Charlton's NHL:
Hard Cap A Tight Fit?

Rick Charlton
July 17th, 2002

"How did you go bankrupt?" Bill asked. "Two ways," answered Mike. "Gradually and then suddenly."

- The Sun Also Rises - Ernest Hemingway

The NHL's seemingly inevitable and nasty labour mess of 2004 is still far enough away that the issues, let alone the solutions, remain nebulous, like what lies beyond the known universe and the reasons our Prime Minister thinks hanging on is somehow good for the country.

But the picture may be clearing a bit.

The New York Post raised many guffaws a month ago when it suggested NHL owners would use 2004 as an opportunity to go for the throats of players, putting a hard salary cap of $32 million in place to ensure everyone would have a chance to make a buck, regardless of the size of the market they might inhabit.

At the time, this seemed like a singularly unimaginative and draconian measure, like killing a fly with a Tommy Gun, even if it could be carried off.

Yet there was Leafs GM Pat Quinn the other day, while defending himself from charges he wasn't aggressive enough shopping for unrestricted free agents, mentioning $35 million as the possible top end of a hard salary structure in 2004.

``We want to be in a good position not to bury the organization with contracts you can't get rid of. If you've got three guys making $24 million (U.S.) and your limit is $35 million, that's not a good situation. How would you pay the rest of the team? Guys aren't going to play for $400,000,'' said Quinn. ``When Armageddon is finished, we want to be in good shape.''

Yipes. $35 million as a hard salary cap?

Even the negotiations with Curtis Joseph, Toronto's uber-goalie who fled to the Wings, seemed to have been coloured with the 2004 brush.

"With Curtis, the factor was less the age than it was coming out of what is probably going to be a lockout, and having a high number of guys under contract in a new collective bargaining agreement that we don't know the ground rules for,'' said Quinn.

Brian Burke, being unusually circumspect considering his normal self, recently talked of the need for "cost certainty" and said the probability that things will be radically different after 2004 is already colouring contracts around the NHL.

''It's certainly a factor in length of contract for some teams,'' Burke told the Boston Globe. ''We're counting on a new system in 2004. What that will look like we're not allowed to speculate on, and frankly, we trust the commissioner's judgment on what that will look like. But we are counting on a new system and we are planning on operating in that new system in 2004. But that being said, these four- and five- and six-year deals, someone's going to have to figure out how they operate in the new system, and we don't intend to be one of those teams who has a problem figuring out how they work.''

So there you have it. The new plan. Don't have many contracts going past 2004 because the "cost certainty" is going to be a very, very tiny one in comparison to the $70 million salary scale the Rangers are expected to employ this year.

It may not end up being $35 million but the fact a hard cap is even being shopped might tell us owners have finally had enough of themselves, that the 'idiot-proofing" of this next CBA will be the undercurrent of the next negotiations.

It's fashionable in some quarters to believe owners are cooking the books, crying poverty while the dough flows over the counter into their pockets. But you can count on a capitalist in at least one regard. He'll cry crocodile tears and squeal in pain even when he's making money but he'll only go out of his way to shut down his league, anger all his patrons, stop the flow of money and risk corporate suicide if he's actually reached a point where that's the most profitable alternative.

Owners have been going broke gradually - relatively speaking - over a period of a decade through massive and largely self-induced salary inflation. But issues like the Adelphia collapse in Buffalo, threatening the existence of the Sabres, as well as the annihilation of the stock prices of Comcast (Philadelphia), Compuware (Carolina), AOL Time Warner (Washington) and Computer Associates (Islanders) to name four, is turning hockey from a toy for boys into an albatross.

The stock market is no longer underwriting the losses generated by many of these franchises.

The day of going broke "suddenly" has arrived.

There are some who simply don't believe it. The Rangers for one. Maybe Dallas for another. Some might not care. How can you figure the $30 million and $25 million deliberately induced losses in Washington and St. Louis? But they were never your friends anyway. The rest? Well they seem to be taking it all pretty seriously. And where there's smoke there's usually fire.

But we've seen past examples of teams anticipating a certain outcome only to be savagely disappointed.

The Calgary Flames, as one example, entered the lockout of 1994-95 confident the end result would be a new CBA giving them the ability to put the screws to Joe Nieuwendyk, Theo Fleury and Robert Reichel, all with contracts expiring just as the following summer rolled around. But the Flames found themselves scooped when Gary Roberts remained injured, Reichel elected to play in Frankfurt, Nieuwendyk held out and only Fleury bothered to sign a below the belt deal being offered by ownership. Doug Risebrough was fired after a horrific start, holdout Nieuewendyk was eventually traded for Jarome Iginla and only the miraculous return of Roberts later in the year saved a playoff spot.

It's been all down hill on the fiscal front in Calgary ever since. The lesson learned? Don't count your chickens before they're hatched.

So we wonder aloud if owners will be able to inflict a miniscule and hard salary cap on players.

Not without an epic fight.

The NHLPA's Bob Goodenow was asked by Ron MacLean on HNIC a while back why he hadn't followed through on an invitation from Gary Bettman to get started on talks for a new CBA.

"All Gary wants to do is roll things backwards," was Goodenow's paraphrased response.

More specifically, Goodenow had this to say about the need to start negotiations sooner rather than later and indicates a hard salary cap isn't going to get more than a one-word reply from the players.

"We have an agreement until 2004, and we intend to abide by it," said Goodenow. "If Gary Bettman has made public statements he wants to start negotiations, then . . . if he has a proposal he thinks the players would be interested in, he should bring it forward. He hasn't done that. He's commented about how he would like a hard cap and that sort of thing, and that's a non-starter. He knows where we were on that issue in 1994-95; if he thinks that's going to be of interest to the players, he should bring it forward. I don't know (if) he would do that, though.

