Gary Bettman

Players getting bad advice?

Hey, it’s Friday October 19th and we’re just six days away from seeing the 82 game schedule become an impossibility.  At least according to the publicly announced position by NHL Commissioner Gary Bettman.

In the past few days we’ve seen the owners come up with an offer, followed by three counter offers by the NHLPA, and yet we still appear not to be heads down working on a final deal.  It’s hoped that at the very least we’ve now got enough common ground (50/50 split of Hockey Related Revenues) to begin the process, but the mechanism remains contentious.

So if the players were to accept the owners position outright, what would be their real risks?

Under the current NHL proposal, the salary cap would drop from $70.2M this year, to $59.9M.  Over the last 10 years, the league revenues have grown at an average rate of 7.2 percent a year.  If that trend was to contine, then the salary cap figure would reach $79.1M by the end of they players’ proposed five year term, and would exceed the $70.2M by the start of the 2015-16 season.

Of the 1431 players currently holding contracts, 402 (or around 28 percent) would see their contracts expire after that “break-even” point.  Another 412 would see their contract expire when the cap would be pegged at around 68.8 percent, or around 2 percent less than it is today.  In other words, close to 57 percent of the players are likely to see minimal negative impact on what they are getting paid today.

What’s more at stake is how you get to that 50 percent.  The league offered to allow clubs to spend up to the original cap for 2012-13 only, in order to allow teams to prepare for a reduced number in 2013-14.  That helps the player and cap management aspect from a team’s point of view, but doesn’t necessarily give the players any advantage if the deferments are immediately put in place.

A couple of things that would help off-set the impact of deferments are the large number of contracts that expire after 2012-13, and the number of players who actually are more likely to spend much of their time in the minors.  A full 55 percent or 788 contracts are projected by Cap Geek as depth players, and as such they should have limited impact on the situation, even if you consider the NHLs goal of making sure certain contracts do count against the cap.

Another thing to consider is that 617 contracts – including 353 depth players – are set to expire after 2012-13, meaning they won’t have as much deferment impact.  This means we should see things start to even out more quickly after the first two seasons.

Other provisions in the owners proposal probably won’t help as much.  Five year contracts will mean players will get shorter terms for guaranteed income, though if you look at players who have six year or greater contracts (42) or those with seven plus years (21), you can see it’s such a small minority of players who would be affected.

Adding the ability to trade cap space actually have some impact on the cap, as more teams find space to spend money.  The current cap limit is set not at a number that represents the players’ share, but at the top end of a range, than an AVERAGE salary expenditure would represent the cap number.  For instance $3.3B in revenue would mean the league would have to average $55M for each team, not the proposed $59.9M, so salary trading could potentially push the average up a little.

The two year Entry Level Contract (ELC) offer by the NHL won’t benefit any of the current players, and if they wanted to be selfish, they could certainly turn that down in order to slow down contract inflation that typically happens after the ELC is concluded.

An increase by one year for UFA status will perhaps a minor dampening effect on salaries who no longer can look to the open market, but the effect may be overstated, and combined with a shorter ELC, might actually lead to a similar sort of salary inflation we see today.

The bottom line is that players claiming that they the league is trying to take money out their individual pockets is not a fair representation of the situation.  Players will have to wait longer for a portion of their salary, and will see salary inflation temporarily slow down for some as the deferments are checked off, before picking up pretty much where they left off by around the fourth year of the agreement.

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