Trouble Ahead - contract time at the National Hockey League

Hockey Digest, Dec, 2001 by John Kreiser

With players getting record contracts and teams setting attendance records, things in the NHL might look rosy, but there's a storm coming--and it could get ugly

DAVE TAYLOR WAS QUIET ON the other end of the telephone as he contemplated where the latest step in hockey's monetary future might lead.

A moment earlier, a reporter who had just come from the news conference at which Alexei Yashin signed a 10-year, $87-plus million contract with the previously penurious New York Islanders had told the Los Angeles Kings' general manager that the deal was indeed now a reality.

A few more seconds ticked by before Taylor, one of the game's better right wings during a career that ended in the early '90s, said quietly, "Wow! That's a lot of money."

That's an understatement. Yashin's contract set new parameters for the length and size of player deals, surpassing a deal signed just two months earlier in which the Colorado Avalanche inked Joe Sakic to a contract that could be worth as much as $57 million over six years. It also marked a turnaround for the Islanders, who under new owners Charles Wong and Sanjay Kumar also committed $20 million over the next five seasons to sign Michael Peca--a stunning turnaround for a team that just two years ago had a total payroll of just $15 million.

The average NHL salary this season is about $1.4 million. But as salaries continue to climb--they now consume upwards of 60% of league revenue--the question is whether owners are willing to continue to foot the bills.

The problem for NHL management is that while hockey's followers may be the most fanatic in sports--no team sport plays to a higher percentage of occupied seats--they're not the most plentiful. While American television networks fall all over themselves to give ever-increasing sums of money to Major League Baseball, the NFL, and the NBA, the NHL's five-year, $600 million deal with ABC and ESPN looks almost like chump change. Think $600 million is a lot? It breaks down to about $4 million per team per year--or less than what the Boston Bruins will shell out annually to Martin Lapointe, a free agent who signed a four-year, $20 million dollar deal with Boston this summer.

Lapointe is a nice player to have on your team. He works very hard, will give up the body, and even had a career-best 27 goals with the Detroit Red Wings last season. But the idea of giving a player like Lapointe that kind of money has Vancouver Canucks general manager Brian Burke's head spinning.

"I've never been more embarrassed to work in the NHL as I was on July 1 and July 2," Burke says about the initial summer rush to sign free agents. "I know we can't support the salaries. I know some of the teams that have spent the money are doing it without the financial capability to pay.

"I'm running my business like a business. I'm going head-to-head with people who are crazy, as far as I'm concerned."

Of course, owners have cried poverty since the day team sports were born. The odd part about NHL management complaining about money woes is that the business of hockey--the revenue-generating portion--has never been better. More than half of the NHL's teams have opened new arenas--complete with luxury suites and higher ticket and concession prices--in the last 10 years. Under Commissioner Gary Bettman's aegis, merchandising revenue, both leaguewide and for individual teams, has soared. There's more money coming in than ever before.

But as any first-year accounting student can tell you, it's not how much you make, it's how much you keep. And with salaries spiraling upward, a growing number of management people think ownership isn't getting to keep enough.

Burke's comments may be the opening salvos in the showdown of 2004.

The NHL has had labor peace following the lockout that cut the 1994-95 season from 82 to 48 games. The deal that ended the lockout has been extended a couple of times and is now set to run out after the 2003-04 season. And like the sound of a thunderclap in the distance on a hot summer day, the storm clouds are already visible.

On one side, the players have never had it so good. Under the leadership of National Hockey League Players' Association head Bob Goodenow, salaries have soared over the past decade. But with that growth has come a baseball-like divide between the big-money teams (Philadelphia, New York, Detroit, Dallas, Toronto, and Colorado) and almost everyone else--one that's exacerbated by the weakness of the Canadian dollar.

Before this summer, salaries had been rising at only 5 to 6% over the past couple of seasons. Revenues had actually been rising at a faster pace than salaries.

On the other side are GMs like Burke, who maintain that only a handful of teams are responsible for this summer's salary surge.

"It's only six teams spending out of control," Burke says, "Maybe some of them can afford it, but the ones who can't are taking a business that already has serious problems and making it worse."

But there's spending, and then there's spending. The Avalanche paid big bucks to keep Sakic, goaltender Patrick Roy, and defenseman Rob Blake--nearly $30 million in salary this season just for these three players. (Peter Forsberg was in line for $11 million before deciding to sit out the season for personal reasons.) All three were keys to Colorado's Stanley Cup victory last spring before becoming free agents. With a well-heeled owner and a sold-out arena every night, it's hard for a team like Colorado to tell fans that it can't pay to keep a championship team together.