NHL Lockout: Will Five-Year Contract Limits Help the Owners Control Costs?
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The NHL would like to get rid of long-term contracts like the ones that Zach Parise and Ryan Suter signed this summer with the Minnesota Wild.
Parise and Suter were the two headliners of the free-agent signing season. The Wild hit a couple of home runs when they signed both stars.
That's not the problem, according to the NHL. The issue is the length of those contracts.
Both players signed 13-year, $98 million contracts. The NHL does not want its teams to offer contracts longer than five years.
It wants a five-year term limit to be included in the Collective Bargaining Agreement that the two sides are currently talking about.
They are talking about it because direct negotiations between the two sides have been stalled since the NHL rejected an NHL Players' Association counteroffer Oct. 18 (actually, three counteroffers were turned down).
When teams have issued long multi-year deals, they do this to reduce the cap hit of the contracts. When the $98 million is spread over 13 years, the Wild takes a salary hit of $7.5 million per year. In the early years of the contract, both Parise and Suter are each scheduled to receive $12 million per season. The final years of the deal call for each player to receive $1 million per season.
Placing a five-year limit on contracts would put a halt to the huge contracts that grab the headlines. However, it would also increase the salary-cap hit that teams would face when they sign stars to five-year deals.
The average salary of a shorter-term deal would be higher and so would the cap hit.
Teams with lesser revenue might have an even more difficult time holding on to star players because the amount of cash needed over the five years of the deal would be more than the cash needed to pay the player during his first five years of a longer-term deal.
Term limits would impact the amount of cash teams are committed to pay individual players over the length of the contract.
However, star players might end up making more over the course of two five-year contracts than one long 10-year deal.
Contract term limits would impact the amount of money on the owners' payroll over the long haul, but it's not necessarily going to limit the amount of cash that comes out of their pockets.
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