NHL Revenues, the Rogers Deal & Maybe the Pens Will Survive After All?

Jamie Sabau

The Penguins have a lot of salary and not a lot of roster, but the Canadian broadcast deal could be key to next year's cap situation -- and to Pittsburgh's ability to address its lack of depth.

Pittsburgh's problems are many, and varied, but boy could the Penguins ever get some help out of a salary cap that has the chance to be much more forgiving than recently thought.

That's according to the latest bits of information from James Mirtle at The Globe & Mail, who reports that the 2014 NHL salary cap could top $69.5 million, if the standard formula for figuring out a salary cap maximum holds to the league's reported 2013-14 revenues of $3.7 billion.

From Mirtle,

As a reminder, the basic formula for calculating the NHL's cap under the new CBA is:

((Half of total revenue - player benefits) / 30 teams) x cap inflator x 15 per cent

...

So if revenues come in at exactly $3.7-billion, next year's cap would be roughly $69.6-million.

If they rise to $4-billion a year later, the cap climbs to nearly $76-million for 2015-16.

That alone could be big help for the Penguins. The cap ceiling for the coming season was originally reported to land somewhere around $71 million, just above the high-water mark set for the lockout-shortened 2013 season.

The cap fell to 2012 levels last season, by design, and the Penguins fought like hell to stay within its bounds all season long.

Pittsburgh is currently in a salary cap fix. They've got six players making more than $5 million next season, three players on the wrong side of 35 signed for three more years and no one whose current deal is worth much in the long term is eligible for a soon-to-expire compliance buyout. All told, the team has 14 NHL players under contract at a total cap hit north of $55 million.

And no one knows where that leaves them in relation to the next cap ceiling, which has yet to be set.

Right around the 2014 trade deadline, reports began to circulate that the next cap would be even lower than thought -- a deflating Canadian currency would put a squeeze on league revenues (seven NHL franchises operate north of the border and most of them contribute a tremendous amount to the league's bottom line).

From the LA Times,

"Asked about his contract negotiations with defenseman Matt Greene, who is eligible for unrestricted free agency this summer, Lombardi said he was told the salary cap, initially projected to rise to about $71 million next season, will be significantly lower because of the recent weakness of the Canadian dollar. Lombardi said he verified that through the league."

"'We found out, to our chagrin and surprise the other day, we had been told the cap was going to be $71 [million] and now with the Canadian dollar having tanked, that the cap could be as low as $68 [million]. That's a huge swing,' Lombardi said."

What's bad for league revenue is bad for the salary cap, and it was thought that the cap might only go as far north as $68 million -- some $4 million greater than this season, but still less than the previous high set in 2013.

That would kill the Penguins, who doled out nearly $28 million per year in contract extensions to five players last summer. Those deals were struck with the expectation that the cap would rise significantly, and soon.

Throughout last season, those deals looked too ambitious. Perhaps they were, as former GM Ray Shero is out of the job.

But relief might be on the way.

New reports are floating that the NHL could post best-ever season revenues of $3.7 billion for the 2013-14 campaign, and the cap could be moving north again.

That revenue comes from always-strong gate receipts, some healthy television ratings and the spate of outdoor games -- six in all -- that the league put on last season.

In the midst of all that, the NHL also reached a landmark broadcast deal for the Canadian market -- 12 years, $5.232 billion with Rogers Communications in a deal that shook the old guard of Canadian TV rights and is set to pump hundreds of millions per season into the NHL's bottom line.

And, by extension, many millions more into the salary cap.

The Rogers deal was struck in late November, 2013. Such a monumental shift in the Canadian broadcast landscape didn't figure to play in immediately, and the first year of the deal is set to begin this fall.

However, word is now circulating that the deal might begin paying into hockey-related revenue immediately -- thus spiking the cap for the coming season.

More from Mirtle,

Based purely on the NHL's projected revenues of $3.7-billion this season, the salary cap will rise to roughly $69.5-million for next year - a noteworthy 8 per cent increase that is in line with what we've seen in the past.

What that doesn't factor in, however, is the possibility that the NHL and players' union negotiate to include the new Canadian television deal in the cap formula right away, a distinct possibility according to multiple sources last week.

"If a significant one-time increase or decrease to league-wide revenues is anticipated in the next league year," the NHL's collective bargaining agreement reads, "the parties will endeavor to estimate the expected increase or decrease and incorporate that estimate into" the cap calculation.

A decision on this front hasn't been made yet, but it could have major implications for the cap. The Rogers deal is so substantial it could mean an increase of a few million dollars, which would result in the NHL's biggest single-season jump ever.

Currently, the biggest single-season jump in the cap ceiling is some $6.4 million, between 2007-08 and 2008-09. Topping that would take the cap as high as its 2013 level, or better.

Such a jump would be tremendously helpful for the Penguins, whose only current paths out of their salary fix seem to be heavy reliance on cheap, young players or ill-advised salary dumps.

Pittsburgh's biggest problem last season was its utter lack of depth, something the team will certainly be forced to address during free agency this summer.

How much the Penguins can spend to fix that depth is going to depend on where the upper limit lands, and the difference between having $13 million (with a $68 million cap) versus, say, $16 million, can't be understated.

No matter where the cap lands (and it will be finalized within the next two weeks, ahead of the opening of free agency on July 1), the Penguins must become smarter about how they allocate their dollars. There's no shortage of stats both fancy and dumb to illustrate just how sorely the team lacked quality depth options a year ago.

Building that depth while still maintaining a core of high-priced, highly-skilled players is always a challenge. If the cap indeed expands to new heights, the new Penguins management team will have no reason not to get the job done of filling in the considerable cracks of last year's roster.

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