NHL Proposes Sharp Salary Cap Increase

The NHL salary cap rose for the first time in three seasons this year, setting at $82.5 million for the 2022-23 season.[1]COVID-19 had a significant negative impact on the NHL’s revenue streams. Commissioner Gary Bettman asserted the league had suffered losses of more than $1 billion.[2] Over the past four seasons, the salary cap has remained essentially flat. The $81.5 million salary cap ceiling from the 2019-20 season was held steady in the 2020 and 2021 offseason before finally being bumped up $1 million this summer. The previously flat salary cap forced general managers to make tough decisions about their payrolls, however, it appears general managers may regain more flexibility in the near future. 

NHL teams have recently been given guidance on where the salary cap could wind up over the next few years. It is projected the possible salary cap in the next three seasons could be: $83.5 million in 2023-24, $87.5-$88 million in 2024-25, and approximately $92 million in 2025-26.[3] While these numbers are just projections, it matches a report by Frank Seravalli, which said the NHLPA should have its debt to owners paid off by the end of the 2024-25 season and that the salary cap would start to rise significantly immediately after. 

As the NHL returns to a form of normalcy following COVID-19, in addition to the continuance of the new television deal, the NHL’s revenue is expected to rise significantly. For the last decade the NHL’s exclusive national television home in the United States was the NBC family of networks, and it gave the NHL $190 per million per season for at most two national exclusive games per week.[4] In 2021, the NHL announced it would be returning to ESPN, with a deal that is worth at least $400 million annually. In addition, the NHL also agreed to a deal with Turner Sports, which will pay north of $225 million per year to the NHL.[5] The combined deals with ESPN and Turner Sports will bring in more than double the revenue that the NHL had received from its previous deal. This is likely the major reason the salary cap is expected to go up significantly in the coming years. Combined with the full return of fans and ticket revenue and concessions following COVID-19, the NHL is projected to make a substantial amount of revenue in the coming years, which in turn allows the salary cap to increase. Ultimately, the salary cap increase is a positive for players as they will be able to command more money in salary negotiations. 

It appears this information has already impacted the way general managers will be making decisions in the near future as several young players have signed what, at this time, seem to be very significant contracts. Younger players that have recently signed long-term extensions include: Tage Thompson, Robert Thomas, Jordan Kyrou, Tim Stutzle, Josh Norris. Each of these players signed for 6-8 years with an AAV of between $7-$8 million.[6] While these contracts have currently been met with some forms of backlash, given the riskiness of signing young players to such significant long term contracts, these types of long-term contracts to young, unproven players appear to be becoming the new norm in the NHL. Could this be because general managers believe the salary cap will significantly rise in the near future, and thus these contracts could be labeled as bargain deals within a few years? In addition, assuming the players listed above perform to the level expected, these contracts will lock in young, talented players at a reasonable price, allowing general managers more flexibly in roster-building decisions as the salary cap continues to rise. 

Assuming the projections for the salary cap are accurate, it will be interesting to see how contracts evolve in the coming years. Nathan MacKinnon recently signed an 8 year $100.8 million contract, making him the highest paid player in the NHL.[7] He likely will not remain the highest paid player for long with players like Austin Matthews entering a contract year soon. The NHL’s top contracts do not begin to compare to the top contracts in the MLB, the NBA, and the NFL. For example, MacKinnon will make $12.6 million per year under his new contract, while Max Scherzer in the MLB makes $43.33 million per year, Stephen Curry makes $48 million per year, and Aaron Rodgers makes $50.27 million per year. Is the goal of the NHL to eventually raise the salary cap to where general managers can offer these types of contracts? Or is it more realistic that we will begin to see contracts with AAVs of between $15-$20 million in the coming years? Overall, this anticipated spike in revenue and salary cap benefits everyone from the league, to general managers who have more flexibility, to the players who can demand more money in contract negotiations.

Featured image retrieved from: http://www.espn.com

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

[2] https://www.forbes.com/sites/carolschram/2022/09/27/report–nhl-salary-cap-projected-to-make-4-million-jump-for-2024-25-season/?sh=53ca61936895

[3] https://oilersnation.com/2022/09/27/report-nhls-salary-cap-projected-to-rise-to-92-million-for-2025-26-season/

[4] https://gothamsn.com/what-the-nhls-new-american-tv-deal-means-for-hockey-a178479e5a97

[5] https://www.nytimes.com/2021/04/27/sports/hockey/nhl-turner-media-rights-deal.html

[6] https://www.spotrac.com/nhl/contracts/

[7] https://www.capfriendly.com/players/nathan-mackinnon

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