• RFA Oddities and CBA Negotiations

    by  • June 25, 2012 • Hockey • 7 Comments

    Two business things of note. James Mirtle has the RFA offer sheet compensation levels up at the Globe and Mail’s website. Of note: the compensation level for players with offer sheets of less than $1,110,249 is…nothing.

    This is kind of interesting because there’s a disconnect in how that level gets set. When the CBA was negotiated in 2005, the level at which you got no compensation for a player was set at $660,000. It then rose proportionately with the salary cap. The problem that this creates is that salaries for the kind of players who were making less than $660,000 in 2005-06 haven’t really risen in accordance with the increase in the salary cap. I’ve put together a graph of how the compensation thresholds have risen since 2006. I’ve included the rookie cap as well, as it provides a baseline for a lot of second and third contracts because of the way that qualifying offers work.

    You’ll note that initially, the no-compensation threshold was far below the rookie salary cap. It no longer is (and hasn’t been for a while). For players who have yet to make the leap to NHL regulars but have become RFAs, the pretty standard qualifying offer is between 100-110% of their previous NHL salary, depending what they were earning, and a two way deal. Up until about 2009, you could do that and anyone making a qualifying offer would pretty much be forced to give you at least a third round pick if they were inclined to grab the player.

    Now though, it’s certain that the bare minimum qualifying offer on a player coming off an ELC will be below the compensation threshold. If Linus Omark, to pick one obvious example, is qualified, it will likely be on a two way deal that provides for an NHL salary of $918,750. Omark is effectively blocked in Edmonton, so that’s not going to be of interest to him. Say you’re the Islanders though, interested in running a team on the cheap and interested in trying to scavenge useful talent. You can offer him a one way deal at $1MM for one year. Will the Oilers match? Seems unlikely – they can’t trade him during the year of the contract, so they’d be stuck paying $1MM for a guy who isn’t in their plans.

    I am, to be clear, just using Omark as an example. It seems to me that there are likely a lot of guys like him, who might be NHLers in different circumstances. With the way salary growth has gone, they’re a lot more available than they once were.

    * * *

    One of Mirtle’s colleagues had an interesting point about the CBA as well. Roy MacGregor wrote:

    But there is one area of potential conflict that gets little talked about. It has to do with the salary cap the owners fought so hard for last time around and the players eventually capitulated on in what was widely considered a triumphant romp for the owners.

    Surprisingly, the owners’ concern isn’t at the top end, where the cap is expected to exceed $70-million a team in 2012-13 – shockingly up from the $39-million it was in the first year of the salary cap, 2005-06.

    It lies, instead, at the lower end, the bare minimum teams must spend. This is expected to rise to $54-million this year, $15-million more than the top of the salary cap was when the current collective agreement began.

    The reason this is of such concern to a number of owners is that, surprisingly, many of the more established owners are actually keener on bringing their stumbling partners in line than they are the players.

    It is common knowledge that the league has had to bail out the Phoenix Coyotes and New Jersey Devils, but there are several other teams either in, or close to, serious red ink. The successful owners are tired of hearing about the struggles of the weak and sick of bailouts.

    It’s time to get the stray ducks in line, they say.

    To that point, there is a movement to go after the minimum. Some clubs would like it abolished outright. Weaker clubs say they don’t care how much the New York Rangers or Philadelphia Flyers spend so long as they aren’t trapped by a minimum that, they believe, forces them to spend on players they’d rather not take on and can be a severe cramp on rebuilding.

    It’s funny – it’s widely acknowledged that the players loathe the escrow system. Under the current system, the players pay a chunk of their salaries into escrow every year and then, once the revenues are known, get part of that back. I’ve talked before about how the salary floor basically forces teams that aren’t interested in being good to spend a bunch of money on players that they’d rather not spend. In effect, players on good teams are forced to subsidize players on bad teams.

    If you got rid of the floor then, you might expect to suddenly see a lot of the escrow payments that are currently being withheld returned to the players, as lousy teams spent less money. If there’s suddenly no floor, presumably a lot of teams will be spending a lot less than they currently do.

    Unfortunately, the genie’s out of the bottle a little bit here. One of the big changes wrought by this CBA is that skilled younger players have started getting paid. This is, I think, the way that teams have gone about ensuring that they can meet the salary floor – pay your younger guys and lock them up for a couple of UFA years. In 2003-04 the ten highest paid 22 year olds collectively earned $16.59MM. Last year they earned $34.98MM, an increase of 111% (NHL salaries as a whole are up about 32% or so from 2003-04). The ten highest paid 24 year olds earned $19.7MM in 2003-04; in 2011-12, they earned $49.71MM, an increase of 152%. The lack of data makes it exceedingly difficult to tell who really did well from a player perspective with this CBA versus the old one but I suspect that the answer is “young star-ish players” and “bottom of the roster plugs.” The former have experienced the increase that I just set out and the latter saw a massive increase in the minimum salary.

