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The Economy, the NHL, and Contract Negotiations

Henrik and Daniel Sedin

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 1st.  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.

8 replies on “The Economy, the NHL, and Contract Negotiations”

Relevant article. Well written. This can’t be Ryan Ballard’s work…just kidding. Great job Ballard!

Great article Ryan. We need some more NHL articles around here. Very well done, great read!

After a long time, I visited a blog that deals with really some brand new topic. As the whole world is facing financial crisis, it is quite obvious that the sportsmen and the sports teams will also face the same thing. $3M will be decreased in the salary cap of the National Hockey League players. So in this way the depressing economic conditions of both North America and the National Hockey League are affecting NHL player agents.

Ryan, where did you get the $3 million cap drop figure from? What might it drop in years after that?

Also, you will notice that though Zetterberg is by far the greatest team player and winner on this list, his salary is far less than Kopitar and Staal. This isn’t be accident. In a hard cap world, to play on a winning team, star must simply must sacrifice one or two million a year. If they refuse, their team is pretty much doomed to second-rung status. So Staal and Kopitar will get more cash, but more playoff wins.

The Sedins must decided what is more important to them, a few more million a year, or success in the playoffs. Vancouver management would have to sell to them that whatever they take, every other player who signs will be met with the same constraint, that no one will be earning much more than the Sedins.

It’s a difficult sell for Gillis, a difficult choice for the Sedins. But Gillis must go all-out to get out this message to them, because it is key to the success of an NHL franchise. If they don’t listen, he must save his money for players more focused on team success, than individual pay, a tough decision for Gillis, a brutally tough one, but the right decision. No more than $6 million a year, I’d say, is the right number, and maybe even $5.5 million.

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Yammer and Kayley: Thanks!

David: The $3M figure came from the quotes from GMs in a few recent articles in the Sports Business Daily. At the same time, they don’t rule out that the cap could stay the same, but the consensus is the $3M figure. I agree that Zetterburg is the best player on that list. His salary is a reflection of the way Detroit runs its franchise. Since the mid 90s players have agreed to receive less money than they could get elsewhere to play in Detroit. When players like Hossa and Zetterburg sign w/Detroit for less money than they’re worth, it’s refreshing in a sports atmosphere where players will hold out because $43M isn’t “enough.” It looks like Detroit will pull it off again this year; both Hossa and Franzen have said they want to sign 4 or 5 year extensions w/Detroit and would take less money to stay in Detroit.

If this happens, it would be a great situation for both the player and the agent. Franzen was a Red Wings draft pick, is still young, and is gaining popularity with the fans. Local endorsement deals are sure to come in the near future. Hossa, on the other hand, is already on the map with an endorsement deal with Warrior Hockey (10-15% of that going to the agent).


Kayley: Hey Ryan,I know this is a little late, but I was wondering if you are planning to specialize or currently specialize in NHL athletes

Planning to, yes. My quest has already begun.

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