The NHL salary cap has been a hot topic of discussion since it was first initiated into the league after the 04-05 lockout, but is it time for a new system? Gary Bettman addressed the concerns of the less-then-projected number of $73 million made in December. “At 82 the cap would be $72.2, and at 80 cents, the cap would be $71.7,” said Bettman when addressing the media before the All-Star Skills competition. The full quote, and news of the announced outdoor games can be found here.
Governors were told that Cdn dollar won’t be as impactful as some fear on salary cap. Worst case less than a million lower than 73M proj
— Pierre LeBrun (@Real_ESPNLeBrun) January 24, 2015
This article will discuss the pros and cons of the salary cap, and whether or not its time for the league to begin discussion of a new system. Overall league growth, revenue sharing, competitive balance, what a ‘hockey deal’ has become, and Revenue Sharing will be highlighted. With CapGeek unfortunately gone, I used nhlnumbers for all my salary cap information.
League Wide Competitive Balance
Might as well begin with the number one pro of the salary cap, which is how competitively balanced the NHL has become.
For starters, even before the ‘cap era’ there hasn’t been back-to-back Stanley Cup Champions since the Detroit Red Wings when they won in the 1997-1998 seasons. Up until recently, with the Los Angeles Kings and Chicago Blackhawks winning titles in four of the past five seasons, there were seven different teams who won championships between 2006-2012.
Even with the salary cap in place, teams have begun to separate themselves into elite status. Imagine if teams like Chicago, Anaheim, or Pittsburgh were able to acquire more star players to add-on to what they already have? Lets just say it wouldn’t be good for the rest of the NHL, especially for teams who are already struggling to reach the cap *cough* Ottawa.
In all seriousness though, the NHL is a big-market league. There’s a reason the Blackhawks take part in outdoor games seemingly every year. With the amount of spending power big-market teams have compared to teams like Florida or Arizona, if there was no cap, they could blow their offers out of the water every time.
Hockey isn’t like Baseball. In hockey we don’t see Oakland Athletic ‘Moneyball teams’ because low-end players simply can’t compete with all-stars. Obviously there have been a couple of instances where that isn’t the case, but when it comes down to it, speed and skill wins almost every time in hockey. If your players aren’t good enough, lets just say things don’t work out so well *cough* Edmonton.
Restricted Vs Unrestricted Free Agents/Contract Length
This was a huge topic in the owner’s lockout where the players wanted desperately to have contracts be however long they wanted. In the end, players are able to sign for eight years with their own teams, and seven with others.
The reason this was so hotly contested was because General Mangers would sign players to very long contracts. They would then tack on extra years at minimum salary to lower the overall cap hit. Ingenious when you think about it, but the reason this is a pro is because it protects the players from themselves, and General Managers from bad contracts.
Players mostly likely don’t enjoy becoming Restricted Free Agents. It’s understandable, especially when they are almost forced to take the two-year ‘bridge deal’ after their entry-level contract ends. If there was something I could change, I would make entry-level contracts two years instead of three. There’s less time for the player to develop, which makes it easier for both sides to sign off on a ‘bridge deal’ instead of holding out like P.K. Subban infamously did.
The salary cap sets the standard. There’s no telling how much a player would ask for if there wasn’t a hard cap. It makes sense because the league isn’t in the financial position where they could pay these players X-amount of dollars. There also isn’t a comparable with Baseball because the amounts of yearly income both leagues make are vastly different. If anything, all that would come out of it would be more fighting and lobbying than ever before.
Revenue Sharing Becoming Key Factor
The NHL simply isn’t in the same league as Baseball. After accumulating a record-high $3.7 billion last season, they still trail the MLB by more than double in gross revenue. However, the NHL has taken up revenue sharing to help guide the process along.
Revenue sharing in short, is the league taking its Hockey Related Revenue (HRR), plus a percentage of revenue from the top-10 highest grossing teams, and dispersing it among the bottom half of teams in need of extra revenue (New Jersey, Arizona, Florida, Carolina, etc.). It’s a system that for now at least, works well with the salary cap because it limits teams from overspending in trying to keep pace with the high-end teams.
