Using Shea Weber as an example why the new contract limitations inhibit Flyers

At the risk of stating the super obvious, all NHL contracts can have salary amounts that vary from one year to the next. However, if you’re reading this, you’re probably a Flyer fan, and you probably rarely think about a player’s salary. To fans of “rich teams” like the Flyers, when it comes to contracts the only number that matters is “cap hit.”

A player’s cap hit is determined by taking the average annual value (AAV) of the deal. So ultimately, the salary matters very little when it comes to filling out a roster.

The now expired Collective Bargaining Agreement featured a bevy of “back-diving” contracts. These are contracts in which players received most of their money up front, and featured multiple years at minimal dollars towards the end of the contract designed to lower the player’s AAV and thus their cap hit.

One of the biggest changes in the newly agreed to CBA are the restrictions on contract variance from year to year. In simpler words, there are further restrictions around how much a player’s salary can change from one year to the next.

Additionally, contracts are now capped at seven year lengths, or eight for teams re-signing their own players.

As a “rich team”, the Flyers typically benefited by being able to offer huge sums of money in the early stages of a contract. They could then add years onto the end of the contract, to reduce the AAV and have a more manageable cap hit. This is something many small market teams would struggle to match.

As an example, Chris Pronger’s contract goes from $7.6 million in years one and two, to $525k in the last two years, resulting in a $4.921 million cap hit.

Danny Briere goes from $10 million in year one to $2 million in his final year.

Ilya Bryzgalov goes from $10 million in year one to $1.25 million in his final year.

image via ESPN.com

These back-diving contracts, and the idea of a rich team taking advantage of their cash flow was never more apparent than this past summer when the Flyers signed Shea Weber to an offer sheet. I also touched on all of the various CBA nuances surrounding the Shea Weber offer sheet at the time.

Weber signed a 14 year $110 million dollar deal for a cap hit of $7.857 million. He will make $14 million per year in years one through four (with $13 million of each year being a signing bonus).

Per section 50.6(a) of the now expired CBA, a player can’t make more (in salary and bonuses) than 20 percent of the cap ceiling in any given season. The cap ceiling at the time was set at $70.2 million, so the absolute most Weber could make in a given season is $14.04 million. He is just about making the most money allowed by the expired CBA…and most of it is a signing bonus.

His contract then drops to $1 million in the final three years of the contract.

Now let’s assume that section 50.6(a) remains the same, and that players still will not be able to pull in more than 20% of the cap ceiling in a single year. Using the terms of the new CBA, we know the Flyers could have only signed Weber to a seven year offer sheet. Additionally, the contract salary can’t vary more than 35% from one year to the next, and it can’t ever drop below 50 percent of the highest salary.

So what does that look like?

The chart below shows Weber’s contract as it currently stands (the offersheet from the Flyers which Nashville matched), and then two scenarios under the new CBA contract terms.

The red number, 14.04, is the maximum amount that Weber can make in a season, based upon a $70.2 million number (this past summer’s cap). The orange number, 9.126, shows a decrease by the maximum allowable 35% from one year to the next. And the yellow number, 7.02, is the lowest the salary can drop (50% of the highest year or 14.04 in this case).

The first scenario under the new CBA terms starts with maximum money in year one, and decreases by the maximum amount each year, until it reaches the 50-percent number. This results in a $8.32 million cap hit.

The second scenario under the new CBA terms starts with maximum money in years one and two (if the Flyers really wanted to throw money around), and decreases by the maximum amount each year, until it reaches the 50% number. This results in a $9.32 million cap hit.

Both numbers not only result in a higher cap hit when compared to his existing contract, but they are also much more easily matched by other clubs.

Whereas only a handful of teams could have afforded to offer Weber the offer sheet he ultimately signed with the Flyers; many teams (I daresay, most), would be able to offer the contracts in the scenarios I outlined above.

The Flyers have lost one of their competitive advantages…money.

  • Parker

    This is an incredible article and very well thought-out. The execution in your spreadsheet regarding caphit under the new CBA is particularly well done. As a Flyers fan, I hate hearing that we’re losing an edge of the competition. However, all should agree that it is for the benefit of the game that the AAV be regulated more strictly to accommodate small-market franchises. The beauty here is that we’ll see more of an NFL-like approach to free agency and less of what we see in MLB. In baseball (and previously, hockey) big name free agents will always sign with one of maybe 10 teams (LAA, LAD, NYY, NYM, Red Sox as tops then second tier of Phils, Giants, Rangers, Tigers and White Sox). That leaves the other 20 teams clamoring for leftovers every year. The likelihood of Albert Pujols signing with the Royals in 2012 was 0%.

