The Business of HockeyDiscuss the financial and business aspects of the NHL. Franchise sales, valuations, TV contracts, ratings, expansion, relocation, the CBA and work stoppage discussion goes here.
Lockout IV: One likes to believe in the freedom of hockey (Moderated: see post #2)
I don't think it has much to do with franchise value. I can't imagine the presence or absence of a bad long contract having any significant impact on the sale value of a franchise.
I think the reason for the league pushing for shorter contracts is because it makes sense in a cap world and it reduces cost and risk for teams. There is simply no upside to long contracts (even more so if back diving is neutered) to anyone but star players. And they will always do well no matter what.
The problem is not long-term contracts, but cap circumvention (which, IMO, should be punished under the terms of the new CBA).
The PA's proposal addresses this: 8-year maximum contracts with the first and last years having no more than a 25% variance in real salary.
Teams who are risk adverse are under no obligation to sign even that, as Brian Burke has proved with his refusal to hand out any contract over 5 years. Those that aren't or are willing to take a gamble on a particular player do so knowing the risk.
A lot of the Bettmanites are confusing these issues. Long-term contracts and Cap Circumvention are two different things.
If you reduce the salary variance, then long-term contracts do not violate the spirit of the cap at all.
All you are doing is saying, if you take less per year, I'll give you security.
That is not against the spirit of the cap.
Fair enough, but the NHLPA doesn't like the 5% variance either and I believe has proposed something along the lines of 25%.
As a fan I'm fine with 100-year contracts if the variance is small enough to prevent cap circumvention, but maybe the owners can only get insurance on 5-year max deals. I can see why they would want the insurance and would want 5 years to be the maximum term for a contract.
The 5 year limit on contracts will affect 90% of the players.
The top 10% will get max contracts.
Instead of 120 million over 13 years you will see more 60 million over 5 years.
This will affect the other 90% huge.
I'm not sure I agree with your premises. Sure, not having back diving deals will decrease the cap space for '90%' of the players. However, if I was a player I would be more interested in the dollars I was paid than the cap space that could be allocated to me. The current back diving contracts takes up a large portion of the actual dollars paid to players, with yearly salaries in the range of $10-14 M. With shorter contract limits I would actually expect the top '10%' players to get lower yearly salaries (though higher cap hits), increasing the share of available money for the remaining '90%' of the players when compared to the last CBA.
tl;dr: The remaining '90%' might increase their salaries with shorter contract limits.
Fair enough, but the NHLPA doesn't like the 5% variance either and I believe has proposed something along the lines of 25%.
As a fan I'm fine with 100-year contracts if the variance is small enough to prevent cap circumvention, but maybe the owners can only get insurance on 5-year max deals. I can see why they would want the insurance and would want 5 years to be the maximum term for a contract.
As I understood their proposal, it was more like a 75% variance (lowest paid year can be no lower than 25% of highest paid year).
Isn't there a loophole in the 5 and 7 years limits that would allow players to effectively sign longer contracts? This would be done by signing a 1 year contract for any team and instantly following it up with a 7 year deal, as they can be be signed as soon as a player is in the final year of their contract. This would basically give a player an 8 year contract, which is what they are trying to negotiate for.
To be honest, I am not sure why the NHL is so set on 5 years. But I also fail to see how this restriction would significantly impact anyone in the NHLPA outside of a small number of the leagues top players.
In the currrent system the heavy front loaded contracts create escrow issues for every player. The limit on variance gets rid of this for the most part. So while we may see some slight bumps in the cap hits of a few stars the net effect of this will be close to negligible for the average player.
To be honest, I am not sure why the NHL is so set on 5 years. But I also fail to see how this restriction would significantly impact anyone in the NHLPA outside of a small number of the leagues top players.
In the currrent system the heavy front loaded contracts create escrow issues for every player. The limit on variance gets rid of this for the most part. So while we may see some slight bumps in the cap hits of a few stars the net effect of this will be close to negligible for the average player.
How about 6 years and 8 for your own FA's?
5 years in a way is a great number for the owners.
- It kills every longterm contract
- Teams basically get players in their prime only, UFA+5 years, very low risk.