Everything seemingly goes back to competitive balance because in this instance, it seems like the highest-grossing teams are being screwed over a bit here. Not in just having to give up some revenue for other teams, but also so those teams will be better off when spending money in free agency (baring escrow payments teams may need to make once set and done).
As bad as it may seem, it’s really not; those high-grossing teams, in some circumstances like Chicago and New York (Rangers), are so well off, that they can easily afford revenue sharing, plus spend to the cap no problem. Competitive balance is a big part of it, but revenue sharing is becoming a key reason in the survival/growth of the league.
Making a ‘Hockey Deal’ Is Almost Impossible
As with pros, there are cons, and my first point, with the salary cap in place, creating that classic ‘hockey deal’ has become next to impossible. What a ‘hockey deal’ is specified as, is a simply a one-for-one, or two-for-two trade which include only players, and no draft picks.
Too often we see in trades made not only at the Trade Deadline, but also at the NHL Entry Draft, are when big-time/mid-range players are traded, there are seemingly always a draft pick involved. We saw something of that nature earlier this month with the Pittsburgh Penguins acquiring David Perron from the Edmonton Oilers in exchange for Rob Klinkhammer, and a 2015 first-round pick. In this instance, Pittsburgh was buying for the playoffs, but that’s a recent example of a trade, which includes a draft pick and a player, for a quality player.
The reason for this is because teams who are so close to the cap can’t trade for a player with a cap-hit higher than the player they are giving in return. Obviously that limits the team’s options immensely due to the restraints of the salary cap.
Even with the rampant rumors of a Phil Kessel or Dion Phaneuf trade out of Toronto, that ever happening is extremely low considering both of their cap-hits are extremely high. Kessel’s cap-hit for the next eight years will be $8 million per-season, while Phaneuf’s cap-hit will be $7 million over the next seven-years.
Those are the most extreme rumors, but excellent examples of what a ‘hockey deal’ won’t look like if either of these two are moved.
Retaining Players Is Very Complicated
The New York Rangers are the best example of a team becoming unable to lockup their young stars due to the salary cap. New York has several young players up for big contracts next season. Those include, Mats Zuccarello, Derek Stepan, Carl Hagelin, John Moore, and J.T. Miller will be up for his second contract. Plus, after all those guys, Chris Kreider will need a new contract after next season.
Expect their new contracts to be along the lines of Marc Staal, who signed a six-year deal, worth $5.7 million per year.
The point here is that the Rangers are being screwed because of the salary cap. Stepan, Hagelin, Kreider, and Miller are homegrown talents, which make it even worse that the Rangers will have to give up players they developed for nothing. It’s a respectable argument; if this was Baseball, the Rangers would be able to keep all of their players, which would keep them as an elite team for several season.
There are other teams with this problem like Chicago and Toronto. They will have to re-sign players like Nazem Kadri, Brandon Saad, Cody Franson, and Marcus Kruger.
There are naturally little problems with something as complicated as a salary cap, and if there was one reason to abolish it, then this would be it.
Limited League Growth
While all the pros are nice for safety, sharing the wealth, and competitive balance, the NHL will reach a point where they may need to change the system.
Specifically when it comes to revenue sharing, as gracious as it may sound, there’s a glitch in the system. The glitch in question? The small market teams, specifically the teams in the bottom-five of revenue, and even more specifically, the Florida Panthers.
Now this isn’t all on the Panthers, but there was a game earlier this season, their second in fact, where there were only 7,311 tickets sold. All types of speculation ran wild afterwards suggesting the team should move, but Panthers co-owner said in response to the speculation, “We are not moving. We have no intentions to move the team anywhere.”
There are other teams like Arizona, Carolina, and New Jersey who are still recovering from financial distress, but are now heading in the right direction.
Expansion is also a question, as there are only 14 teams in the Western Conference, compared to 16 teams in the east. Las Vegas is still preparing their season ticket campaign, while Seattle and Quebec are still question marks. Whatever the NHL decides to do, it will be in the best interest of how to grow the league, and not put teams in position to fail.
Overall, league growth will continually be slowed with a salary cap. Teams like New York especially will struggle because of the cap, and they are one of the NHL’s biggest teams. It’s a difficult line to walk, but if the NHL can somehow develop a new system, whether it’s five or 10 years from now, it could be where the money, and equality lies.
