Wednesday, July 21, 2010

It's All Down Hill From Here

I began forecasting the slippery slope that the NHL is now fully sliding down back in 2008, long before the New Jersey Devils handed Ilya Kovalchuk the most alarming (and according to the powers that be, unethical) contract in the history of North American professional sport.

Back then, shortly after Vinny Lecavalier signed an 11 year $85 million contract, I wrote:

Are teams simply hoping the salary cap will continue to increase, year-after-year, without any recourse? Do they think by the time the last few remaining years of those deals come around, the cap will be $75M or $100M and the contract will actually look cheap? Can they automatically assume that one or two good seasons is enough to project a player's production 5 or 10 years down the line?

It's a nice thought, but...what if that doesn't happen? What if the annual salary cap, after rising a whopping 35% in 4 years, levels off and then a guy you've committed 7 or 8 years and $40-50M to doesn't fulfill expectations? Even worse, what if you have two guys like that? Or three?

It's a dark road the NHL is traveling down, and it's the same trail the NBA burned in the late 90's that lead to people like Jim McIlvane, Tariq Abdul-Wahad, and Austin Croshere earning some $127 million (combined) in salary. This is great news if you're Jeff Finger or Ron Hainsey or any other marginal player who may (or may not) have upside, but for everyone else it means bad times. Unless you cheer for Detroit, each contract from here on out has the potential to bury your franchise for the foreseeable future.

The NBA owners forced a lockout in 1999 not only to put a cap on player salaries, but also to implement the maximum length a contract could run. Teams were doling out 8, 10, even 12 year deals to stars and that in turn increased contract duration expectations around the league. Eager to keep young players away from free agency, GM's began paying on potential instead of production, and tacked on extra years without hesitation.

Remember the deals handed to Larry Johnson, Juwan Howard, Glenn Robinson and numerous other players who were either too young or still unproven? Remember the kind of damage they did to their respective teams?

Larry Johnson 12 years/$84M - 1994
Glenn Robinson 10 years/$68M - 1995
Donyell Marshall 9 years/$42M - 1994

Juwan Howard 7 years/$105M - 1996
Jayson Williams 7 years/$100M - 1999
Brian Grant 7 years/$84M - 2000
Vin Baker 6 years/$86.7M - 1997
Tim Thomas 6 years/$67M - 1999
Bryant Reeves 6 years/$65M - 1997
Antonio McDyess 6 years/$67M - 1998
Tom Gugliotta 6 years/$58.5M - 1998

In a few short years the entire landscape of the NBA changed. Instead of trading players you traded contracts. Where once you had almost every team competing, legitimately trying to win night in and night out, with most having a realistic shot of at least qualifying for the playoffs when training camp opened...all of a sudden you had a clear set of contenders and an equally clear set of pretenders who were fed to the lions and playing for the lottery from day one.

The NBA finally realized guaranteeing several tens of millions of dollars to athletes for a decade or more at a time, regardless of their performance, wasn't working out that well. Didn't exactly lead to motivation. Another factor was injuries. So they capped the length a contract could run for, and proceeded to shorten it again in the next round of CBA negotiating.

It was noted hockey genius Charles Wang who started this particular movement in the NHL, but it wasn't when he gave Rick Dipietro a 15 year contract in 2003. It actually began two years earlier when Wang signed (ahem) Alexei Yashin (10 years/$87.5M) and the Capitals inked Jaromir Jagr (7 years/$77M) to enormous contracts that neither player came close to playing out. In fact, both were paid to leave. Washington ate nearly half of Jagr's contract while he was wearing a Rangers jersey ($3.4M/year), and seven long years from now the Islanders will have squandered $17M in cap space for Yashin to stay home and continue not caring about hockey. Good investments?

In the years since we've seen several hockey players sign ridiculously long contracts and the situation is now unfolding just as it did in basketball. At first it's the stars: the hottest free agents and the best young players score huge extended deals. The rationale is obviously a move to circumvent the cap (more years at less dollars), and also, in the case of restricted free agents, to keep them away from other teams.

The problem isn't with the superstars getting big paydays, it's the length it comes with, and the effect that has on what everyone else can then demand.

As we look back on the recent history of the NBA, we can see the immediate future for the NHL. And it's not a pretty sight.

Now, two years later, the problem is coming to a head. The Kovalchuk deal, along with the contracts given to Roberto Luongo and Marian Hossa, while within the rules of the salary cap, are clearly designed to circumvent it. The tail-end of each contract, when each player will be well into his 40's, will pay those players minimal salaries. Because the contracts were signed prior to the player turning 35 years-old, if the player retires before the contract is fulfilled it doesn't count against the individual teams salary cap. Basically it allows a guy like Kovalchuk to be paid $95 million over the first 11 years of his deal while the Devils somehow only take a $6 million cap hit each year.

It's a loop-hole that will certainly be dealt with during the next round of CBA negotiations when a maximum contract length rule will be implemented. But unfortunately by then it might be too late. More than one quarter of NHL teams already have (at least) one contract on their books that will run more than a decade (Chicago, Detroit, New Jersey, NY Islanders, Philadelphia, Tampa Bay, Vancouver, Washington), and who knows how many more will follow suit before the system can be corrected?

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