The Economy and the NHL

While I hate discussing this, I'm just wanting to gauge member's feelings on the current NHL contracts and where to set the bar for who is overpaid?

First, I think that most pro athletes are grossly overpaid. That being said, some are more overpaid than others.

Looking at the past few years of a salary cap era NHL, every year that goes by in a players free agency period, they are giving up millions. Had Ottawa not re-signed Dany Heatley and Jason Spezza when they did, how much would they have gotten elsewhere?

Then you look at some other players, like the Getzlaf's and Perry's, the Richard's and Carter's, and guys like Dustin Brown, all of whom signed long term at a great bargain by today's standards.

The cap had risen every year and GM's and owner's thought they had more to work with and kept giving out money. Now it looks like the cap will be going down in the next few years and these giant contracts are going to hurt some teams more than others. You can't have massive buyouts because first of all, it costs money that a lot of owners don't have. Second, it still costs towards your cap, and as we will see, every bit counts.

Some people have mentioned retraction, cutting down the number of teams by 4 or so. What to do with all those players who are under NHL contract? The NHLPA would have a huge war with the NHL if all these players contracts were terminated. And you can't just disperse the players throughout the league, again because how will teams afford these players on top of their own?

What teams are in the most trouble with thew contracts they have written recently?

Pittsburgh's top two of Sid Crosby and Gino Malkin are both making $8.7-million dollars (the most paid pairing in the NHL). That's $17.4 million for two (albeit excellent) players.

Washington has the highest paid single player in the entire NHL - Alex Ovechkin, at a massive $9,538,462. All that for one (granted, phenomenal) player!?

The New York Rangers have four players: Scott Gomez ($7,357,143), Chris Drury ($7.05 million), Henrik Lundqvist ($6.875 million) and Wade Redden ($6.5 million), a combined ~$27.782 million for four players!!!

Other honorable mentions:

- Tampa star Vinny Lecavalier ($7,727,273)
- Dallas center Brad Richards ($7.8 million)
- Boston defenceman Zdeno Chara ($7.5 million)
- Carolina forward Eric Staal ($8.25 million)

Ottawa Senators don't look so bad for the most part considering many of those contracts were signed years ago, and who would you rather have, really? With our big three combined for ~$18.839 million (which is just a little over $1 million more than what Pittsburgh is paying their two players), I think Bryan Murray deserves a lot of credit.

If it is in the CBA, the NHLPA cant do a thing. If the cap goes down to about the 45-50 million dollar mark in a few years, its gonna be chaos.

You can have your opinions on this issue, but the fact of the matter is the NHL in a financal sense is in extremely bad shape right now and something is going to give. You can look at it in terms of gas prices, everyone knew that gas was worth 1.35 a litre and it was inflated, so are the NHL caps and palyers salaries. There is a lot more to it than that, but the bottom basically came out from underniether the economy and you can almost count on the same thing happening to the NHL. Plus the NHL has piss poor owners in a lot of places as well.

The NHL is not in a good way, the Senators are a secondary issue to this and it will effect them in just as big a way as everyone else.

If 15 teams are over the cap and the Sens arnt in 2, 3 year, do you think the league will move on without those 15 teams? No, the Sens will get screwed while the 15 teams that didnt take proper precausions will be "bailed out" for a lack of a better term. Look at GM, Ford, and Crystler, they screwed up and they are being bailed out, the same thing will happen in the NHL.

I agree that a 7.5 million dollar ceiling should have been implemented. The owners were so bent on cost-certainty that they made some pretty irresponsible concessions to achieve their goal.

Unless the owners think another lockout or strike is worth it, the NHL should hope that this CBA be extended with an amendment to provide for existing contracts to be reduced, at least for cap purposes if the cap goes down.

SeawaySensFan wrote:I agree that a 7.5 million dollar ceiling should have been implemented. The owners were so bent on cost-certainty that they made some pretty irresponsible concessions to achieve their goal.

Unless the owners think another lockout or strike is worth it, the NHL should hope that this CBA be extended with an amendment to provide for existing contracts to be reduced, at least for cap purposes if the cap goes down.

