Next NHL CBA, not Playoff Exit, Will Set Course for Penguins’ Offseason

As far as the Pittsburgh Penguins are concerned, any meaningful trade talk in the wake of another postseason letdown will have to be suspended until at least September 15.

Jordan Staal Penguins hockey player
Jordan Staal has become the target of trade talk, but the pending CBA renders the speculation largely meaningless (Icon SMI)

That’s the earliest date by which terms on a new NHL Collective Bargaining Agreement can be reached and ratified.

“Certainly, whenever the new CBA is going to be negotiated, which this one expires September 15, everybody is going to have to come into compliance with that,” Penguins GM Ray Shero said following his team’s playoff exit. “But we just don’t know what that is.”

For the Pens, much has been made of a third consecutive playoff meltdown. They entered the second season as prohibitive favorites with first-round home ice and an offense from the 1980s, but were bounced after playing just six games.

After a third unceremonious departure was brought about by the worst penalty killing unit in modern playoff history (48 percent), talk has since turned to a possible remodeling of the franchise in the fashion of the rebuilt Flyers team that ousted them.

Many expect changes. But like the disappointing end to the season, much has also been made of the nearing CBA expiration.

[Listen to the full Shero interview here]

The standing agreement is an extension of the contract signed following the lockout that sacrificed the 2004-05 season, enacted several rules changes and brought massive salary restructuring and a hard salary cap.

Even with record revenue and attendance, a third post-lockout agreement may be harder to come by.

The hiring of hard-nosed executive Donald Fehr as the new head of the NHL Player’s Association means the next round of negotiations can quickly stray into combative territory. Fehr led the MLBPA for years, where his reputation as a players’ advocate was forged (and perhaps tarnished by the 1994 work stoppage).

Thanks partly to Fehr, baseball players now regularly earn some of the richest contracts in pro sports.

Defenseman Brooks Orpik is a union representative for the Penguins, and has been in on the preliminary meetings regarding a new CBA.

“I wouldn’t say I’m concerned about [the next CBA], but I’m definitely interested in it,” Orpik said. “Everybody’s interested in it. We’ve had quite a few meetings in the last two or three months. We’ve had quite a few meetings that almost the whole team attended.”

A lockout should be the last thing on anyone’s mind, for players and owners alike, as the league has had to claw its way through small-time TV deals and mainstream anonymity since the ’05 stoppage.

Despite record revenues, a new CBA will come down to the owners. More than half of the 30 NHL franchises lost money in the 2010-11 season, and the salary cap ceiling is currently as high as 57 percent of revenue.

Compared to the NFL (48 percent) and NBA (50 percent), the other two of the big four leagues with salary caps, hockey players currently derive the biggest piece of the revenue pie.

“It will get more intense in the next couple of months,” Orpik said.

Like every other team, the Penguins’ plans hinge on the next deal.

It might be unlikely that a new CBA will bring a lower salary cap, especially in lieu of revenues (team values have increased an average 47 percent since the first post-lockout season). Perhaps a relaxation of the $16 million minimum gap between the salary floor and ceiling will relieve the pressures to scale back the current cap maximum of $64.3 million.

While the salary gap is meant to preserve competitive balance, the NHL has had more parity than any of the big four leagues. The NFL, MLB and NBA have all had repeat champions in the years since the NHL lockout, while only Pittsburgh and Detroit have appeared in multiple Championship series, each winning once.

Financially, the Penguins are more than sound enough to handle a scaling back of the cap ceiling. While it may hurt their chances to re-sign all of their big-money free agents, their bigger worry may be a league without a salary cap at all.

Even with a home sellout streak topping five season and 250 consecutive games, the Penguins are not infinitely solvent. It sounds strange, given that the team is co-owned by billionaire Ron Burkle, are the 9th-most valuable franchise in the NHL and 6th-most valuable American franchise with an estimated $264 million franchise valuation.

However, a massive annual salary hit (some $68 million as of November 2011) and payments on the new CONSOL Energy Center have given the team operating losses in the last two calculated years (2010, 2011) after posting gains in each post-lockout season prior.

A cap ceiling set at or below the current $64.3 million will likely make keeping all of the team’s big stars together impossible, and paves the way for early (if irresponsible) trade chatter. A modest increase makes the prospect at least somewhat more realistic. An uncapped season(s) would allow the team to spend freely, but would bode poorly for a club which has traditionally had trouble maintaining revenue streams in lieu of unmitigated player contracts.

Contracts handed out to the star players of the early-90s Cup teams led to bankruptcy and salary dumps in the early-2000s.

For the likelihoods of what the next CBA will hold, the possibilities still range to all extremes. Heading into free agency, that’s making the job of all general managers, especially Shero, exceptionally difficult.

“I’ve been a GM for six years, an assistant GM for 14 before that,” Shero said. “This is the first year I’ve addressed the team after the season with what my feelings were.”

The frustrations are evident and understandable following the six-game series loss to Philadelphia. But unlike the Penguins’ 2012 playoff run, the process of re-signing or restructuring the current team won’t be handled quickly.

Too much of the team’s future leverage depends on the state of the next CBA to think about moving anyone just yet.