Closing the vault on NHL player contracts

Tim Kolupanowich
July 17, 2012

It was a hard thing to watch in 2004 as the beginning of October came and went without an NHL season to accompany it. From the first Collective Bargaining Agreement proposal brought forth by the owners, it looks like the same thing may happen again.

After failing in the long run to reduce players’ contracts last time around, the owners are once again trying to make as much profit as possible. That may sound odd because, after all, making money is the whole point of any business, but they are trying to find solutions to problems they caused. Last time it was the salary cap. This time it’s a little more rigid.

According to Harrison Mooney there are five main points to their first proposal:

1. A reduction in players’ hockey-related revenues to 46 percent from 57 percent.

2. A minimum of 10 seasons in the NHL before unrestricted free agency begins.

3. A five-year limit on contracts.

4. No salary arbitration.

5. Entry-level contracts extended to five years from three.

It’s entirely likely the Players Association will negotiate those numbers a little more their way. The owners have to know they won’t get every item exactly the way they want. That’s the nature of negotiation. But what’s strange is that the owners once again need something to save them from themselves. 

[php snippet=1]

The Hockey News columnist Adam Proteau wrote why it is difficult to side with the owners in these CBA negotiations and those starting points are a clear reason why.

Prior to the lockout, there was no salary cap or limits on contracts. Seven teams had payrolls over $60 million, according to Hockey Zone Plus, with the New York Rangers and Detroit Red Wings topping out at $77 million and $77.8 million, respectively. However the average payroll was only $44 million. The salary cap ceiling has been above that point since the 2007-08 season when it jumped to $50.3 million. In fact, the salary cap floor for next season will be $10 million above the 2004 average.

Once again, there are massive contracts owed to players, only now teams are stuck with them for over a decade. Comparing the top salaries from 2004 and the top salaries now, the numbers are very similar. Only now that there’s a salary cap, they needed to add term to the contracts in order to spread out the dollars enough to fit under the cap.

This is salary cap circumvention at its finest.

“This is a consortium of wealthy businessmen; they didn’t get that way by being mousy and charitable,” Mooney said of the owners. “They got that way by being parsimonious and ruthless.”

They may be ruthless in business meetings, after all they have to afford an NHL in which the average team is worth $240 million, but for some reason they seem to enjoy throwing their money away on players who don’t deserve it. You can’t exactly blame the players for taking those contracts because, really, who wouldn’t take a $7 million check dangling in front of them? It’s going to be accepted, but that doesn’t mean it has to be offered. Instead of rules dictating how much the players can earn, why not just try some smart spending?

A term limit is fine but there shouldn’t be restrictions on players’ earnings. They have every right to earn as much as they can. The key word there, of course, is “earn.” What should happen is that GMs shouldn’t be allowed to bury bad contracts in the minors, which would cause management to think twice about handing over big money to a player who has one decent year. If the Maple Leafs couldn’t hide Jeff Finger’s four-year, $14 million contract after just 94 regular season games, they’d (hopefully) learn to be smarter with their spending decisions.

The same goes for the New York Rangers and Wade Redden’s six-year, $39 million contract. They were never forced to offer him that amount; they did so just to outbid any other team trying to sign the defenseman. Some other team would have signed him, likely for less, and because he’s not playing for them now anyway, it wouldn’t have mattered. Sure he’s not counted against the cap as he’s been with their American League affiliate the Connecticut Whale the past two seasons, but they’re still on the hook for the $6.5 million he earned last season.

Redden would probably still be playing in the NHL if he didn’t have that contract holding him back. It wasn’t so much his play that finally got him sent down as much as it was his play that compared to his salary. If it was something a little more down to Earth, there would be a team willing to use a roster spot on him.

We could very well see the same thing happen with Jason Garrison and his six-year, $27.6 million contract with the Vancouver Canucks. His 16-goal effort was a good season, but his production slowed considerably during the season as he had half his goals in its first quarter. Did he earn $4.6 million a year? No, but it was offered and he’d be a fool not to take it.

With free agency really being a bid for the best available players, teams need to spend a lot to avoid a player going to their rivals. But if those rivals couldn’t dump salary as easily, it wouldn’t be nearly as bad to lose a bidding war, because teams with too many bad contracts wouldn’t be able to put together a competitive team. If management wanted to ruin their chances of winning the Stanley Cup and drawing in large crowds, let them. Allow the teams who spend wisely, not abundantly, to have a better chance of succeeding.

One thing the players definitely deserve though is a higher percentage of revenues than the owners are offering right now. It should be 50 percent minimum and that’s being generous considering it’s the players who are responsible for that revenue in the first place. No fan spends money on games to watch the owner sit in his box or merchandise with the owner’s name on the back, they want to see the players in action. That’s where the draw of the crown comes from.

Owners don’t make money without the players entertaining the fans. It’s that simple. It stands to reason that giving consumers a better deal will draw more attention, resulting in more profit in the long run. And there is risk of real damage done to the fanbase if there is a second season-long lockout.

There’s a decent chance the season may not start on time. There’s a very good chance we’ll be going through this when owners find loopholes in the new CBA to try and cheat the system, again hurting themselves through copious spending. Owners are running a business; they shouldn’t penalize their employees when they make a mistake.

[php snippet=1]

The Author:

Tim Kolupanowich