Signed, sealed, and delivered, the NHLPA doesnt have to do a thing. The NHL and Bettman once again F'ed up, and the hammer is going to come down on the little people, the fans, in the long run.

The NHL is in worse shape right now then it was pre lockout, at least there was a healthy economy before and a national TV deal in the US for the most part.

If this league was to contract 6 teams I wouldnt be surprised.

Neely4Life wrote:

SeawaySensFan wrote:I agree that a 7.5 million dollar ceiling should have been implemented. The owners were so bent on cost-certainty that they made some pretty irresponsible concessions to achieve their goal.

Unless the owners think another lockout or strike is worth it, the NHL should hope that this CBA be extended with an amendment to provide for existing contracts to be reduced, at least for cap purposes if the cap goes down.

Signed, sealed, and delivered, the NHLPA doesnt have to do a thing. The NHL and Bettman once again F'ed up, and the hammer is going to come down on the little people, the fans, in the long run.

The NHL is in worse shape right now then it was pre lockout, at least there was a healthy economy before and a national TV deal in the US for the most part.

If this league was to contract 6 teams I wouldnt be surprised.

Contracting would cost money. The league would have to buy back the franchises from the owners and the league would still be on the hook for all those salaries.

The best course of action would be to move the franchises that are not viable and start generating revenues in hockey markets instead of trying to develop revenue in non-hockey markets.

I would have suggested contracting, then selling expansion franchises to interested owners but that would be riskier for the league overall and there's still the matter of outstanding contracts.

Neely4Life wrote:

SeawaySensFan wrote:I agree that a 7.5 million dollar ceiling should have been implemented. The owners were so bent on cost-certainty that they made some pretty irresponsible concessions to achieve their goal.

Unless the owners think another lockout or strike is worth it, the NHL should hope that this CBA be extended with an amendment to provide for existing contracts to be reduced, at least for cap purposes if the cap goes down.

Signed, sealed, and delivered, the NHLPA doesnt have to do a thing. The NHL and Bettman once again F'ed up, and the hammer is going to come down on the little people, the fans, in the long run.

The NHL is in worse shape right now then it was pre lockout, at least there was a healthy economy before and a national TV deal in the US for the most part.

If this league was to contract 6 teams I wouldnt be surprised.

Love or hate Goodenow, he did a hell of a job for the players. I think they are only coming to appreciate it now. Those guys are richer because of him. Personally I hate Goodenow and the idea of unions in general but he made a lot of players rich especially the bottom feeders who have a MINIMUM salary of $500K. WOW.

Unions are needed when people are in danger of being exploited, which is clearly not the case in the NHL.

SeawaySensFan wrote:

Neely4Life wrote:

SeawaySensFan wrote:I agree that a 7.5 million dollar ceiling should have been implemented. The owners were so bent on cost-certainty that they made some pretty irresponsible concessions to achieve their goal.

Unless the owners think another lockout or strike is worth it, the NHL should hope that this CBA be extended with an amendment to provide for existing contracts to be reduced, at least for cap purposes if the cap goes down.

Signed, sealed, and delivered, the NHLPA doesnt have to do a thing. The NHL and Bettman once again F'ed up, and the hammer is going to come down on the little people, the fans, in the long run.

The NHL is in worse shape right now then it was pre lockout, at least there was a healthy economy before and a national TV deal in the US for the most part.

If this league was to contract 6 teams I wouldnt be surprised.

Contracting would cost money. The league would have to buy back the franchises from the owners and the league would still be on the hook for all those salaries.

The best course of action would be to move the franchises that are not viable and start generating revenues in hockey markets instead of trying to develop revenue in non-hockey markets.

I would have suggested contracting, then selling expansion franchises to interested owners but that would be riskier for the league overall and there's still the matter of outstanding contracts.

The amount of money that the NHL is losing because of the bottom 5 teams is about 100 million a year. (give or take) Over the course of time that will cost a lot less money than a year in and out struggle.

There is no where to move 4-6 teams, sure, you can move one of two of them to other places, but there is no where to move a team that it will not lose money right now. Toronto can support another team, there isnt much debate about there, but where do the other 5 go? Where can you put a team that it will not lose money, forget making money, but where can you put one where it will not cost the league and owners more money?

