Now that the New Jersey Devils, Ilya Kovalchuk and the NHL have all come together on an agreement to make things work out, the focus turns to just how the collective bargaining agreement will be amended to in order to “fix” things from this point on until it expires in 2012. While Kovalchuk’s deal and all those signed before it will be grandfathered in (including the questioned contracts of Marc Savard and Marian Hossa), what’s going to happen from this point on is going to actually provide seeming sanity in the NHL regarding contracts.
TSN’s Darren Dreger has the details of what two specific things have been done to “fix the glitch” regarding long-term deals.
First: For long-term contracts extending beyond the age of 40, the contract’s average annual value for the years up to and including 40, are calculated by dividing total value in those years by the number of years up to and including 40. Then for the years covering ages 41 and beyond, the cap charge in each year is equal to the value of the contract in that year.
For example, say a 35-year old player agrees to a 7-year deal that is set to expire when the player is 42 years old. The deal is set up as follows: $7.6 million for the first four years followed by $4 million in the fourth year, then two final seasons at $525,000. Under the terms of the new amendment you would add up the first five years of the contract (to the age of 40) and calculate the average. $34.4 million divided by five years equals $6.88 million. That number would now be the player’s cap hit over those first five years. His cap hit in the final two years of his deal would be the actual value of the contract in those seasons, therefore a cap hit of $525,000 for year six and seven of the deal.
Secondly, for long-term contracts that include years in which the player is 36, 37, 38, 39 and 40; the amount used for purposes of calculating his average annual value is a minimum of $1 million in each of those years (even if his actual compensation is during those seasons).
As an example, a player signs the exact same seven-year deal discussed above, however the deal is signed at the age of 32 and is set to expire when the player reaches 39 years old. For that contract, the two seasons at $525,000 would remain, however they would be treated as a season at $1 million for the purpose of calculating the appropriate cap charge.
I know what you’re saying, and I’m a bit tired of the legalese myself but, the key points here are that both sides came together to agree to close the long-term loopholes on contracts. This doesn’t affect any contracts retroactively, so forget that thought you just had and were ready to explode about. If your favorite team has a player signed to a super long contract already, they’re set and won’t come under fire here. Anyone signing a new contract from this point on, however, has to deal with these stipulations.
So who is the winner out of all this? You could say it’s a win for the little guy in the NHL as they now don’t have to worry about being made to carry more of the escrow burden for mega-contracts. The “fiscal sanity” that many executives wanted is now theirs even in spite of the inherent cross-eyed irony that it was the teams and the executives in the first place that caused it in the first place.
That’s not to say players are guiltless here, players are worth whatever the market dictates for them, it’s just that with the cap in place and finances being tighter in some places than others sometimes the demand for more money can be viewed as unreasonable. I’m certainly not against making as much money as you can, you just have to sometimes do what’s best for everyone when the system is the way it is.
The big wonder here for me is if this sets the table for a kind of peace in 2012 when the NHL and NHLPA are set to go to the table once again to hammer out a new agreement. Taking the temperature of the players around the league regarding this should prove to be interesting.