O League Wide Salary Cap A Formula example essay topic

The rookie salary cap was gutted when teams took advantage of a loophole, adding lucrative 'bonus' payments on top of the 'maximum' base salary. It began in 1997, when the Boston Bruins gave two rookies, Joe Thornton and Sergei Samson ov, the maximum salary allowed under the rookie cap. But those contracts also had bonus clauses that would roughly triple the base salary if certain criteria - such as statistical benchmarks - were met. From then on, all high draft picks began demanding and receiving similar contracts. The multimillion dollar offers made to a few free agents served to 'raise the bar,' leading to comparable salary increases for comparable players.

This movement was led by a few wealthy teams, like the Rangers, Flyers and Red Wings. But it drove up the market value for players throughout the league. Teams did not use their leverage with restricted free agents. At contract time, most under-31 players have two options: sign and play or stay home and earn nothing. Despite holding this obvious bargaining advantage, teams often gave in to salary demands, offering players huge raises and long-term contracts.

For example, in 1997 Joe Sakic of the Colorado Avalanche signed a three-year, $21-million US 'offer sheet' with the New York Rangers. But Colorado exercised its right to match the offer and retained him. Sakic went nowhere, and the only result of the Rangers' gambit was to more than double his salary. In the same year, Paul K ariya of the Anaheim Mighty Ducks sat out the beginning of the season, looking for a big raise.

As a 23-year-old, that was the only leverage he had. The Ducks caved, giving him a two-year, $14 million deal. Other huge contracts for top forwards soon followed. More damaging still is the fact that many of the hefty contracts went to mediocre players. In 1999, the Rangers signed Valeri Kamensky to a four-year deal worth $13.45 million. He scored 14 goals the previous season.

A year later, St. Louis gave Dallas Drake $9 million over four years. He averaged 14 goals per season over the life of the contract. These deals helped 'raise the bar,' boosting the market value of players with similar stats and abilities. Much of this free spending was funded by expansion money as the NHL added teams throughout the 1990's (hefty expansion fees were divided among incumbent teams). There was also the expectation that the game's popularity would grow in new markets and television revenues would soar as a result. Now the expansion money is gone, and the hockey boom didn't happen.

The league's latest American television contract pays no money up front for broadcast rights. Many teams, especially the newer ones, have also seen a decline in ticket sales. In its most recent offer, made February 2, 2005, the NHL owners proposed a six-year deal. Its main features are: o League-Wide Salary Cap A formula will see the players receive 53-to-55 per cent of all NHL revenues. This is the deal-killer.

The players want no part of any such restriction. The percentage formula is especially unattractive now, because short-term league revenues will likely drop because of the lengthy lockout. o Team Salary Cap A team payroll will be no less than $32 million and no more than $42 million benefits included. This range will be adjusted every year, ensuring that players receive 53-to-55 per cent of league revenues. o Possible Salary Cap for Individual Players 'The parties may have a mutual interest in negotiating over the establishment of an NHL maximum salary for individual players. No specific amount is being proposed. ' o Salary Cap for 'Entry Level' Players In his first four years in the NHL, a player will earn no more than $850,000 per year in salary and signing bonuses. He can be offered additional incentives: Up to $250,000 in performance bonuses (for goals, assists, etc.) and up to $500,000 for finishing among the top five in voting for major awards.

Few players qualify for awards, so the salary-plus-bonuses formula would cap most entry-level salaries at $1.1 million. Under the old agreement, there were no meaningful restrictions on bonuses, and the entry-level system applied to the first three years of a player's career. o Salary Rollback The NHLPA's December 9 offer of a 24 per cent across-the-board salary cut is accepted. o Contract Lengths Restricted The maximum term of an NHL contract will be three years. o Unrestricted Free Agents The age at which a player becomes eligible for unrestricted free agency drops from 31 to 30. This is a concession to the players, though many believe a more crowded free agent market will help discourage bidding wars. o Restricted Free Agents As in the previous agreement, a player who is not an unrestricted free agent becomes a restricted free agent when his contract expires. He must receive a 'qualifying offer' from his team, or he becomes unrestricted. A qualifying offer will be 100 per cent of last season's salary for players making under $800,000, and 75 per cent of last season's salary for those making over $800,000.