My point is in the bigger picture the league will lose less money contracting teams then it will keeping a lot of them around. The product will be better, the teams coming into other cities will be in high demand to see (compared to the Atlanta, Florida's, so on). Its not hard to see the league and product would be a lot healthier with 24 teams, but hey, cant let common sense get in the way of running the NHL.

There was an interesting quote from Melnyk the other day regarding this situation and what he's told Bryan Murray.

http://www.tsn.ca/nhl/story/?id=259070&lid=sublink05&lpos=headlines_nhl

Here's the relevant quote:

"You have to have caution, and that's exactly the marching orders
that (GM) Bryan (Murray) has," said Ottawa Senators owner Eugene
Melnyk. "I give him a number, I say `assume this number' - and I won't
tell you what that number is - but I say work on that kind of number
and that's the budgeting and don't go beyond it.

"What I'm not going to do is cut cheques to buy out my contracts.
Those are real dollars flying out the door, it's not hypothetical. So
we're working on various scenarios and one of them is based on a
significant downturn in the economy, if it happens."

So, when Murray isn't pulling the trigger to land that big fish... I think we can all understand why and it's most likely in the club's best LONG TERM interests, even though we need a big fish or two right now.

In my opinion, the league needs to just bite the bullet and contract six teams, and then offer two of those teams for expansion sale to cover the costs of the other 4.

Alot of the players in the contraction would most likely be UFAs. So, they shouldn't be a problem. As for the roster players and RFAs, hold an entry draft of sorts, where the bottom teams in the league pick the best players and it goes down the list.

I can assure you this though, whether this plan is feasible or not, the solution is NOT for the NHL top 6 teams in revenue to continue bailing those other teams out.

If the option of contracting 6 teams is too much, then just do 4, and re-locate 2 of them to the highest bidder.

You'd have approximately 50 players left to be absorbed by 26 teams. And the cost of buying those franchises could potentially be offset by a little bit of smart maneuvering.

shabbs wrote:There was an interesting quote from Melnyk the other day regarding this situation and what he's told Bryan Murray.

http://www.tsn.ca/nhl/story/?id=259070&lid=sublink05&lpos=headlines_nhl

Here's the relevant quote:

"You have to have caution, and that's exactly the marching orders
that (GM) Bryan (Murray) has," said Ottawa Senators owner Eugene
Melnyk. "I give him a number, I say `assume this number' - and I won't
tell you what that number is - but I say work on that kind of number
and that's the budgeting and don't go beyond it.

"What I'm not going to do is cut cheques to buy out my contracts.
Those are real dollars flying out the door, it's not hypothetical. So
we're working on various scenarios and one of them is based on a
significant downturn in the economy, if it happens."

So, when Murray isn't pulling the trigger to land that big fish... I think we can all understand why and it's most likely in the club's best LONG TERM interests, even though we need a big fish or two right now.

Nice to see them thinking ahead. The Rangers will have a whale of a time getting rid of all those big contracts when the cap goes down. Redden, Roszival, Gomez, Drury, Naslund, Lundqvist.

You could probably find a taker for Lundqvist pretty easily. The others? Not so much.

Neely, all I was pointing out was that some of these contracts have gotten out of control, look no further than the ones inked this past off-season and beyond. Spezza and Heatley are being paid quite generously, but from a league standpoint, they are bargains compared to Eric Staal, et al.

I'm not quite sure what your tangent had to do with...? I basically was providing argument and evidence that the NHL is in bad shape considering what some of the teams are paying their star players. When the cap does go down, need not worry about Ottawa, with a few exceptions (Fisher), 'cause we're in much better shape than a lot of other teams.

How someone can value Eric Staal more than Spezza (and his new deal would suggest that) is crazy.

When the cap ceiling caves in, whats going to happen to the Staals, Crosby's, Malkin's and Ovechkin's? Surely they're not going to get waived, bought out, or traded (how many teams would take on that salary when they have their own cap to manage?).

Players cannot renegotiate their current deals, so they won't be taking pay cuts anytime soon.

It's up to the future free agents (Hossa, Kovalchuk, Nash, etc) to set a new precedent and take lower payment and maybe shorter terms.

