SBJ/September 25 - October 1, 2006/This Weeks News

Daly doesn’t see big pay increases continuing

NHL Deputy Commissioner Bill Daly said he thinks the rise in spending on players this year is a one-time occurrence, and that he doesn’t think double-digit percentage increases will happen in subsequent years.

Chris Chelios says players worry about escrow
prospects despite getting all of last year's back.
As the league prepares to start its second season since losing a year in a labor battle, the market for NHL players has been robust, according to agents and team personnel. Two weeks before NHL team rosters are finalized, the increase in NHL payrolls this year over last was about 14.3 percent. The average salary had increased 13.1 percent.

It was not possible to make an apples-to-apples comparison last week, as the 2006-07 numbers are based on 695 players signed as of Sept. 21 versus final team payrolls of 690 players last year. The percentage difference in team payrolls and average salaries could go up or down, depending on the salaries of players signed or cut before the NHL season opens next month. With the vast majority of players signed, though, the data give an indication of the player market this year.

As of last week, only four of the 30 NHL clubs had spent less money than they did the year before, and four teams had year-over-year payroll increases of more than 40 percent.

“I can’t say I am necessarily surprised where payrolls are,” Daly said. “It’s the nature of the cap system that teams tend to migrate towards the cap.”

The NHL salary cap is $44 million this year, up from $39 million last year.

The new collective-bargaining agreement calls for players to receive 54 percent of league revenue. That is enforced by placing a percentage of player salaries into escrow, money that the league may give back depending on what final league revenue for the year turns out to be.

Coming out of the longest work stoppage in the history of professional sports, the NHL last season set its revenue projections conservatively — $350 million too conservatively, as it turned out. The league had predicted revenue of about $1.8 billion, but the final number was about $2.1 billion.

As a result, the upper limit on payrolls was too low, Daly said. This year, it is $5 million, or 12.8 percent, higher. “The reason [spending] grew by a double-digit percentage is we had a payroll range last summer that didn’t reflect what our leaguewide economics were,” Daly said. “I don’t anticipate that we will continue to see double-digit increases in the payroll range on a going-forward basis.”

In any case, it doesn’t matter how much teams spend on player salaries because ultimately, the percentage of revenue is set at 54 percent. “The higher salaries are and the higher the payrolls are, the higher the escrow is going to be,” Daly said.

NHL players last week got some good news and some bad news. The NHL Players’ Association told players that they would receive all of the money that was kept in escrow by NHL clubs last year, plus an additional increase and interest. The bad news, however, is that initial projections call for 12 percent to 14 percent of their paychecks for the 2006-07 season to be placed in escrow accounts.

Players started out last season with a 12 percent escrow rate, but that rate was lowered to 4 percent on Jan. 1 when it became clear that revenue was higher than anticipated.

As for the 2006-07 NHL season, Daly said, “The revenues are looking good,” adding that they should increase over last season, but he declined to be more specific.

Detroit Red Wings player rep Chris Chelios said that players are concerned about the escrow prospects this year, even though players are going to get all of last year’s escrow back. “The cap is going up and teams are spending money,” Chelios said.

There are a number of reasons for the increase in payrolls this year.

Mike Liut, an NHL player agent at Octagon, noted that the age at which a player becomes eligible for unrestricted free agency dropped from 31 to 29 this year. Not only did that create a large pool of unrestricted free agents, but also a larger pool of players approaching unrestricted free agency. Some teams wanted to lock down core players before they hit their free agent year, he said.

Agent Donald Meehan, whose Newport Sports agency represents more than 100 NHL players, said that many free agent contracts this year were not only higher in dollars, but also longer than in the past. One big example of that was the record 15-year deal that the New York Islanders signed with goaltender Rick DiPietro worth a guaranteed $67.5 million. Though many general managers dismissed the contract as an aberration, they conceded that teams were trying to lock players up for more years.

“Maybe term limits are something that has to be in the next CBA,” said Brian Burke, general manager for the Anaheim Ducks.

Players won big in the arbitration process this summer, according to agents and team personnel. In his letter to players and agents last week, NHL union chief Ted Saskin wrote that arbitration awards and settlements “were at a record increase of over 100 percent from prior contract.”

Said Doug MacLean, general manager of the Columbus Blue Jackets: “We’ve gotten totally hammered in arbitration.”

Jeff Solomon, director of hockey operations for the Los Angeles Kings, said, “People are trying to get a feel for how it’s going to be best to operate under this new CBA. As part of that exploration process, we’re going to see teams and agents try to maximize the benefits the CBA affords both sides.”

Daly said that although he is not concerned about the market on a leaguewide basis, the league is monitoring the way certain teams are spending on certain players.

“It’s clearly something we have to monitor … to make sure the right dollars are going in the right pockets,” he said.

But, he added, “I am not prepared to draw conclusions on the basis of one summer.”

Early numbers show rising NHL payrolls
According to the base salaries listed on the NHL Players’ Association Web site last week, a snapshot of payroll numbers for NHL teams as they stand now shows a dramatic increase over last year. While it’s impossible to tell where the numbers will end up, this chart backs up the claims of agents and league officials that the offseason was good for the players (see accompanying story). The final 23-man rosters are due Oct. 4.

Team
2006-07 team payroll
2005-06 team payroll
% increase
Anaheim Ducks
$38,105,833
$32,060,233
18.9%
Atlanta Thrashers
$38,310,600
$37,170,200
3.1 %
Boston Bruins
$41,268,300
$36,662,100
12.6 %
Buffalo Sabres
$41,656,400
$28,515,120
46.1 %
Calgary Flames
$44,993,800
$36,589,140
23.0 %
Carolina Hurricanes
$42,720,800
$35,308,700
21.0 %
Chicago Blackhawks
$34,490,000
$30,141,200
14.4 %
Colorado Avalanche
$40,759,000
$41,044,829
-0.7 %
Columbus Blue Jackets
$30,484,000
$30,093,235
1.3 %
Dallas Stars
$39,982,500
$40,651,480
-1.6 %
Detroit Red Wings
$41,266,000
$39,578,300
4.3 %
Edmonton Oilers
$40,962,000
$38,469,340
6.5 %
Florida Panthers
$38,485,280
$26,500,510
45.2 %
Los Angeles Kings
$39,032,000
$37,856,150
3.1 %
Minnesota Wild
$38,347,500
$25,158,800
52.4 %
Montreal Canadiens
$44,391,507
$32,994,940
34.5 %
Nashville Predators
$33,226,200
$31,649,440
5.0 %
New Jersey Devils
$45,974,566
$44,895,949
2.4 %
New York Islanders
$40,782,200
$31,447,520
29.7 %
New York Rangers
$43,207,760
$41,474,800
4.2 %
Ottawa Senators
$42,440,110
$36,909,094
15.0 %
Philadelphia Flyers
$44,156,550
$42,566,760
3.7 %
Phoenix Coyotes
$43,284,800
$30,354,345
42.6 %
Pittsburgh Penguins
$22,585,953
$23,122,650
-2.3 %
San Jose Sharks
$39,016,000
$31,005,400
25.8 %
St. Louis Blues
$33,646,000
$28,480,800
18.1 %
Tampa Bay Lightning
$44,700,690
$39,157,379
14.2 %
Toronto Maple Leafs
$41,388,920
$36,796,580
12.5 %
Vancouver Canucks
$39,595,000
$43,711,344
-9.4 %
Washington Capitals
$23,615,112
$18,932,830
24.7 %
Note: 2006-07 team payrolls are as of Sept. 21.
Sources: www.nhlpa.com, SportsBusiness Journal research

 

Research associate Brandon McClung contributed to this report.

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