NHL teams prepared to alter economic course
There is no doubt now that the way NHL teams do business is about to change.
Even though the league's board of governors meetings wrapped up Tuesday in Palm Beach, Fla., with confirmation that next year's salary cap won't move very much, it's the potential for a major drop in the 2010-11 season that has some teams prepared to alter course.
Another year will pass before that season's cap number comes into clear focus, but the decisions made by general managers will likely be changing much sooner than that. After two days of extensive discussions about the economy, NHL owners and executives know they need to start watching their spending immediately.
"You have to have caution and that's exactly the marching orders that [general manager] Bryan [Murray] has," said Eugene Melnyk, owner of the Ottawa Senators. "I give him a number, I say, 'assume this number' — and I won't tell you what that number is — but I say work on that kind of number and that's the budgeting and don't go beyond it.
"What I'm not going to do is cut cheques to buy out my contracts. Those are real dollars flying out the door — it's not hypothetical — so we're working on various scenarios and one of them is based on a significant downturn in the economy, if it happens."
The problem, of course, is that it's clearly happening.
As a result, the league is about to see a different side of the mechanisms that come with a salary cap — the device that essentially caused it to call off the 2004-'05 season. Revenues have increased dramatically in the three years since the league-imposed lockout and several teams have responded by signing players to long-term contracts worth big money.
A few of those franchises might come to regret those decisions — and quickly.
"I have always been a believer that, if I were running a team, I would try and keep it to shorter-term contracts so that I have more flexibility," NHL commissioner Gary Bettman said.
"If revenues decline next season — which we don't know but let's say they do — and we get to 2010-11 and the cap goes down, [if] you've got a lot of big contracts, unrelated to your economics, you're going to have cap management issues in terms of your player personnel. That's why I've always believed in flexibility — because you never know what you're going to get."
General managers have long been portrayed as having trouble controlling themselves. That was on display as recently as July 1, when roughly $400 million US in contracts was handed out in one day to a class of free agents that was considered relatively weak.
New Jersey Devils president and GM Lou Lamiorello said he was "shocked" at the decisions made by several of his colleagues that day.
Many of those men might be wise to listen to Lou's advice. After all, he already owns three Stanley Cup rings.
"We're very fortunate that we have a lot of our players signed in our organization," Lamiorello said. "I think that everybody's the same.
"You have to look at your own individual situation, look at your players, look at what you want to have as a salary cap. You should set your own [ceiling], not allow the league to set it and go from there.
"In this day and age, you have to have a cushion if you want to have success. We're no different than anyone else.
"We self-inflict some things and keep our own philosophy, but we don't ever lose sight of what's going on in the economic world."
'Territory that nobody has been in'
The timing could be especially bad for pending unrestricted free agents like Marian Gaborik, Alex Kovalev, Jay Bouwmeester and Henrik and Daniel Sedin, to name just a few. They might find there is less money on the table this July 1 than there has been in previous years.
While the salary cap will stay within $1 million or $2 million of $56.7 million US next season, there will be less to go around after that.
"We're going into territory that nobody has really been in," Detroit Red Wings GM Ken Holland said. "So to say I've got a game plan, I don't know how anybody could have a game plan. You don't know from week to week what's going on.
"It appears it's going to take a long time to pull out of this."
Dire economic news continued to pour in as the meetings were held. The NFL fired about 150 of its staff on Tuesday, joining the likes of the NBA, Major League Baseball and some NASCAR teams in cutting positions. The NHL has no plans to follow suit but has brought in a hiring freeze.
The league's owners also stand to lose — or continue losing.
Perhaps the best example of that is the Phoenix Coyotes, a franchise that has lost "a lot of money," according to chief operating officer Doug Moss. Above all, the NHL is a gate-driven league, and the Coyotes are currently ranked 26th in average attendance.
That needs to be addressed in a big way, although Moss wouldn't divulge exactly where the team stands.
"We've never really released our season-ticket base," he said. "It's too low."
The other franchises with the worst attendance are Atlanta (27th), Columbus (28th), Nashville (29th) and the New York Islanders (30th).
'A much-needed education process'
During two days of meetings, the league's governors weren't offered many solutions beyond trying to provide more value to their customers. Whether that means selling tickets at a reduced price or offering more in-arena entertainment, teams will be looking to get creative.
There are no easy answers.
"A much-needed education process," Predators GM David Poile said about the meetings. "You leave here, not making the decisions, but with more knowledge."
The key decision makers should certainly leave with a strong idea where things are headed.
"What we do is we try to give them a sense of what we, based on our projections, think the [cap] numbers will look like," said Bettman. "The system has a number of complicated formulas that all interrelate.
"We try to make sense of it so people can make their own judgment. We give advice as to how the rules work; that's the only type of advice we give.
"The judgments they make are entirely up to them. As I've said before, I've always been a big fan of short-term contracts and clearly nobody listens to me.
"We don't decide how the clubs manage. That's up to them."