What the new projection of a $68 million dollar salary cap shows about the NHL's Canadian market

Eric Bolte-USA TODAY Sports

Helene Elliott (@helenenothelen) tweeted yesterday that the salary cap for the 2014-’15 season could be as low as $68 million, not the $71.1 million that had been reported earlier this year.

The main reason for this lower forecast appears to be the decline of the Canadian dollar. Below I’ll calculate some numbers to see what this shows about the percentage of NHL revenue that comes from the Canadian market.

First of all, this drop in cap space amounts to ($71.1 - $68 =) $3.1 million dollars. That is a ($3.1 / $71.1 =) 4.36% decrease in the previously-expected salary cap for next season.

The Canadian dollar is currently worth $0.91 US, or 91% of the US dollar, or 9% less than the US dollar.

Of the 30 NHL teams, 7 of them are Canadian organizations. That means the Canadian teams make up (7 / 30 =) 23.3% of the National Hockey League.

With the Canadian dollar being worth 9% less than the American dollar, that means that the reduced Canadian contribution to the NHL should lower revenues by (.233 * .09 =) 2.1%, which would equate to a decline in each team’s players’ share of those revenues—the salary cap--of (.021 * $71.1 =) $1.5 million dollars.

However, the projected drop in the salary cap is not reported to be 2.1%, or $1.5 milion dollars, it is $3.1 million dollars, or 4.36%. This suggests that the Canadian market is responsible for more than just its 23.3% of the total NHL revenues.

So let’s do the above calculations in reverse to find out how the decline in the Canadian dollar results in a 4.36% decrease in the salary cap.

If we take the projected 4.36% drop in salary cap and divide that by the 9% difference between the Canadian and American dollars, we see that, actually (.0436 / .09 =) 48.4% of the league’s revenue is generated by the Canadian market, not the 23.3% that would be expected if the Canadian market only contributed its 7/30ths share to NHL.

This means that, while there are only 7 NHL teams that operate in Canada, the Canadian market (including ticket sales, merchandise, television deals, etc.) contributes the revenue that supports (.484 * 30 =) 14.5 of the NHL’s 30 teams.

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