Who loses with a 17 year contract?

The One Hundred Million Dollar Man

Today’s signing of Ilya Kovalchuk by the New Jersey Devils to a rumored 17 year deal worth more that $100 million is the latest example of an NHL team utilizing a nice little loophole in the CBA to their advantage. Other deals that have taken advantage of the same loophole include the Luongo, Hossa, and Zetterberg contract. If you aren’t a salary cap nerd and this loophole isn’t familiar to you, allow me to explain.

Contracts that take advantage of this loophole are for a term longer than the player will likely play, are heavily front end loaded, and are worth almost nothing in the final years of the deal; years when the player is often over 40 and very unlikely to still be playing. Here comes the good part, because the deal was signed before the player turned 35 there is no cap hit for the final years should (in reality when) the player retires.

Numbers are always easier to understand than wordy explanations so let’s take Hossa’s contract as an example. Last year at age 30 he signed a 12 year, $63.3 million deal with the Hawks; the cap hit for the deal is $5.275 annually. In the first eight years of the deal Hossa will be paid $59.3 million of the total contract value, or on average $7.4125 million a season. If Hossa decided to retire after turning 38 he’d leave just $4 million on the table and the Hawks will have saved over $2.1 million against the cap every year.

The benefit for the player and the team when it comes to contracts like this is obvious; the team reduces their cap hit and the player gets his money. And this is exactly why there is no rush to close the loophole because both sides love it. If the deal is good for both sides then there’s no harm, right?

Well not exactly. If I’m a middle of the pack NHLers – say in the 20 goal, 40 point range – this deal would drive me insane because it costs me money. When my agent sits down to negotiate my next contract he’ll pump up all my good traits and find comparable players that I deserve to be paid like. But if the NHLs elite players are signing contracts worth less on average than what they’re actually worth then that brings down the value of all other players as well. I know we’re talking about guys getting paid millions to play hockey but who wouldn’t want every penny that they can get, after all a career ending injury is always a possibility.

I’ll go on record as saying that I think that contracts like the one Kovalchuk signed today and ridiculous and are a bad idea for the NHL. If Kovalchuk’s contract is in fact a 17 year deal it’ll expire when he’s 44, am I really supposed to believe he’ll still be playing at 44? What about the next contract that expires when the players is 46? Or 48? Teams are going to keep pushing this until finally the NHL has to say no to a deal because the term is just unbelievable and then all hell will break loose.

But what I think doesn’t matter when it comes to CBA issues. And there is no reason for the owners to close this loophole since it’s helping them from a cap perspective. When push comes to shove, if this loophole is going to be closed it’s going to have to come from the NHL rank and file because they’re the ones that are getting hurt by this; the elite are still getting their money and the 4th line grinders and rookies are going to get under a million dollars a year regardless, so it’s only the middle class that suffer. In this case it’s getting them right in the pocket books so they might actually pay attention for a change.