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Cloutier Explains the CBA |
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Hi friends. You know I had to comment on the NHL's first "offer" to the NHLPA. Why? Because it's funny. I know negotiations had to start somewhere, but geez...If that offer is any indication of what the owners are thinking, be prepared for a lockout. There is no way in the world the players are going to touch that deal.
Here are the biggest issues, as I understand them to be (forgive me if I got any of this wrong, but I'm an uneducated person discussing things lawyers make up for fun).
Issue #1: Player/Team Cap Split
Currently, the salary cap is set to around 57% of hockey-related revenues earn by the 30 NHL teams. Theoretically, the players should receive 57% of all league revenues, but of course, it doesn't exactly work that way. Not all teams spend to the cap. I don't have the numbers in front of me, but I'm guessing teams spend around 54% of all league revenues on player salaries. This is a higher split than in other major league sports. Most use a formula closer to a 50/50 split.
In the first offer, the owners have asked to have the number lowered to a 46%/56% split between players and teams. Lemme put this into perspective for you: In 2011/2012, the average team revenue was around $123mil, moving the cap to just over $70mil per team. That's a 57%/43% split. Under the new deal, reduce $70mil to $56.6mil (roughly). A cut of $13.4mil per team. Thirteen NHL teams already have more than $56.6mil allocated for salaries next season, so when we speak of reducing revenues, we need to also speak of pay cuts in order for this to work.
Players in the NHL will need to take a pay cut somewhere between 10% and 15% to make a 46%/56% split work. It's not gonna happen. Further to this, the teams/owners have asked that the league and players redefine revenues in a way that will further decrease the "average" team revenue in future years.
One way teams could rapidly reduce their contract load is if the new CBA contained an "Amnesty" clause that allows teams a window before the season begins to buyout certain contracts. If you're an Oilers fan, there's four contracts I can think of that I'd enjoy buying out (Horcoff, Khabibulin, Belanger and Sutton). In all likelihood an amnesty clause, if it happens, will only allow teams to buyout one or two players. Bye bye, Shawn.
How Will This End? The final negotiated value will be a 50/50 split like other professional sports use. Players will end up taking a 7% to 10% pay cut. I can't see an amnesty clause happening, just because putting one in is a reward for stupid GM's and a punishment against the good ones.
Issue #2: Entry-Level Deals
I will be brief on this subject, because I don't have much information. Under the current CBA, most players enter the league with a three-year Entry Level Contract. Some players, like Justin Schultz did in Edmonton, have a two-year deal...but what determines which one the player needs to sign depends on their age and other factors.
It is my understanding that teams want ELC's to now be five seasons in length. I also believe, although I'm not 100% certain on this, that they want it to be an across-the-board contract; meaning, factors determining the length of deal a player signs will be removed. All new players will be subject to five-year ELC's. Yikes. The NHLPA is gonna hate this.
Why the owners want this is because the value of 2nd contracts are starting to go nuts. I'll give you a "for example": Stamkos went from a $3.725mil cap hit in his first deal to $7.5mil in his second. Drew Doughty went from $3.425mil cap hit to $7mil per. I'm using great players as examples here, but you get my point. What happens with the Oilers at the end of this season when Hall and Ebs come up for contracts? In Hall's case, I suspect the move won't be too ridiculous: From $3.75mil cap hit to $5mil per or so. In Eberle's case, and considering the numbers he puts up, the Oilers will be looking at $6mil or higher per season, up from his current $1.158mil per. Huge raises for younger players equals impossible-to-pay contracts down the road.
How Will This End? Compromise. Maybe ELC's go to four years instead of three. The maximum amount for ELC's will stay more-or-less the same, although the teams want to get rid of signing bonuses too.
Issue #3: Contract Length
This is a situation where teams need to save themselves from each other. Under the old CBA, teams found creative ways to dance around salary limits. You all know the story: 10, 12, 15 year contracts that are obscenely front-loaded. The cap system averages out money given to players.
