Players become unrestricted free agents at a very young age under the current CBA. That means they have an opportunity to hit the free market, essentially maximizing their potential salary, quicker than in the years prior to the lock-out. Organizations must financially plan accordingly which can be tricky in the salary cap era.
Lately, when it comes to signing or extending premiere players between the ages of twenty-five to thirty, the trend around the league is to offer either mid-length contracts (5-6 years) or career-length contracts (12-15 years). The difference is if you sign the player to a five or six year contract you mitigate your risk. If the player under-performs, he doesn’t financially handcuff your franchise for a decade. But mid-length contracts usually occupy a greater amount of salary cap space. With a five or six year contract, a player’s salary cap number reflects his value. There’s no way of getting around it.
Conversely, career-length extensions for premiere younger players and mid-length extensions for premiere veteran players are almost always structured in a way in which the player counts against the salary cap less than his value suggests. This is done by front-loading the contract so that in the final two or sometimes three years, the player is getting paid very little actual money. By this time the player’s production is slowing and is nearing retirement. These contracts appear to be great candidates for buy-outs. It wouldn’t be unreasonable to suggest they were designed with the intention of being bought out, though teams will never admit as much.
At first when these front-loaded contracts started popping up I thought it was a little unfair. Small market teams typically don’t have the extra money it would take to buy out players that were once stars but whose skills have since diminished. It’s almost like the wealthy teams are buying more salary cap room when they sign players to front-loaded contracts. I’ve been able to get past this sentiment though after seeing how recklessly most of the wealthy teams spend their money.
If wealthy teams want to risk their long-term competitiveness by packing their roster with expensive long-term contracts, then they should be allowed to do so. Chicago, Philadelphia, and New York (Rangers) have payrolls that are saturated with these huge contracts for players they signed in free agency that are under-performing. In the salary cap era, teams need to use some discretion with free agents. Big ticket unrestricted free agents never seem to be able to live up to their contracts with their new team. It rarely works in hockey.
Still, it is a little concerning seeing so many long-term contracts all over the league. I don’t envision the salary cap going up much in the near future but every year there is a new crop of young, talented players who are making an impact and whose payday is just around the corner. There’s no way to foresee how much a current amateur may contribute to the success of his professional team a few years down the road. For those that do eventually turn into good professionals, the day will come where their status suggests a large financial commitment. What are teams to do in this case now that they have so many big, long-term contracts? Teams can’t afford to keep everyone. What’s the future going to be like?
That’s the downside of allowing long-term contracts which, in the NHL, are guaranteed. That is to say, teams do not reserve the option to just cut an under-performing player like they can in the NFL. When you have a player who is signed to a big contract, and he starts under-performing, the team just has to ride it out. In years past, it wouldn’t be so bad because it would only be a matter of a year or two before the player’s contract expired, but now some of these contracts can be upwards of ten or more years long. Those are high risk deals and they’re everywhere.
Where this leads, I have no idea. I think it would be pretty smart for the league to try and restrict contracts to a maximum length of six years when it comes time to renegotiate the CBA. The NHL has been fortunate that most of the players with extremely long-term contracts have been performing well. Then again, a quick look at the state of the New York (Islanders), who are still paying Alexei Yashin millions every year after buying out his lucrative, long-term contract, suggests otherwise. These contracts have the potential to serious cripple a franchise. That’s obviously not what the league wants.
Further Reading:
- This is a killer article explaining why front-loaded contracts are not in the best interest, financially, for the majority of the players .