POTENTIAL FLAWS IN NEW CBA
Aug 9, 2005 16:08:57 GMT -5
Post by M. Beaux-Eaux on Aug 9, 2005 16:08:57 GMT -5
UPDATED: August 8, 2005.
POTENTIAL FLAWS IN NEW CBA.
When the new NHL Collective Bargaining Agreement was ratified and implemented last month, many fans and pundits claimed this was a major victory for the league and the team owners.
After all, the players had supposedly given back so much and gotten back so little in return, that it was proclaimed that this deal would severely restrict how much would be spent on player salaries.
Now I'll be the first to admit that it's far too soon to start declaring this new CBA problematic, but only one week into the 2005 UFA market, we're already beginning to see some potential problems that, left unchecked, could make this new CBA as "unworkable" as the last one.
LONGER TERM CONTRACTS.
First is the kind of contracts presently being signed by UFA players.
With all the activity thus far in this summer UFA market, more than a few hockey fans have been scratching their heads over some of the signings made.
There's been a lot of long term contracts, notably over three years, something that wasn't seen as much in the past under the old Collective Bargaining Agreement.
As CP's astute hockey writer Pierre Lebrun recently observed, what we're seeing this summer is the players and the agents using the rules of the new CBA to their advantage.
What's that? Players and agents using the new CBA to their advantage? But...but...that's unpossible!
Gary Bettman and the owners promised us that, under cost certainty, salaries would be under control. Heck, their media cheerleaders assured us that, by golly, we needed this new CBA to stop the insanity of high salaries.
Surely this new CBA is working the way it should! Why, look at the signings! Most of the players are accepting less money than they would've under the old deal.
Sure, that's how it seems, but look more closely and you'll see that it's not.
As Lebrun noted, the players and their agents understand that there's a set limit as to what they can earn per season. But rather than focus on the salary, they're focussing instead on the length of the deal.
For example, rather than Alex Kovalev signing for, say, three years at $18 million with the Montreal Canadiens, he signs at four years for that amount. He's still making $18 million, it's just taking him a little longer to get it.
Now I can hear some of you say, "But Spector, because of the cap, his salary is now spread out longer and therefore more affordable".
True, considering how he was making $6.6 million in 2003-04, his $4.5 million is cheaper, but again, he's now making almost what he would've made if he'd signed with Montreal for the same amount over three years.
Under that deal at $6.6 million, over three years Kovalev would make $19.8 million, so really, Montreal's only saved themselves $1.8 million in salary. That's a lot of money to fans, but not that much of a savings under an NHL team's payroll, and certainly not what was envisioned under this new CBA.
It's also not that much of a savings when one considers Kovalev, who turns 33 in February, is a depreciating asset. It would've been a better deal for the Habs if they'd signed Kovy to a two-year contract so they wouldn't then be saddled with him for an extra two years if it's determined over the first two that he's no longer worth that kind of money.
That doesn't apply just to Kovalev, but to most of the UFA signings we've seen this summer.
ESCROW.
Another potential flaw exposed by these signings is that escrow may not be quite as bitter a pill for the players to swallow as originally believed.
The escrow clause in the new CBA is intended to have the players give back a certain percentage of their earnings if their salaries should exceed league revenues. If salaries don't exceed revenues, the players get their money back.
It was originally thought that the amount would be 15 percent, but apparently it will be determined by quarterly audits, thus the figure could be as low as one or two percent or possibly even higher than 15 percent.
So let's use Kovalev's salary again (no, I'm not picking on him, Habs fans, just using him as an example). He makes $4.5 million per season, but let's say he pays roughly $500K into escrow over the course of the season He still retains $4 million bucks, but if overall salaries don't exceed revenues, he gets that 500K back.
Perhaps the best way for the players to look at this is to not even count the escrow money they're paying as part of their salaries, but rather consider it potential bonus money they could get back at the end of the year.
That would explain why a lot of these signings, as bloggers like Tom Benjamin and Jes Golbez were observing last week, were much higher than anticipated. The players want to ensure that there will be plenty of money available on their salaries for these escrow payments in order to ensure that it doesn't affect their "base" salaries.
