Players Union Might Want To Listen To Ovechkin

On Wednesday’s Caps Clips, JP linked to a poorly written article:

WHERE'S THE BEEF? When the NHL Players Association held its recent conference call, Alexander Ovechkin joined the party. But Ovechkin wasn't on the call to talk about the future of the NHLPA. All he wanted to do was whine about not getting all the money back that he put into escrow.

I am told players earning in the neighborhood of $500,000 to $700,000 were furious with Ovechkin, who by the way, quickly got off the call. Ovechkin, in case you didn't know, is on a 13-year contract that pays him $9 million a year for six years and then $10 million a year for seven years.

The players are on the fourth year of a collective bargaining agreement in which they pay money into escrow each season. In each of the first three years players received most of that money back. Last season the players started off by putting 13.5 per cent of their pay checks into escrow, but part way through the year their contribution was increased to 22.5 per cent. Few players, Ovechkin apparently being one of the exceptions, expected to get much back. In fact, players did receive a little more than five per cent back.

Not enough to please the Russian superstar, though.

Ovechkin is currently out with a mysterious injury that could keep him on the shelf for five weeks.

"Maybe he's not even hurt," one player joked. "Maybe he's protesting not getting his escrow back."

Of course that is not the case, but Ovie didn't do himself any favors by bitching about escrow on a call that was supposed to be about the future of the Players' Association.

Obviously, I wasn't on the call, so I don't know what Ovi really said. But there is a legitimate beef that Ovechkin, and anyone who signed a multi-year contract before this offseason, has with the NHLPA. In fact, any player who signed a long-term contract before this offseason is getting hosed.

The thing about the NHL collective bargaining agreement is that the players aren't actually paid in salary -- they're paid in equity. In effect, the players collectively hold a 50%+ nonvoting share of NHL revenues.


What will be the players' share of League-wide revenues?

The players' share will be 54% to the extent League revenues in any year are below $2.2 billion; 55% when League revenues are between $2.2 billion and $2.4 billion; 56% when League revenues are between $2.4 billion and $2.7 billion, and 57% when League revenues in any year exceed $2.7 billion.

Salary numbers and salary cap levels, are relative, not fixed. They're not in real dollars -- they're all based on an estimate of what league revenues will be. Normally, the estimate is pretty good, and an NHL salary dollar is worth about one real dollar. But sometimes the estimates are bad, like last year when the financial crisis took everyone by surprise. By the end of the year, the players had lost 16% of their salaries because that's how far revenues dropped. Larry Brooks writes:

Slap Shots has learned that the escrow withholding figure for last season has been calculated at a staggering 15.9 percent. That means, for example, that Alex Ovechkin will wind up losing $1.431M of the $9M he thought he was earning last year for the Caps.

Ouch! Then, in the offseason, the players exercised their 5% salary cap "escalator." Effectively, that reduced the value of an "NHL dollar" by 5%. That 5% went to pay free agents -- the salary cap was ultimately set to 56 Million, but it should have been 5% smaller.

Five percent may seem small, but it's more than 2.5 Million. In effect, the players union voted in June to force the Capitals players already under contract to take up a collection out of their own salaries, and use that to pay Mike Knuble's salary. General managers must have been thrilled, because they were given the opportunity to acquire new players without actually having to pay any more real dollars.

I can understand why the players wanted to make sure this year's free agents could get jobs, but it's got to be bitter for anyone who did have a contract. I'm sure Ovechkin is upset about losing about $400,000 so this year's free agents could make more money -- what I don't understand is why other players aren't more upset. Guys near league minimum like John Erskine and Quintin Laing lost about $27,000 -- serious money for people whose playing careers won't necessarily last very long.

With the significant effects exercising the escalator would have on all sorts of people, you'd think the players association took the decision seriously, right? Brooks again:

Attendance at the union meetings in Las Vegas was so limited, it seemed as if one had wandered into a game in Glendale. Fact is, the PA did not have enough player reps at its own meeting to tally the vote on the critical issue of voting on the 5-percent cap escalator clause that eventually was adopted through e-mail tally.

Much worse, and perhaps scandalous, is that a number of players went to Las Vegas on the union's dime, partied, and never bothered to actually, you know, attend the meetings. Wait until the summer meetings in Rome.

The NHLPA has become an absolute soap opera. But you know, when a guy who negotiated the richest contract in NHL history without an agent gets on the line, maybe you might want to listen to him. He might just have something to say that's worth your while.

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