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NHL CBA Negotiations: The "Runaway Salaries" Myth

Mamaaaaaaaa.... just killed a league. Put a gun against its head, pulled my trigger now it's dead.
Mamaaaaaaaa.... just killed a league. Put a gun against its head, pulled my trigger now it's dead.

While a good portion of the hockey blogosphere is busy telling people whether they should or should not be panicking in light of the NHL owners' initial CBA proposal, details of which leaked late on Friday night (conveniently), I want to take a step back and make sure that we're all working on the same page. The owners and the players may be fighting over not only who gets the biggest cut of the revenue pie, but also how much say players have in demanding their own slices (and when), but that revenue comes out of fans' pockets and it's important that fans at least know how the pie is prepared.

One of the pervasive half-truths of this conversation is the idea that player salaries have again gotten out-of-whack; that dedicating $100M to any single player (let alone three players in the span of this summer, as the Suter, Parise, and Crosby contracts have done), is what's wrong with the NHL's system. The problem is that this may be true, but it's not true for the reasons the owners want you to believe.

Player salaries are constrained perfectly within the system the NHL designed and forced on the players in 2005.

Every time you hear somebody say that teams can't afford to give out $100M contracts or that cap-circumventing contracts are a way for the owners to continue to shoot themselves in the foot, just remember that there is one hard-line piece of the CBA that none of these small tricks can work around.

Monies paid to the players in any given year cannot ever exceed 57% of hockey-related revenues. Ever.

While you're playing on your slippery slope of a team built entirely of long-term, cap-circumventing deals, just remember that when we're talking about the owners shooting themselves in the foot, we're talking about a completely different game. Before 2005, owners shooting themselves in the foot was a collective problem; here, it's a competitive one.

Let's go ahead and pretend we have a team (I don't know, let's call them the Mini-Soda Whiled), which is made up entirely of players making a $4M cap hit against $10M actual salaries, because those salaries will drop ten years from now. By pure hypothetical nonsense, our team actually spends exactly 100% of their revenues paying these player salaries. This is awful! We've got a team that has failed spectacularly and the whole league suffers for it!

Well, yeah, the whole league kind of does because now they have one less team to put on their schedules and it's a big pain in the ass dealing with what to do with all of those players and relocation and the whatnot, but what about the actual money?

Monies paid to the players in any given year cannot ever exceed 57% of hockey-related revenues. Ever.

You know what happens if one rogue team pulls this and the rest of the league plays within the rules? The players end up giving back millions of dollars to the league in escrow payments, that money is then given back to the owners and divided among them. It's like the NHL's very own built-in luxury tax!

The way the system is currently set up is not designed to completely eliminate the possibility of a stupidly-run franchise blasting themselves out of existence, and it shouldn't be the players' responsibility to prevent that anyway. The system simply minimizes collateral damage and uses a hard cap on player expenditures to make sure that it's essentially impossible for the entire league to collectively shoot themselves in the foot.

The next time somebody (like Craig Leopold) tells you that "we cannot afford" this or that as far as it comes to player salaries, just remember that person is using "we" to discuss only his team. The NHL told fans that they could run a successful league with this level of cost certainty in place. That level of cost-certainty has never changed.

There remain plenty of small issues at hand about how the money in the NHL is divvied up, but the idea that the league cannot thrive because player salaries have gotten out of hand is complete hogwash. The truth lies in the difference between the spending commitment we were promised would work and how well (or poorly) that commitment is shared among all member teams.