Wednesday, July 21, 2010

NHL Koval-chuks That Deal Out The Window

On Monday, my esteemed colleague offered his commentary on the Devils' 17-year, $102 million deal with Ilya Kovalchuk. The "thesis" of his argument? The deal was absurd. And it seems the NHL has agreed.

I don't mean to give the wrong impression - the NHL can't throw out a deal just because the terms seem ridiculous. This contract was rejected because it is, according to the NHL, in violation of the salary cap.

SALARY CAP 101: Every sport has different rules - some subtle, some overt - regarding the manner in which the salary cap functions. In the NHL, the "cap hit" (the amount of money that counts against the salary cap) each year is essentially the average annual salary of the entire contract. Basically, take the total dollar amount of a deal and divide it by the number of years the contract runs, and you've got the annual cap hit.

So back to Kovalchuk's deal, which was structured like this:
Years 1 and 2: $6 million each year
Years 3, 4, 5, 6 and 7: $11.5 million each year
Year 8: $10.5 million
Year 9: $8.5 million
Year 10: $6.5 million
Year 11: $3.5 million
Year 12: $750,000
Years 13, 14, 15, 16, and 17: $550,000 each year

A total of $102 million over $17 years means a $6 million cap hit each year. But the NHL declared that the Devils were circumventing the cap. The six years at the end of the deal ($750,000 for one year and $550,000 for five years) drag the average down. Without those six years, the cap hit would be over $8.95 million per year. Kovalchuk makes $98.5 million of the total $102 million in the 11 years (roughly two-thirds) of the deal. And no one really expects Kovalchuk to play the last few years of his contract, when he'll be over 40.

The National Hockey League Players' Association has 5 days to file a grievance. We can expect the NHLPA to do so. Deals like this, though sneaky, have been accepted by the NHL in the past. Take a look at the most recent "frontloaded" contract, Marian Hossa's deal with the Blackhawks.

If you give a team a salary cap, they'll ask for a way to get around it. Without an established rule, it's hard to say which frontloaded contracts are permissible and which ones are not. Look for the NHL to come out with a definite set of rules, if not this year then at least in the not too distant future. Who knows, they might even name it the "Kovalchuk Rule."

But if they don't, I guess I'll look like a chuk-ing idiot.

1 comment:

  1. if he plays the entire contract, by the time he's a free agent again he'll still be younger than Chris chelios who at this point in time is 48 and on the Atlanta thrasher's roster