What The Offseason Indicates About The Effects of a Rising Cap

[UWSaint]

Ego

While I fear you are correct, I think it is also possible that’s these moves make buying the franchise more attractive. Less fixer upper, more white box.

[Meds]

I'm thinking that we'll be referring to this post for a while. (and likely we'll see some people from the media stealing from it )

Looks like Mike Grier has this here HTMB on his bookmark bar….

[UWSaint]

I'm thinking that we'll be referring to this post for a while. (and likely we'll see some people from the media stealing from it )

Looks like Mike Grier has this here HTMB on his bookmark bar….

I think Grier probably is one of the guys who has figured it out – though let’s be honest, if a player is ever going to earn a max AAV contract, Celebrini is on a very short list of players that you can make an argument for.

Let's unpack Celebrini's contract under this thread's analysis. 18.8M starts in 2027-28, when the cap is projected to be 113.5M. That's 16.6% of the cap. Assuming a 9% increase each season after, it rests in year 5 of the deal at 11.7% of the cap. Average percentage cap hit (which I haven't calculated exactly) is in the 14-14.5% range.

The deal eats up one UFA season, I think (Players are eligible for unrestricted free agency at age 27 or when they've played 7 full NHL seasons).

There’s a pretty limited universe of comps – centers who have established themselves as quality 1C’s within 2 years after their draft in the past decade or so. Auston Matthews and Conor MacDavid fit. Mackinnon doesn’t fit the bill (took him longer to ramp up, year 5 is when he took off; same for Barkov). Jack Hughes took off during year 3 – and signed his deal early that season before that level up was fully established. Carlsson is similar to Hughes in terms of the productivity arc (and didn’t sign his extension until after completing a successful season); Bedard didn’t sign his deal until after the ELC expired, but is arguably in the group. He’s probably the third closest comp.

Celebrini’s deal was signed to cover the same service and age years as Matthews' first post-ELC deal in Toronto (though Matthews was signed in February of year 3). Matthews' cap hit was 14.2% of the cap at the start of the deal (and for years 2 and 3), and was 13.9% in year 5. To be sure, the Maple leaves weren't expecting a flat cap, but in hindsight, was it really the Matthews contract that created a lopsided roster construction in Toronto, but a series of Oiler like moves. Fact is, Toronto put together a consistently good regular season team whose roster flaws caught up to them in the playoffs.

Matthews was a point a game player in his second season; Celebrini got 115 points (and 45 goals). Matthews was great and will be a hall of famer -- but Celebrini is on his way to being a legend – potentially will be in the top 10 of all time conversation when all is said and done. But as addressed above, the "weight" of this contract on the Sharks should be very similar to (in hindsight) what the Matthews contract was. That’s outstanding for the Sharks under the assumptions made in this thread.

McDavid is probably a better player comp for Celebrini in terms of the level of demonstrated talent by the end of year 2. I respect people who think that McDavid’s in his own category, but even they might concede that the gap between McDavid and Celebrini after year 2 is no greater than the gap between Celebrini and Matthews after year 2. Here, it is harder to compare apples to apples because McDavid signed an 8 year deal, but like Celebrini, he did so in July, one full season before the ELC expired. McDavid's 12.5M salary had an initial cap hit of 15.7%, and in subsequent years was 15.3%, 15.3%, 15.3%, 15.2%, 15%, 14.2%, and 13%. So first 5 years, the hit never got below 15.2%, and over the course of the contract averaged being 14.9% of the cap hits. So a bigger hit than the expected hit on Celebrini’s – but also 3 more years. Did McDavid's salary keep them from being competitive? Nope.

I think for what Matthews brought, the deal was worth it. Edmonton got a bargain with the McDavid contract considering his production (which outpaced Matthews and most importantly showed up in the playoffs). Celebrini's contract is in line with these contracts -- if he doesn't improve, this is a very good deal. He could be a 35-65 guy and this is still worth it. If he improves and the guys who think McDavid’s in a league of his own make room for another? The Sharks end up with a better deal than McDavid's post-ELC contract. Imagine that.

But at the end of the day, the point of this post is to show that what the Sharks are doing with Celebrini is very similar to what the Oilers did with McDavid and the leaves with Matthews at the time their post-ELC extensions were signed.

[rikster]

Good post HWSaint…

When discussing the salary cap and escrow, I think it’s important to remember that the salary cap is reset each season based on projected revenues for that year…

Escrow was the correction mechanism the league and players devised to deal with years when the projections were greater than the actual revenues or visa versa…

Originally it was set once a year, but the most recent MOU changed it to quarterly making it more responsive.

As for EP’s bonus, that’s just the escrow system working to ensure players receive 50% of HRR…Whereas prior to the most recent MOU shortages in players portion would have been added to the following seasons cap limit they are now paid out directly to the players …

When thinking about HRR remember that while teams keep their ticket sale and other in house revenues, they are added to the HRR for the purpose of setting the salary cap and those ticket revenues are converted to US funds before they get added to the HRR pot for salary cap calculations…

4 of the top 10 ticket revenue teams in the league are in Canada including Vancouver which diminishes somewhat the impact of having approximately 30% of your revenues in CDN funds while paying players in US funds…

Regarding franchise values, for content and media businesses live sports is arguably the most valuable IP in the world and when you consider the supply and demand factor coupled with a growing base of the ultra wealthy and billionaire class it’s understandable that values are rocketing up as are the value of media rights deals which is what is propelling the spike in HRR and subsequent salary caps …

And its not just the ultra wealthy wanting to buy in, the league has allowed Institutional Investors to buy stakes in teams which has exacerbated the supply and demand issue…

The Canucks are valued at nearly $3 Billion CDN and produce a healthy bottom line helped in part because it doesn’t have a multi million- or billion-dollar debt load to service on its arena unlike many teams in the league...