    If you look at the payroll of, for example, the New York Islanders, you see where the money’s going – four of their eight highest cap hits in 2011-12 were John Tavares ($3.75MM), Michael Grabner ($3.0MM), Kyle Okposo ($2.8MM) and Nino Neiderreiter ($2.795MM). Tavares and Neiderreiter are on ELCs but Tavares gets a bump to $5.5MM next year. These are the kind of guys who used to have to put in some years of indentured servitude.

    All of which is to say that, in a system with arbitration, eliminating the salary floor isn’t going to do a heck of a lot. It’s hard to imagine how, barring a system that legislated a cap on what you can be paid based on your years in the league, a sort of ELC system that continued longer, this trend can be reversed. What’s more, even if you did impose such a cap, you’d probably see a serious talent flight to Russia. The changes that this CBA has created in terms of who gets paid will make it much harder to “fix” in a new CBA – the Islanders of the world want their John Tavares’ to be cheaper, not the expensive veterans they weren’t really interested in in the first place.

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    7 Responses to RFA Oddities and CBA Negotiations

    1. dog
      June 26, 2012 at

      Interesting stuff – I can see the Omarks of the world could be an untapped resource – hope you havent given any GM’s, who might read this, an idea there !

      However I’m not too sure what you are saying about the floor – are you saying that you think the floor will get increased or removed altogether ? – who do you think amongst the owners will win on this one ?

      Also if there was no floor, yes if you wanted to keep your young stars, then under arbitration you would be hamstrung – but if you didnt you would just offload them and hire a cheap plug who will take your derisory offer

    2. Tom Benjamin
      June 26, 2012 at

      Unfortunately, the genie’s out of the bottle a little bit here. One of the big changes wrought by this CBA is that skilled younger players have started getting paid. This is, I think, the way that teams have gone about ensuring that they can meet the salary floor – pay your younger guys and lock them up for a couple of UFA years.

      I don’t think salaries have gone up for young players because teams are paying them to meet the salary floor. The old CBA suppressed the salaries of players until they reached about 29. As free agency approached, the salary exploded. Players over thirty were ridiculously overpaid. The result? Small markets could build terrific teams on the cheap by letting the likes of Doug Weight go as their salaries made them bad investments. Ottawa had the most talented team in the league with a payroll in the bottom half of the league. Dropping the FA age to 25-27 changed the age salaries exploded. Young players gained, old players lost.

      Getting this change was – in my opinion – the most important change wrought by Bettman. How else could he drive the best players to the biggest markets? An irrational salary system protected small markets, a rational one favours teams with money. Bettman does not want to fix this.

      During the labour dispute, my position was that I did not care how much money the players made – I cared about the age of free agency because I thought that was what made the system was fair for the small markets. That ship has sailed and since I cheer for a rich team, I don’t care any more what happens to the small markets. Let them become farm teams for the rich for all I care.

      I think the salary floor issue is bit of a red herring. It might help some small markets financially, but it will also probably hurt them at the gate. In a rational system, what you spend on players matters to the win/loss record.

      The players would probably go along with no floor. Why not? It might eliminate escrow. It might force reverse escrow making all teams to pay players more than what the contract says. I don’t even think rich teams care what the smaller teams spend. Does it matter whether they have to bail out a Phoenix or if the Coyotes survive better on a low payroll and revenue sharing? Does it matter whether they make a direct payment or whether they pay indirectly with higher salary costs?

      I thought this one from MacGregor was really rich though:

      Weaker clubs say they don’t care how much the New York Rangers or Philadelphia Flyers spend so long as they aren’t trapped by a minimum that, they believe, forces them to spend on players they’d rather not take on and can be a severe cramp on rebuilding.

      This is a complete reversal from the position the league took in 2004. All we need is Kevin Lowe out there claiming he will quit unless we get rid of the salary cap and raise the age of free agency.

      • Tom Benjamin
        June 26, 2012 at

        Sorry I screwed up the html code – only the first and eighth paragraphs should be italicised

      • speeds
        June 27, 2012 at

        I kind of wonder if raising the UFA age by a year or two, coupled with the complete removal of RFA compensation, might an outcome along those lines in the next CBA.

        Maybe the UFA age rises to 28 or 29, but a player signed to any offer sheet, if not matched, leaves with no compensation.

    3. Triumph
      June 26, 2012 at

      Yeah, I tweeted about this when I saw mirtle’s article – seems like there’s a slight opening for teams to send offer sheets to underappreciated players languishing in the minors who aren’t yet waiver-eligible. I doubt it will happen, the NHL GMs being such a buddy-buddy sort of group, but it’s certainly a good idea.

    4. Stocc
      June 26, 2012 at
    5. Pingback: All (Some) of the NHL Free Agent Forwards the Islanders Won’t (Probably) Sign | All New York Islanders

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