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National Hockey League revenue probably won’t grow this season and player salaries may decrease next year because of a drop in the Canadian dollar, said Montreal Canadiens President Pierre Boivin.

In June, the NHL announced it was raising the salary cap to $56.7 million a team -- the fourth consecutive increase since a lockout forced the cancellation of the 2004-05 season. Under the current system, teams share revenue while players’ pay is tied directly to league sales.

Canada’s currency has dropped 21 percent against the U.S. dollar this year, driven by falling commodity prices. That means the NHL’s six Canadian teams, which Boivin said contribute 35 percent to 40 percent of all league sales, generate less money when converting their revenue into U.S. dollars.

“It’s possible” the salary cap will drop next season, Boivin told reporters today after a speech to the Montreal Board of Trade. “Canadian teams account for a large part of revenue. We’ll have to see what kind of growth the U.S. teams are going to have, but it’s not impossible that NHL revenue will be flat this year.”

Demand for natural resources from the U.S. and emerging economies such as India and China drove the Canadian dollar to parity with the U.S. dollar last year for the first time in three decades. As concern over a global recession increased this year, demand for commodities declined and the Canadian dollar dropped. Today the currency fell 0.9 percent to 79.84 U.S. cents as of 5:30 p.m. in Toronto.

Pre-Lockout Conditions

More declines in the Canadian currency would recreate the situation that existed before the lockout, when most Canadian clubs were unprofitable, Boivin said. The Canadiens paid out $18 million last season to other NHL clubs as part of the revenue- sharing system, he said.

“Of course we’re concerned by the dollar’s drop,” he said. “A year ago we had a dollar at par, and now it’s down around 80 cents. To be competitive, we need a dollar at par.”

Hockey’s next labor agreement will have to incorporate ways of compensating Canadian teams for currency fluctuations, Boivin said without being more specific. NHL player salaries are paid out in U.S. dollars.

“In the new collective agreement we will have to come up with mechanisms to offset the foreign exchange swings,” he said. “We will have to look at how Canadian teams can stay competitive. We can’t go back to a situation where Canadian teams each lost tens of millions of dollars every year.”

Former Program

The NHL previously aided Canadian teams through its Canadian Assistance Program, which provided financing to four teams in Canada. The program, which didn’t include the Toronto Maple Leafs or Montreal, ended after the 2003-04 season.

Boivin also insisted NHL owners were justified in sacrificing the 2004-05 season by locking out players.

“It was absolutely worth it,” he said. “Today we have a system that is working. We have the greatest amount of competitive balance that we’ve ever had as a sport. Most of the teams are competitive.”

(Source: Bloomberg)