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The NHL’s hard cap is hurting its product

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The current system is broken. Let’s break down why.

2019 NHL Draft - Round One Photo by Dave Sandford/NHLI via Getty Images

Update: I replaced the Winnipeg Jets example with the Carolina Hurricanes because of a miscalculation regarding their arena capacity. They hit 100% attendance on average and the capacity used was for concerts which is different from hockey games.

Last week, I wrote an article detailing the Flyers’ salary cap situation and how the outlook may not be imminently dire. While the Flyers may end up being okay under the current set of rules, this got me thinking about the salary cap as a concept. The NHL has instituted the salary cap for the majority of my hockey fandom, therefore I never thought of it as anything out of the ordinary. But I have come to the realization that abolishing or altering the salary cap would allow for a number of key changes which would, in my opinion, strengthen both the NHL and the game of ice hockey.

The salary cap is a set limit on the amount to which a club can pay its players. It was first implemented for the 2004-05 season with the introduction of a new collective bargaining agreement after the lockout — the cap was set to $39 million. From that point onward, the cap has been calculated as a fixed percentage of total league revenue from the previous season. This percentage currently stands at 57% of league revenue. The cap is meant to prevent teams in larger markets with larger budgets from taking advantage of teams in smaller markets and is enabled by league wide revenue sharing. This revenue sharing distributes income from the higher income generating teams to the lower income generating teams who wouldn’t be able to spend to the cap without this system. To quote On the Forecheck:

It’s not simply a temporary assistance scheme for franchises going through a rough patch, it’s a recognition that some markets are much, much bigger than the rest, but the league wishes to restrict the payroll range to some extent.

Despite the positive intentions, in its current state, the salary cap exists as a concrete obstruction to the prosperity of the sport. Other sports have struggled with the concepts of implementing revenue-sharing methods — baseball instituted a luxury tax and both the NFL and NBA have salary caps, albeit they function differently from the NHL’s version and they are set at a much larger figure. This is to be expected as the NBA and NFL make more money than the NHL, quite significantly so. However, with the NHL, there are a number of reasons why the salary cap is fatally flawed. In no particular order of importance, the salary cap allows unpopular teams to thrive, obstructs teams from constructing an optimized roster, creates unfair trade markets, and prioritizes undervaluing players.

Let’s break that down:

It allows unpopular teams to thrive

In this instance, I am not referring to unpopularity as unlikable. Despite our personal feelings toward the Chicago Blackhawks, the team draws healthy gate receipts and had the most fans in total attend games last season (855,972 total attendance at home games). What I mean by unpopular is that the existence of the salary cap allows teams which are unsuccessful at drawing crowds to continue to exist. For the past six seasons, the Carolina Hurricanes have been at the bottom of the NHL attendance charts. Even last season, when they were playing well, they only drew 587,222 fans (4th lowest total) and had an average turnout of 14,322 of a total 18,680+ seat capacity of their arena.

2018-19 NHL Attendance

Team Average Attendance Total Attendance Capacity Percentage
Team Average Attendance Total Attendance Capacity Percentage
Chicago Blackhawks 21399 855972 108.50%
Montreal Canadiens 21046 862914 98.90%
Philadelphia Flyers 19141 765622 99.14%
Toronto Maple Leafs 19276 790316 102.40%
Detroit Red Wings 19120 783958 98.00%
Tampa Bay Lightning 19092 782772 100.00%
Minnesota Wild 18907 775216 105.30%
Pittsburgh Penguins 18565 761203 101.00%
Washington Capitals 18508 758845 100.00%
Calgary Flames 18501 758550 95.90%
Edmonton Oilers 18347 752227 98.40%
Vegas Golden Knights 18318 751067 105.50%
Dallas Stars 18178 745314 98.10%
Vancouver Canucks 18022 738918 95.30%
Los Angeles Kings 18000 738029 98.70%
Buffalo Sabres 17908 734238 93.90%
Boston Bruins 17565 720165 100.00%
Nashville Predators 17445 715276 101.90%
St. Louis Blues 17361 711823 90.70%
New York Rangers 17318 710074 96.20%
San Jose Sharks 17266 707909 98.30%
Colorado Avalanche 17132 702446 95.10%
Anaheim Ducks 16814 689385 97.90%
Columbus Blue Jackets 16658 682984 91.80%
Winnipeg Jets 15321 612840 100.00%
New Jersey Devils 14904 596166 90.30%
Ottawa Senators 14553 596684 76.00%
Carolina Hurricanes 14322 587222 76.70%
Arizona Coyotes 13989 573552 81.70%
Florida Panthers 13256 530244 77.80%
New York Islanders 12442 510150 78.90%

