What Does the Nathan MacKinnon Contract Mean for NHL Superstars (and their Teams)?

(Photo via Sporting News)

Colorado Avalanche superstar forward, and now-Stanley Cup champion, Nathan MacKinnon signed an eight-year, $100.8 million extension to remain with the club last Tuesday. This contract makes MacKinnon the highest-paid player in the NHL at an average annual value (AAV) of $12.6 million.[1] MacKinnon will be paid a whopping $89.3 million in signing bonus money.

Of course, this $12.6 million figure is still far less than the highest-paid players across the remaining four major sports leagues make. The fact of the matter is that the NHL, and on a larger scale, hockey, will never be able to generate the same levels of revenue that the NFL, NBA, MLB (and their corresponding sports) generate. Opening up new, creative revenue streams was the motivation behind the league approving advertisement patches on the front of jerseys for the upcoming season, after all.[2]

Current Salary Cap Context

The NHL’s salary cap has remained relatively stagnant in recent years, primarily due to the COVID-19 pandemic. The salary cap increased this offseason for the first time since 2019, with the upper limit set at $82.5 million for 2022-23. The collective bargaining agreement between the NHL and NHLPA mandated that the cap remain flat at $81.5 million until hockey-related revenue (HRR) surpassed $3.3 billion for the previous season.[3]

This freezing of the cap resulted in a number of teams being forced to make unexpected cap-related roster moves. The NHL employs a “hard” salary cap, meaning that a team may not exceed the upper limit at any point (during the regular season). Player contracts that were signed years prior, and which factored in a steady, annual increase of the upper limit, quickly became cap nightmares, as teams had markedly less money to work with than projected.  

The salary cap is in place for good reason, though. It is perhaps the main contributor to the tremendous parity that exists in the NHL year-over-year, giving smaller market teams the opportunity to regularly compete against the traditional juggernaut franchises and larger markets. Moreover, no player’s cap hit may exceed 20% of the upper limit for the given season[4]; while providing for more balanced roster construction, this ceiling further restricts the salaries that top-tier talents can earn.

Impact Around the NHL

MacKinnon’s AAV of $12.6 million just barely (and likely, not coincidentally) surpasses that of Edmonton’s Connor McDavid, the league’s previous highest earner ($12.5 million), and by most accounts, the best player in the world. McDavid was asked about MacKinnon’s new deal, and offered an interesting and honest answer, saying “it’s good for hockey, I guess, to keep raising the bar. But ultimately, the salary cap system’s a weird system where the more money you make the less someone else can make. It’s kind of a weird system that way. There’s always going to be give and take.”[5]

McDavid is correct – “general managers have not yet cracked the code when it comes to offering maximum rewards to their top stars while also leaving themselves enough cap space to round out their rosters,” as Forbes’ Carol Schram notes. To this point, no team has won a Stanley Cup with a player making $10 million or more.[6] The 2021 Lightning featured two $9.5-million players in Nikita Kucherov and Andrei Vasilevskiy, and still needed to weaponize long-term injured reserve (LTIR) for cap purposes. The highest-paid players on MacKinnon’s reigning Cup champion Avalanche were Mikko Rantanen ($9.25 million) and Conn Smythe winner, Cale Makar ($9 million). MacKinnon’s extension is sure to impact the construction of this roster down the road, and has already led to departures from last year’s championship team.

Sportsnet’s Elliotte Friedman reported earlier this week, though, that “NHL teams have been given some guidance on where the cap could be going over the next few seasons.”[7] MacKinnon’s extension likely took this into account. Below are Friedman’s “educated guesses” of the jumps in the salary cap upper limit that will occur in the years to come:

YEAR POSSIBLE SALARY CAP
2022-23$82.5 million
2023-24$83.5 million
2024-25$87.5 million – $88 million
2025-26Approximately $92 million  

(Chart via Sportsnet/Elliotte Friedman)

So, what does all of this mean for the group of truly elite players that are approaching free agency and/or initiating negotiation extensions? Critics of the hard cap system have called for a soft cap/luxury tax system, similar to the one implemented in the NBA, that would allow the league’s best players to command significantly more on the open market. However, the current CBA does not expire until after the 2025-26 season, meaning that this is not a short-term solution. It is important to note that, in preparing for a potential lockout upon the expiration of the CBA, NHL players are frequently taking higher percentages of their contracts as signing bonuses –  this money is paid out to players whether or not the player appears in games for the club in the given season.

McDavid is under contract through 2025-26, so he will likely benefit from any changes to the system under a new CBA. He has the opportunity to make NHL contract history, and entirely reset the market. His deal will be impacted considerably by his teammate, and fellow Hart Trophy (regular season MVP) winner, Leon Draisaitl, although the Oilers will undoubtedly prioritize the generationally-talented McDavid.