- If variance is 5-10% in the contract and contract length is 8-12 years, then new Parise's and Suter's just ask 8 million for the whole 8-12 years, which is actually even worse than cap circumvention contracts.
- Because teams only have so and so much of cap space, they cannot pay players realistically more than probably 8-9 million in cap hit, which means top players salary will decrease.
- It avoids Weber situation from happening, since Weber no longer can ask for 120 million.
It probably would take some adjustments next few years, but in the end the market would stabilise, top earners make less, and small markets retain their stars much much easier, since they can basically pay "max" money to their stars while having low risk financially.
Side-effects would be that superstars get ridiculous cap hits since you have to pay for their prime only which hurts the teams immensely (Giroux for example). Funnily enough this could mean that low revenue teams could steal superstars from contenders because they have a lot of unused cap space.
Fair enough, but the NHLPA doesn't like the 5% variance either and I believe has proposed something along the lines of 25%.
As a fan I'm fine with 100-year contracts if the variance is small enough to prevent cap circumvention, but maybe the owners can only get insurance on 5-year max deals. I can see why they would want the insurance and would want 5 years to be the maximum term for a contract.
I've been wondering about this, something I read somewhere. Maybe somebody who knows can clue me in on this (I'm reading through the threads, but I can only take so much before my eyes start to bleed).
My understanding was that insurance companies were now only willing to cover 5 years at a shot. Is this correct?
Why not institute a rule that the remaining amount of years on a contract may have up to 5 years on it with a 25 percent variance. Allow teams to re-up their player every year, adding another year on the end of the contract with a new salary for that extra year that keeps the remaining variance under 25%.
Any drawbacks to this?
Add in a rule where the re-upped cap hit will always count (example, if the guy retires), preventing this from being able to be circumvented by re-signing the player each year with lower salaries (still conforming to the 25% rule) until the year they retire with 5 years remaining.
The problem is not long-term contracts, but cap circumvention (which, IMO, should be punished under the terms of the new CBA).
The PA's proposal addresses this: 8-year maximum contracts with the first and last years having no more than a 25% variance in real salary.
Teams who are risk adverse are under no obligation to sign even that, as Brian Burke has proved with his refusal to hand out any contract over 5 years. Those that aren't or are willing to take a gamble on a particular player do so knowing the risk.
You have the NHLPA proposal wrong. It's basically a 75% variance between the highest paid year and the lowest paid year. A player must make AT LEAST 25% of his highest year in his lowest year.
This is a legal contract for example: 12m, 12m, 12m, 12m,12m, 3m,3m,3m.
Gets $60 million in 5 years, but only a $8.6 Million cap hit. And the NHLPA's justification for why these long contracts that only elite players generally get are good for the middle class require back-diving contracts to be legal.
As I understood their proposal, it was more like a 75% variance (lowest paid year can be no lower than 25% of highest paid year).
I wasn't sure of the variance proposed by the NHLPA year-to-year. I just knew it would do little to curb cap circumvention contracts when coupled with a 5-year CBA.
To be honest, I am not sure why the NHL is so set on 5 years. But I also fail to see how this restriction would significantly impact anyone in the NHLPA outside of a small number of the leagues top players.
In the currrent system the heavy front loaded contracts create escrow issues for every player. The limit on variance gets rid of this for the most part. So while we may see some slight bumps in the cap hits of a few stars the net effect of this will be close to negligible for the average player.
How about 6 years and 8 for your own FA's?
5 years contract limit will impact the PA by putting more players in UFA status every year. If the the UFA market become a buyer market the going rate will go down by a lot. On the other hand it will incite more average players to resign with current teams balancing the whole deal and pretty much nullifying the effect anyway. Also five years max with players out of entry level at 25 put them at 30. Teams won't be able to buy out more than 3 years out of free agency. That good for everybody who want to see more quality free agent hit the market. The thing is I don't get how any of this crap could be a reason to hold out on a deal for both sides. Ego must be getting in the way that not something I go to war over.
But a 5 year max is a radical departure from the existing circumstance.
An 8 year max is a change. A manageable change.
Perhaps in your world (for the team(s) you follow).
