DeCock: New deal, same problems for Hurricanes

ldecock@newsobserver.comJanuary 11, 2013 

— At the steep cost of half of a season, the NHL has a new labor agreement. It’s a good one for the teams in general, with the players taking a hefty pay cut. How good it is for the Carolina Hurricanes is a big unknown.

Many of the problems the Hurricanes had with the NHL’s old labor deal remain in the new one. Even though salaries will go down to start, over the course of the deal they’re still being asked to grow revenue at the same pace as their bigger-market brethren.

“The market’s still going to continue to grow, which is going to be helpful,” Hurricanes general manager Jim Rutherford said Thursday. “Hopefully the economy continues to grow. And hopefully our team plays well. You get those three factors, then that makes that road a little smoother. If you don’t get all three, it makes it a little harder. And if you don’t get any, then it becomes a little more unrealistic, maybe very, very difficult.”

Eight years ago, the lockout’s benefits for the Hurricanes were clear. The NHL’s new salary-cap system was designed to make teams like Carolina more competitive with their more wealthy opponents. It worked at first: The Hurricanes were able to sign players like Cory Stillman and Ray Whitney and ended up winning the Stanley Cup.

The system quickly ran out of control as big markets and a strong Canadian dollar grew the NHL’s overall revenue – and therefore the salary cap and salary floor – too fast for the Hurricanes to keep up.

The salary cap in 2005-06 was $39 million. Last season’s salary floor was $48.3 million. Just to cover the increase, the Hurricanes would have had to grow revenue by 23 percent in eight years in the middle of the worst economy in a generation. Meanwhile, high-revenue teams spent to the cap’s upper limit while raking in healthy profits.

The new labor agreement doesn’t appear to change that. Even though the players’ share of revenue has been cut from 57 percent to 50 percent, the new numbers aren’t likely to be any more favorable to the Hurricanes than the old numbers were.

Instead of a set $16 million below the cap, the floor will be 70 percent of the cap, which does allow for more flexibility on the bottom end. Still, with just 5 percent NHL revenue growth, a conservative estimate, the floor will go over $50 million in only four years, according to an analysis by Canada’s Globe & Mail newspaper.

The Hurricanes will also lose out on a portion of NHL broadcast and licensing revenue as the league makes $300 million in “make whole” payments.

“It’s always going to be an issue when you’re dealing with higher revenue-teams and lower-revenue teams,” Rutherford said. “I do feel a 50-50 split gives teams like ours a better chance to prepare their teams.”

There are subtle benefits for teams like Carolina. Restrictions on contract length and structure should help the Hurricanes by making it more difficult for high-payroll teams to sign and retain players, while the new ability of teams to retain portions of salaries in trades should open up new trade possibilities.

There is also more money allotted to revenue sharing in the new deal – $200 million per season to start, up from $150 million – but more teams are eligible to participate. The Hurricanes should still get about $12 million per season, but Rutherford said the team will have to raise ticket prices in the near future to meet the NHL’s gate-receipt targets.

The lockout may have helped the NHL as a whole, but only time will tell whether it made the Hurricanes more competitive or stable, now and in the future.

DeCock:, @LukeDeCock, (919) 829-8947

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