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Should the NHL change the salary cap system?

This time without live sports has given everyone plenty of chances to reflect and take a deep look at what works in the world of sports and what doesn’t. There have been countless articles written about ways the NHL could change (including a handful by myself) and there have been lots of different ideas thrown around.

The one topic that I’ve been asked about a few times is whether or not there is a way for the NHL to improve the current salary cap situation. The pandemic has obviously been hard on the worldwide economy and the NHL has not been immune to that. Their sponsorship revenue will more than likely drop for next season and ticket prices might need to come down once fans are allowed back into the stadiums. Less revenue means a smaller salary cap ceiling. I don’t think the league will ever shrink down from the $81.5 million cap ceiling they had for the 2019/20 season, but it might not be going up very much over the next few seasons. 

That has led to a lot of people floating out different ways that the league could give teams some extra wiggle room over the next few seasons. Here are a few that I find interesting:

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THE EXEMPTED PLAYER

Mar 3, 2020; Dallas, Texas, USA; Edmonton Oilers center Connor McDavid (97) in action during the game between the Stars and the Oilers at the American Airlines Center. Mandatory Credit: Jerome Miron-USA TODAY Sports

I really like this idea and it’s something I’ve floated out in the past. Recently, the idea was also proposed by NHL Agent Kurt Overhardt who talked about adding an exempted player. 

“Under this new system, each Club would be allowed to designate one Exception Player whose compensation would be excluded from the team’s salary cap considerations as well as the players’ share of the revenue split. The benefits of this system extend far past the Exception Player as an individual as there would now be more money in the pool available for his teammates.”

It’s a fascinating idea. Simply allow one team the option to take a player’s cap hit off their books while still paying them a salary.

The current system sort of punishes teams who have to sign superstar players and it puts pressure on those players to take less money so that they can give their organization a better chance to surround them with talented players. That doesn’t seem right to me.

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Imagine if the Oilers could exempt Connor McDavid’s $12.5 million cap hit. They would suddenly have enough money to sign Ryan Nugent-Hopkins to a long term deal, give Ethan Bear a long-term deal this summer, and potentially still have some change left over. The exemption of McDavid’s deal puts more money in the pockets of two other players. That would be the case for almost every team in the league.

I really like the level of parity in the NHL and the hard salary cap is the reason that parity exists. However, I wouldn’t mind seeing teams that draft superstars or teams with a little bit more money get a slight advantage. Imagine being a team that didn’t have an exempted contract when a star like John Tavares hits unrestricted free agency. Tavares would have made way more money since a team could have offered him $15 million a season without it crippling their cap situation.

This idea would help star players get paid, create a trickledown effect to other players in the league, and in the short term, it would help teams that are tight up against the cap. That immediate relief would be huge in the next few years as the cap will likely stay flat. It wouldn’t completely kill parity but it would give some organizations a slight advantage which would lead to bigger markets being contenders more often, which could be good for TV numbers. For small markets, they wouldn’t be gutted of their star players because there are only so many ‘exempted slots’ around the league.

I really don’t see a downside to this system and think it would be a great change for the NHL.

THE HOMETOWN DISCOUNT

Oct 18, 2019; Edmonton, Alberta, CAN; Edmonton Oilers defensemen Ethan Bear (74) celebrates his second period goal against the Detroit Red Wings at Rogers Place. Mandatory Credit: Perry Nelson-USA TODAY Sports

This idea was floated to me on Twitter by a member of the Nation, Ty Loney (@grizz4327), so shoutout to Ty! He asked about creating a system where teams are given cap relief when they sign players that they drafted and developed. A discount for homegrown players. 

Basically the way it would work is that when a team signs a player that they drafted, they would get a certain percentage taken off their cap hit. For example, if the Oilers sign Ethan Bear to a contract with a cap hit of $4 million and the league were to put in a rule where only 80% of a homegrown players contract counts towards the cap, only $3.2 million of Bears deal would count towards the Oilers cap even though they’re paying him a salary of $4 million. I hope that makes sense.

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I like the idea of rewarding good organizations that can draft and develop their own talent but there are some issues with this system.

First, I fear that this would completely kill the trade and free-agent market in the NHL. Teams are already tight up against the cap and suddenly if you want to trade for a player you need to be prepared to potentially offload a contract that you’re getting a discount on for a player who will have 100% of his salary count towards the cap. Also, teams would be hesitant to move draft picks because that means you lose the chance to develop a player who you could eventually get for a cheaper cap hit. In free agency, players would rarely ever switch teams because the organization that drafted them could almost always offer them 20% more than other clubs.

There would still be some movement, but we would not see as many players switching teams.

Also, how would you handle players that were traded as prospects? If a player was traded after they were drafted but before they played an NHL game, would they be in-eligible for this 80% exemption? There are a lot of grey areas with this idea.

Ty mentioned the possibility of only have 10% of a contract exempted and that would make trades easier to stomach for each club. If the system was made so it was a very small discount, then it might work. Still, I don’t believe it’s as realistic of an option as just giving each club the ability to exempt one superstar player’s contract.

If the discount is small, say 5-10%, then it would work a little bit better but still, I worry you would just be complicating things for a very minimal benefit.

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ARTIFICIAL INFLATION

The cap was likely going to take a substantial jump once the league got new nation television deals in both Canada and the USA. The addition of the Seattle franchise will also help that number go up. That isn’t coming for a few years, but what the league could do is come up with a three to five-year plan to ‘artificially inflate’ the cap ceiling for the next two seasons before eventually getting it back a more true number in years three, four, or five.

I view this as the most realistic option. It doesn’t fundamentally change the way the NHL operates while giving teams that can spend some extra money the option to do so. It stays true to what the league has been doing since they introduced the salary cap system. 

Some would say that not making a big change to the system at a time like this is a mistake or a missed opportunity, but the NHL generally likes to play things safe. I would love to see them really shake up the way things work and add an exempted player, and there is clearly an appetite for it from some around the league, but I doubt that it would happen.