Monday, July 19, 2010

Time For a New CBA

The early reports on the Kovalchuk deal are that it is for 17 years for a total of $102M which is an annual cap hit of just $6M per year. This is a relative bargain in the salary cap system for a player of his caliber. According to something NESN's Jimmy Murphy re-tweeted, the Contract is structured as such:

First 8 years: $10M per
Next 2 years: $7.5M per
Final 7 years: $7M TOTAL

The $10M man for only $6M on your salary cap!

This is the Devils taking full advantage of the current CBA to gain a competitive advantage on the rest of the league in the near-term. The next CBA needs to institute a "Kovy" rule to address this. If you wiped the final 7 years off the contract his cap hit would be $9.5M per year. With those 7 years on there, he only costs $6M towards the cap. Here's hoping he doesn't live up to his salary of $10M while only costing them $6M per season. You can't blame Lou for doing it, because our own Chiarelli did the exact same thing on a smaller scale with Savvy. Savvy averages $6.375M in actual salary over the first 4 years of his 7-yr extension, but his cap hit is only $4,007,143 per season since the final three years TOTAL only $2.55M.
The inherent problem with a deal like Kovalchuk's is that its made with the distinct intention of buying him out after the 10 years is up. If Lou Lamoriello has his way, Kovalchuk will be a force for the Devils for the next ten years at the bargain basement price of $6M per season against the cap. After the tenth year, Lou will just buy the contract out and bid him farewell at little to no expense since the buyout only has to do with the remaining term and amount (7 yrs for a total of $7M). Same thing with Savvy. Think he will be playing the 2015-16 season for the current league minimum of $525,000 like his contract currently states (and costing his team over $4M against the cap)? The answer is no. He will either have been bought out or retired so the system is flawed and allows this practice.

Lou Lamoriello: For my money, the prettiest man in hockey.

How does the NHL fix it? They need to cut down on front-end loading of contracts. In the Kovalchuk example, let's assume he gets paid exactly $1M per year for those final 7 years. That's 7 years of a 17-yr contract that his salary is only 10% of the most he makes in any single year. So, you could limit this percentage to say 50%: in no year of a multi-year deal could any single-year salary be less than 50% of the largest single-year salary in the deal. Using Kovy as an example again, that means the lowest you could go for those final 7 years would be $5M. For the sake of argument, if the final 7 years were at $5M per, the annual cap hit would be $130M/17 which is roughly $7.65M. No GM would do this deal because it would be incredibly expensive to buyout throughout the life of the contract and the $7.65M cap hit is not enough of a bargain to justify the long-term risk. Therefore, the most you would see a guy like Kovalchuk sign for is 5 years which is much more realistic and better for the game as a whole. Gary Bettman and the boys better get busy and figure out how to transition into the next CBA because the current CBA is beginning to create some problems.

By the way, your Stanley Cup Champion Chicago Blackhawks used a front-end loaded contract to Marian Hossa (actual salary of $7.9M with a cap hit of just north of $5.2M) to help win the cup this year. They don't usually work out though - just take a look at the New York Rangers for an example with Drury, Redden and formerly Gomez. How's Rick DiPietro doing for the Islanders? Vinny Lecavalier looked like a man just going through the motions for much of his first season of an 11-yr contract extension last year. Vinny's deal is similar to Kovalchuk's in that he is making $10M per season for the next 6 years and then it drops off, but not as harshly as Kovy's. Vinny's cap hit is a little over $7.7M which is much more reasonable.

This blogger just hopes that some of these issues with the CBA don't lead us into another lockout. The game has come a long ways since the clutch-and-grab days of the late '90's and early '00's and we certainly don't need another season off. However, another lockout would definitely help keep the pink hats away which wouldn't be the worst thing in the world...let's hope we never see a day where the NHL becomes as over-commercialized and over-hyped as the NFL, NBA, and MLB.

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