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A Line in the Ice: The Kovalchuk Contract and the NHL's Financial


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enough interesting stuff to warrant it's own thread I think...

And make no mistake: by rejecting Ilya Kovalchuk's 17-year, $102 million contract with the New Jersey Devils last week, the NHL has drawn a line in the sand -- er, ice -- for another legal battle against its players. The league's action is really a preview of upcoming -- and likely difficult -- negotiations on the league's collective bargaining agreement, which expires after the 2011-12 season. The NHL wants to close a loophole in the CBA that permits ultra-long, "front-loaded" deals, and it's going to the mat on the issue by taking on Kovalchuk, one of the league's brightest stars, and the Devils, arguably the league's model franchise.

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Sports leagues have largely been unsuccessful in similar previous cases. In the late '90s, the NFL lost when it tried to invalidate the contracts of several players, including quarterback Elvis Grbac, who signed deals that featured large signing bonuses, long terms and low annual salaries. Those contracts were created to take advantage of how the NFL calculates a player's annual "cap number," i.e. the amount that counts against the team's annual allotment. For the purposes of determining an NFL player's cap number, the league's labor deal said signing bonus money could be amortized over the life of the contract, while annual salaries counted in full.

http://nhl.fanhouse.com/2010/07/26/a-line-in-the-ice-the-kovalchuk-contract-and-the-nhls-financia/

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enough interesting stuff to warrant it's own thread I think...

And make no mistake: by rejecting Ilya Kovalchuk's 17-year, $102 million contract with the New Jersey Devils last week, the NHL has drawn a line in the sand -- er, ice -- for another legal battle against its players. The league's action is really a preview of upcoming -- and likely difficult -- negotiations on the league's collective bargaining agreement, which expires after the 2011-12 season. The NHL wants to close a loophole in the CBA that permits ultra-long, "front-loaded" deals, and it's going to the mat on the issue by taking on Kovalchuk, one of the league's brightest stars, and the Devils, arguably the league's model franchise.

-----

Sports leagues have largely been unsuccessful in similar previous cases. In the late '90s, the NFL lost when it tried to invalidate the contracts of several players, including quarterback Elvis Grbac, who signed deals that featured large signing bonuses, long terms and low annual salaries. Those contracts were created to take advantage of how the NFL calculates a player's annual "cap number," i.e. the amount that counts against the team's annual allotment. For the purposes of determining an NFL player's cap number, the league's labor deal said signing bonus money could be amortized over the life of the contract, while annual salaries counted in full.

http://nhl.fanhouse.com/2010/07/26/a-line-in-the-ice-the-kovalchuk-contract-and-the-nhls-financia/

Wow I actually remember that situation with Elvis Grbac. Ugh now I feel old :blink:

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If the league didn't want this to happen, they shouldn't have made the cap hit be the average salary over the contract length. Each year, the team should take a cap hit equal to what they pay the player that year. In other words, each of those 5 years Kovalchuk is paid $11.5M, the team should take an $11.5M cap hit. If the player is traded or retires, the team obviously won't take the cap hit for that year. Why exactly do they take the average salary instead of the annual salary ?

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If the league didn't want this to happen, they shouldn't have made the cap hit be the average salary over the contract length. Each year, the team should take a cap hit equal to what they pay the player that year. In other words, each of those 5 years Kovalchuk is paid $11.5M, the team should take an $11.5M cap hit. If the player is traded or retires, the team obviously won't take the cap hit for that year. Why exactly do they take the average salary instead of the annual salary ?

It stops teams from loading salary into a year where they have more cap room. Teams could sign FA's by figuring out the years they'd have the most cap room and putting a big portion of the contract into those years and putting a small portion into the years where the team doesn't have much cap room.

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It stops teams from loading salary into a year where they have more cap room. Teams could sign FA's by figuring out the years they'd have the most cap room and putting a big portion of the contract into those years and putting a small portion into the years where the team doesn't have much cap room.

Exactly - it's written the way it is because the lawyers who worked on the league's side when the CBA was written up thought it was to the league's advantage to take the average. The league did, and still does, anything it can to actively screw over the players.

