We’re still a season away from the likely outcome of the CBA being re-opened for negotiation but some news came out on Monday that will undoubtedly play an important role in those talks. Larry Brooks of the New York Post reports (Twitter link) that the escrow rate for the second quarter of this season has been increased from 11.5% to 13.5% due to the NHL lowering its overall revenue projections.
Escrow is the amount of extra pay withheld from each paycheque. It is withheld to help ensure a 50/50 split of Hockey Related Revenues (HRR) between the players and owners. Once the overall HRR has been determined (a process that takes a while), a percentage of the withheld amount is then refunded to each player.
This has become more and more of an issue in recent years; as the salary cap has continued to grow, so too has the annual escrow rate while the percentage of salary lost has grown in that time. Back in 2016, TSN’s Frank Seravalli provided an overview of the percentages withheld and refunded as well as the net salary lost by each player over the first few years of the escrow system. The end result wasn’t pretty for the players.
As a result, the NHLPA lately has opted to lessen their annual 5% inflator to the Upper Limit in an effort to lessen the amount of escrow each season. That strategy had been reasonably successful for a few seasons before this news came out. The league factored that approach into their recent salary cap projection of $83MM.
This particular issue didn’t garner a lot of focus during the last CBA negotiations but that’s going to change for the next talks now that the effects of it are now known. The NHLPA will likely want to attack this on a couple of fronts by attempting to place a ceiling on the escrow percentage while seeking to redefine HRR by pushing to include other revenue streams that are not a part of it. For example, expansion fees such as the $500MM paid by Vegas and $650MM to be paid by Seattle are not included in HRR as things currently stand nor are potential relocation fees.
Escrow was already a hot-button issue for the players heading into the season and the news that it’s now going back up will only make it stand out to them even more. As we get closer to September 2019 when both sides can opt out of the current CBA, expect to hear a lot more about this issue in the months to come.
One more reason I’ll be missing NHL hockey around this time next year. It’s going to be a long time before the two sides agree to a new CBA.
Expansion fees should be included in league revenue figures.
Now we know why the league has expanded the last few years.