Passing the Bucks, Again and Again

These are strange times indeed in the National Hockey League, as teams find themselves scrambling to get under a salary cap that has quickly been reduced from a prorated $70.2 million for the lockout-shortened 2012-13 season to $64.3 million for 2013-14. It’s this climate that has paved the way for Ilya Kovalchuk’s retirement, leaving behind nearly $77 million of the New Jersey Devils’ money in order to play for SKA St. Petersburg of the K.H.L. The Islanders have taken advantage (?) of a compliance buyout to remove Rick DiPietro from their payroll, a maneuver that will cost the Isles $1.5 million for each of the next 16 years. And then there’s the Tampa Bay Lightning, who will pay Vincent Lecavalier $32 million over the next 14 years so that he can move on to play for the Philadelphia Flyers (who are, incidentally, paying him another $22.5 million over the next five years).

Given the financial difficulties each team has been facing, it seems completely absurd that these transactions can possibly make any sense. The Devils are over $200 million in debt, the Islanders are still two seasons away from relocating to what should be a more profitable home in Brooklyn, and the Lightning (ranked 23rd in Forbes magazine’s ranking of NHL franchise values) would appear to be in no position whatsoever to pay a star player $32 million to relocate to a large-market cash-cow franchise like the Flyers. Were online sportsbook TopBet.eu to place odds on another protracted work stoppage when the present CBA expires in 2022, the events of the past month have inexorably increased its likelihood.

The problem here, as always, is that the core issues aren’t addressed in the labor negotiations. The players focus their attention on the monetary value of their existing contracts, trying against all costs to eliminate the possibility that their pay will be reduced. And the owners, rather than attempting to construct a system that will further growth across the entire league, instead attempt to establish payroll restrictions that will enable small-market franchises to survive. Of course, “survival” and “success” are quite different, and what’s really needed is a system that will enable all franchises to thrive. What we’ve got instead is a system that spikes the operating income for franchises like the Toronto Maple Leafs ($81.9 million), the New York Rangers ($74 million) and the Montreal Canadiens ($51.6 million), this despite the fact that all three teams are spending to (or near) the maximum on player compensation.

Some analysts are complaining today that Kovalchuk leaving the Devils represents cap circumvention, but in reality, it’s the Devils and their fans who should be complaining. The Devils initially signed Kovalchuk to a contract that was rejected by the league, and were ultimately penalized by having to give up a first round pick (which will be in 2014). If the NHL holds to that penalty, Devils fans would have every right to be absolutely livid, because the absence of Kovalchuk will likely increase the value of that draft pick. And realistically, though the structure of Kovalchuk’s original deal was such that it was quite unlikely that he would play out the final five years (earning only $550,000 against a cap hit of $6 million), it’s not as though the Devils weren’t following a precedent set by the Red Wings, who will pay Henrik Zetterberg only $5.35 million over the final three years of his contract (against a cap hit of over $18 million).

One would think, given the potentially severe ramifications of these lengthy contracts, that NHL owners would shy away from continuing to offer them. But here are the Boston Bruins, signing gritty forward Patrice Bergeron to an 8-year deal worth $52 million and goaltender Tuukka Rask to an 8-year deal worth $56 million. Now, the Bruins are a highly profitable franchise, but owner Jeremy Jacobs has historically been quite conservative with his player spending (to put it gently). The fact that the Bruins are willing to make these huge commitments to an injury-prone (if epically brave) forward and a hot-headed goalie who’s only started 126 NHL games (and only been the team’s starting goalie since January) speaks volumes.

Looking solely at the Lecavalier situation, the Lightning gain nothing but cap space by divesting themselves of his contract, a move that cost the franchise $32 million in real dollars. The original contract was for 11 years and $85 million. He earned $10 million in each of the first five years of that deal, costing the Lightning $50 in real dollars (even though the annual cap hit was “only” $7.72 per year, or $38.6 million). The buyout will cost them another $32 million, so Lecavalier will over time essentially be “made whole,” losing only $3 million of the contract’s total value (though some of the money will be deferred more than originally anticipated). The addition of the Flyers’ money means that Lecavalier’s deal will instead work out to a combined $105 million over 10 years (actually playing hockey), with an additional $2.25 million paid annually by the Lightning for 9 years after his deal with the Flyers will have expired. It’s a great deal for Lecavalier, and a pretty good deal for the Flyers, but it’s virtually impossible to see where this helped the Lightning very much.

In an alternate scenario, if the Lightning had been able to trade Lecavalier to the Flyers – say, for Sean Couturier, not an entirely unreasonable swap – and get the Flyers to agree to pick up $22.5 million of the remaining money on Lecavalier’s original $85 million deal, the Flyers would’ve gotten Lecavalier for an additional year of service, the Lightning would’ve only been responsible for paying Lecavalier $12 million while they’d have added a quality replacement. Given that the Lightning operated at a -$13 million deficit in 2011-12 (according to Forbes), such an arrangement would have made far more fiscal sense. Instead, the CBA put an additional $20 million into the pockets of an already-overpaid player, reducing the amount of money available for players who deserve to be paid more.

Put simply, the system’s still very broken, and it shouldn’t be a surprise to anyone when there’s another labor dispute in 2022 to try to repair the damage.

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