Alex the Great Fails Econ

Hey, even we get confused by escrow sometimes

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    NEWSLETTERS

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    Finance stuff makes us scream, too.

    Poor Alex Ovechkin.  It isn't enough to pal around with supermodels all summer or be the sport's most popular player.  It's not even enough to have a contract that even Albert Haynesworth looks up to.

    He's getting screwed.

    No, not by the supermodels. By the NHL. Well, he and the other players, at least, or so he says.

    "I think right now we're losing money, not the NHL," he said according to the AP.

    Ovie's quote is in reference to the league's escrow requirement, and he's wrong.  As part of the deal the league and the players made, players' salaries are tied into league revenues.  Players get about 56% of the money the league makes.  If the league does well, the players do well.  If the league fails, so do the players.

    With the uncertainty of the economy last year, the NHL held back a greater chunk of players' salaries than usual in an escrow account.  Since their salaries are entirely tied to revenues, their salary would be exactly the same whether they got it in dribs or drabs throughout the year or in even sums throughout the year.

    Nobody's getting screwed, as the Book Blog points out:

     

    "So, the players have to choose: do they want to get paid until after the revenue is actually collected, meaning that their first paycheck may come early (due to season ticket sales), but later paychecks will come in spurts, and will go up-and-down based on gameday tickets sold?  Or, do they want to take 80% of their expected annual salary in bi-weekly paychecks, and then get the remaining salary (if any) based on revenues collected?  In either case, this “$5MM” player will earn $4MM, because that’s the deal he agreed to: he’ll take a 20% paycut if the league collects 20% less in revenue."

    So Ovie and the players make what  Ovie and the players are supposed to make.  There's no conspiracy here.  In fact, it's good for Ovie.  The more popular he gets, and the more revenue he generates, the more he and his fellow players make.

    But when you're making as much as he does, a few extra bucks here and there don't really matter... so long as they're not coming from your paycheck.