The NHL CBA, the Isles, and Wang's World

Dom's post about the potential new deals for KO and Bailey this morning spurred me into some mildly serious consideration of the CBA and it's upcoming expiration. In the interest of full disclosure, I myself am not a lawyer and had not read the NHL CBA prior to the date of this FanPosting.

In this FanPost, I'm only going to be examining certain aspects of the current CBA and labor situation so that we might discuss the potential changes or additions in the next CBA and how it will affect the continued development of our Islanders into a dominating force in the East. With that said, let us continue on to the facts and questions!

Fact: The current CBA expires in September 2011, and has an option for a 1-year extension which only the NHLPA has the power to exercise. Edit: The NHLPA exercised that option this summer, so the CBA now runs through the 2011-12 season. (NHL CBA Section 3.1 clauses a and b.)

Why does this fact matter to us? Well, some of you may have become aware that former MLBPA director Donald Fehr has become increasingly involved with the NHLPA over the past several years and is considered by many in the mainstream media (MSM from here on) to be one of the more likely choices for the currently vacant position of head of the NHLPA. Some Fehr-related tidbits: Fehr presided over not one but TWO strikes during his tenure in charge of MLBPA. (He was also involved in the Seitz decision leading to free agency in MLB.) MLB is the only remaining major sports league without a salary cap, although it does have a luxury tax system in place. I think that Fehr can safely be considered an opponent of salary caps. His influence and potential control over whether or not the NHLPA chooses to extend the current CBA must be taken into consideration.

Popular Conjecture 1: The owners were in favor of a salary cap because they thought it would reduce player costs while increasing their profit margins. The players were against it because they thought it would reduce salaries.
This conjecture is essentially correct, although functionally inaccurate. It can be noted that the salary cap has continued to rise on a yearly basis, which can be presented by individuals such as The Commisioner Who Will Not Be Named as an example of the strength of the league. Glossed over in such representations is the fact that the salary floor (Section 50.5, particularly clause b) has continued to rise, which leaves certain owners (the cash-strapped and cost-concerned) unhappy. The players are likewise unhappy due to the conditions of the player escrow (Section 50.4) implemented as part of the salary cap.

Of course, the inaccuracy of the increase in the salary cap being presented as a product of the league's strength is partially due to the fact that the NHL is one of the few major sports leagues which has to consider international exchange rates. The Canadian dollar is particularly strong at the moment (as of this composition, a Canadian dollar is worth 94 American cents) and the continuing strong profits of the Canada-based NHL franchises handily butress the less robust financial status of numerous US-based NHL franchises, particularly those located in the American South and Southwest.

Fact: The NHL does not have a TV deal beyond the 2010-2011 season.

Versus has been extending year-by-year since the conclusion of the 2 year $130mil (USD) deal reached at the conclusion of the lockout. NBC's Sunday package was renewed for 2 additional years (does anyone know the $ on this one?) prior to last season. There has been speculation (notably by Wysh over at Puck Daddy) regarding the desire of The Commisioner Who Will Not Be Named's desire to increase the NHL's TV deal to a much higher figure (Wysh speculated on $500mil USD combined) to be shared among the franchises. Such a windfall would surely impact heavily the negotiations upon the next CBA.

Conjecture: The NHL is unhappy with the salary structures and terms which have been used by some teams to make contracts fit under the salary cap and feel that teams have been violating the intent of the system currently in place to govern how player salaries are applied to the salary cap from year to year.

I'd say that we can count this fairly well as fact, given their reaction to the Kovy contract and it's bald-faced manipulation of salary averaging to create a greatly reduced cap hit. (I wish there were more available details on the quasi-confirmed NHL rejection of the proposed structure for a new version of the Kovy contract...)

Point of Note: NHL players are in the envious position of having their entire contract guaranteed (Section 50.9 clause i) relatively speaking - the only way they can be "cut" involves buyouts, where the player might be receiving either 33 or 66 percent of their remaining salary for the remaining years on their contract...which still counts against their team's salary cap as we Islanders fans well know.

Where does this leave us? Well, here are the potential swing factors in any upcoming CBA negotiation:

• The influence of Donald Fehr as well as who exactly the next NHLPA Executive Director might be will have a tremendous impact on how the NHLPA approaches the discussion.
• The status of the NHL's TV deal is going to greatly modify the size of the pie and the willingness of participants on both sides of the table to "share" said pie.
• The results of the "Kovygate" Contracts (I think we can pluralize that) and what actions, if any, are taken by the league in response to retroactively identifying similarly offending deals are something which are quite likely to make their way into a clause or subclause of Section 50.5 (particularly subclause d, which stipulates how contracts are averaged*).

(*The actual language in 50.5.d.ii reads: "For any multi-year SPC, for purposes of calculating the Club's Averaged Club Salary in any League Year, the Averaged Amount of such SPC shall be used. That is, the Player Salary and Bonuses for all League Years shall be "averaged" over the length of the entire term of the SPC, using the stated amount, by dividing the aggregate stated amount of all Player Salary and Bonuses to be paid during the term of the SPC by the number of League Years in the SPC (see Illustrations #1 and #2 below)." It's page 222 of the PDF, entertaining  stuff!)

Now, and most importantly, how does this affect us as Islanders fans?

In my opinion, we're one of the teams which can potentially feel severe hurt from multiple permutations of the potential next CBA. For instance, if the current hard cap and floor are removed in favor of a cap-only or a soft-cap and luxury tax, we may be unable to compete with market rate for prime players and thus will potentially lose our budding stars to teams with a larger budget for player contracts.

As best I can tell at this point in my perusal, there are no provisions in the current CBA for the possibility of play without a CBA in place, so our contract negotiations in the period leading up the expiration of the current agreement are likely to be targeted to last through the end of the first year of the next CBA, to allow us to retain control of our players and have the cap flexibility to reoganize contract terms and salaries in reaction to any changes to the salary cap. (I expect that KO will be an exception to this one, and possibly Bailey as well depending on the continued development of both.)

At present, the best-case scenario I can envision would be to first see the league reach a sizable new TV deal well in advance of the 120 day window for the NHLPA to extend the current CBA. Increased TV revenues will relax the owners, and the NHLPA may be more willing to extend the deal due to the major swing in hockey related revenue (HRR) such an infusion of cash would create, giving them leverage at the bargaining table via the "larger pie". Then both parties would be afforded the time and patience to sit down and iron out the kinks in the current cap and floor system to stabilize the league for the next decade or more.

The Dom Questions: Life with Garth and Wang in Wang's World
Dominik commented:

So as for how Snow anticipates that? I have no idea. I guess he’ll have a slightly better clue by next summer.

Of course the other X-factor for us is how much Wang will be willing to spend, and if he’ll even know what venue his team will play in just a few seasons into the next CBA.

So far, Snow is displaying the following talents as a GM:

• Identification of young talent
• Caution regarding salary negotiations
• Thriftiness and an eye for productive trades

His lone major "weakness" right now seems to be difficulty convincing top-tier free agents to come to the Island, which many of us suspect really has more to do with the organization's status than any deficiency on his part.

With an unknown cap situation looming, the odds point to Garth continuing to proceed with his current modus operandi. Namely, well-balanced deals for short-to-intermediate term, prioritizing his "key" parts but resisting the urge to overpay as an opening gambit.

Our X-factor, Wang's budget stipulations, has two large issues hanging upon it: HRR from the TV deal, and the Islander's arena situation. If there's improvement on either or both fronts, we're sure to see the budget increase.

What do you all think?