5 thoughts on “NHL Salary Cap: Should It Be Abolished?”
Big pro to the Leafs if the cap was abolished – they can’t buy their way out of sheer idiotic decision making. Happy to see poor management and ridiculous contract negotiations penalized. Mind you, even when there was no cap, the Leafs sucked. Agents are in the business of being greedy and looking at comparables; terrible contracts for terrible players (Clarkson) and terrible contracts for competent but unspectacular players (Orpik) create unrealistic expectations from middling talent, meaning more players want to test UFA to make that easy money. Clearly, waiting for dust to settle when UFA opens is prudent – gambling high is a bad idea – gambling low can pay off huge. This has created space for ‘second wind’ short term contracts like those of Ribeiro, Gomez, Raymond (last year).
I love the cap – it necessitates mobility and draft/deal savvy from GMs. Unfortunately it kind of does eliminate franchise players from middling and crappy teams (unless you’re mediocre and relatively cheap, like Chris Phillips). On the flip, players accept less money to play with winners, and a solid team like the Blackhawks is rewarded with players willing to bargain to win, like Richards.
The cap is the best thing to happen to hockey in a long time – it ensures this Sens fan will be rewarded with several seasons of better records than the Leafs at half the cost.
Great article, well written.
Thank you for the kind words and the response. I mean what can you say right, the leafs just suck, no other way about it really. The NHL needs to keep the cap for now but like I said, maybe in like 10 years when they are working on a new CBA they will think about moving to a new system.
We’ll see but thanks again for the comment.
Pete Gaeta – there already is an allowance for teams keeping its homegrown talent, and its called “not being idiots in the UFA market.”
Lets make something clear. Good franchises and GMs are capable of keeping good groups together over long periods of time by making intelligent depth signing decisions, mostly avoiding the star UFA market, and drafting well. LAK, CHI, ANA, even SJS… these are all teams that have maintained long term success in a capped league. Teams such as TOR and NYR, who go out and spend millions of dollars on fringe players, have already been compensated for their poor judgement through the two compliance buyouts.
Having a good front office is a huge competitive advantage. Discarding the salary cap gets rid of that. Any idiot can be the GM of the Canadiens without the cap, because they can afford to bury any contract they don’t like in the minors. It takes intelligence and a knowledge of hockey to exploit the inefficiencies in the UFA market, or to buy out some UFA years from your RFA’s. You can also sign players longer term, which is a tangible benefit.
What really should be done is that the reverse order draft should be abolished. Again, the salary cap provides for a perfectly level playing field in all other respects. Why should bad teams like Edmonton be able to suck up a generation of star talent and bury them in a dumb, clueless organization? Taylor Hall on a competent team would be a HUGE star instead of a near-afterthought. Make the draft a formula based on prior year’s draft position, give every team odds at every draft slot (so if you picked 1st in 2014, you’d have the worst odds to pick 1st in 2015).
Removing the cap, though, is silly. May as well hand the league to the rich teams. Does anyone think there is some crazy reason that its only in the last decade that non-traditional markets have started winning? Carolina and Anaheim and other expansion teams can finally AFFORD to compete now that Detroit and their ilk can’t buy Cups every year.
Obviously, competitive balance is important. It would be bad for the NHL to allow teams to become like baseball’s Yankees and go out and “buy” a cup year after year. That being said, I think there needs to be some allowance made to make it easier for teams to keep their homegrown talent and maybe one or two of their star players who they have built their team identity around. Fans become invested in their team’s star players, and when you have Lebron-like situations it can create bad blood between a city and a franchise which can be hard to recover from. Perhaps a 20% discount on cap hit for players who have been with the team 2 full seasons or longer. Maybe a larger discount for 1 or 2 “franchise” players.
Thanks for the comment. That’s a very interesting idea for sure. Fan do become invested in star players and exactly what my roommate says, because he’s a rangers fan, is that they won’t be able to retain any of their players. It sucks, but the 20% or possibly even more is very interesting, maybe kinda like franchise tagging in football. Regardless, appreciate the comment.
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