NHL salary cap analysis: Introduction
I conducted NHL salary cap analysis to better identify league-wide contract negotiation trends and evaluate anticipated flexibility of NHL team’s salary cap structures by looking at:
1) no-trade clauses
2) signing bonuses (S.B.)
3) injury reserve (IR + LTIR)
The recently agreed CBA extension and MOU (April 2020) includes provisions suggesting a flat salary cap for the next several years, and as a result, general managers and players have experienced an unprecedented draft, free agency and arbitration marketplace this Fall. NHL league activity is expected to continue under this unique context caused by loss of hockey related revenue from the Covid-19 pandemic, and the upcoming Seattle expansion draft.
Previous Contract Analysis Work
Having started my journey in analytics with the opportunity to grow as part of the inaugural hockey-graphs mentorship program, it is a privilege to take this opportunity to build on the inspiring contract negotiation and player valuation work of Matt Cane (The Time Value of Money and Player Valuation), Mike Zsolt (The Financial Frontier: Defining characteristics of competitive salary cap management), Josh and Luke Younggren (Projecting NHL Skater Contracts for the 2019 Offseason), and Shayna Goldman (ISOLHAC: How can we better our contract analysis).
Data & Methodology
All contract data was sourced from capfriendly.com. The analysis in upcoming sections are based on 901 active standard player contracts (SPC) and 18 35+ contracts for a total of 919 contracts (as of January 15, 2021).
The following considerations were made:
i) As per the CBA, entry-level contracts (ELC) can include standard signing bonuses but are not eligible for no-move clauses of any kind. As such, they have not been considered in the following analysis.
ii) No-move clause years have been defined to include every type of clause (NMC, NTC, M-NTC) which would apply starting from the upcoming 2020-21 season.
As such, active long term contracts which cover RFA years, but also UFA years with no-move clauses were included in the analysis (i.e. Connor McDavid and Jack Eichel both signed 8 year deals which starting in 2022-23 will include NMC x 4 years).
iii) Furthermore, a few players have recently inked contract extensions that will be kicking in next season (i.e. 2021-22).
These contract extensions have been included in the analysis.
Not all clauses are created equal. As such a helpful reminder of each clauses has been included below to better understand their respective rights and limitations:
iv) Signing bonuses for upcoming contract extensions (i.e. deals starting in 2021-22 season) have also been included in the analysis. Despite a handful of announced contract extensions, the only upcoming contract extension which includes signing bonuses belongs to Montreal Canadiens defencemen, Jeff Petry:
- Petry’s current active deal (signed on June 2, 2015) includes $8M in S.B. on a total contract value of $33M
- The player signed an extension on Sept 25, 2020 which includes $8M in S.B. on a total contract extension value of $25M
Results & Key findings
Distribution of no-movement clauses and its impact on cap motivated trades
Managers throughout the league are increasingly sensitive towards granting no-trade clauses, of any types, as this may prove to shackle their ability to manage their salary cap structure from season to season. The more contract years with no-move clauses are committed on the cap table, the more influence the player has on the Club’s ability to make roster changes.
Throughout the upcoming NHL seasons, 218 players share a total of 695 contract years which include some level of no-move clause (i.e. NMC, NTC, M-NTC).
teams who lead the league in no-trade clause years are the ones that have committed to a core of players. This behaviour aligns with the cup contending stage of a franchise. Tampa Bay leads the league (42 years), followed by Vegas (41), San Jose (37) and St. Louis (34).
On the other end of the spectrum, having the luxury of having little no-move clause years allows some managers to operate with increased flexibility. Organizations such as Detroit (7), New Jersey (7), Philadelphia (9) and Ottawa (11) can weaponize this particular advantage ahead of next season’s trade deadline and Seattle’s expansion draft.
Player leverage when it comes to influencing the management of an organization is not a new phenomenon. We’ve seen it with Rick Nash who was granted a full NMC when he signed a $64.2M deal over 8 years (July 3, 2009) and then requested a trade out of Columbus which landed him in NYR in 2012-13.