Auston Matthews is a bit of a more intriguing case, however. The Toronto Maple Leafs’ mega-star forward will hit unrestricted free agency in 2024. Matthews currently makes approximately $11.64 million, which amounts to 14.1% of the current salary cap.[8] Toronto has notably dealt with cap issues over the past several years, and unsurprisingly, is already dealing with them again this season. These problems stem primarily from their eagerness to dole out large contracts to their stars, as they currently roster three players with $10+ million cap hits; Matthews, John Tavares, and Mitch Marner account for more than 40% of the club’s salary cap. Considering that 20 other roster spots must be filled with the remaining 60%, it is easy to understand why Toronto has had difficulty rounding out its roster.

Matthews is one of the faces of the NHL, and would surely command north of $13 million on the open market (especially from his hometown Arizona Coyotes). He is the cornerstone of the franchise, and in all likelihood, the Leafs will do whatever is necessary to retain his services. He, individually, may not experience a negative contractual impact, but as McDavid pointed out, “the more money you make the less someone else can make.”

That brings us to Matthews’ teammate, Mitch Marner. Marner will be due for a new contract in 2025, a year after the Leafs presumably re-sign Matthews. Marner has been Matthews’ running mate for the majority of his Leafs’ tenure; they complement each other tremendously well, and enhance each other’s games. Although the upper limit of the cap will likely have risen considerably by this time, the Leafs will almost certainly still be pushed up against it. There is a very strong possibility that Marner’s ask prices the Leafs out of negotiations, and that the Leafs are ultimately forced to trade him. Suddenly, Matthews’ new contract has (hypothetically) cost him and his team one of the league’s most dynamic offensive players, and Matthews himself is less effective, as a result. In the event that Toronto re-signs Marner at an AAV of at least MacKinnon’s $12.6 million, this would presumably necessitate the exit of other another important piece(s). 

Similar to the Leafs’ situation, the Oilers will soon have to weigh the value of rostering two of the league’s highest-paid players while attempting to build a complete lineup. Oilers’ forward Leon Draisaitl will also become an unrestricted free agent in the summer of 2025. With McDavid’s looming free agency just a year away, the club will have to make an extremely challenging decision with regards to Draisaitl’s contract. Like Marner and Matthews, McDavid and Draisaitl are one of the most feared duos in the league. However, the front office will have to consider whether paying just two players approximately one-third of the salary cap is a wise roster-building endeavor.

The risks of moving on from such a talent are similar, too. The departure of one of the league’s truly elite players naturally brings down the quality of the team – but is the alternative, “cap hell,” worth it? Is there merit to the fact that no $10-million player has hoisted the Cup yet? These are some of the questions that NHL front offices must wrestle with when handling negotiations with superstars.

Toronto and Edmonton represent just two prominent examples of clubs fighting the endless battle between appropriately rewarding star players, and having enough money left over to build a deep, complete roster. MacKinnon’s deal has set a contractual standard for the game’s top players. With the cap projected to increase significantly over the next few seasons, cap hits, especially those of the league’s elite, will naturally increase, as well. The NHL generating more HRR is inarguably a positive for the players. Players will rightfully be able to command more lucrative deals, and MacKinnon’s contract is evidence of that. With the stakes as high as ever, though, front offices will face as daunting an iteration of this endless battle as they have to date.


Resources

[1] https://www.espn.com/nhl/story/_/id/34630487/colorado-avalanche-give-nathan-mackinnon-eight-year-extension

[2] https://ublawsportsforum.com/2022/09/15/advertisements-are-coming-to-nhl-jerseys-for-better-or-for-worse/

[3] https://www.espn.com/nhl/story/_/id/34103592/nhl-salary-cap-set-825-million-next-season-first-increase-three-years

[4] https://www.capfriendly.com/faq

[5] https://www.mirror.co.uk/sport/other-sports/american-sports/connor-mcdavid-nathan-mckinnon-contract-28045426

[6] https://www.forbes.com/sites/carolschram/2022/09/20/report-nathan-mackinnons-contract-extension-sets-a-new-nhl-pay-standard/?sh=7753ae52c3ab

[7] https://www.sportsnet.ca/nhl/article/nhl-preparing-teams-for-sharp-salary-cap-increase-over-next-three-seasons/

[8] https://www.espn.com.au/nhl/insider/story/_/id/34631157/what-nathan-mackinnon-new-contract-means-avalanche-other-nhl-superstars-auston-matthews-connor-mcdavid?device=featurephone

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3L at University at Buffalo School of Law; BSELS Co-Vice President

MBA in Marketing;

In pursuit of a career at the intersection of sports law and sports business, specifically in professional hockey.

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