There's nothing to talk about? They'll stare at each until 2004 and then beyond?

In fact, they probably will stare at each other if the battle lines are as fixed as they appear, if a hard cap is the answer the owners are focussing on. No dilly-dallying with the complications of a luxury tax or a flexible cap. No examining the fairness of fixing player salaries as a percentage of revenues as the NBA does.

We always thought the NHL would actually require a more complicated solution than the other major sports anyway. The NHL lacks the smoothing effect of a large television deal, with franchises earning substantially disproportionate revenue streams and has always faced an uphill battle to find the right balance.

Unless, of course, they went the low-tech "club 'em on the head" route while pleasing the lowest common denominator.

Did we mention a low value salary cap might even eliminate the need for owners to share revenue, thereby eliminating another sticky problem?

Interestingly, the prospect of a hard cap is likely to be accompanied by the only carrot the players could possibly salvage from such a disaster, unrestricted free agency for players 25 years of age and older.

Last year in this space I suggested such a probability and drew universal laughter but gained some redemption a month later when a player agent (Charlton's NHL - May 16, 2001) quoted anonymously in the Calgary Herald backed me up.

If the majority of owners believe a low value hard salary cap is the target then they must also believe that unrestricted free agency will begin much sooner than it does now. One would seem to follow the other.

Which leads to another question. Since we're already seeing contract practices being altered will we also see trading patterns begin to change to fit the kind of outcome anticipated in 2004?

Sam Pollock made a career of trading old used-to-be's for up and coming young whippersnappers, the infamous Ralph Backstrom for a first round pick which turned into Guy Lafleur trade perhaps his finest moment. And that's been an iron-clad rule in hockey for a long time - trading future young stars for serviceable veterans comes with a large esthetic price tag which eventually has to be paid.

Will that change in 2004?

Recent speculation coming out of New York had the Rangers Petr Nedved coming to Calgary for Derek Morris (denied by the Flames). Such a rumour smacks of something in the Lafleur/Backstrom vein, a disaster waiting to happen as Nedved fades towards retirement and Morris ascends to his long forecasted stardom.

Unless, of course, you believe that a few years from now Morris is going to be a unrestricted free agent, not much different than Nedved in the minds of most, his services open to the highest bidder without compensation.

And that fact would also come in a world where all teams are equal in the shadow of a hard salary cap.

Will this be the summer where trading patterns change to reflect a newer, coming reality where a 25 year-old is no longer substantially different than a 31 year-old in terms of free agency status?

Not yet. Morris is still a Flame and Nedved is still a Ranger while Calgary GM Craig Button scoffs at the suggestion of such a trade.

Nevertheless, a hard salary cap accompanied by much younger unrestricted free agents would lead us to wonder as well how enthusiastically teams will be when developing young talent, knowing the kids can skip town just when they begin to hit their stride at age 25.

Will a hard cap mean the new carrot for players choosing one destination over another could be marketing opportunities in larger American cities? Iginla is an excellent example of how a hard cap doesn't necessarily put Calgary on an even footing with New York, his opportunity for other income being substantially greater in the U.S. than in Cowtown.

The cold hard reality is that this could also be the last contract Jarome Iginla signs in Calgary.

There is a certain compelling argument in favour of hard cap and even total unrestricted free agency. Every team is equal and good management is the only requirement to win. Fans in some larger market cities might actually see ticket prices regress to win back their support after a long work stoppage.

On the other hand, the Flames are having trouble breaking even with a $31 million dollar payroll. How does a $35 million cap help them?

So many questions. So much uncertainty. And yet, teams seem to be engaging in actions for a plan, which still doesn't exist and still hasn't even been negotiated.

Is this a group of owners seeing a future with rose-coloured glasses? Maybe. But hockey people are the one's who are bringing it up these days, not the media. And most league GM's seem to be altering their patterns of doing business to fit a predicted "new order."

They're not just thinking about it.

They're doing it.

''THERE ARE A LOT OF DIFFERENT WAYS TO COME UP WITH COST CERTAINTY, and we trust the commissioner's judgment. I do think he has wide-ranging support and I do think some of the people who have decided to spend money (on free agents - Dallas/New York) support him completely. They're just willing to operate under the new system with these long-term deals. I don't think it's a sign the commissioner doesn't have a unified group behind him at all. He's got our complete carte blanche.'' - Brian Burke, President and GM of the Vancouver Canucks. Burke highlights the one factor, which is markedly different about the coming negotiations between NHL players and owners versus previous confrontations. Bettman has been given a 75% veto by owners to negotiate a deal to his liking. That means to overturn his judgement on what needs to be done, at least 23 teams would have to vote against him. That's a tremendous amount of power that millionaires and billionaires have given to Bettman, a salaried employee. It also makes the job of Bob Goodenow significantly more difficult than the one he had in 1994. We would presume that Goodenow will do what he has done in previous negotiations, look for the seam which brings the mid-sized market owners in line with the larger markets, screwing the small markets for the benefit of his union. Which is his job by the way and something I wouldn't argue against. Bettman, without a doubt, was given the 75% veto to prevent Goodenow and his team from pitting owners against themselves. It's perhaps another example that owners recognize themselves, and not the players, as their own worst enemies.

. . . . . . WE'RE ON RECORD AS SAYING WE BELIEVE there must be a system of cost certainty that enables all of our clubs to be economically viable and competitive where they are currently located." - Gary Bettman.