SBJ/July 22-28, 2013/Labor and Agents

Opinions differ on pace of NHL free agency

Spending in the first few days of the NHL’s free agency period was similar to what it has been in recent years, despite a lower salary cap, but there was a question as to whether that will continue into the summer.

Clubs spent $350 million on the first day of free agency, July 5, according to published reports, and that spending was aided by the use of “compliance buyouts,” a new feature in the collective-bargaining agreement that owners and players agreed to in January.

Under the CBA, clubs are allowed to buy out a player’s contract by paying him a portion of its value over twice the length of the contract. The clubs get instant salary cap relief and the player receives two-thirds of the value of the contract and becomes a free agent. Clubs exercised the option on 18 players by the deadline of July 4.

“The compliance buyouts were certainly intended to ‘lubricate’ the marketplace and facilitate payroll adjustments that certain Clubs needed to make in order to build their teams and be cap compliant,” NHL Deputy Commissioner Bill Daly wrote in an email. “Some people on our side didn’t like the idea of having compliance buyouts, but for the League, it was primarily a matter of making sure that the money owed and that will be paid to Players doesn’t ‘fall outside’ the system. And we were able to accomplish that.”

Daly added that he was not surprised by the level of spending so far in free agency and did not think a lull of signings last week was unusual. “We are only 11 days in,” he wrote. “Market always slows considerably after the first few days. I haven’t noticed any difference with this year’s activity.”

But others saw it differently.

Brian Lawton, a former NHL agent and former general manager of the Tampa Bay Lightning and now an analyst for Rogers Sportsnet, said free agency “started off with a bang and it completely stopped.” Lawton said the market seemed much the same as it has been for years in the first few days, but the slowdown is different, which he attributes to teams’ lack of cap space.

Octagon Hockey director Allan Walsh agreed. “We had an initial frenzy of signings on the first day, like we have seen in years past, but the market calmed down much faster than in previous years,” Walsh said. “Several GMs told me on the second or third day of free agency that they would not be filling out their rosters until August.”

Still others said it was too early to make any meaningful judgment about the marketplace. “You may be able to make some assessment down the road, but not this early,” said NHL Players’ Association Executive Director Don Fehr.
Meanwhile, some agencies and players emerged as early winners, even with a lower salary cap.

Octagon’s hockey division had negotiated $150 million worth of contracts for 20 free agents as of press time. That was similar to what the agency handled last year, despite the fact that the salary cap is 8 percent lower this year. “This year has been a fairly strong year for Octagon,” Walsh said. “The elite players are winners because they, once again, continued to get elite money and long-term deals.”

The biggest change in the CBA agreed to this year is that the players’ percentage of overall revenue decreased from 57 percent to 50 percent. In the first year of the deal, the salary cap was set at $64.3 million, down from $70 million last year.

Newport Sports, which represents about 130 NHL players, more than any other agency, had 17 clients sign free agent deals as of last week, agency founder Don Meehan said.

“It’s been a very good year,” he said, while declining to reveal the total dollar amount of his clients’ deals.

Meehan said that spending on top players early in free agency has been similar to that of years past.

“I don’t think it’s been any different,” Meehan said. “There is an initial rush of acquisition. But as we move into a secondary market, that takes more time.”

The new “compliance buyout” made a winner out of Vincent Lecavalier.
Photo by: GETTY IMAGES
Meehan agreed with Daly that the compensation buyouts had an effect on the market by allowing clubs more cap room to spend on free agent players.

The new buyout feature turned out to be a pretty good thing for 33-year-old center Vincent Lecavalier.

He will earn $55 million now as part of two deals — about $10 million more than he would have received had the Tampa Bay Lightning not bought out his contract and made him a free agent. Before the buyout, Lacavalier had seven years and $45.5 million remaining on his contract. Under the buyout, the Lightning will pay him $33.5 million over 14 years. After being bought out, Lacavalier signed a five-year, $22.5 million deal with the Philadelphia Flyers.

“Lecavalier is the guy who is the primary beneficiary of the buyout,” said agent Anton Thun, co-managing director in MFIVE Sports, who represents Lacavalier with partner Kent Hughes. “It’s better than a 401(k).”

Other bought-out players may not be as lucky. The Flyers bought out goalie Ilya Bryzgalov’s contract for $23 million, but he was unsigned as of late last week.

Although the buyout gives clubs cap room, which is helpful to players, it also increases the number of free agents on the market. Some hockey sources expressed concern about the number of high-profile players without deals and lack of cap room for some clubs.

“Some clubs are in better cap shape than others,” Carolina Hurricanes general manager Jim Rutherford wrote in an email. “There are still a few good NHL players out there, which always happens.”

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