THE BOOK--Playing The Percentages In Baseball

I don’t think the NHL is swimming in cash.  The salary cap is jumping up because the Canadian teams are taking in revenue in Canadian $’s which is now almost at par with US $.  The Canadian teams are doing well.  There’s probably half dozen US markets that are dead in the water, like Nashville and Phoenix.

The currency exchange rate between Canada and USA, by season:

Jul 1, 2004 - Jun 30, 2005: 0.80 ... NHL lockedout
Cap set at 39MM
Jul 1, 2005 - Jun 30, 2006: 0.86
Cap set at 44MM
Jul 1, 2006 - Jun 30, 2007: 0.88
Cap set at 50MM

The exchange rate has barely moved over a two-year period.  Since May 2, 2007, the exchange rate has been above .90, and is currently at .95.

Even if you want to argue that the Canadian dollar now gets you 8% more US dollars than expected, you’ve got 20% of your teams in Canada.

Presuming 600MM for all Canadian teams, the extra 8% (48MM) in exchange rate revenue works out to 1.6MM per NHL team, of which a bit under 1MM goes to the players.  The jump in payroll cap per team however was 6MM.

And, like I said, the exchange rate is not a factor, unless the NHL is anticipating a 0.95 exchange rate instead of 0.88.  If that is the case, then 1MM of the 6MM jump was due to the strength of the Canadian dollar (relative to the US dollar).

The NBA yesterday revealed their soft cap number (10% higher than NHL), and their hard cap being 35% higher than the NHL number.

***

http://www.forbes.com/lists/2006/32/biz_06nba_NBA-Team-Valuations_Revenue.html
Total NBA revenue (2005/06): 3.4 billion$

http://www.forbes.com/lists/2006/31/biz_06nhl_NHL-Team-Valuations_Revenue.html
Total NHL revenue (2005/06): 2.3 billion$

Based on revenues of 05/06, the NBA takes in 48% more than the NHL.

***

Interestingly, the NBA market value is 100% higher than (double) the NHL.

***

The way to calculate the cap for the NHL is based on expected revenue (55% at 2.2 billion, 56% at 2.4, 57% at 2.7).  They announced a 50.3MM cap per team. If expected revenue is 1 dollar less than 2.7 billion$, that gives us an expected cap of 50.4MM.  If the expected revenue is exactly 2.7 billion$, the expected cap is 51.3MM.  As you can see, the NHL is expecting revenues just shy of 2.7 billion for the 07/08 season.  The year before the lockout, I think they were at 2.1 or 2.2 billion$.  This gives them a season-to-season increase of 7-8% per season.  Pretty good, considering they came off a lockout.

***

In the NBA, their soft cap number is based on 51%.  Since they announced 55.6MM, that implies a league revenue expectation of 3.3 billion$.

***

It seems to me that the revenue-generating ability of the NHL is just a shade worse than the NBA.  This is in spite of the incredible exposure the NBA gets in the USA.  Any media person who treats the NHL as some also-ran, and not in the same discussion as the NBA is not telling you a complete story.

Tango,

Does this analysis make any sense to you?  It seems that he’s vastly overrating Ichiro’s value just to defend a horrible, horrible deal.

http://ussmariner.com/2007/07/11/ichiro-20-million-a-year/

#4, the problem, I think, stems from using the average RC for the 100 CFers in the link he provided to the Hardball Times. They only averaged 517 PA, whereas Ichiro is going to get more like 730 PA. Comparing Ichiro to replacement for 730 PA and adding in defense makes him more like a 5-6 win player, not a 7-8 win player.

Based on Tango’s salary scale, a 5.5-win player is worth 5/108. Which we need to multiply by 10% (right?) which makes him worth 5/119. Still a great deal for Seattle.

Before I read that thread, let me point out what I already said in December:

http://www.insidethebook.com/ee/index.php/site/comments/sabermetric_moves_of_the_off_season/#68

In there, I said 3/65, plus 20MM per year.  So, a 5yr deal would mean 5/105.  Assuming Ichiro is still Ichiro, then he got fair (free agent) market value.

Ok, I read it.  I was skeptical that Ichiro’s RC was that high, so I went to Fangraphs.  Wow, he’s good.  The problem is that Dave (by the way, the author’s name doesn’t appear in the blog-with-comments, just on the main blog page) didn’t consider the outs Ichiro creates.

The way to remember is to either do: RC per 27 outs, or LWTS per PA.  Dave used RC.  Since Ichiro is a leadoff hitter, he gets tons of extra PA (and therefore, tons of extra outs).

http://www.fangraphs.com/statss.aspx?playerid=1101&position=OF
At the bottom, you can see a few measures, and the one most appropriate is likely BRAA, which is LWTS by the 24 base/out states.  Ichiro is +20 runs per season.  (I don’t know if that includes his baserunning or not).  That’s really what you are after. 

I’m OK with the rest of his analysis.  He’s a fantastic fielder, and deserves the +10 that Dave is suggesting.  I personally give CF a +5 premium.  Add it up, and you’ve got a +35 player above average, or +55 above replacement. 

He is 34 years old, an age where you won’t find anyone be able to hit an inside the park HR standing up… ooops.  Who knows what age adjustment to apply to this guy.  He’s got reverse platoon splits, a fantastic bunter, becomes a CF into his 30s, great with men on base.  He’s every sabermetrician’s nightmare, and every fan’s love.  The human equivalent of Fenway.

Let’s say he’s +5/+4/+3/+2/+1 WAR over the next 5 years, which is a rather severe decline.  And let’s say the cost/win rises modestly at 7%, which is incredibly conservative.  Start at 4.3MM per win, and you’ve got him at 5/70 as the reasonable worst case scenario.  Instead, start him at +5.5 and drop him only 0.5 per year.  Make the cost/win as increasing at 10%.  Start at 4.4.  That makes him 5/120 as the reasonable best-case scenario.

So, 5/100 is reasonable.  Plus, you get Ichiro himself.