GMs looking for holes in CBA

Now that the NHL has a new CBA, GMs throughout the league are looking for ways to circumvent it.

Updated: July 13, 2005, 8:04 PM ET
By Scott Burnside | Special to ESPN.com

Even as photocopiers and laser printers work overtime to produce copies of the new agreement that will spell the end of the longest labor stoppage in North American pro sports history, forces on both sides of the National Hockey League's 10-month-old dispute will begin the task of trying to tear the document to shreds.

No surprise there. It's the job of GMs and agents and now the new suit on the NHL block, the capologist, to poke holes in the new CBA. It is their job to push and prod and check for signs of weakness, look for loopholes and shortcuts and fissures that will best suit their own constituents. In short, the league and its players have engaged in a 10-month exercise in building an airtight capsule in which their game might exist and thrive. Now it's time to find out if it leaks.

The toll of the NHL Lockout
• The 2004-'05 NHL season was the first North American major pro sports league to have an entire season canceled (labor or other factors).

• The 2004-'05 NHL season was set to begin Oct. 13 with seven games scheduled. The entire schedule consisted of 1,230 games (82 per team) and was supposed to run through April 10.

• The stoppage was hockey's third and the first for a North American major professional league since the 1998-'99 NBA lockout canceled 464 games, cutting each club's regular-season schedule from 82 games to 50.

• It is possible that some players will not return -- looking back, 154 played their final NHL season in 1993-'94 before the previous lockout.

• Wednesday marked the 301st day of the lockout.

Back in January 1995, had NHL commissioner Gary Bettman and NHLPA executive director Bob Goodenow tested their new CBA in such a fashion, it would have leaked all over their shoes like a disobedient dog.

"Last time everybody thought the CBA was going to be a slam-dunk winner for the owners," said Toronto-based corporate finance lawyer and sports business analyst Jeff Citron, who worked on the last CBA on behalf of the NHLPA. "But the owners didn't use the tools that were available for them to use."

Instead the players and their agents took advantage of a poorly constructed document to drive salaries through the roof. Owners, cash drunk from expansion revenues and lucrative television deals that have since evaporated, happily paid those salaries until teams were declaring bankruptcy and the game had fallen from grace.

This is why the process of hammering out this new agreement was so painstakingly slow. Instead of agreeing in principle on issues and allowing lawyers to fill in language weeks later in an effort to save part of the 1994-95 season, lawyers this time around have been drafting and re-drafting as the two sides inched along in an effort to save the start of the 2005-06 season.

It's expected the six-year agreement will be at least six times the length of the old one that expired Sept. 15. A source told ESPN.com the section dealing with the salary cap alone is 100 pages.

But will it work?

We're about to find out.

"I think on the surface everybody thinks the answer to that is yes," Citron said. "Somebody smart will always try and get an edge. But these are smart people drafting this and they are probably trying to close loopholes now as they're doing the drafting."

Agents and GMs told ESPN.com they are cautiously optimistic this new document will accomplish its intended goal, dramatically closing the gap between high-spending, big-market teams and their frugal small-market cousins.

Traditionally, small-market teams like Edmonton couldn't compete with the salaries paid by teams like Toronto and New York, and as a result had no hope of retaining their young stars. In theory, this constant turnover of talent diminished the ability of these teams to succeed on the ice and in turn stunted their ability to make money.

Regardless of whether that theory is entirely accurate (that 12 different teams, including small-market teams Carolina, Anaheim, Tampa Bay and Calgary, have been in the final four of the playoffs the last three years is evidence it's not necessarily so), the new system will mean there is a dramatically smaller range in which teams can spend, likely between an established floor of $22 million and a ceiling of $37 million, not including benefits.

Still, it's not perfect.

Even though the spending gap will narrow from a factor of 4 to 1 (the Wings spent almost four times as much on salaries as Nashville did in 2003-04) to about 1.5 to 1, the gap still is too great for some GMs.

"I don't see this as being a level playing field, in fact far from it," one GM said. "I would think that difference [between top and bottom spenders] would certainly be a pretty big advantage."

How big?

Teams spending at the top of the cap range still will be more likely to pluck the top free agents from the market, the offensive defensemen and high-scoring power forwards, who can often mean the difference between making the playoffs and not, or advancing in the playoffs or not.

"That's what that difference will represent," the GM said.

If revenue sharing, which is expected to see the top 10 spending teams diverting revenue to the bottom 10 spending teams, is designed to help those bottom teams spend up from the minimum, as opposed to merely reaching that minimum level, then suddenly the gap declines to $6 million or $7 million.

"Then I think that allows you to call it a level playing field," the GM said.

Certainly, it seems most of the catalysts for the spiral of salaries, which topped out at an average of $1.8 million during the 2004-05 season, have been negated.

Entry-level contracts have been rolled back to levels of a decade ago with a maximum of $850,000 per year and a tight limit on money paid out in bonuses that, under the old system, allowed young players like Joe Thornton and Ilya Kovalchuk to earn four times their base salary.

Arbitration, although not eliminated as the owners had initially demanded, is expected to mirror baseball's system wherein each side presents a number, makes its case and the arbitrator picks one or the other. Under the old CBA, arbitrators often selected the middle ground and each decision added another plank in the salary tower. This will allow owners to lobby an arbitrator to reduce a player's earning if he is underachieving.

Unrestricted free agency will decline over the life of the CBA and likely settle at 27 years of age by 2008. This will allow players more flexibility to move within a cap system and put more pressure on teams to lock up their players for longer-term deals, which should create more stability around the league.

Using the NBA and NFL as models, the new CBA will have punitive measures installed for teams that either under-report revenue or attempt to divert monies away from the final total. It's expected the penalties for such transgressions will be fines in the hundreds of thousands of dollars and include forfeiture of draft picks.

"If you build a big enough hammer into it people won't do it," said Citron, who pointed out that the public doesn't hear teams in the NBA, NFL or Major League Baseball, which has a revenue-sharing component, accused of cooking their books.

Because player salaries will now represent 54 percent of league revenues as opposed to a straight hard cap that was the basis of the owners' final proposal last February, it behooves players and owners to work together to improve the game on all levels. The better the product, the better the product is marketed, the higher the revenues and the higher the salaries that can be paid to players.

The addition of two playoff teams per conference is a good example of a new wrinkle that should benefit both sides, should the NHL's board of governors accept the proposal which has Bettman's support.

In recent years teams such as Phoenix, Atlanta, Florida, Columbus, Chicago and the New York Rangers have been eliminated from meaningful playoff competition sometime early in the second half of the season. But, with two additional spots up for grabs in each conference, fan interest should remain higher longer, meaning increased revenues during the regular season. Of course there will be additional revenues for those extra playoff teams. Purists will bemoan the fact 20 of 30 teams make the postseason but from a business perspective it makes sense, Citron said.

And in the end, before we can talk of the game itself and of recapturing the particular essence of the game that makes it unique, it must first and foremost be recognized as a business, and one that works.

It's taken 10 months at a cost that's impossible to quantify, but now the players and owners are betting that the NHL is a business that can work.

Scott Burnside is a freelance writer based in Atlanta and is a frequent contributor to ESPN.com.

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