Here's my take on it on Tom Benjamin's blog:
I'm wondering if the agents aren't using escrow to their advantage here with these negotiations. They tell the GM they'd love to sign a three year deal worth $4 million per, but you know,there's that little business of escrow, which would actually drive down the "true" worth, so why not make it, say $4.5 to $5 million, since after all, Mr. GM, you're most likely to get that 15% or whatever it may be back from escrow.
And if salaries don't exceed 54% of revenues, the players keep the full amount, which would be like a nice season-ending bonus for them.
Indeed, I think that's possibly how this was spun to the agents and players. Don't look at escrow as a potential gouge to your salaries, but rather, look at it as a bonus at year's end if salaries don't exceed 54% or whatever the figure is at each given year.
Looks like escrow could end up a paper tiger.
I think that's partially why salaries are staying quite high. The agent makes the GM believe he stands to get a deal here because, if he signs a player at, say, $5.5 million, a certain percentage of that could return to the team, which would make that player's true worth to be between $4-$5 million per.
Meanwhile, the player accepts that lesser figure, which is still subtantial and which, not too long ago, was considered too high for small market clubs, but then stand to face a nice season-ending raise, depending on if salaries exceed 54% of revenues, and if so, by how much.
THE RECENT SPENDING FRENZY.
Turning to the teams involved in this summer's UFA signing frenzy, it is quite noticeable that, as expected, a good number of the teams involved were clubs that in previous years never got into the UFA bidding wars for big name players.
Atlanta, Calgary, Florida, Pittsburgh, and Columbus have thus far made news with their UFA signings. Ditto the Boston Bruins and Chicago Blackhawks, big market cities who for the most part refused to engage in the wild free agent spending sprees under the old CBA.
The Edmonton Oilers also made news, not for their UFA signings, but for their trade acquisitions of Chris Pronger and Michael Peca from the Blues and Islanders, two teams that because of cap limitations couldn't afford to retain those players.
There's been lots of rejoicing by fans in these cities, even some schadenfreude ,as they gleefully watch their clubs scoop up players previous unavailable to them whilst listening to the whining of fans and pundits in big market cities that are suddenly restricted by their current payrolls and a cap ceiling.
Yes, it seems as though the new CBA has levelled the playing surface, that finally the little guys are gonna get their chance to compete with the big boys, and thus create more parity in the NHL.
But is this really the new CBA at work, or merely just a situation unique to this summer?
Anyone who paid attention to the CBA negotiations understood that the aforementioned clubs would likely be very busy in this summer's UFA market. Most of them had the most available cap space, in part because they'd dumped a lot of salary prior to the lockout in anticipation of more affordable player salaries.
Nobody, however, expected these teams to land many of the players they have thus far, or at how much most of them would spend to do so.
As Tom Benjamin noted regarding the Edmonton Oilers, they pled poverty for years, their owners and management all but begging Gary Bettman not to accept anything that didn't put a hard cap tied to revenues into place.
We've heard for years that the Oilers simply couldn't afford to pay big money for name players, hence the reason so many stars left the Oilers over the past ten years.
Yet in just one week, they've acquired two players in Chris Pronger and Mike Peca who'll eat up over $10 million of their payroll this season. This comes with league revenues expected to drop this season and with the Canadian assistance program eliminated.
So why have the Oilers, and other small market clubs like them, suddenly gone spend-crazy?
What might help the Oilers is the improvement in the Canadian dollar, and they could be eligible for revenue sharing, provided they don't have a lengthy playoff run.
But as Jes Golbez observes, it may well be that the new CBA has eliminated the fear of spending money in those teams. They always did have a considerable amount to spend on player salaries, but under the old CBA, they knew they could never win a bidding war against unrestrained free spending big markets, so why waste the cash.
But now, they have the opportunity to spend, only instead of perhaps investing more wisely, as Golbez points out, they cannot contain themselves and are spending like crazy.
It's like a poor man winning the lottery, but instead of spending wisely to improve his lot in life in the long term blows it all on things previously denied to him.
