qualify it like crazy: if.. hopefully… best case scenario…

On the contrary, my take on what is being said by “economic experts” and the talking heads of the financial press is that the worst is yet to come.

What do you expect Gary.Ass. to say? The sky is falling? The truth? Nope and nope. Other than Chicago attendance is down. Looking at the vendor lines at the Pond and the Shark Tank this season, people are spending less when they do go to a game.

I disagree with your assumptions and conclusions; given current economic conditions, look for the salary cap to drop back at least to $44 million next year.

Posted by CaptainDennisPolonich from Sunny SoCal on 01/15/09 at 02:43 PM ET

If 2009 fares poorly, i don’t think you’ll see a huge cap hit until next-next season. Caps are set by the previous season’s revenues, and 2008-09 season tix are paid for. Right now, single-game tickets are what will probably drop in the 2nd half. Renewals for 09-10 will be lower, though if the economy is on the rise in early 2010, single-game tickets may help it recover.

If not, look for a smaller drop for 09-10 and a big drop for 10-11, then an even bigger drop for 11-12.

Posted by Mike Chen on 01/15/09 at 03:53 PM ET

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About Mike Chen’s Hockey Blog

Mike Chen prides himself in being the only hockey writer integrating puck discussion with both Morrissey quotes and Star Wars references. Since 2004, he’s blogged about all things hockey and currently contributes to FoxSports.com, the Battle of California, and RotoRob.

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