Lockout Imminent?

The recent re-signing of free agent Ilya Kovalchuk has got fans worried, including me, about the financial situation of the NHL. Kovalchuk was re-signed for 17 years, including 5 years at the league minimum.
 
Now, why am I troubled besides the fact that James Sheppard is making more than what Kovalchuk will be making in 6 years?
 
While I am not an NHL executive and not extremely educated in the financial status of the league, the recent omens are just too hard to ignore and too disturbing for me to keep quiet.

For example, the Mikko Koivu contract. GM Chuck Fletcher was very detailed in the layout of the terms. It seemed puzzling why any general manager would construct it the way that he did. The contract has Koivu's salary fluctuate from $7,290,000 to $5,400,000 and from $5,400,000 to $9,180,000. While the length of the contract is not long enough to be considered cap circumventing, the numbers do raise questions as to why.  When asked about the strategy behind Fletcher's move, Michael Russo, the Minnesota Wild's beat writer wrote:

"There are multiple reasons for this. 1) Lockout protection. In other words, if there’s a lockout in 2012-13 and Koivu loses his salary, he basically recoups it during a backloaded contract. 2) I’m told the signing bonus payments protect Koivu’s estate, which is mostly legal protection. That’s way over this sportswriter’s pay grade."

Russo also mentioned:

2)The seven-year deal is specifically seven years because it can be insured in case of injury. Deals over seven years can’t be insured.

While I am not an NHL executive, GM Chuck Fletcher certainly is, along with the entire Wild management, and they made an effort in building Koivu's contract in order to withstand any CBA complications that may arise.

Following Koivu's eye-opening contract, I stumbled upon this blog entry by The Denver Post (http://bit.ly/dnTFT3). It talks about the fragile state of the NHL, and how a lockout is not just history. Here are a few excerpts:

Again, it’s a little early to fret too much, but already there are whispers that, under Fehr, the players might try to abolish the current hard salary cap and get a soft-cap, luxury-tax, revenue-sharing style system that baseball has had for the last seven years. Basically, that would mean that teams could spend as much as they wanted on players again, provided they pay the tax over a certain threshold. The Yankees, of course, are the only team to have paid it every single year.

For starters, all the players hate the fact that they have to put aside a certain amount every year in escrow to cover any projected revenue shortfalls. This past season, players lost 12 percent of their salaries to escrow, money that won’t come back.

- Think about it: small-market teams before the lockout are still small-market teams now, making whatever dollars they make at the gate and whatever piddling money they’re getting in TV money now (more on that in a bit). Ticket sales in cities like Atlanta, Phoenix, Anaheim, Carolina, Columbus, Nashville, Tampa, the other team in Florida, etc., etc., weren’t all that great last year. Granted, none were Stanley Cup winners and no marketing plan succeeds quite like winning, but they aren’t making much more, if at all, in ticket sales than they were right before the lockout.

The article really paints a picture of the current status of the league and how even after years of raising the cap ceiling, the league is still in a very vulnerable state. A combination of Koivu's contract and that article got me shaking. No, I am not being paid an NHL salary but I don't think I can stand hockey withdrawal for a whole year. Seven months between missing the playoffs and season opener is bad enough. Now, to make my day worse, I read the Kovalchuk re-signing. Red flags appeared everywhere in my head...

Ilya Kovalchuk will be paid for 17 years and with the last 6 years below 1 million dollars each year, but how many truly believe he will still be playing at the age of 44 years old?
 
It is clear that the Devils don't intend for Kovalchuk to play till he is that age but it gives them the ability to lower the cap hit by offering extra years at league minimum. While it is against the rules to build contracts purely to circumvent the cap, the league is powerless without any proof that talks of retirement took place.
 
Now why would I be afraid of this contract that is considered legal and fair?
 
Well, it gives other GM's the heads up that they could do the same. What's there to stop other GMs from re-signing their key players to 30-year deals with no intention of them playing till the end of the contract? Nothing.
 
In a cap driven economy, using this loophole is an big benefit, low risk move. Soon, you'll have a league filled with long-term contracts that undermines the whole point of the cap system, which is to control costs and create parity between teams.

CBA negotiations will take place during 2012, but between now and then, there are just too many key players that will be up for free agency, and the temptation to use this loophole to lock up key pieces might just prove too great.

And what happens afterwards? If teams manage to lockup numerous key players for ridiculous long-termed contracts, what happens to the teams that DID heed Gary Bettman's discouragement for long-term deals? How will the new CBA cope with these deals that are signed for 15-20 years? If these type of deals occur in numbers, the league will have a tough time trying to deal with them as waiting for them to expire is just not an option since fans do not have the patience to wait that long.

It just seems that these recent occurrences is a ticking time bomb.

As a Wild fan, I have a lot of faith in GM Chuck Fletcher, but seeing him try to build a contract that is made on the expectation that a lockout will occur is not a comforting thought. That, along with the recent signing of Kovalchuk has me thinking that there is great division between the league, team executives and the NHLPA. With so much going on and the league still recovering from the 2004-05 lockout, I can only guess that the next CBA negotiations will take longer than an off-season to discuss.

Ironically, negotiations occur in the year 2012, and we all know what that means: the apocalypse...