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Winnipeg Free Press - PRINT EDITION

Escrow rumblings might raise Kane

Taking 20% off pay will irk NHL players

12/08/2009 1:00 AM | Comments: 2

Not for nothing would I not want to be the one to break this news to Patrick Kane: Reports are circulating that NHL players might have to put as much as 20 per rcent of their salaries in escrow this year.I mean, if the Chicago Blackhawks star forward and his cousin will lump up a taxi driver over 20 cents in change, one shudders to think what fate awaits the unfortunate individual who will have to inform young mister Kane that, um, er, remember how you were supposed to get $875,000 this year? Well, it's probably going to be closer to around $700,000 and...

NOT IN THE FACE! NOT IN THE FACE!!

We digress. But safe to say there will be many grumpy NHL players if, as the Boston Globe reported this week, between 13 and 15 percent of last year's earnings will be lost to escrow, which could claim up to 20 per cent of salary in 2009-2010.

Talk about taking a hit. Superstars like Alex Ovechkin and Sidney Crosby, who make around $9 million, could stand to lose almost $1.5 million. Those are some big tippers, my friends.

"You always err on the side of caution," the Bruins' player representative told the Globe. "You always take more than you think. It would be an absolute nightmare if there was a shortfall. Try tracking down money from 700 guys who live in every corner of the planet. If there's a guy in Russia who owes an extra thousand bucks, you think you'll ever see that cheque? You always have to take more."

Adds up fast

Whatever the final number, this is the league's CBA at work, where owners are obligated to pay a percentage of revenue (56) in salaries, but are protected if total revenues tank. And it adds up fast. For a team with a maximum $56.6 million payroll, such as the Calgary Flames or the Philadelphia Flyers, that's more than $10 million thrown back to the owner's kitty.

That's one expensive safety net.

In fact, if you ballpark the average NHL payroll at $50 million and multiply a 20 per cent deduction by 30 teams, we're talking about upwards of $300 million being yanked out of players' wallets.

Of course, this cash is critical for struggling markets. If you are a sane individual, you might wonder how, say, the Atlanta Thrashers are still functioning despite a wonky fan base in Georgia combined with a reeling economy. Answer: A revenue-sharing cheque from the league for $10 million, plus another $10 million in escrow.

Boom, problem solved.

Sadly, that's what passes for NHL math these days. But, hey, that's the system, and it will go a long way to prop up franchises in places like Florida, Nashville and Columbus.

Heck, no wonder Jerry Reinsdorf might look at the Phoenix Coyotes -- at least, if he gets the sweetheart deal from the City of Glendale that's been reported. It includes a special tax to generate $23 million annually, plus $15 million if the Coyotes lose money.

Here's our calculation: $38 million in taxpayers' money from the city, $8 million to $12 million in revenue sharing from the league, and another $10 million in escrow from players. See, that's all you need to make hockey work in Phoenix -- about $60 million every single season in glorified welfare. It's so simple.

So even though some owners might grumble about subsidizing failing markets and players will gripe about de facto pay cuts, the bottom line is the system helps keep franchises alive. That means player employment. More importantly to the NHL, it means avoiding messy bankruptcies such as the one currently unfolding in a Phoenix courtroom.

In short, it's kinda like socialism for millionaires and billionaires.

But as mentioned in this space before, there has to be a point of critical mass where continuing to subsidize chronic money losers becomes secondary to finding markets that would generate more revenue to grease the system. After all, this past year will mark only the first time players have lost a significant amount of salary to escrow. Next year, every time Crosby and Ovechkin open their garnished pay stubs, they'll have to remind themselves again why they're playing before a half-empty arena in Florida that's selling season tickets for under $300.

After all, it's not about 20 cents. It's about 20 "per"cent.

Memo to Mr. Kane and his associates: Wake up, boys, you're getting hosed. You're paying for Gary Bettman's mistakes. Yes, the system has been good to you, too, but that doesn't mean you have to eternally subsidize franchises that suck at the teat of league largesse.

Remember this the next time owners decide to "expand" to Las Vegas or Kansas City.

Consider that my tip.

randy.turner@freepress.mb.ca

Republished from the Winnipeg Free Press print edition August 12, 2009 C1

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2 Comments

Posted by: Chris

August 12, 2009 at 2:48 PM

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Posted by:

August 12, 2009 at 12:22 PM

Did such a thing exist when the Jets were here? Was the organization being propped up back then too, by other teams?

How long has this been happening?

Regardless, this is old news, and doesn't apply to us anymore,so why even print it? Why did I even read it? Slow day for everyone. It must be the heat.

I feel sorry for the fans though, cause this money or revenue is all coming out of someones pocket. Seems like a bad business practice to me, but then again sports has it's own rules so it seems. These players make more in a year, than most people make in a lifetime,and I'm sure the players know that, so maybe they won't complain too loudly.