If Ottawa had to buy out or move Fisher they'd have a lot more luck with his price tag than most.

And teams must not forget that when they sign free agents to long term, heft contracts, that they will soon have RFA's like Setoguchi, Gagner, Cogliano, Toews, Kane, J. Staal, Dubinsky, Dawes, etc. to re-sign, or else lose them.

PKC wrote:In my opinion, the league needs to just bite the bullet and contract six teams, and then offer two of those teams for expansion sale to cover the costs of the other 4.

Alot of the players in the contraction would most likely be UFAs. So, they shouldn't be a problem. As for the roster players and RFAs, hold an entry draft of sorts, where the bottom teams in the league pick the best players and it goes down the list.

I can assure you this though, whether this plan is feasible or not, the solution is NOT for the NHL top 6 teams in revenue to continue bailing those other teams out.

If the option of contracting 6 teams is too much, then just do 4, and re-locate 2 of them to the highest bidder.

You'd have approximately 50 players left to be absorbed by 26 teams. And the cost of buying those franchises could potentially be offset by a little bit of smart maneuvering.

I have a feeling Gary Bettman would rather die before he allows for any contraction in the NHL. I can see him relocating clubs as a last resort, but not contracting. Anytime he talks about the state of the game, it's "everything is fine" but we all know it's not and clubs like Phoenix are bleeding so bad it's not funny.

DashRiprock wrote:Neely, all I was pointing out was that some of these contracts have gotten out of control, look no further than the ones inked this past off-season and beyond. Spezza and Heatley are being paid quite generously, but from a league standpoint, they are bargains compared to Eric Staal, et al.

I'm not quite sure what your tangent had to do with...? I basically was providing argument and evidence that the NHL is in bad shape considering what some of the teams are paying their star players. When the cap does go down, need not worry about Ottawa, with a few exceptions (Fisher), 'cause we're in much better shape than a lot of other teams.

How someone can value Eric Staal more than Spezza (and his new deal would suggest that) is crazy.

When the cap ceiling caves in, whats going to happen to the Staals, Crosby's, Malkin's and Ovechkin's? Surely they're not going to get waived, bought out, or traded (how many teams would take on that salary when they have their own cap to manage?).

Players cannot renegotiate their current deals, so they won't be taking pay cuts anytime soon.

It's up to the future free agents (Hossa, Kovalchuk, Nash, etc) to set a new precedent and take lower payment and maybe shorter terms.

If Ottawa had to buy out or move Fisher they'd have a lot more luck with his price tag than most.

And teams must not forget that when they sign free agents to long term, heft contracts, that they will soon have RFA's like Setoguchi, Gagner, Cogliano, Toews, Kane, J. Staal, Dubinsky, Dawes, etc. to re-sign, or else lose them.

Yeah, but the issue in general is the economy of the NHL, its more than just player contracts. The players are doing nothing wrong here, if you want to blame someone, blame the owners. What moron would turn down 50 million dollars.

You can say players should do this, or owners should do that, but thats not how it works, and it never will. The only way things get solved are contraction or another lockout.(which the NHL cannot afford)

I think Murray and Melnyk will have to spend money to make money. Money in the bank from playoff revenues would do nicely, even if it just sits there.

The cost-cutting is built-in with millions in expiring contracts on the horizon.

Besides, I thought these geniuses bought US currency to insulate themselves from a downturn. I agree that caution is advisable, but icing a non-playoff team will do more to damage the bottom-line than spending relatively little to have a shot at success.

SeawaySensFan wrote:I think Murray and Melnyk will have to spend money to make money. Money in the bank from playoff revenues would do nicely, even if it just sits there.

The cost-cutting is built-in with millions in expiring contracts on the horizon.

Besides, I thought these geniuses bought US currency to insulate themselves from a downturn. I agree that caution is advisable, but icing a non-playoff team will do more to damage the bottom-line than spending relatively little to have a shot at success.

If Melnyk is the owner here to make money then there is a problem. The goal in Ottawa is to win a Stanley Cup, nothing else. Can Melnyk afford to lose money, year after year, defently not, but he has stated the idea here is to win a Cup, making the playoffs this year could turn out to be a step backwards, just as I think crawling into the playoffs on our hands and knee's last year was as well.

