Tuesday, July 14, 2009

The Blackhawks' Pickle

If commissioner Gary Bettman's pre-lockout hope was that an NHL salary cap would function to create NFL-style parody, then Chicago hockey fans are about to get a first-hand taste of what that means.
Blackhawks fans, say hello to your friends in Buffalo and Tampa Bay -- two of the NHL's best franchises in the middle part of this decade that have sunken to also-ran status (or worse) because they were, in effect, "capped out."
ESPN.com's Scott Burnside gives an insightful look today into why Chicago general manager Dale Tallon was relieved of his duties after bringing the franchise to its most successful point in 13 years. It seems there was a lot of politicking going on in the front office and that when Tallon flubbed the timing of sending out qualifying offers to retain the team's restricted free agents at the end of last month, potentially risking that they could become unrestricted and leading to the filing of a grievance by the NHL Players Association, Tallon provided the amunition to his enemies that led to his ouster.
Yes, the Blackhawks have delivered one of the NHL's most exciting renaissances in recent years and, in the process, have become a financial juggernaut, leading the league with an average attendance of 22,247.
But this isn't Major League Baseball or the NBA where a team can buy itself out of bad contracts or the NFL, where cutting a player means you don't have to pay him. These are precarious times for NHL general managers to negotiate the NHL's guaranteed contracts and its hard salary cap, set for next season at $56.8 million.
And it appears that the trend of teams' awarding insanely long contracts is going to start haunting some teams. Philadelphia is among them, with Daniel Briere and his eight-year, $52-million deal and Chris Pronger, whose seven-year, $34.9-million extension won't kick in until he's 35, leaving the Flyers, most likely, with dead cap space at the end of that contract for at least a few years.
But let's take a look at the 'Hawks and what gave Chicago president John McDonough the pretense to get rid of Tallon.
Because of Tallon's mistake in the timing with the qualifying offers, he was forced quickly to sign deals with two players that ended up being more lucrative than might have been the case to prevent the possibility that they would go unrestricted (at which point he might have lost them to potential rivals or had to pay them even more). In particular, rookie of the year finalist Kris Versteeg, a forward, will assume a $3.083 million cap hit for the next three years, as will defenseman Cam Barker.
Those millions -- or hundreds of thousands -- are precious in the cap era and the Blackhawks' cap issues will shortly become an acute mess. A quick look at the Blackhawks' cap figures on NHLnumbers.com would indicate that the Blackhawks' window to win the Stanley Cup, as currently constituted, could be as short as next season.
Here's why: The Blackhawks owe the 21 players signed to contracts an estimated $58.147 million, which would theoretically put them $1.347 million over the cap.
Two of Chicago's best players and the foundation of the franchise for years to come, Jonathan Toews and Patrick Kane, are on rookie contracts that pay them $850,000 and $875,000, respectively. However, those players' cap numbers are $3.725 for Kane and $2.8 million because of performance bonuses in their contracts. The Blackhawks are only under the salary cap because of a $4.26 million cushion provided by the league in case those players do not hit all of those bonuses.
If they do hit all of those bonuses -- which is very possible, considering they ranked as Chicago's No. 2 and 3 scorers last season -- then the mechanism in which the NHL compensates for teams that exceed the cap through bonsuses is to deduct the overage from the following season. (Ain't cost certainty a bitch?)
So the Blackhawks could face a 2010-11 season in which all of the following happens: The salary cap goes down because of continuining economic pressures, the Blackhawks face a charge of several million dollars from the previous season, further lessening their cap space, and, oh by the way, those two pillars of the foundation both hit restricted free agency. So does defenseman Duncan Keith, who led the team in average ice time per game. (Defenseman Brent Seabrook, No. 2 in average ice time, hits it the following season, but that's another quandary for another year.)
This is the crisis that new general manager Stan Bowman, one season into his tenure, will face. It will be impossible for him to keep the key elements of the team together.
Take a look at Chicago's largest contracts:
-- Defenseman Brian Campbell, cap hit of $7.140 million with four years remaining after '09-'10.
-- Goalie Cristobal Huet, who was the team's back-up in this year's playoffs but will assume the No. 1 job, at $5.625 million with two more years.
-- Right wing Marian Hossa, $5.233 million, with 10 years remaining.

So if Kane, Toews and Seabrook all receive contracts in the $5-$6-million range, one way to get under the cap would be to get rid of Campbell, Hossa and Huet, which, in addition to being nearly impossible, would eviscerate the team.
Here are some of the hideous options the Blackhawks could undertake to remedy the situation. They could buy out Campbell at a cost of $19 to $20 million. They could send him -- their No. 3 defenseman and highest scoring player at that position -- to the minors and pay him $7.14 million per year so he wouldn't count against his cap.
They could trade Huet, if anyone would take him at that salary, or buy him out and then try to find a cheap goalie capable of winning a Stanley Cup. (Good luck with that, although it's more risky than impossible.)
Ironically, the most movable player becomes Hossa. His 2009 Stanley Cup final performance aside, he's one of the game's premier wings and when compared to his peers his $5.233 cap number makes him much more palatable -- despite the length of his contract -- than say, Dany Heatley, whom Ottawa is finding untradable, in part, because of his $7.5 million cap number. (Remember, those players were once traded for each other with Greg de Vries thrown in largely as a salary dump for the then-cap strapped Senators.)
One other minor point about the Blackhawks' situation is how it puts the NHL and the NHLPA at odds even when they are supposedly partners. The union wants to maximize revenues (and, thus, salaries) so having a team resurgent in a market like Chicago, with its vast windfall of revenues, is vital.
But to the NHL the most important thing is keeping teams under the cap, which, in this case, could hurt the Blackhawks on the ice and, as a result, on the balance sheet. Chicago's loss could be the gain of, say, Nashville or Phoenix, if it still exists, which would do nothing for revenues.
So good luck Stan Bowman. You'll need all the help you can get from your legendary father.
And your accountant.


  1. Great writing and analysis as usual, though I do have one point of contention from the very end.

    You say that "Chicago's loss could be the gain of, say, Nashville or Phoenix, if it still exists, which would do nothing for revenues." On the contrary, every market sees increased revenues with increased winning. Greater parity means more frequent "up" seasons for every team. More winning means more butts in the seats, regardless of whether it's in Phoenix or Ottawa.

  2. Razor, unfortunately not all revenues were created equal. The truth is that in markets like Chicago were demand is higher (and corporations and individuals are wealthier), revenues are higher.

    Think about average ticket prices. The Boston Red Sox have Major League Baseball's highest because of demand and affluence. I've seen Toronto hockey writers talk about taking a winter vacation to Florida and bringing their family of four to a Panthers game for less than what it costs for one Leafs ticket.

    Don't get me wrong: living here in Atlanta, I'm a nontraditional market guy, but the truth of the economics is that people will pay more for hockey tickets in Chicago than they will in Phoenix, Nashville or Atlanta. Just like the way you couldn't get 96,000 to a college football game in Ottawa the way you can in Athens, Ga.