Bill Wirtz and Jeremy Jacobs were the owners leading the charge for cost certainty, but now that they've achieved their dream, now that they seemingly have the players right where they want them, they're suddenly spending as wildly as their formerly freespending rivals that they used to disparage.
The Blackhawks invested $6.75 million per season over four years in Nikolai Khabibulin, a good goaltender whose stock increased dramatically based on one strong playoff season.
The Bruins, meanwhile, just gave Alexei Zhamnov a three year contract for the same amount of money ($4 million) he earned over the past three years and re-signed Glen Murray to a nice long term raise over his previous salary, plus invested $4 million in one year for a fading Brian Leetch, a player their management bad-mouthed for years when he was a member of the free-spending NY Rangers.
I'm certainly not begrudging these teams desire to improve by pursuing the best talent available, but what's troubling is that they're spending as wildly as most of the big markets did under the old CBA.
But for all the joy in these cities this summer, it could be short-lived.
Remember, these were the teams that had the cap space available to spend in this year's market.
Next year, and subsequent years, could be a different story, particularly if the players they signed up this summer were for deals of three, four or five years.
It'll be interesting to see what these clubs do when they're the ones with limited cap space, especially if revenues decline more sharply than expected and drives down the cap ceiling.
Furthermore by next year teams that have been quiet, like the Toronto Maple Leafs, will have more room available, which could prove more beneficial if there's younger and potentially more affordable talent in next summer's market.
What'll be even more interesting will be what these teams do when (not if) revenues increase over time to the point where the cap ceiling reaches or exceeds the mid-40 millions range.
Will they have have the available cash then? Or will, once again, they find themselves being outbid by teams able and willing to max out at a cap of, say, $45 million?
I'll bet those fans in small market cities won't be singing the praises of the new CBA then!
RESTRICTED FREE AGENCY DEADLINE. Another potential flaw in this CBA could be the December 1 cut off date for signing restricted free agents.
Under this rule, a player must come to terms with his team by that date or be declared ineligible to participate in the remainder of the hockey season.
This was meant to prevent players from holding out for longer that half a season, or perhaps force their teams into agreeing to their salary demands or trading them away to a club that would.
But what tweaked me about how this could be a flaw was an unsubstantiated report last week of the Toronto Maple Leafs sending an offer sheet to Detroit Red Wings RFA forward Henrik Zetterberg.
The Leafs and Wings of course denied this, as did Zetterberg's agent. But what if Zetterberg is still unsigned as December 1 approaches? What if the Leafs should somehow free up some room on their payroll and send Zetterberg an offer sheet and he accepts?
That gives the Red Wings only 72 hours to match it. Now obviously one would hope there would be a stipulation in the new CBA that sets a time limit for teams to make offer sheets to players by no later than 72 hours before the December 1 cut off date.
Now suppose Zetterberg and the Wings remain far apart in negotiations and now this offer sheet comes from Toronto that's more than the Wings are willing to pay, or has the potential push the Wings over the salary cap?
What do they do?
The Wings would face either letting Zetterberg go and accepting a package of draft picks (which I believe for a player like him would be a first, a second, and a third round pick under the new deal) from the Leafs which likely aren't to be very high in the draft, or matching the offer and then scrambling to dump salary elsewhere to retain him.
In the past, it wasn't a worthwhile endeavour for a team to make offer sheets to another team's RFA because the offer would be matched. But now, matching that offer could push a team over the cap, and if that team can't free up the space, they'd be left with no choice but to watch that player go to the bidding team and accepting draft picks in return.
And if you're a team like the Maple Leafs, which tends to dump draft picks in trades anyway, it's not going to bother you to do this. You get a promising, established young forward like Zetterberg, and all it cost you was two or three draft picks which may not have landed you a player of his calibre anyway.
That could make the RFA holdout game a lot more interesting, and could result in more offer sheets flying around than under the old CBA and potentially more RFA players on the move.
That in turn will put more pressure on teams to re-sign their RFAs as quickly as possible, which would give the players and their agents leverage in salary negotiations.
As I noted earlier, it's still far too early to fully evaluate how this new CBA will work out, but it's possible the moves made thus far could be an ominous harbinger of things to come.