We would have taken Karlsson with a if we were picking 5 spots ahead last year anyways, but in the general sense, it did no one any good for the Sens to get bounced in 4.

SeawaySensFan wrote:I think Murray and Melnyk will have to spend money to make money. Money in the bank from playoff revenues would do nicely, even if it just sits there.

The cost-cutting is built-in with millions in expiring contracts on the horizon.

Besides, I thought these geniuses bought US currency to insulate themselves from a downturn. I agree that caution is advisable, but icing a non-playoff team will do more to damage the bottom-line than spending relatively little to have a shot at success.

The problem is, there is no way to "insulate" against a decreasing cap if you have a slew of long term, over paid contracts that are going to chew up more of your cap space as the cap goes down.

Melnyk is saying to Bryan that they need to tread carefully over the next couple of years and be wary of taking on long term, big contracts as tempting as they may be. It's not about "not losing money", it's about ensuring the team will have enough cap space to actually do something later should the cap go down. And "doing something" is not buying out everyone's big contract to clear space.

shabbs wrote:

SeawaySensFan wrote:I think Murray and Melnyk will have to spend money to make money. Money in the bank from playoff revenues would do nicely, even if it just sits there.

The cost-cutting is built-in with millions in expiring contracts on the horizon.

Besides, I thought these geniuses bought US currency to insulate themselves from a downturn. I agree that caution is advisable, but icing a non-playoff team will do more to damage the bottom-line than spending relatively little to have a shot at success.

The problem is, there is no way to "insulate" against a decreasing cap if you have a slew of long term, over paid contracts that are going to chew up more of your cap space as the cap goes down.

Melnyk is saying to Bryan that they need to tread carefully over the next couple of years and be wary of taking on long term, big contracts as tempting as they may be. It's not about "not losing money", it's about ensuring the team will have enough cap space to actually do something later should the cap go down. And "doing something" is not buying out everyone's big contract to clear space.

Wel put, and with the struggles of this team right now and over the last year, the best time to rebuild might be right now. Let the other teams pay the big contracts and compete for the cup for the time being. Do the Sens want to be a playoff team or a Cup conending team.

With the self impossed budget, the struggles of the team, the lack of tallent up front in the system, right now is the time to struggle, that way when the other teams are struggling, we are on the way up.

Thats nonsense.

cash wrote:Thats nonsense.

Care to go a little more indepth?

Back to player salaries. A lot of the blame can be put placed on the players. They are the ones, along with their agents, demanding the money. They give the team an ultimatum, to match or we go elsewhere. In their right mind, Carolina would have offered Staal no more than Spezza... why did he get more?

The players are going to have to start taking huge paycuts sooner than later. At this rate nobody will be able to afford to pay a player $7M+.

Couldn't one argue contraction with expansion? Wouldn't the league want to have more teams bringing in more money? Sure, first relocate the teams that are on the verge of bankruptcy, let owners who want out a chance to sell the team to anyone willing to buy an NHL team at this time, and let them move the team wherever they want.

DashRiprock wrote:Back to player salaries. A lot of the blame can be put placed on the players. They are the ones, along with their agents, demanding the money. They give the team an ultimatum, to match or we go elsewhere. In their right mind, Carolina would have offered Staal no more than Spezza... why did he get more?

The players are going to have to start taking huge paycuts sooner than later. At this rate nobody will be able to afford to pay a player $7M+.

Couldn't one argue contraction with expansion? Wouldn't the league want to have more teams bringing in more money? Sure, first relocate the teams that are on the verge of bankruptcy, let owners who want out a chance to sell the team to anyone willing to buy an NHL team at this time, and let them move the team wherever they want.

How can you blame the players for asking for something then being given it. If you were to ask for 7 million dollars and someone say ok, anything else? NTC, ok anything else? so on, you are going to take it.

Blame the owners and GM's bud, the players are the ones excepting the money. How many cases go to arbitration? how many players sit out because of a contract? Not a whole lot.

Expanding the NHL further will create an even shallower tallent pool, extremely boring hockey and just basically destroy the NHL period. Expansion is the absolute last thing that the NHL should be doing. Also, there is absolutly no where to expand to.

