Monday, July 21, 2008

End Of The Rookie Salary Cap?


1) The NHL instituted the idea/concept of limiting the salaries of entry level players in the mid 90's when several big time players (Eric Lindros) came into the league demanding huge sums of money before they even had played one NHL game. The rule set forth that players under 24 who are playing in the league for the first time would have their salary limited in their first 3 seasons to a set maximum plus set allowable bonuses not to exceed an annually set level. The cap was worked into the 1994 CBA as a way for owners to have a level of cost certainty for rookie contracts. However, players, agents and owners initially circumvented it by using lucrative signing bonuses and performance incentives to supplement rookies' maximum base salaries. In the most recent CBA these loopholes were largely abolished.


2) With the new league wide salary cap restricting team payrolls GM's used the rookie cap to infuse talent at relative low cap cost. Even when these entry level deals expired in years past players had only a few areas of leverage as they were still RFA after the 3 years were up. They could use arbitration, or the threat of an offer sheet. Even today (despite the ramblings of Brian Burke), an offer sheet is still a rarity, and something you'd unlikely see for anyone other than the top tier stars. As Vancouver found out the hard way, trying to poach another team's RFA can come back to bite you! Therefore we believe we won't see many offer sheets thrown around in the future. The recent Radulov situation illustrates where it might become plausible for additional young talent to go back to Europe to play if they are offered salaries beyond what they normally would be paid in their early 20's and not yet established themselves.

3) So why would the NHL then abandon a rookie cap if its working for them so well? Firstly, we don't believe it will in the short term, but if things progress they may have no choice. Their problem is the KHL and European super leagues. Without a player transfer agreement, and with the Eurpoe, especially the new KHL trying to poach as much young talent as they can, they will surely try to lure the players with big paydays. Well beyond what the NHL would compensate them for their first 3 years. For instance next summer John Tavares and Magnus Pääjärvi will probably be drafted in Montreal first and second. If soon after KHL teams made both ridiculous offers and they accepted them to play in Russia for a quicker big pay day it could be the tipping point for others to decide to do the same.


4) Now realistically we doubt Tavares would do such a thing. If he wanted, he probably could have signed on to play there already, but we would not be shocked to see increasing numbers of young Russian and other European born players staying closer to home where they can get the big money much sooner. You might even see several N.A. born players who are not happy with who drafted them use the KHL as leverage to force a trade, again ala Eric Lindros to Quebec in 1992. (Eric was traded to Philadelphia, in exchange for players such as Mike Ricci, Peter Forsberg and Ron Hextall, along with $15 million). As a result the NHL might have little choice but to either seriously alter or abolish entirely the concept of the rookie cap.

8 comments:

blaine said...

Do you actually read the feces you put out there before you post it? Here's a news flash for you: The rookie salary cap is going nowhere anytime soon. The CBA 4 years left and the owners can't and are not going to end that provison.

FAUX RUMORS said...

1) Blaine: We never gave a time line for this. We are aware of the CBA length. We understand that it can't/won't be altered without both parties agreeing to that.
2) However, as we often do, we discuss topics that others are not yet talking about. We stay ahead of the curve this way. If you disagree with our take, thats fine, but explain if you will why. Thanks.

Jes Gőlbez said...

Faux is into MTG? Who knew?

FAUX RUMORS said...

MTG, Jes?

gdoawg said...

Staying ahead of the curve is fine, but to speculate on something that has little to no merit right now is kind of ridiculous. People are bitching about the way salaries are booming now, if they got rid of the rookie cap then people like sid and malkin and ovechkin would be making what they're making right out of the gate.

I think that before you start trying to stay ahead of the curve, it might be smart to wait until the KHL has SOME kind of tangible impact on rookie salaries. Right now, it just comes off as doomsaying.

FAUX RUMORS said...

1) gDoawg: We understand your take. As we wrote we don't believe that the rookie cap will soon be eradicated, BUT if trends continue the way they have started to develop, it could become the new reality
2) Staying 'ahead of the curve' means thinking/projecting ahead BEFORE the new reality is apparent. We understand that leave us open to criticism/alternative opinions. Which we always welcome

Jes Gőlbez said...

MTG = Magic The Gathering, a collectable card game

That is what that card design is from

FAUX RUMORS said...

1) Oh geez, LOL Thanks Jes. No didn't know that's where that came from. Hope it isn't a copy right infringement. ; )

 
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