At least that was the word that came through loud and clear on CBC's Satellite Hot Stove last night (Click here (Real Player) for the video):
Owners will find out the projected salary cap for the 2006-07 NHL season when the league's board of governors meets next week in Scottsdale, Ariz.What they will discover, according to Canadian Press reporter Pierre LeBrun, is that the current salary cap of $39 million US won't be going down, but instead increase.
"The owners are going to [learn about the] projected salary-cap figure for next year, and it's not going to be under $39 million, in fact it's probably going to be more than $39 million," said LeBrun during Saturday's Satellite Hotstove segment on Hockey Night in Canada.
And if revenues and the salary cap rise, that also means that the percentage of salary that the players pay into the dreaded escrow account will be dropping.
Does this mean the NHL is healthy again? Maybe it does. But there's always the possibility that the league might be massaging its earnings and managing expectations in a way that redounds to its benefit.
Stick with me here.
Say Bettman and the owners, who knew they had all the leverage with the players, overestimated the projected drop in revenues on purpose.
Why do that? First of all, it means that the storyline going forward will comport with ownership's position on revenue and salaries. And Bettman and the owners get to go to the press and say that the model is working.
Next, the news will help defuse union opposition over the size of the player escrow payments, as it will be lowered.
Don't believe me? It happens on Wall Street all the time -- just read the following piece from the University of Illinois titled, "To beat earnings expectations, first you have to lower them":
You needn't cook the books to make yourself look good on Wall Street. A safer approach is to talk down your company's fortunes to analysts before springing a "better-than-expected" earnings announcement for the quarter."Beating the forecast" does wonders for a company's stock price. A University of Illinois economist who analyzed thousands of forecasts of publicly owned companies between 1989 and 1998 found that there was a significantly higher probability for a company to beat the consensus forecast if the forecast was lowered two weeks prior to the announcement.
"We document empirically that many firms apparently have ways of lowering the forecasts as the earnings announcement date approaches," said Dan Bernhardt, the UI economist who conducted the study with Murillo Campello, an economist at Michigan State University.
No, they'd never do that. Not in a thousand years.
For other agenda items from this week's NHL Board of Governors meeting in Arizona, click here.
