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A Simple Way to Fix the NHL’s Flawed Cap System
Posted By Corey Krakower On Jun 4 2010 @ 4:25 pm In Around The Rinks | 3 Comments
Mass Exodus is coming to the NHL.
Of course, I am not referring to the concept of human migration; I am referring to the abnormal number of salary dumps, buyouts and players that will be sent to the minors because their salaries are too high that will happen over the next 2 years. The salary cap system, where salaries are tied directly to a percentage of league revenues in the NHL’s Collective Bargaining Agreement (CBA), was designed to protect the owners from themselves and act as a means of providing cost certainty. It turns out; the league is right back where they started. Teams have too much money invested in a few “star” players and now that the salary cap number will remain stagnant and will quite possibly be going down over the next 2 years as opposed to going up like it has every other year, General Managers will be forced to correct those mistakes at the expense of making their teams worse. The question is; how did they get themselves into this mess where players’ salaries are grossly inflated? In a nutshell, restricted free agents (RFAs) have too much power, and unrestricted free agents (UFAs) are in a position where they can demand salaries that do not fluctuate in a world where the cap does.
My proposal to help correct this issue is two-fold; make it easier for teams to match offer sheets, and since the salary cap number is tied to league revenues, it only makes sense to have player compensation also directly linked to the cap number.
Offer a “discount” to offer sheets
It wasn’t long ago when Dustin Penner signed a deal with Edmonton that would see him earn $4.25 million per year for 5 years. Brian Burke, then the GM of the Ducks, owned Penner’s NHL rights but he had no choice but to let him walk and take the compensation of draft picks. What if Brian Burke would have been able to match the deal at a discount? Hypothetically, let’s say there was a rule that stated: the team that owns a player’s rights can match any offer at 75% of the cost. In the Penner case, Burke would have had the option to prevent Penner from signing with the Oilers for $4.25 million per season, and instead agree to pay him 75% of that, or approximately $3.2 million dollars per season, which was much closer to market value at the time. This would without a doubt decrease the threat of offer sheets, which in turn would force RFAs to sign at the going rate, as opposed to being drastically overcompensated and creating bigger problems down the road.
Player salaries based on a percentage of the salary cap
Tomas Kaberle, a star defenseman for the Toronto Maple Leafs, would never have signed a deal that would see him earn just north of $4 million per season if the cap was $56.8 million (the current salary cap ceiling). On the other hand, there is no way Brian Campbell, an above average defenseman for the Chicago Blackhawks, would have been offered a $7 million dollar contract if the cap was still at $39 million (the max payroll when the NHL introduced the cap system for the 2005-2006 season). The need for a system that accounts for fluctuation in the league’s salary cap is vital for the long term prosperity of the league. What if there was a rule whereby teams offered UFAs a salary percentage instead of an actual number? Kaberle signed for $4.25 when the cap was $39 million, which translates to 11%. Campbell signed for $7 million when the cap was $56.7 million, which is just about 12%. It seems reasonable to suggest that Kaberle should always get 11% of the cap and Campbell should always get 12% of the cap, otherwise, this penalizes players who signed contracts when the market called for lower salaries. There could be additional clauses to this system as well, such as; a player can only make a maximum of 20% (already exists in some capacity) and a team must pay out a minimum of 70% and a maximum of 100%.
If this ruling was in effect, it would give a team like the Philadelphia Flyers more flexibility to keep their core players together. Right now, the Flyers have 6 core players in Mike Richards, Simon Gagne, Jeff Carter, Danny Briere, Chirs Pronger and Kimmo Timonen that take up 60% of their payroll. The reality is that when it comes time to compensate their prospects and young players, such as Braydon Coburn, Ryan Parent, Claude Giroux and James van Riemsdyk, they won’t be able to without ridding themselves of several big contracts first. However, had the cap hits of their current core players adjusted when the team’s payroll adjusted, then the Flyers wouldn’t be forced to dispose of several assets while getting nothing comparable in return.
Many GMs are just about ready to push the panic button. Their budget will be decreasing, while player salaries will remain constant, which, in theory, does not make any sense. If owners will be forced to spend less, then it only makes sense to have players earn less. That is why a system where player compensation is based on a percentage of the cap works; because GMs are not handcuffed when the cap goes down. It might seem as though this system is only beneficial to the club and not the player, to which I would respond to you by asking if you think the players who signed deals in 2005 and 2006 when the cap was considerably lower would like this system better? The real problem with the concept is that uncertainty is a major factor and would not be well received. The Player’s Association would in all likelihood prefer salaries based on a tangible number, rather than a ballpark percentage, even if that ballpark percentage proved to be more beneficial in the long run. Regardless, the bottom line is that there are major problems with RFA and UFA compensation in the NHL, and both will need to be re-evaluated when the CBA is re-opened in the near future; either with a system similar to this one, or something else. Until these problems can be corrected, the salary cap system will never provide the cost certainty that the owners are looking for.
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