The Economy, the NHL, and Contract Negotiations

There has been much concern about the financial conditions of NHL teams the past few months.  Obviously, a struggling economy isn’t good for any sports team.  So how will the depressing economic conditions of both North America and the National Hockey League affect NHL player agents?

NHL General Managers held their winter meeting last week, where they addressed the issue of how to counter the downtrodden economy.  It is expected that the salary cap will be reduced next year to help franchises deal with declining profits.  Since the 2005 Collective Bargaining Agreement was established, the salary cap has been $39M, $44M, $50.3M, and $56.7M this year.  A fair estimate is that the cap will decrease about $3M.

With the above in mind, let us consider the situation in which an agent represents an elite player on an average team.  Actually, make it twins, twins who have played together their entire lives.  They are equally talented and want to keep playing together.  Their contracts are about to expire, and it’s time to begin negotiations for contract extension (the NHL CBA prohibits contract renegotiation and allows extension negotiations only in the final year of the contract term).

This is the situation that player agent J.P. Barry faces in representing twins Henrik and Daniel Sedin.  Thus far, negotiations have gone well, but no agreement has been made.  The Sedin twins play for the Vancouver Canucks.  Vancouver’s GM, Mike Gillis, is faced with the challenge of fitting two elite players into a shrinking salary cap in a league with shrinking revenues.  On the other side, Barry is faced with the challenge of trying to secure valuable deals for two elite clients, on the same team, who have never played without seeing their twin brother streaking down the other side of the ice.  Players of similar stature have garnered significant contracts this year: Henrik Zetterburg signed a 12-year deal for $6.1M annually, Eric Staal signed a 7-year deal for $8.25M annually, and Anze Kopitar signed a 7-year deal for $8.6M annually.  The Sedin twins should be making somewhere in that ballpark.  It would be a significant raise for the twins who each currently make $3.575M annually.

Barry has called off negotiations to let the twins and the team focus on the rest of the season, so there won’t be much time to negotiate an extension when the season is over; NHL free agency begins on July 1^st.  A tough reality that NHL player agents must face is that their players’ salaries may not increase as much as they should.  The Sedins should be making around $7M a year, but their special circumstances of wanting to stay together, combined with the NHL’s less than desirable financial situation, create the reality that it just might not happen.  A mechanism that is extremely useful to MLB player agents, performance bonuses, is not available to Barry in negotiating the Sedins’ extension.  Per 50.2(C)(2), the NHL CBA allows performance bonuses for three categories of players: (1) players signed to an entry-level contract, (2) players at least 35 years old who sign one-year contracts, and (3) veteran players (played more than 400 games) who sign one-year extensions after returning from long-term injuries.  The Sedins don’t fit into any of the three categories.

Barry’s challenge in negotiating an extension for the Sedin twins will become the norm for NHL player agents if NHL franchise revenues continue to fall.  Negotiating lucrative deals for NHL players is harder than ever before.  So, to those agents representing elite players seeking more money…good luck.