Kukla's Korner


Musings On The Salary Cap

In a story that I posted the other day, Melnyk had this to say on the subject of a potential Alfredsson contract extension:

“What we’d like is to come up with something so he is a Senator for life,” Melnyk said here yesterday morning. “We have to be realistic about what we can do and where the economy is headed. We’ll see what happens.”

It got me thinking about how the economy affects - and now threatens - NHL teams in our current salary cap world, bringing me back to the notion I shared in my second ever blog post: what a better salary cap might look like.

Reading about the NHL, you would not think that it needs any change, since everyone seems to be saying that the League is healthier and more successful than ever. Revenues are up, average salaries are up, attendance is up; what could possibly have Eugene (clearly the couple of times I’ve met him has us on a first name basis) sounding so concerned in that article?

Melnyk said teams can’t cavalierly go over the salary cap and think they can get out of it by buying out the contract of another player. That’s the road to disaster, he said.

“That’s the concern that we all have and one of the things you need to be careful of,” he said. “Yeah, there’s a solution (to going over the cap). You buy (players) out. But that’s real money, that’s what people don’t realize.

“It’s one thing to be under the cap and try to stay under the cap, or buy out a player. But when you’re talking about real dollars going out the door to stay under the cap ... I just don’t see it happening.

“If there is a reduction and people are close to the cap line, then it’s just going to be a lot of cash flying around and the losers are going to be the owners that end up having to write big cheques to buy out contracts.”

What he is concerned about is now a very real threat. Should NHL revenues fall, the cap will indeed fall with it. It doesn’t take an expert to see that the issues with the American (and to a lesser extent the Canadian) economy are serious, and could have an effect on the NHL’s bottom line.

Consider for a moment that, according to nhlnumbers.com, the average team is only $5.7 million under the cap, with seven teams less than $2 million under, and another five teams over and still trying to sneak under. Even a cap that is $2 million less than last year’s, then, could potentially force 40% of the League’s teams to get rid of players in order to get back under it.

Of course, they could trade them, but are we forgetting how stingily some teams cling to the cap floor? Or that with a lowered cap, even more teams would be unable to accept players in trade? That leaves one obvious and undesirable option: the buyout.

Teams loaded with multiple high-priced players - as Ottawa will be next season with Spezza, Heatley, and (hopefully) Alfredsson - would not likely want to destroy their team’s success by chopping off that part of the team, and yet they would have a need to do something to get under the cap. Whether it be a large single or many tiny ones, buyouts would ensue.

This is the folly of the hard cap, or at least one of the biggest ones. The way I see it, a new cap is needed, and I would propose one that throws out the hard, million-dollar figures, in exchange for the benefits of the always-fashionable “%”.

How would this work you ask? Simple: instead of signing a player to a $5.67 million extension, you would sign them to a “10%” extension, which would yield the same result today since the current cap is $56.7 million, and 10% of that is $5.67 million.

Sound pointless? It shouldn’t. Consider that each year, contracts are given out based on current market value. Contracts signed at the end of the first post-lockout year, with its $39 million cap, would now look like bargains under the $56.7 million cap, since while the cap goes up with revenues, the salaries stay the same.

What you end up with is a system where players are never hurt for signing long-term deals. A player deemed to be worth 20% of the cap, the maximum allowed, will still be earning that ‘worth’ for the full term. Had Crosby been able to sign for the max when the cap was only $39 million, he would be earning only $7.8 million under the current cap.

Suddenly I’m caught thinking that this is a respectful-of-players dream. Really, it is a nice scenario, but not without its own concerns.

What happens to that $16 million cap floor-to-ceiling gap? It doesn’t translate well into the percent-cap world. Does it make sense in the first place though? Sure, when it meant n the beginning that the floor was 59% of the value of the ceiling, it was a good spread to help the owners of less spendthrift franchises. Now though, the floor has risen to 72% of the value of the cap, and it will only grow as the cap rises.

If I were a diligent owner, the thought of a $54 million floor in a $70 million cap year would make me queasy, and that’s a figure I’ve heard thrown around for the near future. In this sense, a percent-cap also fits the logic, because at some point the $16 million gap might seem insignificant, whereas saying that the floor was firmly 60 to 70 per cent keeps a respectable separation, and no matter how the cap rises or falls, if you have contracts built on a percent-cap system, year over year you won’t ever have to buy out contracts to fit under the ceiling, or sign preposterously overvalued ones to reach the floor.

Just as we now have money held in escrow until the year’s revenues are finalized, we could do the same to ensure the players still get their share. With better revenue sharing, a contentious issue at the best of times that I will not touch now, and a similar escrow system for player salaries, owners could also be protected from large one-year rises, and players from large one-year salary drops.

Am I crazy? Yes, no doubt. Have I ever been able to fully chew through the current CBA (and win a t-shirt)? No. You can also rest assured that I am anything but a contract lawyer or anyone with any legitimate expertise.

But when you think of it, a system like this in which the players value is protected, and the owner’s team not held hostage to the rise and fall of the cap (giving additional protection to the players who could be sacrificed due to those fluctuations), does that not sound like a good way to protect everyone’s interests?

Isn’t that what we should all want for the health of the league? There’s always room for improvement, or at least a little dialog, and I hope we can always continue this discussion.

Filed in: NHL General, | SENShobo | Permalink
  Tags: blog


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About SENShobo

Native of Northern California.  Hockey fan since 1998... sort of... there's a hiatus in there that I still can't explain.

I want to know about anything and everything related to the sport and the spectacle.  I watch, I react, I write it down.

My interest in the Sharks was initially a matter of geographic convenience and regional loyalty because that seemed to be how it worked.  I had no prior interest (at all-- AT ALL) in professional sports of any kind.  When I met hockey, it might have set off a chain reaction of general sports fandom.  It hasn't, I don't think it will.  At all.

Since then, that interest developed into full blown (mostly sort of usually almost completely) exclusive loyalty to the Sharks.

I started blogging a couple years ago on wordpress. I still occasionally put things there that I don't think fit here because they are not about the Sharks. Wherever my words wander, here on Kuklas Korner, they will (usually) hang on to a teal thread.

I can be found in cyberspace on Twitter @petshark47, or emailed at talkingstick@petshark.net