Wednesday, July 28, 2010

Burke, Leonsis Not Fans of Kovalchuk Contract

"I don't like the structure of the deal," Leonsis said. "I don't think it's right, but I don't have a say in it. But I don't know of other wings that are playing when they're 44 years old, so we'll see what happens."

The Capitals signed Alexander Ovechkin to a 13-year contract worth $124 million in 2008. The contract will pay Ovechkin $9 million per year for the first six years and $10 million per year for the following seven. The deal comes with an annual salary cap hit of roughly $9.5 million. This compares to the $6 million cap hit on the Kovalchuk contract.

The contract does not have any throwaway years like the Kovalchuk contract. However, don’t forget that Overchkin signed the deal when he was 22 years old, so it would have been tough to add throwaway years on a 13 year deal as he'll only be 35 when the contract expires.

Of course, Leonis could have signed Ovechkin to a 22 year deal, and included throwaway years - but did not. This is where Leonis takes issue – he feels like the Devils are not competing on an even playing field.

“I don’t believe these players are going to play in their mid-40s. And I don’t believe they’re going to play for what they’re making in those final years. So it defies logic. It may not defy the CBA. But it defies logic to think that players are going to serve the term of all these contracts. So that’s why we don’t do them. And a number of teams don’t do them. If the league thinks that this is one that they need to look into, then we support that.”

Burke added,

“Do you admire a criminal lawyer who gets a murderer off on a technicality?” Burke asked Monday. “So why would there be admiration or appreciation for finding a loophole that somehow defeats the purpose of a collective bargaining agreement that’s designed to put teams on the same footing?”.

Burke concluded with,

“I have no problem with long-term deals if they’re straight across the board, but not if the last few years are designed to reduce the cap hit and nothing else,” he said. “I’m not being critical of other teams that do. But if a team has four guys on contract like that, they’re actually icing a team with false values on their players. And if another team is playing it square, then you’re losing ground.”

Note this distinction: the issue is not only that Kovalchuk won’t likely play until 44; it’s more his age at the tail end of his contract together with the last 6 years on the contract paying him nearly nothing (relatively speaking). These two factors suggest the contract, the NHL would argue, was designed to artificially lower the cap hit – and for no other reason. Remember if the contract had Kovalchuk playing until 44 BUT he was fairly compensated in those latter years, we wouldn’t have an issue today.

To put it in perspective, right now the cap hit on the Kovalchuk contract is $6 million a year. If you remove the last 6 years (at $3.5 million) then the salary cap hit climbs from 6 million to about $9 million.

It doesn't help that if Kovalchuk is still playing at 40, he would be making $550,000. Marc Recchi just signed a 1 year deal valued at $1 million with the Bruins taking him to the age of 43 (he turns 43 in February 2011). Adjusting Kovalchuk’s salary in 2021 for inflation, the $550,000 he is slated to be paid seems quite low.

And the Devils can buyout the last 5 years of his contract and spread the cap hit across twice that time - 10 years. The cap hit would be nominal.

So the ultimate question comes down to this: why was contract designed the way it was?


Anonymous said...

I think that it's pretty clear that the contract was designed to lower the cap hit. However, proving this is difficult as it is impossible to say if Kovi will be playing at age 44. The argument that only "a few" players have played to that age is counter productive as it does nothing but prove that it is in fact possible. Proving the intent of the Devils/Kovi is very dificult as well. No matter how clear their intent seems to me or anybody else, it is rather irrelvant, as it does nothing to prove it. I believe that the ultimate question is how do you prevent these deals from happening in the future. I do not see how the NHL can decide to suddenly put their foot down when they have let similar contracts slide. In comparison to Hossa's deal (Hossa: 94% of money in first 66% of contract vs. Kovi: 96% of money in first 64%**), Kovi's deal does not cross any line that has not been crossed already.
As for Ovechkin, I do not believe this to be a fair comparison. Their circumstances are much different (age, skill level). The Capitals needed Alex (franchise player) where as the Devils no not need Kovi. It only makes sense that Ovechkin's cap hit would be higher than Kovi's. Kovi wanted his money (much of it arguably undeserved) and by adding the throw away years, he is getting it, and the Devils are getting a reasonable cap hit. Fair? Maybe not. Legit? Sure seems so...

**I did not do the math myself so I cannot say for sure if that is 100% accurate. If I am wrong, feel free to correct me.

Great blog by the way. In no way do I understand sports law (and as a result my information/opinions may be misinformed), but your posts are very enjoyable to read. Keep it up!

Eric Macramalla said...

Great comments. My reaction is that you don't need to show he can't play to 44. You need to show that even if he does he would be so grossly underpaid that those last years were just added to artificially lower the cap hit.

I think though that your analysis is terrific and that it would certainly form part of the NHLPA's argument.