It is vital for teams to have maximum flexibility ahead of the Seattle expansion as they look for opportunities to exploit restricted teams. Now more than ever in the NHL, affordable organizational depth is essential and younger players in the league are increasingly having a tremendous impact on results.
Given every cap and salary dollar counts, Clubs are willing to play ball and take on cap hit for players who underperform their cost, as long as the ‘seller’ makes it worth their while. The opportunity to add quality draft picks is a compelling value proposition, especially given the cost certainty of ELC contracts. Adding critical depth at the trade deadline can make a big difference in overcoming injuries to secure a playoff spot and making a deep playoff run. Creating cap space can help improve a team’s financial flexibility ahead of upcoming internal extension signings (i.e. offer sheet deterrent) and increase leverage to better target upcoming UFAs.
Given the ongoing flat salary cap and some teams already in position of having to shed salary to be compliant before the start of the season, rival managers have taken advantage of the marketplace and required a sweetener to be added to a ‘salary dump’ transaction. NHL salary cap analysis of the trade market helps identify notable trends:
- Dec 27, 2020
Tampa Bay acquired contracts of LTIR Marian Gaborik ($4.875M) and LTIR Anders Nilsson ($2.6M) from Ottawa, in exchange for veteran Brayden Coburn, versatile depth forward Cedrique Paquette and a 2022 2nd round draft pick. Tampa Bay acquires $7.475M in LTIR contracts while shedding $3.35M in active contracts. This transaction grants TB the ability to spend $4.125M more through LTIR contracts and ensures that the Lightning are cap compliant and have valuable cap flexibility ahead of the 2020-21 season. This ability to retain most of his Stanley Cup championship core of players and leveraging CBA rules around LTIR contracts speaks to the GM of the Year nominee. It is worth noting that Coburn has a NMC which may have prevented the transaction from being concluded, and yet GM BriseBois was able to secure approval of his veteran defenseman prior to the trade
- Oct 9 and Oct 12, 2020
Vegas trades veteran centerman Paul Stastny to WPG in exchange for depth player Carl Dahlstrom (64 NHL games played) and a 2022 4th round pick. Three days later, top-4 defenseman Nate Schmidt was traded to VAN in exchange for a 2022 3rd round draft pick. Already in a tight cap situation at the time following the signing of coveted UFA star defenseman Alex Pietrangelo (7 years x $8.8M), GM Kelly McCrimmon was able to free up $11.6M in cap space towards ensuring his Club’s cap compliance ahead of opening night. The timing of the trades and Vegas’s public cap situation had an impact on the quality of return.
- Oct 8, 2020
Columbus traded former 2nd overall pick Ryan Murray to New Jersey in exchange for a 2021 5th round pick. Defencemen Markus Nutivaara is also traded to Florida, in exchange for ELC forward Cliff Pu (0 NHL Games Played, 63 AHL GP). GM Jarmo Kekelainen frees up $7.3M with these transactions, while offering a public deterrent for rival clubs looking to snag their #1 Center with an offer sheet. He used that cap space to sign RFA Pierre-Luc Dubois to a two-year deal carrying a $5M AAV. A further benefit of a cap relief transaction is that the Club has additional funds to take advantage of opportunities which may have presented themselves in the Free Agency market.
- Oct 8, 2020
Anaheim traded Erik Gudbranson to Ottawa for a 2021 5th round pick. GM Bob Murray frees up $4M in cap space by transacting with an Ottawa organization that has valuable cap space. Weaponizing the cap has been a profitable strategy for Ottawa GM Pierre Dorion, and there have certainly been opportunities for win-win transactions with teams in need of cap relief.
- Oct 5, 2020
Minnesota successfully navigates former Vezina nominee Devan Dubnyk’s M-NTC and strikes a trade with SJ by adding a 2022 7th round pick and retaining 50%of Dubnyk’s salary. The Wild acquired a 2022 5th round pick and $2.166M in cap savings.
