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The Malik Report

The salary cap is indeed ‘insidious’

Generally I don't do the Paul-posted-it-and-I-post-it-too thing, but this issue has me particularly aggravated. As the New York Post's Larry Brooks reported, the NHL and NHLPA set the upper limit of the salary cap at $69 million on Friday, and I really do wonder whether Gary Bettman giggled while stating as much to the media.

The mid-season estimates suggested that the salary cap would rise from $64.3 million to $71.1 million for the 2014-2015 season, and while the Canadian dollar dipping below equivalency with the U.S. dollar complicated the situation, it certainly appears that many general managers and player agents--especially the ones who were allowing general managers to "wine and dine" their unrestricted free agent-to-be clients this past week--were assuming that the NHL's massive deal with Sportsnet would allow the cap to at least hit $70 million (the most optimistic estimates in May suggested a $72-73 million cap).

Instead, the NHL and NHLPA split the difference due to escrow concerns (the NHLPA appears to have tired of having 15+% of its salaries deducted for potential escrow withholdings--escrow = if the league spends more than 50% of revenues, the players have to give money back to the league, so all of that long term injured-reserve spending ends up being paid for by the players), but when you spread, "Two million dollars under estimates" per team over 30 teams, you get a gigantic chunk of money not being paid out, and Philadelphia, Boston, Los Angeles and Chicago in a boatload of Capgeek-estimated trouble already, which means that players are going to be traded, restricted free agents won't be re-signed...

And to a very large extent, the fact that the players have taken a hit in terms of money actually going in their pockets vs. promised paychecks as the split of revenues has gone down from 57-43% to 50-50 over the past two seasons...It's yielded lingering effects from a third lockout that supposedly ended a year-and-a-half ago, as well as a continued cap-restricted dispersal of talent around the league.

So here's Brooks on the cap's vicious realities:

The insidious nature — or, on the other side, the genius — of a hard-cap system was on display Thursday night and Friday afternoon when the NHLPA voted against including the new Canadian television contract as revenue for purposes of calculating the 2014-15 cap.

The players, concerned about escrow that might have increased by 3 percent if the cap had gone to the projected $71 million, instead authorized a cap of $69 million that will create a significant squeeze on a significant number of the league’s most successful clubs and will cost players jobs on those teams and eliminate those teams as potential destinations when the market opens on Tuesday.

The cap pits player against player — for what’s good for one always costs the next guy money, always. In this case, it was players without contracts for next season against those with contracts.

Despite the urging of executive director Don Fehr, the membership could not and did not see the value in getting as much money in the system as possible and instead went with the penny-wise, pound-foolish approach. Narrow interests won.

Three lockouts later, the players capped themselves.

I really wonder whether Gary Bettman has informed the players that he's ended up with successive seasons' worth of de-facto dispersal drafts thanks to this third lockout, just as the last one forced teams to cut ties with players they wanted to keep, and I certainly hope that the mid-market teams who overpay for talent and thus drive up the "market values" for everyone else remember that they are, to some extent, screwing over themselves and their fans over.

That's where we are, folks, we're watching a sport where the cruel realities of capitalism have, for teams and players, a very socialist (not that there's anything wrong with that) and totalitarian (that is very bad, and that's why I call him Chairman Mao) bent.

In the end, yes, the Chairman's done a wonderful job of selling the game, but the salary cap system isn't just designed to keep a "minimum level of talent" on the ice or to keep big-market owners pissed off about having to prop up small-market franchises as the Chairman shuffles owners in and out of the Floridas and Nashvilles and Long Islands and New Jerseys every eight-to-ten years because enough billionaires want Big Boys' Toys that they'll sink capital into building rinks for unsustainable franchises...

But that is another story for another day. For now, if your team loses players, or if it isn't able to make the free agency splash you wish it would (hello, Wings fans, Capgeek says our favorite team has $14.72 million in cap space with which to re-sign Danny DeKeyser, Tomas Tatar and Riley Sheahan, and go after a free agent defenseman OR a free agent forward, would'a been nicer to have $16 or $17 million, wouldn't it?)...

You can thank the fact that this league's weird triple-capped system.

The high salary floor means that the low-rung teams spend the money they're given in revenue-sharing overpaying to fill salary...

The mid-market teams are usually the ones who drive the inflation the most by overpaying to, say, bring Nikita Nikitin to Edmonton...

The high-cap teams find themselves struggling to retain the players they've drafted and developed, as well as the ones they've acquired via trade...

And the players who vote to not deal with escrow payments end up ensuring that some of their teammates will be packing up their homes and families to move to other cities.

Yay pairity!

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I can’t really blame a guy making the league minimum for voting for lower escrow payments. He is only getting the minimum no matter what the cap # is set at. The union should protect him more than the super-stars IMO. The extra 3% might not make a huge diffence to someone like a Zetterberg, but it sure adds up for a Jurco type next year who is still on their entry level contract.

$500k disappears pretty fast after filing a tax return in every state/province you play a game, paying someone to do those taxes, paying your agent, plus escrow.  I realize most of us would kill for that problem, but just trying to provide some context.

Posted by easmus on 06/29/14 at 08:40 AM ET

RWBill's avatar

$500k disappears pretty fast after filing a tax return in every state/province you play a game, paying someone to do those taxes, paying your agent, plus escrow.  I realize most of us would kill for that problem, but just trying to provide some context.

That is right “on the money”.

I despise the roster churn mandated by this communist hard-cap system, among other things it forces.  That is what happens when natural human and market forces are artificially manipulated.  There are always many unplanned consequences beyond that issue that is targeted.

Posted by RWBill on 06/29/14 at 02:57 PM ET

SnarkinLarkin's avatar

Right on , @RWBill. I miss the days of free market capitalism (ie the Wings 2002 superstar roster). Communalism is one thing (What’s mine is yours), but this Socialism/Communism (What’s yours is mine) cap system punishes great organizations (like the Wings) and their fans. P.S. I laughed my butt off when the Philly fans booed Chairman Troll at the draft!

Posted by SnarkinLarkin on 06/29/14 at 07:47 PM ET

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The Malik Report is a destination for all things Red Wings-related. I offer biased, perhaps unprofessional-at-times and verbose coverage of my favorite team, their prospects and developmental affiliates. I've joined the Kukla's Korner family with five years of blogging under my belt, and I hope you'll find almost everything you need to follow your Red Wings at a place where all opinions are created equal and we're all friends, talking about hockey and the team we love to follow.