I still think it's a matter of the team giving into the player's demands. Don't for one minute believe Crosby and Ovechkin weren't offered $7 million.

DashRiprock wrote:I still think it's a matter of the team giving into the player's demands. Don't for one minute believe Crosby and Ovechkin weren't offered $7 million.

Not a chance they were when Heatley was signed for 7.5 before them. 0% chance they were offered anything less than 7.5 mil, prob not less than 8.

In light of the comment's from the Governor's meetings, I think it would behoove Murray to try and peddle Kelly before Vermette. Vermette's contract will be over before the "Armeggedan" year of 2010/11.

I was just thinking this one over today:

Players should be negotiating for a guaranteed percentage of the team's cap -- a set percentage -- rather than a yearly salary figure. Instead of signing for a set number of dollars per year, they should sign for a set percentage of the team's total cap space.

E.g.: a $7.5 million player like Heatley signs a contract that guarantees him 13.4% (that is, 7.5/56) of the team's total cap, rise or fall. Even a severe dip in the cap (say, by $10 mil, down to $46 mil) wouldn't be disastrous -- in the Heatley example, he'd still be making over $6 mil a year. Right now, he loses almost the much to the escrow fund, annually, anyway (the number this year is, I think, 10 or 12%). You'd have to think, too, that over the life of these long contracts -- 5-, 6, and 7 years long -- the cap is, on the whole, more likely to rise than to fall.

Such a system would mean that players profit (and lose) at the same rate that the NHL does, which would provide the players with incentive to really sell the game: the better the NHL does, the more money they make, in real dollars, year to year. It would also mean that you could maintain a cap system (which the owners want) and not worry about the ramifications of yearly ups and downs of the cap in terms of keeping a team together or affording players. It would be a problem of real dollars (i.e., not actually being able to pay your players, which is a consequence of poor attendance anyway), and not cap dollars, if you couldn't afford to keep a given team together.

I imagine the NHLPA wouldn't be too hot about the idea, but think about all the hassles it would save everybody -- players included. If the NHL gets into trouble with all these long-term, high-money contracts, they ought to consider something like this. It's a formula for permanent stability, at any rate, which is something that the new CBA doesn't seem to be offering to the extent that everybody thought it would.

If the Cap drops to approx 48-50 million in 2010-11, then the floor would also drop to 32-34 million, which might save a couple of franchices.

rooneypoo wrote:I was just thinking this one over today:

Players should be negotiating for a guaranteed percentage of the team's cap -- a set percentage -- rather than a yearly salary figure. Instead of signing for a set number of dollars per year, they should sign for a set percentage of the team's total cap space.

E.g.: a $7.5 million player like Heatley signs a contract that guarantees him 13.4% (that is, 7.5/56) of the team's total cap, rise or fall. Even a severe dip in the cap (say, by $10 mil, down to $46 mil) wouldn't be disastrous -- in the Heatley example, he'd still be making over $6 mil a year. Right now, he loses almost the much to the escrow fund, annually, anyway (the number this year is, I think, 10 or 12%). You'd have to think, too, that over the life of these long contracts -- 5-, 6, and 7 years long -- the cap is, on the whole, more likely to rise than to fall.

Such a system would mean that players profit (and lose) at the same rate that the NHL does, which would provide the players with incentive to really sell the game: the better the NHL does, the more money they make, in real dollars, year to year. It would also mean that you could maintain a cap system (which the owners want) and not worry about the ramifications of yearly ups and downs of the cap in terms of keeping a team together or affording players. It would be a problem of real dollars (i.e., not actually being able to pay your players, which is a consequence of poor attendance anyway), and not cap dollars, if you couldn't afford to keep a given team together.

I imagine the NHLPA wouldn't be too hot about the idea, but think about all the hassles it would save everybody -- players included. If the NHL gets into trouble with all these long-term, high-money contracts, they ought to consider something like this. It's a formula for permanent stability, at any rate, which is something that the new CBA doesn't seem to be offering to the extent that everybody thought it would.

The NHLPA would never go for it, but that is a very creative solution to a moving cap system. Excellent idea!!