I don’t understand the notion being parroted around Canuck nation that ownership is broke, especially when you consider their recent purchase of a trophy real estate development in downtown Vancouver…

Buying out a family member as they are in the midst of doing is common estate planning, what I assume is making this process challenging is putting a dollar figure of the total estate value and deciding how they want to finance the buyout…themselves or by bringing in a partner …

I wasn’t sure what you meant by compounding salary cap?

Appreciate the time and thought that went into your post...

Take care...

[rikster]

Get yer tickets here......deals on tickets here....they have some interesting promo packs out already trying to generate interest (and (as you indicate Canadian Dollar) revenue)....

For example...this just popped into my feed...

Get yourself a Pacific Pack!!!


Screenshot_20260727-181726_Instagram.jpg


..or be a weekender!!


Screenshot_20260727-193806_Instagram.jpg


Not White Hot....RED HOT!!!


Screenshot_20260727-203913_Instagram.jpg

I'm assuming that's the work of Tim Hinchey III, the former President and CEO of USA swimming and who has more than 30 years of experience in sports business, primarily focused on revenue growth, ticket sales, marketing, sponsorships, and fan engagement across the NHL, NBA, MLS, English football, and Olympic sports...(copied from ChatGTP)

[UWSaint]

Good post HWSaint…

I wasn’t sure what you meant by compounding salary cap?

Thanks for the response & more revenue info.

Compounding cap meaning that if revenues (& the cap) increase at 9% a year, next years 9% is based on an already enhanced cap and so forth each and every year. It’s how you get an 82% increase in 7 years when it never goes up 10% in a season.

[rikster]

Good post HWSaint…

I wasn’t sure what you meant by compounding salary cap?

Thanks for the response & more revenue info.

Compounding cap meaning that if revenues (& the cap) increase at 9% a year, next years 9% is based on an already enhanced cap and so forth each and every year. It’s how you get an 82% increase in 7 years when it never goes up 10% in a season.

Technically its not a compounding method, but I get what you are saying ...

Not sure if I've mentioned this before but for anyone interested in the business side of the game, a must watch is a podcast called The Deal with Alex Rodriguez and Jason Kelly and the episode with David Blitzer, who has an ownership stake in at least 18 professional sports teams including the New Jersey Devils...

They talk a range of interesting topics including why obscure sports like pillow fighting and slap fighting are signing lucrative media deals which helps make sense of the rising franchise values and salary caps ...

Take care..

[UWSaint]

Technically its not a compounding method, but I get what you are saying ...

Not sure if I've mentioned this before but for anyone interested in the business side of the game, a must watch is a podcast called The Deal with Alex Rodriguez and Jason Kelly and the episode with David Blitzer, who has an ownership stake in at least 18 professional sports teams including the New Jersey Devils...

They talk a range of interesting topics including why obscure sports like pillow fighting and slap fighting are signing lucrative media deals which helps make sense of the rising franchise values and salary caps ...

Take care..

Sounds like an interesting podcast.

And yes, I get that "technically" its not compounding. But the effect is the same, and I wanted people to see they were thinking of the cap like its a bond market and not a bullish equity market, and how much that influences what a "good deal" will be when considering a multiyear deal.

A couple of other points. While the NHL's cap has gone up 24.2% since the flat cap era, the NFL's went up 50%. The NBA's soft "cap" and luxury tax went up 47% in the same time.

I don't think the NHL's losing relative popularity on the NBA these days (though haven't dug into it) -- but (1) the NHL spent much of this time paying back escrow (2) the bang that comes from new TV deals is coming into effect now (for Canada) and next year (for US rights), and (3) the actual NHL revenue exceeded the projected revenue for the cap by 5.5%, so really the players were getting 30% more. The NHL has catch up space (all while its been doing well).

[rikster]

Technically its not a compounding method, but I get what you are saying ...

Not sure if I've mentioned this before but for anyone interested in the business side of the game, a must watch is a podcast called The Deal with Alex Rodriguez and Jason Kelly and the episode with David Blitzer, who has an ownership stake in at least 18 professional sports teams including the New Jersey Devils...

They talk a range of interesting topics including why obscure sports like pillow fighting and slap fighting are signing lucrative media deals which helps make sense of the rising franchise values and salary caps ...

Take care..

Sounds like an interesting podcast.

And yes, I get that "technically" its not compounding. But the effect is the same, and I wanted people to see they were thinking of the cap like its a bond market and not a bullish equity market, and how much that influences what a "good deal" will be when considering a multiyear deal.

A couple of other points. While the NHL's cap has gone up 24.2% since the flat cap era, the NFL's went up 50%. The NBA's soft "cap" and luxury tax went up 47% in the same time.

I don't think the NHL's losing relative popularity on the NBA these days (though haven't dug into it) -- but (1) the NHL spent much of this time paying back escrow (2) the bang that comes from new TV deals is coming into effect now (for Canada) and next year (for US rights), and (3) the actual NHL revenue exceeded the projected revenue for the cap by 5.5%, so really the players were getting 30% more. The NHL has catch up space (all while its been doing well).

Given that the NHL hasn't done a very good job of marketing itself when compared to the NBA or NFL, you could argue that in addition to the US taking second place at the 4 Nations, winning the Olympic Gold Medal was the best outcome for the NHL in terms of selling the game and overcoming its star power problem..

Not to mention the very popular tv shows Heated Rivalry and Off Campus...

The NHLPA wants to build on this and has introduced a new program, Player Collective https://www.nhlpa.com/news/nhlpa-restru ... ective-to/

The NBA attracts a younger audience which is what the NHL is targeting with these initiatives, and I assume that the talk of expansion plays into this goal...