The NHL has become a different place since the Collective Bargaining Agreement. The game changed and now the market is changing. I do not mean the market for merchandise, tickets and actual economic activities I am instead referring to the market for players.
I hate to try and be the Nostradamus of the hockey world but I feel I have to. The prediction today, the market for a core NHL hockey player free agent is slipping further into recession and something needs to be done.
At this point I’m sure I’ve lost a few of you as this is a concept that I am to still wrapping my head around. But for our sake I’ll try and explain as best I can.
The salary cap was instituted to stop the inevitable rise of player contracts, as NHL teams brought in more money players began being offered ridiculous sums of money for their services, it was time for change. The salary cap, however, also brought with it a new system of building a team.
Before a team built mostly through draft and trade but now since financially superior teams have spending limits free agency has become a market for every NHL club and a more integral part in building a team, thus creating our first problem. Clubs were still in the age of bidding wars where it was a financial battle to attain top talents.
So in the post-lockout era when free agent strategies should have changed, we saw teams still going all out offering the biggest names a little over $7 million, roughly 12% percent of today’s team’s maximum salary. As well it became practice that teams would commit a little over $28 million on their four or five franchise players, roughly 50% of a team’s maximum salary. Due to this salary inflation an NHL free agent became much more valuable in the eyes of both players and clubs, the average cost of an average free agent rose while the cap stayed still remain remotely similar.
Still the NHL and teams did nothing because the expectation was that the future would bring a higher ceiling and core players could be re-signed once teams could spend more. This day did not and will not come anytime in the near future.
What has happened is teams are now stuck with players they cannot move that eat up a large fraction of their payroll. The core second and third line players that need new contracts are asking for too much because of the inflation of free agency. The teams originally found this okay for the last few years because it was fairly simple to keep a few core players and replace the others with younger up and coming talent that was limited to signing a rookie contract, less than $1 million (with bonuses). However, the league than furthered the issue by making bonuses count towards not just the payroll but the salary cap of a team.
Rookie players between the ages of 18 and 23 who enter the league were previously limited to contracts of $0.9 million. Now they are making upwards of $2 million due to bonuses that count towards the salary cap.
Now that teams have signed 50% of their maximum payroll to a few players, they can not re-sign core players because of inflation and they cannot replace core players with young talent because of bonuses they are simply forced to sign no name talent to play behind the superstars.
What this has led to is a free agent market where training camp has begun and there are still players that or 40 or older who are still without contracts. A few recently signing contracts that are ridiculously low simply because of their intense want to keep playing hockey.
This concept is what I am calling the free agency recession. In which, similar to the housing market collapse, no one wants to buy and spend because the jobs and money simply is not there anymore. If this continues inflation will continue to rise, younger player’s bonuses will become inflated and we will be watching an economic collapse in which teams are simply to handcuffed to do anything.
This concept could very well lead to an NHL lockout or a NHLPA strike, basically an NHL depression. Whether it escalates to this point is uncertain, but what is certain is if it does occur, it will occur soon.