As we approach NHL Free Agency we will see a new type of contracts, those signed under the new CBA. They will be the first signed with the knowledge of what the salary cap will look like multiple years down the road. Teams would very much enjoy this insight under normal circumstances, however knowing the cap will remain flat seems like a dark cloud over their heads.
The National Hockey League’s highest paid players are demanding higher salaries every year, based on the annual increase of the upper limit. Now, it is not clear if the cap will rise until 2022, and even then the increase would be limited to $1m. Top free agents now have to negotiate for the same contract value as their comparables, rather than percentage of the cap. Even then, existing contracts were signed with the expectation that the percentage of the cap that contract occupied would dwindle over time. Every cent of every contract from this point on will take up a measured amount of space in a team’s cap structure.
The two big extensions already signed under this CBA are examples of how the flat cap will impact negotiations. Those belong to defencemen Jeff Petry and Jonas Brodin, who both signed for $6.25m or less when Tyler Myers was able to command $6m a year ago as the top D on the UFA market. For a comparable that wasn’t on the open market yet, Justin Faulk commanded $6.5m in September 2019. I feel that Petry and Brodin are more valuable, but a lower cap in the coming years limited their ask.
In that sense, a contract signed with the knowledge of a flat cap is fundamentally different than one signed previous. Existing contracts have been punished equally, but not every team has the same amount of players signed for the same length of time. This led me to inquire about which teams are ‘punished’ the most by their existing contracts.
Over the past 5 seasons, the upper limit has risen an average of $2.5m per year. Even though we are all currently being exposed to the complexities of the salary cap, let’s keep it simple and extrapolate that over the next 5 seasons. A pessimist would say that you cannot just project past growth because things like, well, a pandemic can get in the way. An optimist would say the new US TV deal would increase the cap even faster. The baseline is $2.5m per year increase for 5 years.
If a player has a cap hit of $8.15m, 10% of the cap, on a five year deal the expectation would be that by the end it would only be 8.9% of a $91.5m cap. I took each contract signed beyond 2022 and calculated the difference between their expected cap hit under $2.5m annual growth, and their actual cap hit on a flat cap. For contracts that extend into the period where the cap could rise (2022-25), a $82.5m cap was used for actual value. Beyond that, the expectation the cap will again be tied to HRR means contracts signed prior to the flat cap are not punished any further.
Then I added up the amount by which each contract would exceed the expected percentage, for each team, in each year. In this, we have a single number that represents the amount of cap each team expected to open up, but will not due to the flat cap.
For example, Buffalo’s Jeff Skinner has 7 years remaining on his contract at $9m per season. Assuming the cap would have been $94m for the 2024-25 season, Skinner’s $9m contract would be 9.6% of the cap. That same percentage would occupy just under $7.9m of the projected $82.5m cap for that season, and as such the Sabres would be ‘punished’ $1.1m on Skinner’s contract for that season.
I looked at all the contracts signed for at least 3 seasons beginning in 2020-21, in order to determine which teams suffer the most from the changes to the salary cap.
Who Suffers the Least?
There are 4 teams that stand out, with very few contracts signed for at least 3 years. Naturally these teams are not very competitive, looking to rebuild or in the middle of a rebuild. New Jersey, Columbus, Vancouver, and Detroit got off the hook the easiest, in order with Detroit having the lowest ‘penalty’.
Between those 4 teams only three players have contracts beyond 2023. New Jersey has Nico Hischier, Columbus has Cam Atkinson, and Vancouver has Tyler Myers. The Red Wings longest contracts are Justin Abdelkader and Dylan Larkin, both of whom are UFA in 2023. They might not be in the best position with contracts, but at least Detroit has a clean slate moving forwards.
What the new rules mean for these 4 teams, is that they have an opportunity to build a more cap-efficient roster than anyone else. More cap space this summer would allow Vancouver to re-sign some nice pieces, however they might be better off trimming the fat now. The Canucks have some franchise players to extend over the next couple of seasons, including Elias Pettersson and Quinn Hughes, and signing them to long term deals under a flat cap could be an advantage. Building around them now, would mean that the cap starts going up again when the Canucks core is most cap efficient. If they can navigate the initial squeeze without losing a player like Brock Boeser, they have a chance to stop signing bad contracts and become a contender.
Matt Sekeres: I’m told the Canucks are exploring the possibility of trading Brock Boeser.#TSN1040
— Rick Dhaliwal (@DhaliwalSports) July 10, 2020
On the flip side, teams like Detroit can save their cap space to be the dumping grounds for contracts contenders cannot afford. With the cap being flat more teams are likely to spend to it, and more teams are likely going to get into cap trouble. When you add the Seattle expansion to the mix, there could be some nice sweeteners for taking odd bad contracts, like the 1st round pick the Leafs traded the Hurricanes to buy out Patrick Marleau.
