Wednesday, July 06, 2005

Entry Level Salary Restrictions

I have long claimed that entry level salary restrictions will drive some NHL ready talent away. I think the most likely candidates are talented Europeans who can make as much money or more while staying in Europe, instead of uprooting their lives to come to the NHL. I think Alexander Ovechkin and Evgeni Malkin will be the first two examples of this. I think it is a horrible shame that the NHL could be so short-sighted to shortchange their fans the chance to see these talented players.

It turns out that even Sidney Crosby is negotiating to play in Europe. That's right, North American talents may turn down the NHL if they can make substantially more money in Europe. Sidney Crosby is negotiating with Lugano in the Swiss league to sign a contract that could be worth up to $10 million over three years. It is believed that under the new NHL CBA, Crosby will be able to make about $3 million maximum in the NHL in that time. I am sure that Crosby doesn't want to actually play in Europe. I am sure that the hope is that the "Crosby clause" will be put in the CBA to allow extremely talented players to make far more than they can under the expected CBA entry level restrictions.

Crosby already has signed endorsement deals with Reebok and Gatorade and would likely make more endorsement money in the NHL then overseas, but will he be able to make enough endorsement money to make up for being very underpaid (as compared to what the free market provides) under entry level salary restrictions?

Even if Crosby does not go overseas, many talented European prospects will not bother coming overseas to the NHL because there is less money for them to be made as long as they are bound by entry level restrictions. Further, middle class type Europeans squeezed out by the salary cap may also depart the NHL when their potential incomes drop under the new CBA. This can only hurt the NHL. Its major strength is being the league with all of the best hockey talent in the world. It is not clear if that will remain true under the new CBA. If it is not true it will be a huge loss for the league and for the fan of the league. No longer will fans be able to watch all the best players in the world regularly.

John Fontana at Boltsmag also discusses this subject. Although we both agree Crosby is unlikely to play in Europe next year, he fails to see that other European players who have NHL talent will - and as a result we will be denied the chance to watch them play. These are the potential Ilya Kovalchuk's and Marian Gaborik's of tomorrow who will be kept out of the league (at least for a few years) by a bad CBA. In a nightmare case, the Gaborik's and Kovalchuk's of today might get some competitive offers to play in Europe if their NHL pay declines.

I don't think there is any way the PA would consent to this without some form of "loophole" such as performance incentives. Both sides surely have to recognize that the talent loss would result in a direct hit on revenues if the public gets the idea that their product is in any way inferior. I think this is a bit of speculation based on incomplete information; at least we can hope so.
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