Canada's Cup drought and the salary cap

June 1, 2013

The lockout-shortened 2013 NHL season marks the 19th straight season in which the Cup will not be raised by a Canadian team. In a blog post yesterday, Nate Silver took on the question of why Canada is on such a dry spell. In the article, he puts forth three explanations. First, that Canadian teams have just been on a bad luck streak. Second, that changes to the NHL's salary cap rules changed at a time when the Canadian dollar was gaining strength against the US dollar. Third, that there are too few Canadian teams, relative to the sport's popularity in different markets. The article is well put together, there were a couple things that stood out to me about his arguments.

Statisticians don't often like to tell story of cause-and-effect based strictly on "bad luck" or, in statistical jargon, randomness. I think however in this case, much of the story of Canada's Cup drought comes down to randomness. Sure it's been 19 years since a Canadian team won the Cup, but in that time there have been five north-of-the-border franchises to make the Finals. Four of those teams (Vancouver in 1994 and 2011, Calgary in 2004, and Edmonton in 2006) lost in a decisive Game 7. If "randomness" had just gone the other way and one of those teams had won, this whole conversation about a Canadian drought would be moot.

This is a point that isn't very well highlighted by Silver, but it's important because it somewhat undermines the strength of his other two arguments. If it is just a fluke that the Canucks, Flames, and Oilers all lost those games, then his points about cap rules and team numbers lose their flair.

The argument regarding cap rules seems to make some sense at first, but when you actually look at the data on team spending, the argument falls apart. Below is the table of average team salary for American and Canadian teams (in US Dollars) since the 1998-1999 season.

What's clear from this table is that Canadian salary spending actually improved following the implementation of the salary cap starting in 2005-2006. Canadian teams went from being outspent by their American counterparts by several million dollars, to outspending them by $3-4 million. If anything, the new salary cap rules have made is more likely that a Canadian team will win the Cup.

That assumes that salary spending actually impacts the probability of a team winning the Cup. If we look at the teams that won the Cup, we find that spending seems to have very little to do with Cup success. Only once in the past 13 seasons has the highest paid team won the Cup. In the mid-2000s, there was a four year streak in which the Cup was won by teams in the bottom-half of the NHL in terms of team salary.

Using a simple linear probability model (akin to logistic regression, except with more straightforward assumptions and easier to interpret results), I find that teams that spend more money, relative to other teams, does have a statistically significant impact on a team's probability of winning the Cup. Adding a million dollars to a team's payroll only increases that team's probability of winning the Cup by 0.22%. This means that the probability model suggests that the team with the lowest salary in 2011-2012 (Islanders) was only 3.9% less likely to win the Cup than the team with the highest salary (the Flyers).

Obviously this percentage doesn't take into account all the other reasons that the Islanders and Flyers are different. What it does emphasize is that salary seems to have very little impact on a team's probability of success in today's NHL.

My final point about Silver's article relates to his argument that Canada's lack of Cups is explained by its lack of teams. Obviously. It's the same reason that Canada hasn't won the World Series, NBA Championship, or Super Bowl since the early 1990s. Fewer teams = fewer championships. Reallocating teams based on fan numbers and intensity is a nice idea. But until the NFL puts a franchise in LA, I don't think we'll be seeing an NHL team in Saskatoon.