I'd say that more than half of the NHL teams have NEVER signed a player to a deal longer than five years. So how is "status quo" on term a change for them?
Now those teams have a chance of making a fair offer to UFAs.
Knowing my local GM/ownership stance, I knew there was no way they'd be in on the Kovalchuk, Suter, Parise deals.
Perhaps in your world (for the team(s) you follow).
I'd say that more than half of the NHL teams have NEVER signed a player to a deal longer than five years. So how is "status quo" on term a change for them?
Now those teams have a chance of making a fair offer to UFAs.
Knowing my local GM/ownership stance, I knew there was no way they'd be in on the Kovalchuk, Suter, Parise deals.
One selling point the NHL should use is that with a system this regimented why would you pay an agent anyway?
One selling point the NHL should use is that with a system this regimented why would you pay an agent anyway?
Ovechkin wondered the same thing. It could be that superstars who sign long term contracts dont need agents since they have all the leverage, its the other fellows that dont.
The problem is not long-term contracts, but cap circumvention (which, IMO, should be punished under the terms of the new CBA).
And what I find quite odd is that the NHLPA is not up in arms about cap circumvention as well. The truth is the players should hate it far worse than the owners. Far worse.
Prime examples this summer. Say the CBA did not end this year. You take the deals for Parise, Webber and suter. Who is paying those salaries? Collectively it is not the owners, it is the players. And to be honest, I do not think the vast majority are smart enough to realize this. In fact, I'd even doubt the majority of posters on here even realize that.
It is really simple. When the teams collectively pay over the agreed upon percentage they are to receive, they have to give every dollar back in the form of escrow. For years the players have received a far greater percentage then what they were allowed (approaching 70% some years, and from what I understand about 63% last year). That number get reduced to 57% via escrow.
So when those 3 signed for what amounts to about 35M for this season, that is just that much more about 57%, aand the full amount of this 35M must be paid back by the players collectively.
Lets say you are a run of the mill 4th line player making 1.2M dollars. These guys sign that contract. 35M over a 1.9B cap may not sound like much, but its actually 1.75%. So your 1.2M player now has to fork out his share, or 21K of his money to pay for those contracts.
Sure its not a huge amount, but if the rank and file players actually really realized what this meant, they would probably want to get rid of these contracts too.
Ultimately cap circumvention of this nature helps out only precious few owners and players. It is quite detrimental to the vast majority of players and owners. And if I thought the union wanted to help their membership more than stick it to the owners, I honestly think they would demand (not just accept) this from the owners and show the players why its good for the 99% who will never get this type of deal.
to me this is just further indication that the union leadership are more interested in sticking it to the owners and helping out the top 1% of the players rather than helping out the rank and file players
I've been wondering about this, something I read somewhere.
My understanding was that insurance companies were now only willing to cover 5 years at a shot. Is this correct?
That's my understanding as well.
__________________ "It’s not as if Donald Fehr was lying to us, several players said. Rather, it’s as if he has been economical with information, these players believe, not sharing facts these players consider to be vital."
I really dont get why the NHL is so fixated on term limits... the problem i see happening is Agents are going to start looking at that 5 year term limit as a bullseye. Look at the NBA, they have 5 year term limits and everyone gets those contracts. Anytime the agents have a target they are going to shoot for that.
With the variance protection and cap restrictions they are proposing i DO NOT see the need to protect against long term kovalchuk like deals via a term limit because NO ONE is going to sign a long term deal like that again, the player wouldnt even want to because thats alot of money he might never see.
And what I find quite odd is that the NHLPA is not up in arms about cap circumvention as well. The truth is the players should hate it far worse than the owners. Far worse.
to me this is just further indication that the union leadership are more interested in sticking it to the owners and helping out the top 1% of the players rather than helping out the rank and file players
I tried to explain it (post 52), however everyone ignored it. But I agree. The rank and file feel the effects of these contracts a LOT more than those actually signing them due to the bonuses. At least if it was salary, they'd feel the same escrow hit as everyone else.
Fair enough, but the NHLPA doesn't like the 5% variance either and I believe has proposed something along the lines of 25%.
