Our recommendations for the top CBA issues

October 14, 2012 by Leave a Comment

Everyone has their opinion about what the final agreement should look. Here are our two cents based on finding some type of balance for both sides and addressing the major issues from both an economic and sustainability perspective.

Revenue Share:

Our recommendation is to have the revenue share start at 53% for the players in 2012/13 and be reduced by 1% each year until it reaches 50/50 in 2015/16. At the same time, all currently signed contracts should be paid without an across-the-board reduction. However, we also suggest for salary cap purposes, all current contracts be prorated for the salary (e.g. only count at 93% against the cap in Year 1 – 53% divided by 57%) based on the current year rev share percentage divided by 57%.  As a result, all current contracts would still be paid at the full amount, but allow teams to manage the salary cap in a more reasonable manner. Thus teams with large long-term contracts will be ‘punished’ by having to pay the full cash amount but not be harmed from a salary cap perspective.

Contract Lengths:

As mentioned previously, 10 years is too long and does not make economic sense for a contract length given the lack of visibility into any contract 10 years out. We recommend a maximum of 7 years for UFAs and 5 years for players who are RFAs.

HRR :

This is a very complicated issue as Elliotte Friedman has pointed out. It seems like the current CBA has flaws, in particular because the agreement tried to simplify things across all 30 teams by setting rules to simplify the effort required to calculate true HRR. If the NHL & NHLPA agree not make any changes to HRR that is fine – but in reality all revenue related to hockey players performing on the ice should be included with the owners calculations with direct costs being subtracted to determine the net shareable revenue.

Clearly there were many challenges in the recently expired CBA, at the team level that created unintended consequences and need to be addressed. I would suggest spending a little more money and time to get an impartial cost-accounting expert/firm to develop an activity based costing approach for each of the 30 teams that can be updated every year based that adjusts to the dynamics of each team/arena.  This would address head-on all the nuances of owning/operating versus not owning the arena handle both revenue and costs in a more accurate manner to reflect actual hockey-related activity.

Cost Sharing:

We recommend the NHL adopts cost sharing,  not revenue sharing, for the top 5 revenue generating teams to offset the player and travel costs for the bottom 5 revenue generating teams for games in which the low-revenue team visits the high-revenue team.

Filed under Economics, NHL CBA, RFA, Salary Cap, UFA

2011-12 Top 3 Underpaid Defensemen

June 16, 2012 by Leave a Comment

Here is the list of most underpaid defensemen fromt he 2011-12 season.  There is no surprise that Erik Karlsson is at the top of the list given his Norris Trophy nomination.  What is consistant among all three of them is that they are still on their entry-level contracts and are playing at a very high level with less than three years of NHL experience.

Team Goals Assists Points TOI Cap Hit ($M) True Value ($M) Amt Underpaid   ($M)
1. Erik Karlsson OTT 19 59 78 25.32 1.30 6.24 4.94
2. P.K. Subban MTL 7 29 36 24.30 0.88 4.04 3.16
3. Ryan McDonagh NYR 7 25 32 24.73 0.85 3.90 3.05

Both Karlson and Subban and RFAs this summer, so both should expect big increases in their pay and will certainly not be on this list next year. Unfrotunately,  McDonagh still has one more year on his entry level contract, so his pay day won’t come until next year. The Montreal Canadiens don’t need another reminder that they gave up McDonagh in the Gomez deal, but this is yet another piece of data reinforcing how one-sided that trade was.

Filed under 2011-12, Defensemen, RFA, Underpaid Tagged with , , ,

Logan Couture: The Sharks got a great deal

June 15, 2012 by Leave a Comment

Last summer Doug Wilson, GM of the San Jose Sharks, announced that he had re-signed Logan Couture for a 2 year deal which kicked in when his entry-level contract was completed at the end of the 2011-12 season.  Couture had just come off a great first full-year campaign with the Sharks and finished second for the Calder Trophy voting for rookie of the year.  It made sense that the Sharks wanted to lock him up for a longer period of time and address the contract before he reached RFA status.

What was very surprising to me at the time was the size of the contract.  Couture’s first year stats were impressive, ranking #66 in overall point with a +18 plus-minus. When you factor in his playoff performance in 2010-11 (14 points in 18 games) it was clear that even if he just maintained that level of performance he was a Tier 1 player in the NHL.  When I looked at the numbers of the two-year contract of $2.75M and $3M ($2.875 cap hit) it seemed rather low. Now that the 2011-12 year is done (which included an All-Star game appearance), it seems even more obvious that Doug Wilson and the Sharks are getting a smoking deal for the next two years (assuming he stays healthy and continues to perform at a similar level).

Logan Couture
GP G A Pts Cap Hit ($M) True Value ($M)
2010 25 5 4 9 0.30 0.59
2011 79 32 24 56 1.24 3.72
2012 80 31 34 65 1.24 4.57

Keep in mind these numbers are regular season only and do not include playoffs (see the Puckonomics methodology for an explanation) so adjusting for playoffs would likely make his True Value even higher than the amounts shown above.

While Couture would have only been an RFA at the end of the 2011-12 season and probably not been able to capture the full amount of his True Value like a UFA would, it is clear that he is worth significantly more than the $2.75M & $3M he will be earning the next two years.  I certainly hope that whoever is the GM of the Sharks at the end of this contract is ready to compensate Logan Couture not only for his future value on the ice, but also recognize that the organization underpaid him since day one on the team.

 

 

Filed under Forwards, RFA Tagged with , ,