Who Suffers the Most?
To be blunt, it’s Tampa Bay. The Lightning have 8 contracts signed for at least 3 seasons, and 5 signed for at least 5 seasons. On top of that the players locked up are their stars, so there is a lot of money tied up for those 5 years.
Just to be clear on what you are seeing in these charts, the bar represents the effective cap disadvantage in a given season. The different shades in the bar are for different contracts, so you can see how much one individual player contributes.
Tampa’s cap constraint has been well documented, but the flat cap may have changed the best solution to their cap problems. They already need to move a big contract, it may be a good idea to trade a long term one if the Lightning think they can sign a similar player at a lower price somewhere down the road. There are 3 seasons where Tampa is particularly impacted by the contracts they already have signed. The first of which, 22-23, will be the first season of Brayden Point’s eventual new contract, and they face a disadvantage of over $4m.
They are also one of few teams with an 8 year extension beginning in 2020-21, starting goaltender Andrei Vasilevskiy. Even once the cap begins to rise on a regular basis, his contract will still take up a larger percentage than expected as it went through multiple years with no cap growth.
The flat cap is bad news for Tampa, but they just won a cup and will still remain one of the top teams in the league. The loss of a guy like Yanni Gourde or Tyler Johnson does little to slow them down, especially when they can recuperate assets when they make a trade. I think back to the Jonathan Drouin for Mikhail Sergachev trade and wonder if they will target another ELC player.
San Jose Sharks
It feels a bit like kicking the Sharks while they’re down, but they are a clear 2nd. Their top 3 defencemen are all over 30 and all signed for at least 5 more seasons.
Similar to Tampa Bay, San Jose faces their biggest disadvantage just as a key forward becomes RFA. For the Sharks it is Timo Meier, who has a $10m qualifying offer at the end of his current deal in 2023.
Where the Sharks differ is how they performed this season. Not only did they miss the playoffs, but they didn’t have their own 1st round pick. Perhaps this was just a bump in the road, the Sharks were a very good team for a long time. More likely though they are at the beginning of a path that leads to bottoming out as their core becomes less productive and more expensive. The best course of action for them could be to make space for cheaper, younger players, and try to collect assets while they part out their core.
This is one team who might have sympathy for the Sharks, they both took a top potential UFA off the board in 2019 (Duchene for Nashville and Karlsson for San Jose), but failed to meet expectations for the season. Nashville finished at the top of their division last season, then lost in the first round to Dallas. This year they finished 5th in the Central, and now they must defeat Arizona to make the playoffs.
Nashville had the oldest roster in the league this year, their youngest forward was 25 year old Filip Forsberg. They are already paying all the core pieces that need to be paid, and have them locked up for term. The flat cap is going to impact Nashville more than almost any team, yet they are very equipped to handle it.
Between Mikael Granlund and Craig Smith the Preds have $10m opening up this summer, and no players in need of a significant raise. The big question for Nashville is if they can better production out of Kyle Turris and Matt Duchene. If those guys rebound the Predators have a cost-controlled core with room to add, and a win-now window. If not those are two deals with significant term that are going to be made much worse by a flat cap.
These are the 10 teams that face the biggest cumulative impacts on their existing contracts under a flat cap.
The Leafs are the 8th most disadvantaged team by the flat cap, but they do not face any immediate challenges with regard to extensions. They have a strong core under contract for the next 3-4 seasons, at which point the cap will be rising again. If the core is still together at that point the Leafs may have some additional wiggle room to extend players like Nick Robertson.
The average age of the players on these ‘punished’ contracts also tells a story. The top 4 teams have all been to the Stanley Cup Finals in the past five years, and 6 of the top 10. These teams are being punished on the back end of their star players primes, and it will likely expedite their transition to a rebuild after their window closes. On the other hand, young teams like Toronto, Winnipeg, and Florida may be able to offset the ‘extra’ cost on their contracts by the on-ice improvements of those players. Mitch Marner may not be worth $10.893m on a flat cap, but he will be far more valuable at 27 than a player like Jeff Skinner will be at 32.
The fact that these contracts were signed before or after the pandemic will eventually be lost to time, and in fact some of the contracts in this study have already been traded. At this moment in time though we can attempt to quantify the misfortune caused by the flat cap, and use it to understand the implications on teams moving forwards.