- Sept 26, 2020
New York Rangers agreed to receive future considerations from Detroit in exchange for Marc Staal’s last contract year ($5.7M) and a 2021 2nd round draft pick. GM Jeff Gordon demonstrated creative cap management in order to avoid adding to the Rangers’ buyout pool, which accounts for nearly $13M for the 2020-21 season . Staal was persuaded to lift his NMC prior to the trade, and the early round draft pick is compensation to Detroit for the cap relief to New York. In this particular situation, GM Steve Yzerman successfully weaponized his cap space to take advantage of a situation where he can add veteran presence to a young, rebuilding Red Wings team without being tied to an expensive cap hit for more than one season.
- Feb 24, 2020
Brady Skjei ($5.25M) traded by New York Rangers to Carolina in exchange for a first-round pick. This transaction was motivated by injuries as key defenseman Dougie Hamilton , Brett Pesce, and Sami Vatanen all missed time, and Carolina needed reinforcements in the backend to secure a playoff spot. New York traded away Skjei before his M-NTC kicked in (2021-22), which allowed them to maximize the return
- June 22 and June 30, 2019
Tampa Bay sends J.T. Miller and his $5.25M to Vancouver in exchange for the rights to AHL goaltender Marek Mazanec, a 2019 3rd round draft pick and a 2020 1st round draft pick. GM BriseBois traded Miller prior to his M-NTC kicking in, speaking to the fact that Clubs are aware of the impact on the quality of the return for an asset and the potential limitations of negotiating with a reduced number of buyers. A few days later, an injured Ryan Callahan agreed to lift his NMC so Tampa Bay could trade his $5.8M cap hit ($4.7M in payable salary) to Ottawa alongside a 2020 5th round pick for Mike Condon and a 2020 6th round draft pick. The trade with Ottawa allowed Tampa Bay to save $3.4M on the cap.
- June 22, 2019:
Patrick Marleau ($6.25M) agreed to lift his NMC to allow TOR to trade his rights to Carolina in exchange for a 1st round pick (2019). This transaction allowed Toronto to free up valuable cap space ($6.25M) in order to lock young RFAs Andreas Johnsson (4 yrs x $3.4M) and Kasperi Kapanen (3 yrs x 3.2M) to multi-year contracts. Carolina proceeded to buy out Marleau’s last contract year. Marleau signed consecutive two year deals with SJ, and thus further maximizing his career earnings despite the buyout.
Utilization and impact of Signing bonus in contract negotiations
Signing bonuses are part of standard player contracts negotiated by clubs and NHLPA agencies. High end talent, core players and free agent players have the most leverage to make these types of demands, yet compelling trends can be seen when breaking down the aggregate amount of signing bonus granted on active contracts. Out of the $12.415B in total contract values committed for 2020-21 and $150.6M in extensions kicking in 2021-22, signing bonuses represent a total of $2.472B. NHL owners are paying one of every five cap hit dollars in signing bonus (19.67%).
Toronto ($250.66M), Tampa Bay ($174.75M) and Montreal ($171.52M) lead the league in total signing bonuses allocations. On the other end of the spectrum, Columbus, Winnipeg, Colorado and Ottawa notoriously do not offer signing bonuses and this speaks to the reality of each club and their investment philosophy and salary cap managerial culture.
– Columbus: Agent Gerry Johannson leveraged Mikko Koivu’s status as a UFA veteran leader to include $250k in signing bonuses
– Winnipeg: GM Cheveldayoff grants $4M in S.B. to Jets captain Blake Wheeler which was paid out last season. The Jets now have no players owed S.B. throughout their entire roster (i.e. not including ELCs)
– Colorado: GM Joe Sakic inherited the signing bonus commitment tied to Nazem Kadri’s contract, which was signed with Toronto.