- spectorshockey.tripod.com/spectors_soapbox.html
POTENTIAL FLAWS IN NEW CBA.
When the new NHL Collective Bargaining Agreement was ratified and implemented last month, many fans and pundits claimed this was a major victory for the league and the team owners.
After all, the players had supposedly given back so much and gotten back so little in return, that it was proclaimed that this deal would severely restrict how much would be spent on player salaries.
Now I'll be the first to admit that it's far too soon to start declaring this new CBA problematic, but only one week into the 2005 UFA market, we're already beginning to see some potential problems that, left unchecked, could make this new CBA as "unworkable" as the last one.
LONGER TERM CONTRACTS.
First is the kind of contracts presently being signed by UFA players.
With all the activity thus far in this summer UFA market, more than a few hockey fans have been scratching their heads over some of the signings made.
There's been a lot of long term contracts, notably over three years, something that wasn't seen as much in the past under the old Collective Bargaining Agreement.
As CP's astute hockey writer Pierre Lebrun recently observed, what we're seeing this summer is the players and the agents using the rules of the new CBA to their advantage.
What's that? Players and agents using the new CBA to their advantage? But...but...that's unpossible!
Gary Bettman and the owners promised us that, under cost certainty, salaries would be under control. Heck, their media cheerleaders assured us that, by golly, we needed this new CBA to stop the insanity of high salaries.
Surely this new CBA is working the way it should! Why, look at the signings! Most of the players are accepting less money than they would've under the old deal.
Sure, that's how it seems, but look more closely and you'll see that it's not.
As Lebrun noted, the players and their agents understand that there's a set limit as to what they can earn per season. But rather than focus on the salary, they're focussing instead on the length of the deal.
For example, rather than Alex Kovalev signing for, say, three years at $18 million with the Montreal Canadiens, he signs at four years for that amount. He's still making $18 million, it's just taking him a little longer to get it.
Now I can hear some of you say, "But Spector, because of the cap, his salary is now spread out longer and therefore more affordable".
True, considering how he was making $6.6 million in 2003-04, his $4.5 million is cheaper, but again, he's now making almost what he would've made if he'd signed with Montreal for the same amount over three years.
Under that deal at $6.6 million, over three years Kovalev would make $19.8 million, so really, Montreal's only saved themselves $1.8 million in salary. That's a lot of money to fans, but not that much of a savings under an NHL team's payroll, and certainly not what was envisioned under this new CBA.
It's also not that much of a savings when one considers Kovalev, who turns 33 in February, is a depreciating asset. It would've been a better deal for the Habs if they'd signed Kovy to a two-year contract so they wouldn't then be saddled with him for an extra two years if it's determined over the first two that he's no longer worth that kind of money.
That doesn't apply just to Kovalev, but to most of the UFA signings we've seen this summer.
ESCROW.
Another potential flaw exposed by these signings is that escrow may not be quite as bitter a pill for the players to swallow as originally believed.
The escrow clause in the new CBA is intended to have the players give back a certain percentage of their earnings if their salaries should exceed league revenues. If salaries don't exceed revenues, the players get their money back.
It was originally thought that the amount would be 15 percent, but apparently it will be determined by quarterly audits, thus the figure could be as low as one or two percent or possibly even higher than 15 percent.
So let's use Kovalev's salary again (no, I'm not picking on him, Habs fans, just using him as an example). He makes $4.5 million per season, but let's say he pays roughly $500K into escrow over the course of the season He still retains $4 million bucks, but if overall salaries don't exceed revenues, he gets that 500K back.
Perhaps the best way for the players to look at this is to not even count the escrow money they're paying as part of their salaries, but rather consider it potential bonus money they could get back at the end of the year.
That would explain why a lot of these signings, as bloggers like Tom Benjamin and Jes Golbez were observing last week, were much higher than anticipated. The players want to ensure that there will be plenty of money available on their salaries for these escrow payments in order to ensure that it doesn't affect their "base" salaries.
