The heart-warming tale of how Dustin Brown gave Ilya Kovalchuk $9,000 to play in New Jersey
by Quisp on Jul 19, 2010 11:33 PM PDT
in Free Agency
11 comments
Two great articles beat me to the punch on a topic I've been struggling to understand, to say nothing of being able to boil it down to bite-sized morsels. First up, from our very own "On the Forecheck":
What the NHL should do about sham contracts like Kovalchuk's 17 year, $102M deal - On the Forecheck
There's a good reason why players should support clamping down on these contracts, and it's called escrow. The players are entitled to a specific percentage of league-wide hockey related revenues over the course of the season, and when their combined payrolls exceed that amount (as has been the case lately), they have to give the overage back to the owners. [...] What that all means here is that when stars make big money in excess of their cap hit, that inflates the amount of overall player salaries, and the rest of the players end up giving that back to the owners in the form of escrow. [...] [W]hen a guy like Kovalchuk gets big money now, everybody's escrow costs grow higher, too. Here are a few examples of how much individual players stand to lose next season as a result of Kovalchuk's $10M salary exceeding the cap hit of $6M:
- Alex Ovechkin $23,196
- Dustin Brown $9,021
- Joel Ward $3,866
Read the whole article, though. And then read this one:
The basic fairness of averaging the salaries contained in a contract for salary cap purposes is that while players might take more from the pool than their cap hit in some years, in other years, they’ll take less. Take Shawn Horcoff as an example. He’s a cap hit of $5.5MM annually. This year he makes $7MM. In a few years, he’ll make $3MM. If you’re a player who has to kick some money back into escrow this year because Horcoff’s salary is greater than his cap hit, you know that in a few years, Horcoff will be eating up more salary cap than he’s taking in salary, which is of benefit to the rest of the players. From the perspective of the players, the entire system is premised on the idea that contracts will be signed in good faith, with an intention to play them out.
And that's where the front-loaded mega-term deals come in. Because Marian Hossa will not play till he's 42. Kovalchuk will not play till he's 44. They will never receive millions less in salary than cap hit, so the benefit passed on to their fellow players will be exactly zero. Nice. More from mc79hockey.com:
These nine players [Vincent Lecavalier, Roberto Luongo, Marian Hossa, Henrik Zetterberg, Chris Pronger, Daniel Alfredsson, Mikka Kiprusoff, Marc Savard and Johan Franzen -- doesn't count Kovalchuk, since the article is from last December], assuming that they play until their contracts call for stipends of less than $2MM, will pull in $73.524MM [more] than they’ll cost in terms of cap hit. [...]
Why does this matter? Well, that money has to come from somewhere. The players have a fixed piece of the pie. When someone games the system to make his salary exceed his cap hit in the long term, he does it by taking money out of the pockets of the other players.
[...]
The cost to the players of the contracts signed by the Frontloaded Nine [was] $4200.00/$1MM in salary. [...] When considering anything NHL related, my first thought is always "…But how does this affect Shawn Horcoff?"
I am adopting this rubric for my own life from this day forward.
How much cash will come out of Shawn Horcoff’s pocket next year so that Vancouver, Detroit, Chicago, Boston, Tampa, Calgary, Philadelphia and Ottawa will have better teams than they otherwise would? To what extent is he subsidizing the decisions made by those players? [...] [T]he answer is somewhere between $27K and $28K. Bad enough that Chris Pronger and his wife hated Edmonton - Horcoff will be kicking money into the pot so that they can live somewhere less objectionable.
And that subsidy just went up several thousand dollars, per player. This is why I was mildly surprised, a month ago, that the NHLPA voted to invoke the 5% inflator. They're giving the owners an extra $3MM of their own money which will come out of their own pockets, (money which is over and above what the league and players' union have determined to be a reasonable projection of what the cap should be in order to be in line with revenues) in order to make deals like this.
Dustin is a pretty nice guy, Kovy. He probably would have just given you the $9K. All you had to do was ask.