    In the NFL, there is always a balance for free agents. While not as impacting due to rapid performance decline and high draft value – NFL Free agents look for a balance of opportunity and available cash. This is why Payton Manning would sign with Denver instead of the Jets.

    In short, in baseball the Yankees will never be one of the worst teams in the league and in football the Jets can continue to suck for an eternity.

    I look forward to what this new CBA will do for hockey free agency. I would love to see free agents lured to Columbus because the team has 2 first round picks in the coming draft and they have the cap room to front-load more money than the Rangers do. It will help balance the game out and make it better.

    • http://www.facebook.com/iamhouli Sean Houlihan

      the only caveat being the NFL does not guarantee contracts in a similar way to the NHL (relying mostly on bonuses for such payment that have a non-direct cap hit). The NFL can cut players with ridiculous contracts, whereas the NHL forced a buyout (not sure what the new CBA specs out for this) with a % hitting the cap for the remainder of the contract depending on age when the contract was signed. To me, this supports your feeling even more that it will make the competitive free agent season even more exciting across the league and not limited to the top 5 franchises. Sure the flyers will now lose a bit more than win, but overall it is going to be better for the league and owners, but potentially drive down overall individual player revenue.

    • http://www.flyersfaithful.com/ Kevin Christmann

      Thanks for the kinds words, and thank you for reading! I agree with you that it’s better for the game. Allowing these contracts just made the league dramatically top heavy.

  • http://www.facebook.com/iamhouli Sean Houlihan

    I believe this is the point though – the Flyers (and similar teams) cheated the system via an unforeseen loophole. Now, the League Owner’s (which include Mr. Snyder) want decrease the year on year variance to alleviate cap circumvention by teams like the Flyers/Rangers – the ’04 CBA was completely taken advantage of, the league hated it, but the NHLPA refused to give ground because they wanted players to make as much as possible (see the league not fining the Flyers for Pronger, a hall of famer making the league minimum in the last 2 years of a 7 year deal). Overall, this will decrease player “value” across the league while having the Cap hit make more sense. For example, is Shea Weber really a 9+M player? Sure teams can easily match in the scenarios above, but you will see this trickle down throughout all players in the league, it will level, and teams with cash will still be able to front load deals that 1) hit a reasonable cap number AND 2) will still out do anything small markets can or want to handle – because the economy of the league will level to these new norms. All this is doing is putting a priority on CAP hit faster. Teams spending the minimum will still spend the minimum, so big market teams will still be able to outbid (for the most part). It may affect RFA more than anything, but UFA still allots players right to choose their destination…so a better comparison would be looking at deals Minnesota offered Parise & Suter and the question would there have been more competitive/teams bidding for them. Overall, I actually like this as we wouldn’t have to deal with a Pronger type cap hit of 5M if he retired prior to his contract ending because the Flyers would have actually had to think of their cash out payments to players not actually playing (if that makes sense). The flyers are “lucky” that the buyout clause is coming and/or Pronger will be on LTIR the rest of his career, especially with the potential to resign G, etc. Plus, this continues to spread the talent (or available talent), makes teams more responsible for signings long-term, and drives for actual value contract. The Flyers will not hurt for FA as a result of this. (sorry for the novel).

    • http://www.flyersfaithful.com/ Kevin Christmann

      I agree that the market will level out. While some teams still won’t be able to offer contracts like I outlined above…more teams could.

      At the minimum, I think small market teams can take solace in the fact that if someone tries to poach their RFA (or even a UFA to some extent), It’s much harder to do so without resulting in a very large cap number. So they should at least feel like they have a more realistic chance to keep their guy.

      • http://www.facebook.com/iamhouli Sean Houlihan

        Yes…I am all about parody, which is weird in the only sports league (well since the NFL and MLB have fewer playoff teams) in which the 15th/16th best team can win the championship. In addition, specifically with RFAs, the teams ability to not get poached decreases by their ability to pay for a player (spreading out more level cash flows over the years), will also hopefully help the league in understanding which teams actually have financial stability. Up front cash (frontloading/backloading) is what kills smaller franchises. As you indicated, as salary goes up, the cap goes up…thus deterring the “big” teams that spend to the upper limit from giving a player (artificially) too high of a salary. So rather than not signing a player because of lack of cash flow (i hate accounting tricks), the league should have better insight into the financial long term stability of a franchise. Wishful thinking I know…I just want a 24 team league, 60 game schedule, and 8 team playoff.