A restricted free agent can accept an offer from other teams. But his old team can match the offer or receive compensation, as in the previous free agent system. A restricted free agent must sign a contract within 14 days of the opening of training camp, or be ineligible to play that season. This is designed to prevent lengthy hold-outs in contract disputes.

Combined with the new limits on salary arbitration, the new rules for restricted free agents would virtually eliminate any bargaining power for the majority of players in the league. o Salary Arbitration All restricted free agents are eligible for arbitration to settle contract disputes. Teams or players can initiate the process. Under the old salary arbitration system, only players could request arbitration. Teams can avoid arbitration at any time by offering the player 105 per cent of the previous season's salary. The league can 'eliminate salary arbitration mechanism in its entirety at any time' by dropping the age of unrestricted free agency to 28. The '105 per cent offer' provision and the potential elimination of the system renders salary arbitration toothless.

Players are willing to accept modifications, but are not likely to agree to this. o Possible Payroll Tax The parties will explore 'the use of a Payroll Tax on Clubs within the Floating Team Payroll Range at the Union's sole discretion. ' This is what the NHLPA proposed, but they want it instead of a salary cap, not in addition to it. o A Profit Sharing Plan Players and teams would split profits 50-50, once profits exceed a level to be negotiated. A promising idea, but sketchy on the details. o Joint Auditing and Accounting To ensure that the players get their 53-to-55 percent. Teams that do not report all revenues will pay stiff fines. o Joint Owner-Player Council To meet regularly and make recommendations on various business and game-related issues. The players have long wanted this.

The NHLPA argument is why should NHL players pay for the mistakes of high rolling team owners. It's true that NHL teams created their own financial troubles by signing too many players to too many lucrative contracts. But the league argues that the current collective bargaining agreement is at the root of the problem. Teams do not act in isolation.

If the New York Rangers sign a checking center like Bobby Holi k to a contract worth nearly $9 million per year, it affects the market for other checking centers all over the league. The league argues that there will always be mistakes and poor decisions. There will always be teams and players that do not perform up to expectations. That's the nature of a sports league with 30 independent, highly competitive teams. But under the current NHL system, decisions made by one team have far-reaching consequences for all other teams.

A few big-budget teams can change the way the entire NHL does business. The NHL says the system that allowed this environment to flourish has to be changed. A salary cap would obviously even out league payrolls, so that the $23 million Nashville Predators would no longer be taking the ice against the $77 million Detroit Red Wings. But whether this would give more teams a chance to compete for the Stanley Cup is far less certain. Recent evidence suggests the NHL already has as much competitive balance as a 30-team league can reasonably expect. In the last three years, a dozen teams have made it as far as the Conference Finals, within eight victories of winning the Stanley Cup.

The wealthy New York Rangers have failed miserably, and other big-budget teams like Toronto, Philadelphia and Dallas have fallen short of expectations. The NHL argues that such short-term results are misleading. Cheap one-year wonders like Calgary (2004) and Anaheim (2003) come and go. But the teams that win consistently tend to have huge payrolls - teams like Detroit and Colorado. Without a meaningful salary cap, the league will always be divided into haves and have-nots. The experience of other pro leagues suggests that salary caps come with their own problems.

In the NBA, teams looking to make trades or sign free agents often find their hands tied because they have no room under the salary cap. In the NFL, strict payroll limits force teams to cut good, talented players every year. For fans that have seen a favorite star leave town or watched a great team broken up for salary cap reasons, the cap is little more than a form of enforced mediocrity. It's a system that punishes teams for drafting and developing well, and for winning.

An NHL salary cap would likely be accompanied by more liberal free agency, which would mean a lot more roster instability. Under such a system, the slash-and-burn approach of the 2004 Boston Bruins - they went into the summer with just six regulars under contract - might be commonplace. But some teams might prefer this flexibility. The players want to preserve some version of a 'market system' with salaries decided by individual teams. They see a salary cap as an unfair restriction in a system where they already have little leverage or freedom. In its most recent detailed proposal, on December 9, 2004, the NHLPA proposed:.