In reading and listening to the media reaction in the wake of the Ilya Kovalchuk saga, it’s struck me as very odd that everyone expects the NHLPA to support Kovalchuk’s right to an absurd, salary cap-breaking contract. While I’m sure the PA felt compelled to do so,victory would have meant that the rankandfile – most of whom will never have the opportunity or right to demand a similar deal for themselves-would lose more money off their paycheques to escrow, something I don’t think everyone’s fully considered. It brings to mind Spock’s famous line from Star Trek II, that the needs of the many outweigh the needs of the few1:while a couple dozen elite players would benefit from such a victory, the hundreds of others at the opposite end of the scale, would get screwed, meaning that ultimately, this probably isn’t something the PA really wanted to go through, anyway.
To back up for a second, as an emailerto the show noted a few weeks back, the players get a finite sum of money each year, regardless of what the numbers on the contracts say: specifically, they get 57% of hockey-related revenues, no more and no less. As revenues go up, player compensation goes up. If the cap increases out of proportion with League revenue, however, the players don’t get any more money: they’re locked in at 57%, come Hell or high water. This is where escrow comes into play: at the start of the year, the NHL and NHLPA set a percentage of each player’s salary to be stored in escrow, based on projected revenues and projected salaries. This number is updated periodically, and at the end of the year, the players get back any money they’ve paid in up to the 57%; the rest goes back to the owners.
To show how cap-circumventing contracts make things worse, let’slook at the most extreme example:Kovalchuk’s initial, rejected contract. He would have gotten $102M over 17 years, but just $3.5M of that over the last six years of the deal. The going assumption on this deal, and others like it, is that the player will retire when his salary becomes a (relative) pittance, so assume he retires after Year 11 of the deal, at the age of 38, having gotten $98.5M out of the $102M. His average salary for those 11 years would have been $8.95M, while his cap hit throughout would have only been $6M. As long as that the players are already slated receive more than their 57% share, that extra $3M per year he’s getting above his cap hit – which in some years would be as high as $5.5M – will show up in the League’s end-of-year accounting as money paid out above and beyond the players’ share, and will come right back to the owners out of the escrow fund. This loss is spread out equally across all 700+ players in the NHL, even though it’s entirely due to Kovalchuk’s contract. Is that really what the PA wants to be fighting for? Costing all its members extra money so one of them can get a couple extra million dollars?
Of course, the real question is, what’s the actual cost for each player? Tyler Dellow did some calculations using the nine most egregiously front-loaded deals as of last December, to try and get an estimate. If you update the numbers to include the final version of the Kovalchukcontract, it turns out that over the next four years, the “Frontloaded Ten”- Dellow’s nine plus Kovalchuk – will get an average of $17.2M more per season in cash than they will consume in cap dollars. Based on thesenumbers from Sports Business Journal, the players received $1.67B in salary last year, making that numberabout 1% of all player salary,which gets clawed back by the owners at the end of the year. Now, in the grand scheme of things, 1% isn’t all that much, but when you consider the fact that the owners pulled back 10.8% of the players’ salaries last year, it’s a severely disproportionate percentage of the whole, coming out of just ten contracts. Moreover, not having to pay that extra 1% would result in an extra $10,000 per $1M salary coming back to the players, which is a pretty meaningful sum of money whether you’re making $500,000 or $11M; just ask Dan Ellis.On the other hand, if any of these front-loaded players were to finish up their contracts, they’d wind up pushing things back the other way, as the latter portion of Tyler’s chart shows, but then most of today’s working stiffs probably won’t be around in eight or ten years to enjoy the corresponding decrease in escrow.
Now, maybe at the end of the day, everyone agrees that this is worth it. After all, it’s only 1%, and in exchange, the best of the best can get as much money as the owners can throw at them, and the best teams have a better chance of staying together longer. For some guys, like Drew Doughty, it’s a worthwhile sacrifice today, because it means he has a good shot at one of these deals tomorrow, but I wonder how the average NHLer would feel, if he realized that those ten contracts alone could move the escrow needle as much as they do. Would he still have wanted the Kovalchuk deal to stand as it was, without amending the CBA for future cases? I also wonder ifthe “Kovalchuk Rule” be enough to deter these crazy long-term deals, or at least tamp down their effects on escrow. We won’t know, really,for at least a couple of years, but if I’m Joe NHLer, I’m secretly hoping so, because while those changes may look like a capitulation by the PA, theycouldultimately prove tobe a small victory for the majority of its members.
**Â Â Â Â Â Â Â Â Â *
1 Let me get on my nerd soapbox for a second: Star Trek II: The Wrath of Khan is one of the best science-fiction movies ever, and I will brook no opposition on this. The themes of revenge, redemption, and sacrifice are timeless, and the way they are executed in this film helped pull Star Trek above its usual place as camp theatre and special effects extravaganza, by telling a more universal story. It also transformed Khan from just another scenery-chewing Monster of the Week into one of the genre’s most memorable villains, and gave Kirk some much-needed human failings, to complement the damn-the-rules-I’m-always-right space cowboy of the â€˜60s. The space battles, by dispensing with a lot of the future tech in favour of more traditional naval-style combat, had more punch and more tension than anything else in the franchise’s history, culminating in a heroic sacrifice that you’d have to be a robot not to be moved by. The only flaw, in my mind, is that they made a Star Trek III. And that it was terrible.