Here's my take on it on Tom Benjamin's blog:
I'm wondering if the agents aren't using escrow to their advantage here with these negotiations. They tell the GM they'd love to sign a three year deal worth $4 million per, but you know,there's that little business of escrow, which would actually drive down the "true" worth, so why not make it, say $4.5 to $5 million, since after all, Mr. GM, you're most likely to get that 15% or whatever it may be back from escrow.
And if salaries don't exceed 54% of revenues, the players keep the full amount, which would be like a nice season-ending bonus for them.
Indeed, I think that's possibly how this was spun to the agents and players. Don't look at escrow as a potential gouge to your salaries, but rather, look at it as a bonus at year's end if salaries don't exceed 54% or whatever the figure is at each given year.
Looks like escrow could end up a paper tiger.
I think that's partially why salaries are staying quite high. The agent makes the GM believe he stands to get a deal here because, if he signs a player at, say, $5.5 million, a certain percentage of that could return to the team, which would make that player's true worth to be between $4-$5 million per.
Meanwhile, the player accepts that lesser figure, which is still subtantial and which, not too long ago, was considered too high for small market clubs, but then stand to face a nice season-ending raise, depending on if salaries exceed 54% of revenues, and if so, by how much.
THE RECENT SPENDING FRENZY.
Turning to the teams involved in this summer's UFA signing frenzy, it is quite noticeable that, as expected, a good number of the teams involved were clubs that in previous years never got into the UFA bidding wars for big name players.
Atlanta, Calgary, Florida, Pittsburgh, and Columbus have thus far made news with their UFA signings. Ditto the Boston Bruins and Chicago Blackhawks, big market cities who for the most part refused to engage in the wild free agent spending sprees under the old CBA.
The Edmonton Oilers also made news, not for their UFA signings, but for their trade acquisitions of Chris Pronger and Michael Peca from the Blues and Islanders, two teams that because of cap limitations couldn't afford to retain those players.
There's been lots of rejoicing by fans in these cities, even some schadenfreude ,as they gleefully watch their clubs scoop up players previous unavailable to them whilst listening to the whining of fans and pundits in big market cities that are suddenly restricted by their current payrolls and a cap ceiling.
Yes, it seems as though the new CBA has levelled the playing surface, that finally the little guys are gonna get their chance to compete with the big boys, and thus create more parity in the NHL.
But is this really the new CBA at work, or merely just a situation unique to this summer?
Anyone who paid attention to the CBA negotiations understood that the aforementioned clubs would likely be very busy in this summer's UFA market. Most of them had the most available cap space, in part because they'd dumped a lot of salary prior to the lockout in anticipation of more affordable player salaries.
Nobody, however, expected these teams to land many of the players they have thus far, or at how much most of them would spend to do so.
As Tom Benjamin noted regarding the Edmonton Oilers, they pled poverty for years, their owners and management all but begging Gary Bettman not to accept anything that didn't put a hard cap tied to revenues into place.
We've heard for years that the Oilers simply couldn't afford to pay big money for name players, hence the reason so many stars left the Oilers over the past ten years.
Yet in just one week, they've acquired two players in Chris Pronger and Mike Peca who'll eat up over $10 million of their payroll this season. This comes with league revenues expected to drop this season and with the Canadian assistance program eliminated.
So why have the Oilers, and other small market clubs like them, suddenly gone spend-crazy?
What might help the Oilers is the improvement in the Canadian dollar, and they could be eligible for revenue sharing, provided they don't have a lengthy playoff run.
But as Jes Golbez observes, it may well be that the new CBA has eliminated the fear of spending money in those teams. They always did have a considerable amount to spend on player salaries, but under the old CBA, they knew they could never win a bidding war against unrestrained free spending big markets, so why waste the cash.
But now, they have the opportunity to spend, only instead of perhaps investing more wisely, as Golbez points out, they cannot contain themselves and are spending like crazy.
It's like a poor man winning the lottery, but instead of spending wisely to improve his lot in life in the long term blows it all on things previously denied to him.
Bill Wirtz and Jeremy Jacobs were the owners leading the charge for cost certainty, but now that they've achieved their dream, now that they seemingly have the players right where they want them, they're suddenly spending as wildly as their formerly freespending rivals that they used to disparage.
