In the January 2004 (the midpoint of the pre-lockout season), the Canadian dollar was worth about $0.78 U.S. today it's $0.97 which is a remarkable 24% increase. During that same period the NHL salary cap went from $39 million to $44 million and now up to $50.3 million which is a 29% rise. Since there are 6 Canadian teams the collect revenue in Canadian dollars, what impact does the dollar rise have on the salary cap? Probably lots.
It is a good assumption to make that the cap would not have risen to $50.3 million without the increased value of the Canadian dollar since league revenue is reported in U.S. dollars. So struggling U.S. based teams are having to pay higher player salaries to stay competitive without necessarily seeing an increase in revenue. It is likely that there is a fair amount of price elasticity when it comes to ticket sales so if teams increase ticket prices to meet the higher salary demands it will eventually impact on future sales. At some point in the future (when the Canadian dollar stops increasing or possibly falls) revenues could fall which will create a dilemma for players because it will require a drop in the salary cap. Teams with a lot of long-term contracts will be really be squeezed.
There is another possible impact which will likely appear this season. Canadian-based players have actually be taking a pay cut as the dollar rises. Since Darcy Tucker lives full time in Toronto but gets paid in U.S. dollars, his buying power has been falling. This will likely become more evident to players should the Canadian dollar rise above the American. The CBA prevents agents from negotiating contracts in Canadian dollars so will Canadian teams be a less desirable destination?
12 years ago
