The Rogers/NHL Deal And Its Impact On Ottawa

With all apologies to news that the Senators had dangled Eric Gryba, Erik Condra and/or Colin Greening to the New York Rangers individually or as part of a package for struggling defenceman Michael Del Zotto, the biggest news yesterday was Rogers Communications’ announcement that they had agreed to a 12-year agreement with the NHL – giving the conglomerate the broadcast rights to national Canadian games during this span.

It would be one thing if the bulk of this money went to only the Canadian franchises, but the money will actually be shared with all 30 NHL franchises. This shared money will not be divided equally however. As ESPN’s Pierre Lebrun explained, Canadian franchises will get a bigger cut.

The 12-year deal, announced Tuesday morning, is worth $436 million per year for the league and its 30 teams. 

(Note: Under the old television deal, Chris Botta indicated that the NHL received $190 million annually from the television networks.)

Divided by the 30 clubs, that’s an average of $175 million over 12 years per team ($14.5 million per year), although not every team will get the same share, a source said. The seven Canadian NHL teams will get a bigger share of the TV pie due to “invasion fees.” 

Invasion fees are designed to compensate the Canadian teams for the local inventory lost to the national TV deals.

These invasion fees help explain how the Ottawa Sun’s Bruce Garrioch came to the conclusion that the national rights on the new deal will pay teams in Canada an estimated $17-to-$20 million. That doesn’t include what the Senators will get from their local television and radio rights.

Local television rights that should get ownership and Senators fans rubbing their hands in anticipation of a potential bidding war when the broadcast rights for Ottawa’s games expires at the end of the season; especially since viewership on these regional broadcasts continues to grow.

Now TSN has lost their national broadcast rights, the possibility exists that they could decide to be aggressive in their pursuit of regional games like Ottawa’s.  And should the purchase of these rights allow the Senators to put more money on their bottom line, then so be it.

But here’s the rub, like baseball’s revenue sharing, there’s no mechanism currently in place that requires ownership to spend any of this revenue on payroll. In other words, you may want to quell those thoughts that this deal suddenly allows the Senators to become haves in the league and spend to the upper thresholds of the cap ceiling.

If anything, these shared revenues will allow the Senators to stay afloat of the salary cap floor that will assuredly rise over the course of the next few seasons as Elliotte Friedman discussed in his 30 Thoughts blog post today.

While there is nothing firm for 2014-15, a couple of NHL general managers said they expect the cap to be close to the $70.2-million figure from the lockout-shortened 2013 season (Don’t forget there is a clause in the new CBA allowing for a five per cent “escalator” on the initial figure and only once in the previous deal did it go unused). Last summer, those same GMs said they’d been told to expect an $80-million limit in the not-too-distant future. Now, depending on outdoor games, a World Cup and the fact the annual media rights fee grows toward $500 million per season, I can’t help but wonder if we’re looking at an even higher number very soon. That’s really something.

And from a competitive standpoint, the biggest question is whether the Senators will be operating at a profit and whether they’ll be prepared to reinvest money into their payroll.

For some time, the organization has been hinting at money not being an issue if management could find a player who could improve this team from a competitive standpoint and through the first two months of the season, all fans heard from the media is how the Senators can’t make any deal unless it’s a dollar-for-dollar deal.

At some point, the fan base is going to become frustrated with the organization for not putting its money where its mouth is. I can understand the organization’s claims that there’s no direct causal link between spending to the cap ceiling and winning. There’s no question that the Senators can compete with a payroll that is $10 to $15 million less than the NHL’s biggest spenders, however, the question of whether the organization will ever be able to augment a good roster to help put it over the top is a valid one. And with the way that the Senators are hesitant to take on salary to improve this team right now, the fan base’s confidence in ownership to bring a winner to this city is shaken.

Perhaps most importantly, if Melnyk is content to just let this team be competitive spending near the cap floor, the competitive imbalance between the Senators and the big money franchises is only going to grow.

 And Friedman noticed this point as well…

The true test of the new CBA will be how many teams can't afford to go much higher than the floor because you know the revenue powerhouses can't wait to flex their financial-steroid muscles.

That's the only concern I see. It's at $44 million this season, and a $60-million base – with the upper limit approximately $20 million higher – is not out of the question in the near future.

This deal coupled with Forbes’ valuation that saw Ottawa’s franchise value jump 73-percent over the course of one year has to leave Eugene Melnyk smiling. It will be interesting to hear what he has to say when he joins Ian Mendes and Lee Versage today at around 4:00 pm on TSN 1200’s The Drive.

More Friedman Thoughts…

There were a few other blurbs in Friedman’s 30 Thoughts piece, for the sake of readability, I’ll post my thoughts in bold after each thought.

9. One thing to remember is the Ducks, with legitimate Stanley Cup aspirations, have two first-round draft picks in 2014. One of them is from Ottawa (Bobby Ryan trade) and the more the Senators struggle, the more valuable that pick becomes in the market. Don't think that's going unnoticed.

Puke. Should this trade go south, hopefully this first rounder doesn’t find its way into the Eastern Conference via trade so that we have to see the constant reminders of what the Sens missed out on.

10. Ottawa and the New York Rangers talked about Michael Del Zotto. It was quickly determined there wasn't a match. Del Zotto's market value is a little low right now. But New York is determined to get a fair price for the guy, who twice led Rangers defencemen in scoring and averaged more than 20 minutes per game the last two seasons. I thought the Edmonton Oilers might be a potential destination. But that doesn't sound like a fit, either. They want size on the blue-line.

I wrote about the rumoured Rangers return for Del Zotto yesterday, so check it out.

11. I've always wondered how close Edmonton came to getting Ben Bishop, currently standing tall in Tampa Bay's goal. The Lightning got him from the Senators for Cory Conacher and a fourth-round pick. From what I understand, the Oilers offered a second-rounder, a third-rounder and Ryan Jones. The issue? That second-rounder was Anaheim's, which turned out to be 56th overall and Ottawa wanted Edmonton's original spot, which was 37th. It sounds like the deal fell apart when the Albertans wouldn't do it.

I don’t blame the Senators for holding firm on higher valued pick. I am kind of surprised that the Oilers weren’t more willing to accommodate the Sens however. It’s not like the Oilers have any luck drafting outside of the first round anyways.

20. Recently, I wrote about Erik Karlsson and the feeling his stride isn't yet 100 per cent right. One player who understands is Jets defenceman Zach Redmond, who is making a terrific comeback from a sliced artery and vein suffered last February. Redmond said his own step isn't fully recovered and won't be until he gets another full summer of workouts. He added the groin muscles in his right leg are still shorter than those in the left. It was great to see him back in the NHL for the time being. Good luck.

Other News and Notes…

With Mark Borowiecki having been on the parent roster for some time and there really being no indication that he'll be returned to Binghamton anytime soon, B-Sens coach Luke Richardson has named Mike Hoffman as the team's new captain.

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