Almost everything in today’s climate is up in the air, but one thing that can be easily forecasted is that the NHL, much like almost every business in the world right now, has an issue with lost revenue.
Though the league is officially still waiting and watching to see what happens in the COVID-19 world, and the season is officially just “on pause” it is likely, if not certain, the NHL regular season won’t be a full 82 games. Revenue from missing games will be lost forever, be it just 12-15 regular season games, or even all playoffs too if that can’t be salvaged. And if games can’t be played in front of full arenas full of fans, that also severely dings the money that the NHL will make.
In the CBA, the players and owners split revenue 50/50. When dollars are lost, this will affect players heavily. The 2019-20 salary cap was set at $81.5 million, based on a projection of 2018-19 revenue. This projection will badly miss the target, just a question of by how much. Players will be dinged with escrow, the concept of “truing up” to make sure that the player’s share of the pie is 50% and not more.
To help teams ease books, after the 2012 lockout, the NHL allowed a compliance buyout where the teams could issue buyout money to up to two players and allow a full erasure of the salary cap hit. This is an important distinction, since the normal summer buyouts team use only cut a fraction of the salary cap hit from the player they’re dumping.
Another issue or uncertainty to deal with is the unknown about a “second wave” of the virus that could again stop the 2020-21 season and affect revenue moving forward beyond this season.
There are whispers and theories, which make common sense, that the NHL might go down the compliance path again to help clubs manage their salary cap numbers. Former general manager Brian Burkle talked of this a couple weeks ago, transcribed by the Edmonton Journal:
“First off we have to determine what the losses are. Does insurance cover these losses? In some places I’m told it will, in some it won’t. So what is the total loss? We got in 85% of the regular season, so we gotta figure out what that wage gap is, and and there’s ways to figure out moving forward how to deal with it. I’ve heard discussion of compliance buyouts to help teams get to this new cap, to solve some of their problems. Which they gave in the last CBA, each team got two cap-compliance buyouts which were exempt from the cap. I’ve heard talk of that.”
The Penguins did not choose to utilize their compliance buyout in 2013, since they didn’t feel they had the dead-weight to trim. This time around, they would probably be wise to do so. CapFriendly has Pittsburgh with $68.275 million worth of contracts on the books next season for 14 players. They also have several key restricted free agents (Matt Murray, Tristan Jarry, Jared McCann, Evan Rodrigues, Dominik Simon, Sam Lafferty among them) that need new contracts for next year.
The three biggest candidates for the Pens to buyout, if a situation occurs with no cap penalties would be Patric Hornqvist ($5.3 million for three more years, full no trade clause next season), Nick Bjugstad ($4.1 million for one more year) and Jack Johnson ($3.25 million for three more years).
Hornqvist at 33, probably has painful years ahead of him, and he again missed some time with injuries this season. His no trade clause is meaningful, if the Pens want him off the roster for 2020-21, a compliance buyout is probably the way to go. But is it time to put the warhorse out to pasture? Hornqvist still finished fourth on the team with 17 goals this season, and adds his patented amount of energy, feistiness and passion is useful, amping up his game at the most important time of the season. Still, getting out of $5.3 million makes this a question to at least ask.
Bjugstad hasn’t worked out and a $4.1 million salary for an oft-injured third line center is probably a luxury the Pens can’t afford next season. Especially since they have Teddy Blueger on the books next year (at a discount $750k rate) who has shown the chops to play up the lineup. Shoot, in most projections for next season, in a normal year, Bjugstad would be trade bait to fit in younger players. But if the cap is tight, there may be no trade to make to ensure financial relief for Pittsburgh. Wiping Bjugstad away to have the money to re-sign, say, McCann and Simon, makes a lot of sense.
Getting out of the last seasons of Jack Johnson would be a blessing for the Pens. Johnson has struggled all over the ice, only passing as capable when buried on the third pair. Luckily, Juuso Riikola has already shown that he too can excel in a third pair role, and would be a fraction of the cost (he too is an RFA this summer coming off a $850k cap hit that could be retained for a modest bump). The missing elements the Pens thought they were getting with Johnson (a top-four player who could help them) didn’t pan out, dropping him before he continues to age towards 35-36 at the end of his contract would surely be an addition by subtraction for the future.
So if you’re in a place where you want to look forward to something as frivolous as future-looking NHL salary structures, how and what the league decides on regarding a future compliance buyout will be another little wrinkle to watch unfold in the coming weeks and months as we all sit and wait to see what happens. A high-budget team like the Pens who have a ton of high dollar players locked in could really use the space and room of such a tool, if it is available.
Obviously all the details have to be figured out and decided, and decisions will have to be made accordingly. If the salary cap remains around 2019-20 levels, the Pens might be in a position to cancel out Johnson and move on. If the cap is lower, they might need to make a tougher choice on a player like Hornqvist or Bjugstad who are contributors but at just too ripe a cap number.
If the Penguins had 1 compliance buyout this summer who should they use it on?
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