There was an uproar this week due to the massive contract signed by Ilya Kovalchuk with the New Jersey Devils.  Not only is it the longest contract in NHL history, but it immediately raised eyebrows due to the obvious attempt to cheat the salary cap.  Kovalchuk would be paid market value of $9.5 million a year for the first 10 years of the deal, but the team would only take a salary cap hit of $6 million a year during that time.

How does that work, and what’s a fair way to deal with this situation?

The solution to the fiasco surrounding the league rejecting the Kovalchuk deal is simple.  The league just has to follow their own example of how buyouts work.  When a player is bought out, the team’s cap hit for the buyout period is calculated to ensure that the total money paid by the team to the player is exactly equal to the total cap hit incurred by the team.  See NHL Offseason: What’s the Cap Hit For A Buyout? for an explanation of how this works.

Similar to a buyout, if a player retires before his contract has expired, the team should have to suffer a cap hit penalty if the contract is front loaded, or a cap hit rebate if the contract is back loaded.  The way this would work is to figure out what the total the player had been paid during the contract, and what the total cap hit was during this time.  If the amounts aren’t equal, the difference is spread out over the years remaining on the deal and applied to the team cap total for those years. 

In the case of the 17 year, $102 million Kovalchuk deal, Kovalchuk would have earned $95 million in the first 10 years of the deal, but only $7 million in the last seven years.  The average cap hit is only $6 million, even though Kovalchuk would be paid an average of $9.5 million until he turns 37.  If he decided to retire at that time, the team would be off the hook for the $6 million a year cap hit for the remained of the deal when Kovalchuk would be paid an average of $1 million a year.

The league correctly assessed that the deal was designed to circumvent the salary cap because there is very little chance that Kovalchuk would play out the last years of the deal when he would be paid so little.

The Kovalchuk Rule.

The rule I am proposing would require the team to square up how much it has paid the player and how much of a cap hit they took.  In Kovalchuk’s case, the team would have paid him $95 million in the 10 years that he played, but only took a cap hit of $60 million during that time.  So, the team owes a cap hit of $35 million.  This would be spread out over the seven years that would have remained on Kovalchuk’s deal.  That would work out to $5 million a year.  With this rule in place, teams would still be able to sign players to ridiculously long deals.  There would just be no way of cheating the cap.

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On the surface, they are all ridiculous. Marian Hossa at 42? Henrik Zetterberg at 40? While recent contracts may make it look normal, few players are on the ice during their life’s fourth decade.

Still, long term deals in the new NHL are becoming a trend—an often used loophole to keep cap hits down and top talent in town.

There is no doubt that these contracts can go wrong quickly. Just ask the New York Islanders. Rick DiPietro is having a hard time making it to the fifth year of his mega deal, never mind the 15th. Alexi Yashin was the definition of what can go wrong with a healthy player as he became complacent and ineffective.

The rejection of Ilya Kovalchuk’s 17-year contract with the New Jersey Devils draws the line in the sand. GM’s are now, we can assume, on notice. Obviously, the league believes that deals such as this that circumvent the cap hurt the game.

The thing is, they don’t.

Let’s begin by looking to the most popular league in the world, the NFL.

NFL teams have made a living off of cap circumvention by using performance bonuses to spread out cap hits over future seasons and minimize the current impact. This allows for better planning while keeping a team together. This is how the New England Patriots and Indianapolis Colts have had winning teams for years.

There is, however, a more important aspect to cap circumvention which the league needs to realize. When you think of the Colts and Patriots, you think of winning teams and two of the most recognizable faces in sports—Peyton Manning and Tom Brady.

The main complaint about the NFL is that players switch teams to often. Yet, the most marketable players stay in place for the majority of their careers.

Let’s look at the NHL. Why wouldn’t you want Sidney Crosby and Alexander Ovechkin to sign lifetime contracts? If either of these players pulled a LeBron James and left in their prime, that market would be destroyed (similarly to what can happen in Cleveland with the NBA). A life-time deal guarantees revenue and marketing for that team in that city.

Here’s where the NHL’s biggest problem hurts them at a time they are trying to flex some muscle. If the league understood how to market itself and its players, this contract wouldn’t be an issue.

What would happen to the league if Ilya Kovalchuk signed for 17 years in New Jersey? You would have an elite player in his prime on a winning team within marketing distance of the biggest city in the world, a city that also happens to have a heavy Russian community.

The New Jersey Devils have forever been the boring, defensive hockey team that killed the NHL. This signing changes every stereotype about the organization.

Zach Parise and Martin Broudeur can’t be marketed as well as Kovalchuk because they will always be looked at as products of the system. Kovalchuk makes this team marketable and he puts people in their seats, home and away. He even helps puts them on NBC and Versus.

And do you really believe there are NYC area hockey fans that don’t want to see more of Kovalchuk versus Sean Avery? It makes those Hudson River Rivalry battles that much more entertaining.

There is literally a train under Madison Square Garden that leaves you blocks from the Prudential Center. Think having an elite player a few minutes away by public transportation would hurt attendance?