Now, these numbers are an uptick in attendance total for the Hurricanes franchise, though the fact of the matter is that due to the salary cap, teams that underperform are rewarded. The fact that the salary cap era rules even out the amount of total spending ability per team results in an unequal balance that places unpopular teams like the Carolina Hurricanes and Arizona Coyotes equal with the Toronto Maple Leafs and Philadelphia Flyers.

I have no problem with the NHL attempting to expand to places where hockey would not be traditionally played, though these franchises need to have staying power. This is what separates clubs like the Vegas Golden Knights from other teams. Whether it is due to their improbable first season, proper marketing, or the lack of other professional sports franchises in Las Vegas, the Golden Knights have been embraced by the city, are loved, and sold to 105.5% capacity. They created fans and those fans have stayed.

Of course, teams that win will draw more fans, this is a given. But shouldn’t the NHL be aiming to create lasting bonds with fans of various teams? Why should the New Jersey Devils be rewarded when they consistently fail to attract crowds, and placed on an even level as franchises that are popular regardless of their league position? The salary cap places an even bar for both unpopular and popular teams, and while I am all for fair competition, the Arizona Coyotes have proven to me that rewarding teams for simply existing is a logical fallacy. In 2011-12, the Coyotes made the Western Conference Final as the number three seed, compiled a 42–27–13 record, but still only drew 72.3% percent of their arena capacity. That’s embarrassing.

It obstructs teams from creating an optimized roster

The way that NHL salaries and player valuation have developed, with regards to the salary cap, has turned team pay scales into a weighted bell curve of sorts. It has created a normal distribution of player valuation where a team essentially organizes a pay hierarchy where a certain amount of players fit into one area or the other. In this example, high end (and therefore highly paid) players would appear at the far right, low end players (minimum salary) would appear at the far left, and the majority average would populate the middle of the scale and would be most common.

A Bell Curve
Huffington Post

However, this model assumes that a normal distribution of talent compared to salary exists, and at least for me, I call that into question. As an example, last season, a total of 248 centers iced at least 20 games in the NHL, which is roughly one quarter of the season (the benchmark I have set for the purposes of this test). Using Pension Plan Puppets’ scoring metrics, I have measured out a distribution of talent level of top (+60 points), middle (+44 points but fewer than 60), and bottom tier talent (43 points or lower). Please note, however, that I have not distinguished between good and average versions of players in these tiers as Pension Plan Puppets did, for the sake of argument.

Note how the distribution line acts more similar to a logarithmic or exponential function rather than a straight line. The way pay scales are set up in the NHL under the salary cap would lead most to think that the middling category would be the most populated, however, this is far from the case. 46 of the centers fit into the top tier category, with only 27 in the middle and an astonishing 177 in the lowest tier. Of course one can argue about whether or not a 43 point center would be in the “bottom tier”, but the point is this: NHL payrolls are set up on a bell curve due to the salary cap, but the reality of the situation is that true talent level does not work on this curve.

This is why so many teams are struggling to hold on to their key young talent when they hit restricted free agency. Take Mitch Marner, for example. Marner scored 94 points last year, which is elite territory for a winger. However, because of the salary structuring of the Leafs, as they are paying both John Tavares and Auston Matthews $11+ million AAV, they are struggling to come to terms with Marner and are attempting to low-ball him when he clearly deserves a large contract, especially compared to what his teammates are making. At the moment, the Leafs only have $3,765,301 remaining in cap space, and for them and many others, the cap is essentially limiting the number of good players a team can hold onto given their individual salary structure. This idea that a team can only keep a certain amount of “good” players is backwards and is caused by the salary cap. The solution is this: either pay the majority of players less, or change the cap to allow for the current valuation of talent to be able to continue, and I would far prefer the latter to the former.

