In Years After NHL Lockout, Fight Over Finances Lives On

It's possible the Capitals will lose $7 million to $8 million this season, but they still have to worry about re-signing Alex Ovechkin, left, and Alexander Semin before next season. (Preston Keres - The Washington Post)

In the days after the end of the NHL lockout, the popular belief was that the players had lost, and done so in spectacular fashion. The owners had imposed a hard salary cap, linked player salaries to league revenue and received a 24 percent "rollback" on all existing contracts.

The new economic system was hailed as a cure for all that was wrong with the league's finances, particularly for cash-strapped clubs in nontraditional markets. To a certain extent the system has worked, narrowing the gap between the big-market New York Rangers and the small-market Nashville Predators, while also putting a limit on the amount of money that wealthy clubs such as the Philadelphia Flyers are able to spend on free agents.

But as the NHL prepares to open its season tonight -- the third under the new collective bargaining agreement -- some league executives and outside observers are again voicing concerns about the growing disparity between high- and low-revenue teams.

Although the average player salary this season is expected to be about $1.8 million, which is what it was in 2003-04, the salary cap ceiling has grown to $50.3 million per team, an increase of nearly 30 percent in two years. The salary cap floor, meantime, is up to $34.3 million, substantially more than some clubs spent before the lockout that scuttled the 2004-05 season.

Most unsettling, though, was the handful of eye-popping contracts signed July 1 -- as well as the teams that handed them out. The Rangers and Flyers, two franchises whose free-spending ways precipitated the perceived need for change, made big splashes on the opening day of free agency. The Rangers signed not one but both of the best players available, in centers Scott Gomez and Chris Drury. The Flyers lured high-scoring center Daniel Briere.

"Clearly the new CBA has worked for the players," Carolina Hurricanes General Manager Jim Rutherford said. "With the cap going higher, each team is going to have their own internal budget, and the bigger-revenue teams will have a better chance, on a regular basis, of making the playoffs than the teams that can't afford to spend."

Bill Daly, the NHL's deputy commissioner and one of the chief architects of the collective bargaining agreement, doesn't see it that way. If salaries are up, that must mean that revenues -- and sharing among the clubs -- are up, too, he said. The NHL projects this year's total revenue to approach $2.4 billion, up from $2.3 billion last season and $1.9 billion in 2003-04, when the league claims to have lost $273 million.

"I'm not sure there were any competitive advantages within the system for those teams to end up with those players," he said.

The Rangers will pay Drury and Gomez a combined $87 million over the length of their contracts and will have a payroll at or near the maximum. Philadelphia signed Briere to an eight-year, $52 million contract that will pay him $10 million this season.

More than $300 million in contracts were handed out on the first day of free agency alone.

"I don't see the players ever wanting to [renegotiate] this CBA, ever," said Howard Bloom of Sports Business News in Ottawa. "The bottom line is that the economic disparity that existed in the NHL before the lockout still exists, and it has everything to do with how hockey is perceived in the individual markets."

Said Capitals goaltender Olie Kolzig: "Obviously, when the cap goes up every year, that means salaries are going up, too. Guys are happy."

Both Drury and Briere came from the Buffalo Sabres, who remain competitive but are clearly diminished. Nashville, a year after challenging for the Presidents' Trophy, could have the lowest payroll in the league this season.

Flyers General Manager Paul Holmgren offered no apologies.

"Certain markets are always going to be able to spend to the upper limit," Holmgren said, shrugging.

The NHL Players' Association is taking a wait-and-see approach to the agreement.

One thing no one envisioned was the appreciation of the Canadian dollar, which is near parity with the U.S. dollar these days. Because of that increase, the six teams in Canada, which receive strong support from fans and local businesses, are turning profits. Those profits are contributing to the increase in the salary cap ceiling.

There are several layers of protection for the owners built into the NHL's new economic system. Escrow payments are taken out of the players' paychecks based on league revenue projections; that money is returned if player salaries account for less than 55 percent of the league's revenue and is retained by teams if they are higher.

Under the new system, small-market teams also benefit from a revenue-sharing program that redistributes about 5 percent of leaguewide revenue.

Still, one doesn't have to look further than the Washington Capitals' situation to understand why there's some uneasiness.

Capitals owner Ted Leonsis added almost $9 million in salaries this season in an effort to be more competitive, and in turn, bring more fans through the turnstiles. Even with $5 million to $10 million in revenue sharing, and a modest bump in ticket sales, it's possible the Capitals will lose $7 million to $8 million this season. Leonsis, though, said that such a loss would be manageable compared with the $30 million he says the club lost in 2001.

Leonsis also must re-sign all-star left wing Alex Ovechkin and Alexander Semin, among others, before next season.

"I hope we'll sell more tickets," he said. "I hope we'll make the playoffs. That's what you've got to hope for."