Nhl Lockout
Essay Preview: Nhl Lockout
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The rookie salary cap was gutted when teams took advantage of a loophole, adding lucrative “bonus” payments on top of the “maximum” base salary. It began in 1997, when the Boston Bruins gave two rookies, Joe Thornton and Sergei Samsonov, the maximum salary allowed under the rookie cap. But those contracts also had bonus clauses that would roughly triple the base salary if certain criteria – such as statistical benchmarks – were met. From then on, all high draft picks began demanding and receiving similar contracts. The multimillion dollar offers made to a few free agents served to “raise the bar,” leading to comparable salary increases for comparable players. This movement was led by a few wealthy teams, like the Rangers, Flyers and Red Wings. But it drove up the market value for players throughout the league. Teams did not use their leverage with restricted free agents. At contract time, most under-31 players have two options: sign and play or stay home and earn nothing. Despite holding this obvious bargaining advantage, teams often gave in to salary demands, offering players huge raises and long-term contracts. For example, in 1997 Joe Sakic of the Colorado Avalanche signed a three-year, $21-million US “offer sheet” with the New York Rangers. But Colorado exercised its right to match the offer and retained him. Sakic went nowhere, and the only result of the Rangers gambit was to more than double his salary. In the same year, Paul Kariya of the Anaheim Mighty Ducks sat out the beginning of the season, looking for a big raise. As a 23-year-old, that was the only leverage he had. The Ducks caved, giving him a two-year, $14 million deal. Other huge contracts for top forwards soon followed. More damaging still is the fact that many of the hefty contracts went to mediocre players. In 1999, the Rangers signed Valeri Kamensky to a four-year deal worth $13.45 million. He scored 14 goals the previous season. A year later, St. Louis gave Dallas Drake $9 million over four years. He averaged 14 goals per season over the life of the contract. These deals helped “raise the bar,” boosting the market value of players with similar stats and abilities.
Much of this free spending was funded by expansion money as the NHL added teams throughout the 1990s (hefty expansion fees were divided among incumbent teams). There was also the expectation that the games popularity would grow in new markets and television revenues would soar as a result. Now the expansion money is gone, and the hockey boom didnt happen. The leagues latest American television contract pays no money up front for broadcast rights. Many teams, especially the newer ones, have also seen a decline in ticket sales.
In its most recent offer, made February 2, 2005, the NHL owners proposed a six-year deal. Its main features are:
League-Wide Salary Cap
A formula will see the players receive 53-to-55 per cent of all NHL revenues.
This is the deal-killer. The players want no part of any such restriction. The percentage formula is especially unattractive now, because short-term league revenues will likely drop because of the lengthy lockout.
Team Salary Cap
A team payroll will be no less than $32 million and no more than $42 million benefits included. This range will be adjusted every year, ensuring that players receive 53-to-55 per cent of league revenues.
Possible Salary Cap for Individual Players
“The parties may have a mutual interest in negotiating over the establishment of an NHL maximum salary for individual players. No specific amount is being proposed.”
Salary Cap for “Entry Level” Players
In his first four years in the NHL, a player will earn no more than $850,000 per year in salary and signing bonuses. He can be offered additional incentives: Up to $250,000 in performance bonuses (for goals, assists, etc.) and up to $500,000 for finishing among the top five in voting for major awards. Few players qualify for awards, so the salary-plus-bonuses formula would cap most entry-level salaries at $1.1 million.
Under the old agreement, there were no meaningful restrictions on bonuses, and the entry-level system applied to the first three years of a players career.
Salary Rollback
The NHLPAs December 9 offer of a 24 per cent across-the-board salary cut is accepted.
Contract Lengths Restricted
The maximum term of an NHL contract will be three years.
Unrestricted Free Agents
The age at which a player becomes eligible for unrestricted free agency drops from 31 to 30. This is a concession to the players, though many believe a more crowded free agent market will help discourage bidding wars.
Restricted Free Agents
As in the previous agreement, a player who is not an unrestricted free agent becomes a restricted free agent when his contract expires. He must receive a “qualifying offer” from his team, or he becomes unrestricted. A qualifying offer will be 100 per cent of last seasons salary for players making under $800,000, and 75 per cent of last seasons salary for those making over $800,000. A restricted free agent can accept an offer from other teams. But his old team can match the offer or receive compensation, as in the previous free agent system. A restricted free agent must sign a contract within 14 days of the opening of training camp, or be ineligible to play that season. This is designed to prevent lengthy hold-outs in contract disputes. Combined with the new limits on salary arbitration, the new rules for restricted free agents would virtually eliminate any bargaining power for the majority of players in the league.
Salary Arbitration
All restricted free agents are eligible for arbitration to settle contract disputes. Teams or players can initiate the process. Under the old salary arbitration system, only players could request arbitration. Teams can avoid arbitration at any time by offering the player 105 per cent of the previous seasons salary. The league can “eliminate salary arbitration mechanism in its entirety at any time” by dropping the age of unrestricted free agency to 28.