In case you haven’t been paying attention to news and politics lately (it’s OK, we understand that little-to-none of the news has been good), the United States’ credit rating went from AAA to AA-plus according to Standard & Poor’s. It’s been called “an unprecedented blow” to the American economy and could “eventually raise borrowing costs for the American government, companies and consumers.”
If you’re visiting this hockey blog to escape that nightmare story, we apologize. The sad reality is that real-world economics often invade the comfy bubble of low-stakes sporting events.
On the Forecheck’s Dirk Hoag did a fantastic job of explaining how this scary situation might affect the NHL in general today. After giving an overview of how the values of the Canadian dollar and the American dollar changed over the years – and how those fluctuations affected the NHL in that time – Hoag gave three hypotheses on how this latest crisis might affect the highest levels of hockey.
Let’s take a look at each of the the main points he made.
1. More Canadian teams spending closer to the cap
… A windfall gain due to currency shifts could make it easier for those teams to boost their player salaries for the upcoming season, and/or increase off-ice spending to gain edges elsewhere (Calgary recently hired Chris Snow to conduct video & statistical analysis, while Toronto has a front office loaded with ex-GM’s from around the league).
Could these shifts also mean more Canadian teams, period? It certainly gives an extra bit of credibility to hockey-starved Quebec, if they could ever get that pesky NHL arena built.
2. Small market American teams face an additional challenge
The NHL has a revenue sharing plan that can benefit the league’s smaller markets, but those markets must reach certain spending and revenue benchmarks to enjoy those benefits. Here’s how Hoag described that possible situation.
For a team which earned a full share in 2010-2011, missing that target next year would mean they’d only get 75% for 2011-2012, a hit which could easily amount to $3-5 million depending on individual circumstances. Teams missing those targets for the second consecutive year only get 60% of their share, and for 3-year (or more) offenders, they get 50%.
The third point is more about minutiae, unless you’re asking Dan Ellis.
3. Players may benefit from decreased escrow
Again, that’s a concern that probably doesn’t register with many fans, but read the post if you’re curious.
So, the basic takeaway is that Canadian teams could benefit across the board while small market (non-traditional?) American teams might be under even more stress if the downgrade has a significant impact on American currency. In a way, it almost seems like Canadian teams are getting revenge for the ’90s, when their teams were bleeding money and the Sunbelt expansion was in full swing.
Of course, while Hoag’s post is grounded in logic, it’s still speculation at this point. That being said, could the NHL actually consider putting together an American Assistance Plan in the next Collective Bargaining Agreement to echo the Canadian version from the latest one? There are all kinds of possibilities at play here … and most of them are rather depressing.
We could have more than a year to discuss these and many other issues as the CBA races toward expiration, although most of us will spend the majority of our time simply begging for both sides to avoid another lockout.