– Ottawa: GM Pierre Dorion inherited the signing bonus commitment tied to Nikita Zaitsev’s contract, which was signed with Toronto.
There are 215 players across the league who benefit from signing bonuses in their contracts. It is worthwhile to note that Crosby and Ovechkin are the only players in the top 20 earners of the league whose contracts do not include a signing bonus.
Reviewing the contracts that contain the most signing bonuses , we see that the majority are players considered ‘core pieces’, respected veteran leaders (Edler) and sweetened offer sheets (Aho). Rival clubs may submit a hostile offer sheet to an RFA and deliberately structure the deal to leverage a very high signing bonus as to put pressure on a rival owner’s finances (i.e. Aho signing Montreal’s offer sheet, which was later matched by Carolina).
IR & LTIR cap optimization opportunities
The demand for cap flexibility has never been as high, and yet its supply is lower than normal as more organizations have to comply with an internal cap due to Covid-19.
When conducting this NHL salary cap analysis, there are a few opportunities which stand out for managers looking to leverage IR and LTIR contracts. Finding a creative way to take advantage of acquiring these types of contracts can allow managers to make trades, sign UFAs or ensure they submit a cap compliant roster before season puck drop.
On the day of the start of the 2021 season, we can find over $112.3M in contracts that are currently assigned to LTIR across 25 players and 15 Clubs. As such, there are 16 organizations that currently have no player contracts on IR+LTIR. With the recent announcements of Jonathan Toews’ injury, the Blackhawks lead the league with $21.275M placed on IR+LTIR. In second place, we find the cash-strapped Tampa Bay Lightning ($16.975M) thanks to the recent acquisition of Anders Nilsson and Marian Gaborik’s contracts. Wrapping up the top 5 in the league are the Boston Bruins ($14.04M), St. Louis Blues ($13.25M) and Anaheim Ducks ($7.675M).
Diving in some of these Clubs cap tables and organizational situations, we can identify trends as to how LTIR contracts can prove useful.
- For example, St-Louis has leveraged the news of Alex Steen retiring due to injury to sign UFA scorer Mike Hoffman to a PTO. The expectation at the time was for Hoffman to sign a deal with St-Louis (which he did on Jan 11, 2021) and start the season with the Blues, yet adding Hoffman’s cap hit ($4M) would have proven challenging if it wasn’t for recent contracts allocated to LTIR. The timing of this decision shows how dynamic the NHL marketplace can be, and that patient teams can sometimes take advantage of opportunities despite getting some bad luck and news of long term injuries.
- We’ve previously outlined how Detroit took advantage of their cap space to snag a 2nd round draft pick by picking up Marc Staal’s $5.75M cap hit, and yet GM Steve Yzerman has the opportunity to entice a cap strapped team to consider Henrik Zetterberg’s LTIR contract. His deal is especially attractive with one year left with his cap hit ($6.083M) is significantly higher than the amount of payable salary ($1M) for the 2020-21 season.
Teams across the league will leave no stones unturned and similarly to contract structure (clause, signing bonuses), the health status of a player as per the CBA will continue to create player mouvement opportunities.
Conclusion of NHL salary cap analysis
Given the economical landscape of a flat salary cap for years to come, continued availability of quality Free Agents who remain unsigned and the imminent expansion draft, it would be expected for upcoming transactions to involve cash strapped teams that will generously entice teams with significant cap space.
With the salary cap of the upcoming season directly tied to hockey related revenue (HRR) and the fragility of many business sectors, it can be expected to see NHL owners adopt a less generous approach to granting out signing bonuses. Clubs who go against the current may find themselves in a position to win the commitment of free agents, or be able to secure extensions for their high-end RFAs at favorable terms.
I would like to take this opportunity to thank Asmae Toumi and Matt Cane for their mentorship across the years. As well, I appreciate Josh Pohlkamp-Hartt’s help, guidance and feedback on this NHL salary cap analysis.