The only certainty is uncertainty.
That’s where the NHL is with its salary cap, and that’s where it will likely be until draft weekend in Sunrise, Fla., in another few weeks.
This happened last year in Philadelphia – with general managers anxiously waiting until late June to learn the cap figure – and the reason it drags out is that the players and league have to come to an agreement.
As we know from the NHL’s labour strife over the years, that’s never easy.
As Game 1 of the Stanley Cup final began on Wednesday, the NHL Players’ Association was in the midst of meetings in New York. The big topic of conversation for players is what to do about escrow – the roughly 15 per cent of their paycheques they’ve been losing all season – and whether they should vote in late June to keep the cap as low as they can.
The NHL’s cap is designed to go up. The league’s collective agreement has an escalator clause built in that boosts the midpoint – the middle between the cap and floor – by 5 per cent each year.
Most of the time, that 5 per cent is a given.
Of late, because of escrow, it hasn’t been.
If the NHLPA relents and again agrees to go with that full boost, the NHL’s cap will rise marginally, from $69-million this season into the $71-million range, which would be an all-time high.
If they don’t, it won’t, and teams such as the Chicago Blackhawks – who already have $65-million committed to next year’s cap – will be even more pressured to dump useful players in order to get under the limit.
“We obviously have to have a discussion with the Players’ Association, as we’ve said all along,” NHL commissioner Gary Bettman said on Wednesday in his annual address before Game 1 of the final. “If we use the full 5 per cent [escalator], our preliminary calculation is we’ll be somewhere over $71-[million]. But the cap is somewhere in the 70-71 range we believe.”
The “if” is the integral part of that answer.
The NHL’s cap is directly tied to revenues from the previous season. If we take Bettman’s $71-million figure and back out the various calculations, that means that league revenues are in the $3.75-billion range.
If players won’t agree to any escalator, that equates to a cap of only $68-million, which would be the NHL’s first-ever cap decrease that wasn’t the result of a new labour contract.
Increasingly, talk is that the NHLPA may go with a compromise solution of a 2.5-per-cent inflator, but even that will mean a cap of around $69.5-million.
That’s a far cry from the salary cap’s average increase of $4.2-million a season under the previous collective agreement.
What that speaks to is how limited the NHL’s revenue growth has been this season. The fall of the Canadian dollar has been a factor, as has the drop in the number of outdoor games, which boosted last year’s revenues.
Even so, it’s remarkable how limited the growth has been given the new Canadian television deal with Rogers is still being worked into the cap equation.
The debate for the league over where the cap should be set comes down to one between the high-spending teams and those on the low end, a conversation that usually ends with the big dogs winning out.
On the players’ side, it’s more complicated. The NHLPA has typically supported a higher cap to the benefit of players entering free agency, reasoning that all those getting to that point – potentially for the only time in their career – deserve a similar potential payday.
The problem is the cap has become badly misaligned with what actual revenues are, which creates huge escrow payments. That means that players such as Chicago’s Jonathan Toews and Patrick Kane, who signed front-loaded extensions that begin at $13.8-million in salary next season, will be paid closer to $11.7-million – losing more than $2-million – if escrow remains that high.
For them, and every other player with a big contract, a lower cap means better alignment with revenues and lower escrow coming off their 13 cheques.
More and more, the league’s stars are signing those long-term deals, which means fewer players are going to free agency each July 1. Those who do are then outnumbered by those with contracts, which puts pressure on the NHLPA’s decision, given the majority have to vote against their own interests.
Hence the potential “compromise” solution of a 2.5-per-cent escalator, which would ease the escrow burden to a small degree.
With the way the league has designed its cap, this is likely to be an annual debate around this time of year. It creates tense times for GMs who are looking at buyouts and other creative ways to get under the cap, when the difference of even a couple million dollars is a big one.
And it means even the commissioner isn’t certain what his league’s salary cap will be.Report Typo/Error