Apparently, with no hockey to watch, I am passing the time running numbers in Excel. I was thinking a little bit more about the NHLPA’s bullshit claim that the NHL should have used either their ten year revenue average of 9.4% or five year average of 7.8% instead of the 3% number they used when determining the impact of the NHLPA’s last proposal. I debunked that a few days ago, but I thought of another interesting angle -  if the players association really believed that revenue average, then I think they would be willing to accept a salary cap. Here’s why:

Based on the NHLPA’s proposal, it’s pretty clear they want the average team payroll to be around $50 million. Their proposed payroll tax doesn’t even start until you get to $45 million and is a pretty lame 20% until you get to $50 million (at that rate, a $50 million payroll would be taxed only $1 million) The current average team payroll is around $50 million and would be $40 after the NHLPA’s proposed 24% salary rollback. (Note – I realize $40 million appears to be a rollback of 20%, but there are some components of team payroll like benefits and payroll bonuses that are unaffected by the rollback.) Now, under the NHL’s proposal, the salary cap would be linked to overall revenue – as revenue goes up, salary cap goes up too. If revenues really went up by 7.8% per year, in three years the team salary cap would go up to $49.7 million. At 9.4% growth, the salary cap in 07-08 would be $51.7 million! So you get the NHL’s cost certainty while still driving salaries up to a level that the players want.

This disparity is really obvious when you look at the NHLPA’s revenue projection using five year historical league averages of revenue and player cost growth. In this model, revenue increases at 7.8% per year and player costs at 7.3%. If that were really true, wouldn’t the salary cap system actually be better for the players? Since their share of the overall revenue would stay the same, that would mean the total paid to players would also grow at 7.8% per year. At those rates, the NHL’s plan of linking player costs to revenue would mean nearly $20 million more for the players in 07-08 than their own plan.

So either the NHLPA is really bad at math, they want the owners to make more or even they don’t believe their own bullshit. I’m guessing door #3.

Looks like the hypocrosy is running wide and deep @ the NHLPA. After claiming for months that the NHL’s numbers are “fundamentally flawed”, they claim to have pluged those very same numbers into the NHL’s forcast projects and “proved” a difference of nearly a billion dollars, from losing $569 million over three years to making $412 million. Wow, if that’s true, that’s some pretty shitty math by the NHL. Of course, it’s complete bullshit.

The NHLPA’s argument rests on the projected revenue and player cost growth for the next three years. The NHL projects that revenue will rise at 3% per year while the players claim the NHL’s own historical numbers suggest that revenue will rise 7.8% per year. And it’s true that over the past five years, the NHL’s Y/Y revenue growth has been 7.8%. Of course, during that time, there has been three new teams added as well as TV contracts that have come and gone (the current NHL TV contract w/ NBC is worth much less than the previous one with Fox). If you look at just the past four years – a much more relevant time frame – revenue has gone up between 4.3% and 6.4% per year. Given the effect of the lockout, I’m thinking 3% is a pretty good estimate.

The NHLPA goes on to argue that the NHL’s own numbers suggest that player salaries will only go up 7.3% rather than the 12% the league suggests. Again, the 7.3% number for five years is accurate, but if you at the player cost growth for 01-02 and 02-03 the increase was 11.6% & 11.8% Y/Y. (03-04 was a paltry 1.8% Y/Y increase, but I would attribute that to the looming lockout.) What’s really scary is that in 01-02 and 02-03, total player costs went up more per year than in the two years prior when new teams joining increased the total number of player jobs! In 00-01, when two new teams (around 50 new players) joined the league, total player cost went up $121 million. The following two years, when no new teams were added, total player cost went up $127 and $144 million respectively. Gee, looks like the 12% estimate is pretty close to reality too. Plus, the league admitted that the player cost growth might drop as low as 9% based on the 24% salary rollback and other deflators the players proposed. But last I checked 3% revenue growth + 9% player cost growth = bad news for the owners in the long run.

I’m thinking the NHLPA has a bunch of excel users punching in random historical data into the model to see what provides the best outcome for the league. In their “rebuttal”, they keep switching their historical model - first they use 10 year historical revenue growth numbers, then they use five year historical revenue and player cost growth numbers. Then, in their final chart uses an unprovided player cost growth estimate that is actually marginally higher than what the league is projecting, cutting the difference from the NHL’s projection in half to $440 million.

If they can’t even keep their story straight on their web page, do they really expect to fool anyone else with this Enron-esque number crunching?

So the latest round of negotiation has come and gone with little change. The players offer an eye-popping 24% salary rollback and a yawn-inducing luxury tax system that doesn’t even kick in until $45 million and doesn’t really get serious until $50 million. (The current average team payroll is around $46 million.) The league offers with a predictable salary cap that they have said they need since day one. (They appear to be losing hundreds of millions of dollars per year at the current average team payroll.) Both sides walk away blaming the other side. And Tampa Bay edges that much closer to being the current Stanley Cup Champions for two years without winning back-to-back titles.

