Thursday, September 01, 2005

 

The Escrow Scare

Slow day for rumors, so I thought I would throw out something ALOT of the guys I talk to are concerned about. The Escrow. Remember the escrow? It was being touted as a big deal when the deal was signed, but there were words out there sort of implying that you shouldn't worry about it. It was sort of brushed under the table....

Well it exists, and current trends point towards it kicking in..or do they? Larry Brooks had a short section alluding to this recently, and that got alot of players talking. Now there is a bit of a frenzy being whooped up about it. What is it? What does it mean? Will these players be getting the money they are signing for?

To start the escrow is set up to guarantee that player's salaries don't exceed 54% of league revenues. That 54% had a little to do with why we missed an entire year, remember? Basically how it works is that the final paycheck is held back until revenues are determined.

When this cap was set it was set at 39 Million it was based on the estimation that league wide revenues would be 1.7B. That 1.7 billion really was a shot in the dark, and that is why it is hard to tell whether or not the escrow scare is legit or not. Some say, given a year off, the 1.7 is EXTREMELY high and that the league will take a much bigger hit.

So what does this mean based on the current "Free Agent Frenzy?"

So far 540 players are signed at around $900,000,000, that makes the current average salary $1.66 Million. There are 144 players left to sign, and let's assume they sign for 1/2 the current average, $800,000(remembering there are some very big names still out there to sign) that is an extra $115,200,000.

That means salaries are at $1.05 billion and the cap is based on a revenue stream of 1.7B...so if the current trends continue, on the highly conservative side, the salaries will represent 62%...8% higher than 54, and therefore the players would be giving back 8%...If some of the guys left sign big contracts, that number will go higher.....the amount lost will be greater

So there lies the escrow scare. However the thing that the players need to remember here is this. the 1.7 is a shot in the dark number. Some say the 1.7 is based on the old model of revenues, and that Saskin, Linden, Shannahan, and Gartner work really hard to find more revenue streams and this CBA is as long as it is because of that...Ticket sales are very strong, and yet some cities that always sell out, lowered prices...that lowers revenue. The OLN deal helps in alot of ways..The new stars mean new Jerseys to sell...etc..

So this scare is like all scares...not enough info creates fear. We just don't know yet..It is foolish to scream from the mountain tops, "The Escrow is coming, the Escrow is coming!" and it is also foolish to think that the players don't need to work hard everyday as partners here to make that 1.7 moot.

Bottom line is this. We will not be able to judge how strong the CBA is for quite some time...and the Escrow is a trigger point to this in some ways. Too soon to tell how well everyone did putting this CBA together...

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On a much more important note...the tragedy in my country to the great people of the northern gulf coast weighs very heavy on all of our thoughts. There are hockey fans down there and they have been emailing me, encouraging me to help...I am going to help, and I encourage people everywhere to help...This blog gets millions of readers a month from all over the world. Please do what you can. During the Tsunami crisis we raised some money, and we need to do so again. please call the American Red Cross at 1-800-HELP-NOW. It always seems like these disasters happen somewhere obscure...Most of the people reeding this could hop in there car and be to the front lines in a matter of 15 hours..many of you less. We should all consider it. And consider your prayers as well. The human spirit is incredible. In the end, even when everything is taken away that we depend on, we are survivors. We find a way to live. Lets help these people find that. Thanks.



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