As a fan I'm fine with 100-year contracts if the variance is small enough to prevent cap circumvention, but maybe the owners can only get insurance on 5-year max deals. I can see why they would want the insurance and would want 5 years to be the maximum term for a contract.
I think everyone recognizes cap circumvention is was a joke.
And I think even the PA's offer of 25 percent + that recomputation thing f people retire early... shows the PA is willing to move on the issue.
The sides are very close. The NHL is going full bore to try to scare the PA into a couple big concessions in the last week and Fehr does't scare easy.
I tried to explain it (post 52), however everyone ignored it. But I agree. The rank and file feel the effects of these contracts a LOT more than those actually signing them due to the bonuses. At least if it was salary, they'd feel the same escrow hit as everyone else.
That's not fair at all considering what the PA has on the table.
There isn't any room for serious cap circumvention in the PA's offer.
And what I find quite odd is that the NHLPA is not up in arms about cap circumvention as well. The truth is the players should hate it far worse than the owners. Far worse.
Prime examples this summer. Say the CBA did not end this year. You take the deals for Parise, Webber and suter. Who is paying those salaries? Collectively it is not the owners, it is the players. And to be honest, I do not think the vast majority are smart enough to realize this. In fact, I'd even doubt the majority of posters on here even realize that.
It is really simple. When the teams collectively pay over the agreed upon percentage they are to receive, they have to give every dollar back in the form of escrow. For years the players have received a far greater percentage then what they were allowed (approaching 70% some years, and from what I understand about 63% last year). That number get reduced to 57% via escrow.
So when those 3 signed for what amounts to about 35M for this season, that is just that much more about 57%, aand the full amount of this 35M must be paid back by the players collectively.
Lets say you are a run of the mill 4th line player making 1.2M dollars. These guys sign that contract. 35M over a 1.9B cap may not sound like much, but its actually 1.75%. So your 1.2M player now has to fork out his share, or 21K of his money to pay for those contracts.
Sure its not a huge amount, but if the rank and file players actually really realized what this meant, they would probably want to get rid of these contracts too.
Ultimately cap circumvention of this nature helps out only precious few owners and players. It is quite detrimental to the vast majority of players and owners. And if I thought the union wanted to help their membership more than stick it to the owners, I honestly think they would demand (not just accept) this from the owners and show the players why its good for the 99% who will never get this type of deal.
to me this is just further indication that the union leadership are more interested in sticking it to the owners and helping out the top 1% of the players rather than helping out the rank and file players
You understand the issue quite well but forgot that this is about a negotiation. If you know the other side want something that you also want but they asked for it first why would give it out unless you get a concession back on another point.
I've been wondering about this, something I read somewhere. Maybe somebody who knows can clue me in on this (I'm reading through the threads, but I can only take so much before my eyes start to bleed).
My understanding was that insurance companies were now only willing to cover 5 years at a shot. Is this correct?
This is 100% correct.....the owners have been getting the shaft on revenue for the last 20 years, I don't blame them for wanted to correct it. The mindset that a rich person shouldn't be able to continue and try to make money just because they are rich is exactly what is wrong with society today. The worst part of it is when players who are making 7 figure salaries are the ones making the claim....look in the damn mirror people. Stop talking to the fans like we're a bunch of idiots, no one is going to feel sorry for you.....get this done, keep it out of the media, and let's get back to the rink.
This is 100% correct.....the owners have been getting the shaft on revenue for the last 20 years, I don't blame them for wanted to correct it. The mindset that a rich person shouldn't be able to continue and try to make money just because they are rich is exactly what is wrong with society today. The worst part of it is when players who are making 7 figure salaries are the ones making the claim....look in the damn mirror people. Stop talking to the fans like we're a bunch of idiots, no one is going to feel sorry for you.....get this done, keep it out of the media, and let's get back to the rink.
I don't blame them for wanting the 5 yr limit either. That being said, if I am an owner and I have a player like Croby, Malkin, Stamkos etc.. I would want them locked up longer than 5 yrs but overall, I can see the 5 yr being important.
Owners/PA should trade off the back diving contracts for the 10yr CBA, after all, how bad can the contract really be if it's only 5 yrs? Assuming they have this 25% or even a 50% rule (highest to lowest paid years)
