NHL Salary Cap reportedly going to $70.3 million
(Globe and Mail)–How’s this for a strange scenario for the NHL’ssalary cap this off-season. General managers were told at a meeting in New York this week that the upper limit (or cap) will rise to roughly $70.3-million (U.S.) from where it was at for the 2011-12 season ($64.3-million). The catch is that the cap is only a temporary one, as the league’s CBA expires on Sept. 15 and the new agreement could have a vastly different structure than this one. What that means is that GMs will be working under one cap all summer and in free agency, but then ultimately dealt another one whenever a new agreement is finally signed between the league and the NHLPA. Teams are also permitted to spend 10 per cent more than the cap during the off-season, meaning a really ambitious GM could spend $77.3-million or so before having to get under the eventual cap on the final day of training camp. The way the NHL currently calculates the salary cap is tied directly to their revenues from the season before, and commissioner Gary Bettman put that figure at a record $3.3-billion in his address before Game 1 of the finals on Wednesday.
This is very interesting and encouraging news. It’s great to hear that even in an economy that has been in a recession for five years the NHL is thriving. I have said many times in this space that there has never been a better time to be a hockey fan. Plenty of coverage, tremendous parity, and every team has a star that is worth the price of admission. Having said all of that NHL GMs have a virtually IMPOSSIBLE job to do this summer.
In 2005-06, the first season of the salary cap era, teams could spend a maximum of $39 million. Just seven years later the salary cap could be almost double. The Cap has gone up by $14m in just two seasons. With a seemingly ever-growing salary cap ceiling it is virtually impossible to set a value on a player. Let’s use the most recent Blackhawks signing as an example. Johnny Oduya was given a 3 year contract with an annual cap hit of $3.375m. Many people, myself included, were outraged by this deal. It seems like a huge cap hit for a player who is a 2nd pair D(3rd pair on a contender), but maybe in two years that’ll seem like a steal if the cap continues to race skyward. In 2006-07 NHL all-star defenseman Dan Boyle had a cap hit of $3.65m. Similar to what Oduya is making now. Boyle would have made 8% of the total team salary for a cap ceiling team. Oduya by contrast accounts for just under 5% of the speculated $70.3m cap for 2012-13. If that ceiling continues to go up then the Oduya obviously won’t be as bad. NHL GMs are forced to assign value based on a moving target. Determining value from year to year is always difficult, but this summer should be even worse with the CBA expiring on September 15th.
I can’t decide if the CBA expiring makes this the worst or best summer to be a free agent. Teams could either protect themselves by not committing to expensive contracts without knowing the future salary cap formula. Or, they could just as easily try to spend money now and essentially bargain hunt if they feel the players will be given a larger piece of the revenue pie in the new CBA. Signing players to long-term expensive contracts is also tricky because at some point the player you signed will have diminishing returns as he ages. Will a player like Marian Hossa, who is signed at $5.275 through 2021, still provide value at that cap number? It’s an impossible question to answer because there are so many variables in play. It’s kind of a game of Russian Roulette. If a team signs a player to a long and rich contract, the team is basically banking on the fact that salary cap will continue to rise. So even though a player’s cap hit will remain the same he will take up a smaller and smaller percentage of the team’s payroll. Therefore an aging player who produces less won’t necessarily handicap a team by being “over-paid” because essentially…he won’t be overpaid. However, the NHL salary cap simply can’t go up forever. Eventually revenues will normalize and the salary cap will increase incrementally if not decrease. That could leave teams scrambling to trim payroll.
I guess the point of this whole blog is two-fold. 1) Being an NHL GM is harder than it looks. It’s still easier than Stan Bowman makes it look, but it’s a tough job. 2) I think the NHL should allow teams to go over the cap, but have to pay a stiff luxury tax to do so. This would allow for more flexibility and would also allow players to potentially earn more money. The luxury tax paid by big spenders could then be redirected to a slush fund to help some of the teams in weaker hockey markets. No matter what this is going to be the most intriguing NHL offseason of all time because the GMs HAVE NO IDEA WHAT TO DO!!!
PS: Just for fun/torture…if the salary cap was $70.3m the summer after the Hawks won the cup they could’ve resigned Ladd, Niemi, Byfuglien, Burish, and Versteeg, they could’ve kept Brian Campbell, and we’d be talking about a minimum 8-peat in Chicago.
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