I'll pick on Jordan Eberle again, because he's a good lad and he won't mind. Let's say Eberle's new deal averaged out at $5mil per. Eberle, of course, would want more than $5mil per season, so the contract could be intentionally designed to be too long and pay him most of the money in the first few seasons. Let's say his deal is 18 seasons line, paying him $12 million in his first two seasons, but $1mil over his last three. If you make the contract long enough, the cap number ends up not reflecting what the player actually makes, making the player happier (because he earns more up front and can retire when the money is bad), and makes the team happier (by reducing the cap hit).
There are numerous player contracts around the league that dance around the rules. And since GM's are stupid and can't tell right from wrong, they're gonna keep happening until the CBA puts a stop to it. From what I understand, teams want to put limits on how long a contract can be. The number I've heard is five seasons maximum, which is a massive change from the current limitless system.
How Will This End? This debate could get ugly, because it not only influences how much money players can earn early in their career, but it will greatly reduce what players earn as they get later in their careers. 35 year-old players who earn big bucks on long-term deals now will be forced to be cost-competitive with younger players...there will be more free agency, which could keep contract values up for players. I'm thinking the negotiated contract length limit will be closer to eight seasons when this debate is over.
Issue #4: Free Agency
Didn't I just mention free agency? Look, the owners completely screwed up with the last CBA, making it so players could move on too soon. In many cases, a player could move on from a team after seven seasons or at a certain age. Well, the teams now want 10 years out of players before they can go UFA. From seven to ten might not sound like much, but the players are going to hate it. If anything, I believe going into this negotiation the NHLPA wanted to make free agency sooner to achieve, not longer.
How Will This End? I don't think the owners will win this end of the debate. The main argument going into CBA negotiations is that too many teams are losing money. The players will need to bend on that issue, because they can read financial statements and see for themselves certain teams are getting clobbered. However, every negotiation requires give and take. If the players give up salary, they're gonna want something in return. The right to determine for themselves where they live and play is a pretty good negotiation point.
I'm not convinced all teams will be hardliners on the free agency issue. Certain teams...the "cornerstone" ones in the league, especially Original Six franchises...have no problem using free agency to attract big names and better themselves in ways many other teams can't. Teams like Carolina, Edmonton, Phoenix, Dallas and so forth want to see young players stay put longer. Teams in New York, Philadelphia, Toronto, Montreal and such like free agency the way it is. If the owners of the Leafs and Rangers took on the owners of the Hurricanes and Stars in an arm wrestle, who do you think is going to win?
Issue #5: Elimination of Arbitration
Teams want this gone. Yes, teams as well as players can use the arbitration process to sort out contracts, but most of the time, it's players who ask for it.
The problem teams have with arbitration is a simple one: The guy making the decision may or may not know anything about hockey. During an arbitration process, the team indicates what they think a player is worth and why, and then the player indicates what they think they should receive. Then, the judge, regardless if he knows anything about hockey or not, looks at the player's stats and other contracts that on paper that are comparable. A ruling will then be given that is usually somewhere between what the player wants and the team wants. Most of the time, the team hates the rulings, but are forced to live with them because overpaying someone is better than losing the asset.
How Will This End? I'm not sure. I think arbitration is horrifying, but you find things like this in all areas of life where unions exist. The arbitration process is a way to ensure contracts get sorted out and players can continue their employment. I'm not sure how the league can eliminate that fairly, if not legally.
Where Do We Go From Here?
After the NHLPA finishes laughing at this ridiculous first offer, they'll counter it. I suspect the counter offer will be just as ridiculous. Considering how far apart the two sides will be, I see this situation eating up most of September, if not longer. The two sides will walk away from each other, bash each other in the media, roll their eyes and make death threats...this is gonna get ugly, folks. I suspect there will be a moment when Sean Avery is waving his glove in Gary Bettman's face.
I seriously believe what we saw today was more-or-less a bluff. The issue here is revenues and nothing more. The owners got the message across that they're prepared to hit the players every way possible if they don't get a deal they like. Or worded another way, if the players don't cough up money, owners will make players lives more difficult in other areas, just because.
Eventually, the players will move to a 50/50 split and take a big pay cut, but the rest of the league's mechanics will more or less stay the same. The owners will walk away from the table happy, because this is about money. The league is much less broken than the owners made it seem today.
Edmonton Oilers Blogger • 
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