Instead, the NHL would rather make teams pay top dollar cap wise, in effect forcing them to choose one franchise player and let the rest walk. If Kovalchuk’s cap hit is above $6 million, the Devils can’t keep Brodeur and Parise, the Kings can’t keep Doughty and Johnson, the Blackhawks can’t keep Hossa, Kane and Toews, etc.

They want this loophole closed during the next CBA and they are using this contract to make poorly thought out point.

But by closing the loophole, the NHL would effectively be spreading around the wealth—athletic socialism if you will. Does forcing teams to lose a superstar player after a few seasons really make the league better,? It helps other teams, for sure, but it makes all 30 look like the old Atlanta Thrashers—Kovalchuk with Heatley/Hossa and nothing else.

If a team has two elite players with a salary and cap hit at $10 million, you’re looking at the remaining $40 million going to 21 players. All this does is force more $4-5 million players to either take pay cuts or go to the KHL. It effectively enrages the NHLPA and puts the European leagues in contention for higher caliber talent.

Neither is a good end result for the NHL.

The truth is, whether those in the leagues front office realize it or not, cap circumvention is good for the league. Fans like to know that the best players will be in one spot. Jerseys are an investment now thanks to Reebok and no one wants to waste that money on a short term player (think a Red Wings Modano jersey will be a hot seller?).

And no one likes the messy breakup that comes with talent moving on (insert favorite jersey burning ceremony here). Closing this loophole brings out all of that negative emotion year after year. It bothers fans and hurts way more than it helps.

Devils fans will never forgive Scott Gomez or Paul Martin. Seattle Mariners fans will never forgive Alex Rodriguez. Cleveland Cavaliers fans will never forgive LeBron James. Is that what the NHL wants to see?

Are there teams that, cap wise, can afford a $10 million hit? Yes. But they can’t afford it cash wise and if they can, they definitely can’t pay that salary and win.

The league needs to ask itself what it believes to be more beneficial—players bouncing around on short term contracts every few seasons or keeping the best players in one city for their careers. I would love to hear the argument for the former.

Unless Bettman and Co. want to lose talent overseas and precious fans at home, they need to realize that there is more to the job than forcing teams south of the Mason Dixon line to be competitive. When done correctly, long term contracts can be beneficial to the league. It would be helpful if they noticed that.

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Seventeen Years. It’s a long time. Seventeen years can give us up to four different presidents, four world cups, and a birth, entire career, plus retirement for a Chinese olympic gymnast. The University of Georgia can even beat the University of Florida three times in football in that time span. It’s an eternity. 

So why would an NHL franchise sign a player (with a reputation for poor work ethic) for seventeen years? Manipulation. 

The structure of the NHL’s salary cap regulations have been completely abused by league owners and GMs this offseason, with Kovalchuk’s $102 million deal being the most notable.

Two things make the contract (which has been rejected by the NHL) ridiculous: The front-loaded salary and the age at which Kovalchuk will complete it. The all-star Russian winger will be 44 in 2027, an age at which no athlete has ever (and will ever) be able to compete at a world class level. 

Not only has Kovalchuk already recorded nine seasons in his career, he’s not exactly the best at his position. He’s certainly been in the argument before, but conventional wisdom says that only Alex Ovechkin or Sidney Crosby are worthy of the longest contract in the sport. 

Pair that with the fact that New Jersey is a franchise that has built a reputation of being the most defensive-minded group in hockey, and committing $102 million to a purely offensive piece sounds like a head scratcher. Imagine the Baltimore Ravens signing Chad Ochocinco for 17 years. It’s a move that would not be congruent with the team’s identity. 

If you’re going to pay a man whose game is built around speed and finesse to play for your franchise when his hair is mostly gone, it better be cheap.

That’s where the front-loaded cash comes in. Kovalchuk will make a peak of $11.5 million during the core years of the deal, but then will sharply decline to earnings of $550,000 for the last several years. 

The solution is simple. If Gary Bettman and the league are serious about keeping these long-term commitments genuine, they only need to enact a policy of “contractual salary balance.”

Example: Player X signs a 10-year, $100 million dollar deal when he’s 30 years old. He’s due to make $15 million for the first five years of the deal, $7.5 million for seasons six and seven, and $3.3 million for seasons eight, nine, and 10. 

If the league’s salary structure required that a player’s lowest-earning year in a contract can be no less that 50 percent of the salary in his highest-earning year, then “front-loading” could never be so dramatic. 

In our example with Player X, his $3.3 million in the last three seasons is well under 50 percent of $15 million. The terms of that particular contract would be disapproved. 

We’ll leave the actual number crunching to those who are actually employed in finance, and in the meantime I’ll give credit where credit is due.

With arbitration coming in the Kovalchuk contract controversy, the 27-year-old will likely get his massive payday from New Jersey. Kovalchuk and his agents have potentially guaranteed him a substantial amount of cash that will take him well into his mid 40s, an age at which forwards are rarely on an NHL roster.

When his speed and scoring touch start to fail him in his later years, Kovalchuk will need to learn to be a well-conditioned, hard working, selfless, high-morale teammate.

Will $550,000 be enough motivation?

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