Tuesday, July 19, 2005

Poking a hole in spending sprees

It has long been speculated that performance bonuses will count towards the reported $39M cap figure. This has essentially been a given else the richer teams would simply sign a Ziggy Palffy or a Peter Forsberg to a $2M/year contract and load on expensive and easy-to-reach bonuses. (You've played 10 games! Here is $5 million dollars.) However, several rumors have emerged today that the cap space must always be available during the year. For example, if the bonus in a player's contract is $1 million for reaching 40 goals, that team can only effectively carry $38M in "salary" for the entire year, whether or not that bonus will be paid out.

However, from all reports, the bonus structure is standardized league-wide and applies to all contracts and is not something negotiated individually between teams and their players. Consequently, there has to be a certain amount of cap space allotted by each team in case any of their players reach these bonuses, whether the player is Jaromir Jagr or Colin White (with no disrespect intended to Mr. White). Speculation has it that roughly $4-6 million dollars per team must be allocated under the cap for these bonuses, meaning team payrolls will be more in the neighborhood of $34 million than $39 million.

The biggest impact this has, if true, is on the supposed spending sprees that certain teams and their fans -- er, that is, their beat writers -- assume they will be engaging upon. Will the endless UFA speculation out of Toronto finally come to an end? One would hope reality will finally catch up but a certain degree of cynicism in this regard is understandable.

A second impact of this development is that the (poor beleaguered) large market teams will have to pare more payroll than many have been speculating to get under the "effective cap" of ~$34 million. That means buying out one more Lang, Nolan, Amonte, or Foote than expected, for those of you keeping track.

And finally: that means less money in total for the players than perhaps some were expecting. It was unrealistic to assume that most teams would spend close to the $39M cap, as it is counter-intuitive (unless you're a salivating fan hoping to add Scott Niedermeyer) for a salary cap to act as a magnet -- else, league-wide spending might always exceed 54% and it would have to be given back through escrow anyway. What does this mean? People expecting Adrian Aucoin to sign for $4M might be surprised when he signs for $2.5M. People expecting Scott Niedermeyer to sign for $6M or $7M might be surprised to see him coming in closer to $5M. Players who may have made between $2-$4M in the previous agreement might be lucky to get $1M in the first years of the agreement while the salaries settle down and pull in line with the new economic reality.

It's not only the hot-air-balloon hopes of large market teams signing big-name UFAs that need have air let out of them, but possibly many of the players' egos and expectations come contract negotiation too.


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