The Blackhawks invested $6.75 million per season over four years in Nikolai Khabibulin, a good goaltender whose stock increased dramatically based on one strong playoff season.
The Bruins, meanwhile, just gave Alexei Zhamnov a three year contract for the same amount of money ($4 million) he earned over the past three years and re-signed Glen Murray to a nice long term raise over his previous salary, plus invested $4 million in one year for a fading Brian Leetch, a player their management bad-mouthed for years when he was a member of the free-spending NY Rangers.
I'm certainly not begrudging these teams desire to improve by pursuing the best talent available, but what's troubling is that they're spending as wildly as most of the big markets did under the old CBA.
But for all the joy in these cities this summer, it could be short-lived.
Remember, these were the teams that had the cap space available to spend in this year's market.
Next year, and subsequent years, could be a different story, particularly if the players they signed up this summer were for deals of three, four or five years.
It'll be interesting to see what these clubs do when they're the ones with limited cap space, especially if revenues decline more sharply than expected and drives down the cap ceiling.
Furthermore by next year teams that have been quiet, like the Toronto Maple Leafs, will have more room available, which could prove more beneficial if there's younger and potentially more affordable talent in next summer's market.
What'll be even more interesting will be what these teams do when (not if) revenues increase over time to the point where the cap ceiling reaches or exceeds the mid-40 millions range.
Will they have have the available cash then? Or will, once again, they find themselves being outbid by teams able and willing to max out at a cap of, say, $45 million?
I'll bet those fans in small market cities won't be singing the praises of the new CBA then!
RESTRICTED FREE AGENCY DEADLINE. Another potential flaw in this CBA could be the December 1 cut off date for signing restricted free agents.
Under this rule, a player must come to terms with his team by that date or be declared ineligible to participate in the remainder of the hockey season.
This was meant to prevent players from holding out for longer that half a season, or perhaps force their teams into agreeing to their salary demands or trading them away to a club that would.
But what tweaked me about how this could be a flaw was an unsubstantiated report last week of the Toronto Maple Leafs sending an offer sheet to Detroit Red Wings RFA forward Henrik Zetterberg.
The Leafs and Wings of course denied this, as did Zetterberg's agent. But what if Zetterberg is still unsigned as December 1 approaches? What if the Leafs should somehow free up some room on their payroll and send Zetterberg an offer sheet and he accepts?
That gives the Red Wings only 72 hours to match it. Now obviously one would hope there would be a stipulation in the new CBA that sets a time limit for teams to make offer sheets to players by no later than 72 hours before the December 1 cut off date.
Now suppose Zetterberg and the Wings remain far apart in negotiations and now this offer sheet comes from Toronto that's more than the Wings are willing to pay, or has the potential push the Wings over the salary cap?
What do they do?
The Wings would face either letting Zetterberg go and accepting a package of draft picks (which I believe for a player like him would be a first, a second, and a third round pick under the new deal) from the Leafs which likely aren't to be very high in the draft, or matching the offer and then scrambling to dump salary elsewhere to retain him.
In the past, it wasn't a worthwhile endeavour for a team to make offer sheets to another team's RFA because the offer would be matched. But now, matching that offer could push a team over the cap, and if that team can't free up the space, they'd be left with no choice but to watch that player go to the bidding team and accepting draft picks in return.
And if you're a team like the Maple Leafs, which tends to dump draft picks in trades anyway, it's not going to bother you to do this. You get a promising, established young forward like Zetterberg, and all it cost you was two or three draft picks which may not have landed you a player of his calibre anyway.
That could make the RFA holdout game a lot more interesting, and could result in more offer sheets flying around than under the old CBA and potentially more RFA players on the move.
That in turn will put more pressure on teams to re-sign their RFAs as quickly as possible, which would give the players and their agents leverage in salary negotiations.
As I noted earlier, it's still far too early to fully evaluate how this new CBA will work out, but it's possible the moves made thus far could be an ominous harbinger of things to come.
- spectorshockey.tripod.com/spectors_soapbox.html
