NHL Salary Cap: Effect on the Free Agent Market
By Frank Maduri
Aug 8, 2013; New York, NY, USA; NHL commissioner Gary Bettman speaks at a press conference at Yankee Stadium. Two outdoor regular-season NHL games will be played at Yankee Stadium during the 2013-14 season as part of the 2014 Stadium Series. Mandatory Credit: Ed Mulholland-USA TODAY Sports
The NHL has a salary cap of $64.3 million for the upcoming 2013-14 season (www.capgeek.com). The cap for the lockout shortened 2013 season was set at a pro-rated $70 million, which meant that some teams had to dump salary to fit underneath the new cap.
Some hockey reporters and analysts feel that the salary cap set at $64 million coupled with the larger market teams having to get below the lower cap from the pro-rated mark of $70 million, caused a slower amount of offseason activity. I tend to agree with that analysis.
Furthermore, the internet is buzzing in the past few days with reports that the NHL salary cap could increase to $80 million in approximately 4 years. This increase is due to the new revenue sharing model approved in the 2013 Collective Bargaining Agreement (C.B.A.) and the increase in revenues expected from the NBC television contract with the NHL.
The other important point to make here is that the C.B.A. set the salary floor at $16 million below the cap for the given year. However, due to the lockout, an exception was made for the upcoming 2013-14 season which set the floor for teams at $44 million (www.nhl.com).
This article will look at this offseason and the overall stagnant free agent activity, and the outlook for the future of the league with a higher salary cap in the near future.
In addition, because this is Pucks & Pitchforks I will detail these changes from the perspective of the New Jersey Devils, and their role in the future free agency market.
Slow Summer
In my opinion, and it is shared by others, this offseason was slow overall for free agency activity. I detailed the potential causes earlier in this article. Here are the overall trends I observed:
Teams had less cap room because of the pro-rated spend from the 2013 short season
Players in free agency seeking long term deals at times took shorter term deals or 1 year contracts in order to seek higher paying contracts in the next couple of years when the salary cap is expected to increase
The players view: relative to the increase in revenues for the league they should be entitled to better salaries (the crux of their argument in the lockout)
May 27, 2013; Detroit, MI, USA; Detroit Red Wings center Damien Brunner (24) prepares to take a shot as Chicago Blackhawks goalie Corey Crawford (50) goes for the save in the third period in game six of the second round of the 2013 Stanley Cup Playoffs at Joe Louis Arena. Mandatory Credit: Rick Osentoski-USA TODAY Sports
The players who are going to become free agents in the next 1 – 3 years are in a unique position in that they have leverage over the owners. The team management in those cases have to be very smart about how they are going to approach those negotiations as well.
Role of Free Agency in Hockey vs. other sports
The role of free agency in hockey as compared to other sports is much different. NHL teams need the ability to re-sign their own restricted free agents or top-tier talented unrestricted free agents because it is harder to improve the team via the draft.
Conversely, in the NBA or the NFL some of the players that are drafted make an immediate impact to their respective team. In hockey, the draft consists of younger players who need years of development time, for the most part, before they can make an impact on their respective team.
It is more difficult to turn around a struggling NHL team with limited free agent salary cap spending. This is where the new salary cap increases could really have a significant impact on the way team management approaches rebuilding a franchise. This would improve parity among the entire league.
However, the opposing viewpoint is that the salary cap increases will favor larger market teams and potentially hurt small market teams; a disparity which is exactly what the salary cap system was supposed to prevent.
In the event that the reports I referenced earlier are accurate, and the salary cap in the NHL is raised to $80 million in 2017-18, then the salary cap floor would be $64 million.
In my opinion, several smaller market teams will not be in favor of the increase and will have a hard time spending more money to reach the mandatory floor.
I will be interested to see how the new ownership for the Phoenix Coyotes approaches the new potentially increased salary cap. Will they become a player in drawing top free agents there?
I am also interested in the New York Islanders approach to an increased salary cap. They have been hurt by the reduced revenue streams from playing at the Nassau Coliseum. Will the team change their approach to free agency when they have increased revenues when they move the team to Barclays Center in Brooklyn?
Effect on the Devils
Here at Pucks & Pitchforks, we are always interested in how certain issues will impact the Devils. This offseason was a busy one for the Devils in that they had to plug holes from free agency losses on their roster. They also had to address the retirement of Ilya Kovalchuk, who returned to Russia to play in the KHL.
The Devils also have a new ownership group, and that group has a track record for spending money to improve their teams. The proposed increase in the salary cap, coupled with the desirability of playing in the New York metro market, and the new ownership group could combine to make the Devils a major player in future free agency classes.
Jun 30, 2013; Newark, NJ, USA; New Jersey Devils general manager Lou Lamoriello speaks on the phone during the 2013 NHL Draft at the Prudential Center. Mandatory Credit: Ed Mulholland-USA TODAY Sports