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Well if the league really wants to play hardball on this one, they are screwing over a LOT of teams. It is going to become increasingly harder for teams to keep their superstars. I really think they should do what the NFL does and tag ONE franchise player where his salary doesn't count against the cap.

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Well if the league really wants to play hardball on this one, they are screwing over a LOT of teams. It is going to become increasingly harder for teams to keep their superstars. I really think they should do what the NFL does and tag ONE franchise player where his salary doesn't count against the cap.

That is not how the NFL's franchise tag works.

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It stops teams from loading salary into a year where they have more cap room. Teams could sign FA's by figuring out the years they'd have the most cap room and putting a big portion of the contract into those years and putting a small portion into the years where the team doesn't have much cap room.

So, what's the problem with that ? If you have extra cap room in 2 years, what is the problem with signing somebody and giving them some extra cash in 2 years ? If you are under the cap, you should be able to spend that money as you wish. I don't see how's that's worse than the current situation.

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So, what's the problem with that ? If you have extra cap room in 2 years, what is the problem with signing somebody and giving them some extra cash in 2 years ? If you are under the cap, you should be able to spend that money as you wish. I don't see how's that's worse than the current situation.

It's the NHLPA that would never go with the per year cap.

Think about the Ilya Kovalchuk contract. The Devils would take the big cap hit in the early years with 11.5M. Then in the later years when his skill depletes and he is not the focus of the team anymore they would only have to pay 600K in cap and Kovy is easily tradeable. They would have him for 17 years with no real dilemma if he can't play into the latter years but won't retire and refuses to be traded.

On the other hand the cap hit also helps teams sign players. It gives teams a chance to keep their players. Teams are able to stay under the cap even if their star player's salary shoots up to 10M one year because the cap hit is only let's say, 7M.

Edited by ben00rs
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Well if the league really wants to play hardball on this one, they are screwing over a LOT of teams. It is going to become increasingly harder for teams to keep their superstars.

I think an idea was thrown out there a while back that teams should get cap discounts for players they drafted or players who have spent X number of years with the team. I don't hate that idea.

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I think an idea was thrown out there a while back that teams should get cap discounts for players they drafted or players who have spent X number of years with the team. I don't hate that idea.

It's a good idea...nothing to hate there. I'm just afraid it's the slippery slope to becoming like the NBA where there is basically no cap because of all the exceptions. If they institute rules to give cap discounts on drafted/long-time players then the league must then stand firm that there will be NO other exceptions.

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I think an idea was thrown out there a while back that teams should get cap discounts for players they drafted or players who have spent X number of years with the team. I don't hate that idea.

I've always been a huge fan of this idea. Definitely allows for home grown talent to remain, especially with smaller market teams (assuming of course the owner can afford to pay the player).

As for 'players who have spent X' years with the team....that'd X would have to be pretty large to avoid more loophole abuse and what not

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Okay explain!

(I don't watch football so I obviously am mis-informed.)

Quick explanation is when a team designates a player with the franchise tag they basically give them a 1-year deal at the average of the top 5 salaries at that position. That amount still counted against the cap (when there was a cap as this coming season is uncapped).

Here is a more detail. http://en.wikipedia.org/wiki/Franchise_tag

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the way the NHL has it set up is far better than sliding salaries and finding stanley cup windows in how one structures salaries. it's not the CBA's fault that teams are continually stupid and sign players to contracts that will screw the team down the line. the CBA didn't hand out dumb contracts to brian campbell and cristobal huet, and it didn't sign wade redden or brian rolston or michael ryder or milan lucic.

Edited by Triumph
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the way the NHL has it set up is far better than sliding salaries and finding stanley cup windows in how one structures salaries. it's not the CBA's fault that teams are continually stupid and sign players to contracts that will screw the team down the line. the CBA didn't hand out dumb contracts to brian campbell and cristobal huet, and it didn't sign wade redden or brian rolston or michael ryder or milan lucic.

But it is the NHL's problem to make the league as good as possible. It is the NHl's responsibility to make improvements upon the league. It it's teams generally give out "stupid" contracts then it has to adapt something to that. Again though - I believe in the slippery slope, so would want the league to be very cautious.

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