It creates unfair trade markets

As I talked about in a previous article, the trade market this year has been puzzling to say the least. I wanted to expand upon a paragraph from that article:

Objectively, the Devils traded for an elite defenseman using expendable (and honestly, bad) assets when the Flyers made a slight upgrade but worsened the deal by including the retention of salary. Now, I do understand that the Flyers may have never been in on Subban (especially with hiring Therrien) and that the Predators needed to clear cap space that the Flyers couldn’t afford to clear for them. But with patience, the Flyers could have extracted more from a now-favorable market given what Subban went for. The point isn’t about any particular guy like Subban or even Trouba (since he went for practically nothing). There are objectively better defensemen that the Flyers could have traded for, and now this is no longer an option since the Flyers decided to make their moves early. Even if the Flyers knew they had their “guys” identified in Niskanen and Braun, it feels like non-diligent practice to jump the gun before a team knows how much buying power they will have given market valuations of their assets.

The P.K. Subban and Jacob Trouba trades highlight just how much influence and clout the salary cap has in the trade market. As much as we sometimes belittle NHL general managers for poor performance, they certainly understand the salary cap and how to exploit it. They have the ability to swindle clubs who are facing pressure from the cap and this makes sense logically. If you were a general manager, and you knew a team needed to get rid of a player, you would have leverage in that situation since you could always sign the player in free agency. We see this again and again with players who are unhappy on a team, or who simply only have one destination in mind (Adam Fox with the Rangers), and cap pressure has skewed the balance of the trade market. A player of Subban’s caliber almost certainly should demand a greater price than his end-market value.

If there was no salary cap, general managers would still have leverage when a player is unhappy or is unwilling to sign with a team. But, without the constraint of maximum affordability, clubs won’t lose players simply due to arbitrary spending limits, or see them go for far under market value.

It prioritizes undervaluing players

This is perhaps the most egregious crime of the salary cap. In an era where athletes are making more money than ever, the result of collective bargaining having set the cap so low has forced the hands of general managers to penny pinch to an extreme. Teams obviously want to keep their best players, and as those players command increasing salaries, general managers are having to find bargains in order to fill a roster with acceptable talent. As has been documented, the salary cap this year came up shorter than what teams were expecting and because of this, they were put in a difficult position. This financial pressure brought on by the cap has turned the undervaluing of talent into a sort of art.

It has also turned the everyday hockey fan into a desk-chair actuary. While there aren’t any statistics to back this up, I have personally seen more and more fans upset at contracts more than anything else. The argument presented is no longer “this player is bad”, but “they are paying this player $4.0 million AAV and he isn’t a $4.0 million player”. Personally, I felt this wave of response no greater than when the Flyers announced the Kevin Hayes deal. No longer can we be happy that a great player signed for the club, we must be vigilant of this overarching doom, the proverbial boulder tumbling toward Indiana Jones, the salary cap. The feeling that the $7,142,857 cap hit mattered more to Flyers fans than the player himself is a sobering reality check, and for me, solidifies my belief that the salary cap should be abolished.

Conclusion

Despite the league-wide trend of attendance increasing (up 95% from just eight seasons ago), the NHL is holding itself back by keeping the salary cap. In theory, the cap generates fairness and parity by setting a level beginning financially for all of the NHL’s clubs. However, in practice, it allows teams in unsuccessful markets to continue being unsuccessful, propagates the undervaluing of talent, and creates irregularities in the trade market. At the least, the cap should be increased substantively to a point where it is not being held unnaturally low. This way, the lower budget clubs will not be completely made irrelevant, and clubs with talent won’t inevitably be driven to be fleeced in the trade market. In this scenario, the ideas of parity and fairness can be kept.