Mike Smith’s Blog: Don’t give the players a CBA win just yet

Dany Heatley is the highest paid player in the NHL this year with a $10 million salary, but how much will he owe back? (Photo by Jana Chytilova/NHLI via Getty Images)

Mike Smith
2008-10-22 12:03:00

The NHL is entering the fourth season under the new collective bargaining agreement. The first three years have witnessed significant revenue growth that has led to an increase in club payrolls. 

Salaries, from the players’ perspective, have risen nicely.

There is a notion the new agreement has helped the players more than the clubs. But before you make an assessment, you need to read the entire pact. There is likely to be a major shift back toward the clubs during the 2008-09 season.

First, let’s look at some numbers:

The Hockey Related Revenue (HRR) for 2007-08 was $2.606 billion. The players received 56.7 percent of the HRR, $1.508 billion. The salary cap was $50.1 million for each club. It has been reported by various sources that the six Canadian clubs were responsible for one-third of the total HRR.

The salary total for players committed at the start of the 2008-09 season is $1.599 billion (according to nhlnumbers.com). The average club payroll is just more than $53 million. The cap ceiling is $56.7 million per club, which is $1.701 billion for the league.

The average player salary is approximately $2.215 million. Good work if you can get it.

Clubs that have less than $1 million in cap space are: Boston, Chicago, Detroit, Montreal, New York Rangers, Pittsburgh, San Jose, Minnesota and Washington. This list includes the last Stanley Cup winner, Detroit, last year’s runner-up, Pittsburgh, and several others that believe they can compete for the Cup this season. Chicago is the only non-playoff team from last year in this grouping.

Seven teams have more than $8 million in cap space: Atlanta, Los Angeles, Nashville, New York Islanders, Phoenix, Toronto and Vancouver. Only Nashville made the playoffs last season. This group, unlike the first one, has plenty of cap space for roster upgrades during the season.

So why is there a strong possibility of a change this year and, if so, what are the causes?

There is an “escrow” clause in the CBA that says approximately 10 percent of each player’s salary is placed in an “escrow account.” If the league’s projected HRR is met, the players receive 100 percent of their salary. Last season, all players received their full salaries.

That does not look to be the case for this season. There have been different factors that have led to the league’s revenue growth and two of them are Canadian related. First, the passionate Canadian fans, driven by their love of the game and the sense that anyone can win right now (not just the rich teams), have filled the buildings night after night. 

Second, the Canadian dollar has risen in value against the U.S. dollar. For most of last season it was at par, a far cry from when the dollar was 75 or 81 cents U.S.

The Canadian dollar has dropped below the 90 cents U.S. level during the recent economic crisis. At this level – and more so if it stays around 85 cents U.S. - the league’s HRR will drop.

If it drops far enough, the players will not receive their full salaries. The amount will be determined at the end of the season. As the season progresses, grumbling from the players’ side will be heard with the realization they will be taking a salary cut. 

If you, the fan, are keeping score on how the new CBA is working, the “escrow” is a point, a big point, for Gary Bettman and the owners.

Mike Smith is a former GM with the Blackhawks and Jets and associate GM with the Maple Leafs. He also served as GM for Team USA at the '81, '94 and '95 IIHF World Championship. His Insider Blog will appear regularly only on THN.com.