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One thing about all these contracts that actually helps other players though is that Kovalchuk’s cap hit will be at about 6 million instead of up near at least 8 million which is definitely what he would be worth if he signed only a 4 year contract or so. So by doing his contract this way he is making more real money while keeping his cap hit lower(duh that the whole loophole rule I know). BUT this benefits other players because now there is 2 million more in cap space in the NHL for GM’s to give to other players so other players will get a little more money than they would have been able to if some of these guys signed fro cap hits that they are actually worth. I have no idea how much extra they gain by this and how much they lose due to the escrow, but it seems like it would even it out at least a little bit for the rest of the players
Oh, I forgot to say too
that the reason they may have used the 5% inflator is that they know its only a small amount of money from each of them coming out of their pockets, but that these free agents are setting precedents with their high salaries that will result in more lucrative future contracts in other summers. For example, a guy like Kaberle next year can say “Hey, Paul Martin got X amount of money or Hamhuis signed for Y amount so I deserve at least Z amount”(where my letters represent the actual salaries because I forget the real numbers*I think Martin was a little over 5 million and Hamhuis was somewhere between 4-5 but I could be totally wrong*). This could result in more future money for Kaberle because of the precedent set this summer for how much a guy of his caliber should get even though he gives up a little bit of money this year due to the escrow
I think you're being native to think that
Here is the argument that I have been having with my hockey friends. I’m all for players making more money, but when they do, it’s not like the organization decides that making more money is enough. What they do is pass the cost off to the fans by raising ticket prices. I am a season ticket holder so I don’t want my ticket prices to go up.
And I actually think it’s bad for hockey to have contracts like Kovalchuk’s bullshit deal. I was rather hoping that both GM’s, Dean and Lou wouldn’t do a deal like this. They had the opportunity to draw a line in the sand to actually set a precedent. But Lou couldn’t resist apparantly. He paid $22 million more than he had to to get Kovi. You better pray that Kovi doesn’t get hurt, in at least the next 10 years. STUPID!
I personally think that Kopitar, who is 5 years younger than Kovalchuk, could have two 50+ seasons in the next few years.
Different Markets
“I’m all for players making more money, but when they do, it’s not like the organization decides that making more money is enough. What they do is pass the cost off to the fans by raising ticket prices.”
If an owner could figure out how to ice a roster at the cap floor that also managed to be entertaining and competitive — a good draw — he would still raise your season ticket prices. Costs don’t set the price of the product — demand for the product does.
by Lars H on Jul 20, 2010 6:41 AM PDT up reply actions 1 recs
Fascinating
If the NHLPA is at all interested in the welfare of its constituents, they cannot let this sort of thing continue.
Contracts like this present many problems, I know, but the problem isn’t this Kovalchuk contract here. The time to object was way back when teams started exploiting the loophole.
It has gotten out of hand, but they opened themselves up to it. That horse hasn’t just left the barn, it’s sprinted from it.
In Dinglebarn We Trust
I agree with you
except that people were objecting way back when the loophole was discovered. Bettman could have slammed the door shut by not approving such deals and issuing penalties, thus drawing the clear line in the sand, i.e. “no deals longer than five years which pay a player after his 40th birthday.” Or whatever. The CBA gives him the authority to do this. People are talking like it’s an iron-clad loophole the league can do nothing about, but the league can rule that it’s a circumvention if the deal merely has the effect of circumventing the CBA.
It’s just like head-shots. “Ooh, we need a new rule!” Except, no, the rule is already there. Intent to injure is against the rules. They could suspend people for every head shot if they wanted to. But they don’t want to.
Wait till this year.
Yeah, that’s what pisses me off the most about it. They just made feeble flappy-hand OH NOES kinds of gestures each time. They could have set precedent long ago.
It’s just like head-shots. "Ooh, we need a new rule!" Except, no, the rule is already there. Intent to injure is against the rules. They could suspend people for every head shot if they wanted to. But they don’t want to.
UGH, agree. Dammit, NHL. Hardworking guys like Savard and Mitchell get their careers disrupted or even destroyed, bastards like Cooke and Malkin roam free. What a way to run things.
In Dinglebarn We Trust
So much for that
From the perspective of the players, the entire system is premised on the idea that contracts will be signed in good faith, with an intention to play them out.
Good faith? Concern for your fellow colleagues? Surely you jest.
I'm the pretty ho.
Great Article, here's the punch line:
“And that subsidy just went up several thousand dollars, per player. This is why I was mildly surprised, a month ago, that the NHLPA voted to invoke the 5% inflator. They’re giving the owners an extra $3MM of their own money which will come out of their own pockets,”
Sounds like NHL players are about as smart as the average Voter..
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