I’m still with the owners on this. I’ve seen a few reporters suggest that the players are the only ones giving back in these negotiations. Scott Burnside of ESPN wrote “Both sides have taken steps toward a compromise — the players’ step a stride, the owners’ step a shuffle.” Of course, it’s the players who’ve been making out like bandits under the previous CBA while owners have been getting the screw. Jim McKenzie of the Nashville Predators predicted no hockey until 2006 and then went on to point out that he “would not be where I am now if 10 years ago the [players] had given in [to a salary cap]“. But then he points the finger at the league for their graduated roll back proposal: “They’re like ‘Don’t worry about it. You’re going to get your money.’”. So which is it Jim? Are you worried about getting yours or aren’t you?

Chris Pronger of the St. Louis Blues also predicted no hockey until 2006. Pronger said that “Probably December of ’05 and going into January ’06 we’re going to be in the same position we are in now, trying to come to a resolution.” I’m not sure what’s going to happen then that will resolve this – will the laws of economics suddenly change or will the players union wake up? Personally, I don’t think there will be hockey until 2006 either. We lose this whole season from the lockout and most if not all next season with legal wrangling after the owners eventually declare an impasse.

Will there be anything more disingenuous than Bob Goodenow saying something like “We’re suing the league to protect its integrity” or some shit like that?

A year ago, I was pointing out how badly messed up the BCS computer system was, denying the unanimous #1 ranked team in the land a shot at the national championship game. This year, USC has gone wire to wire ranked #1 and will face the #2 Oklahoma Sooners for the national championship. Fight On!

Of course, there are those pointing out the fact that #3 Auburn went undefeated creates an “unprecedented headache for the BCS“. Excuse me? What a bunch of crap. The BCS is supposed to make sure there’s a unified national champion – something it failed to do last year I might point out  - by having the top two teams play each other. USC and Oklahoma have been #1 and #2 all year, and they’re playing each other. Sure, it sucks to be Auburn, go undefeated and still come up third. But there’s no question who the top two teams are – they’ve been the same all year.

I’m sure this will revive the yearly “BCS sucks, we need a playoff” talk. Quick memo to playoff people: any college football playoff system is going to screw someone. For example, a 4 team playoff this year (using the BCS rankings) would have been USC, Oklahoma, Auburn and Texas, screwing unanimous #4 ranked Cal. An 8 team playoff would add Cal, Utah, Georgia and Va Tech, but screw Louisville who’s ranked at least 8th in both polls. Even a 16 team playoff – which is virtually infeasible – would screw unanimous #16 ranked Wisconsin. So let’s not pretend this issue will go away by playing more games.

Do I think the BCS works well now? No, even though USC didn’t get screwed this year (not exactly a ringing endorsement). Personally, I think BCS computer system should only be used when the polls don’t agree. There’s just no objective way to measure the relative records of teams that don’t play the same teams. Thus, leave it in the hands of the humans, and use the computers to break ties when they happen. It would have given us a USC vs. LSU championship last year and still had a USC vs. OU championship this year.

John Evdemon and I were chatting about making time to “get our hands dirty” on some code. After the last meeting between hockey owners and players, it looks like we’ll both have plenty of time on our hands since there won’t be any hockey to watch.

I agree with this ESPN.com article that there is plenty of blame to go around, but it looks to me that most of it sits with the players on this one. The players 12th-hour proposal apparently included a luxury tax/revenue sharing system and a salary rollback that would come to about $100 million dollars. The problem is the league as a whole is losing around $200-$300 million a year (according to former SEC Commission Chair Arthur Levitt). So great, with the player’s proposal, the league continues to hemorrhage over $100 million a year while the luxury tax system spreads it around so everyone feels the pain.

Maybe these guys have been checked into the boards a few too many times, but the numbers are very simple: According to the league, their revenue is around $2 billion, with around 75% going to player salaries. Furthermore, in the past decade, revenue has grown 173% but player salaries have grown 261%. Mess around with those numbers in Excel and you’ll discover that revenue is growing about 5.6% year while salaries are growing 10% a year. Assuming those numbers stay constant and you have salaries equaling revenue in 2011 – only 7 years away. Now, if you include the 5% salary rollback that the players are proposing, assuming the model doesn’t change much (and it shouldn’t – my understanding of the rest of the player proposal deals with revenue sharing, but I’m using the overall league revenue and salaries in this analysis) then that date pushes back just one entire season before the player salaries equal revenue. I’m not sure how anyone in the player’s union can say the current system is working with a straight face.

It’s going to be a long cold winter if you’re a hockey fan. I’m guessing the players are assuming they owners will cave like they did during the ’94-’95 season. Memo to the players, in 1994, the owners were only paying about half of league revenues to player salaries. In other words, they made more money playing than not playing. This time, with the owners losing less money by not playing, they don’t have much incentive to cave.