'Perfect storm' sparks NHL summer spending spree

On June 1, NHL commissioner Gary Bettman held his state-of-the-league news conference at the Stanley Cup Final. He barely touched on the labor situation. He gave a friendly acknowledgment to NHL Players' Association executive director Don Fehr, standing at the back of the room.

No need to panic, not with the collective bargaining agreement running until September 2012. The sides hadn't even gotten down to business yet.

"I would hope that when we discuss these kinds of issues, we'll find a way to come to some common agreements and understanding, and I share Gary's hope that it can be done quietly," Fehr said after Bettman finished. "I've had that happen once or twice. A few other times, it didn't. But the once or twice was nicer."

Fehr laughed.

On July 1, the free-agent market opened, and all hell broke loose. Actually, it broke loose even before that, with teams trading for pending unrestricted free agents so they could have the exclusive right to overpay them. The Florida Panthers did it with Tomas Kopecky(notes) (four years, $12-million), the Buffalo Sabres with Christian Ehrhoff(notes) (10 years, $40-million), the Columbus Blue Jackets with James Wisniewski(notes) (six years, $33-million).

No need to panic? Maybe not yet. The union and the league still have plenty of time to reach an agreement - Fehr pegging the start of talks for "midwinter" some time - and there are plenty of reasons to think they should avoid another Armageddon.

But with the NFL locked out, the NBA locked out and the NHL facing some of the same issues that led to its last lockout, there are plenty of reasons to be concerned that next summer will be a lot hotter than this one. The gap remains great between rich and poor teams, and some are being forced to spend more than they can afford by the very system that was supposed to save them.

"We all know that we're going to get a new system; nobody knows what that's going to be," Carolina Hurricanes general manager Jim Rutherford said. "You have to do your best with your team this year, and you have to be positioned for the following year for the unknown."

The owners were supposed to have broken the players in 2004-05. They sacrificed an entire season to achieve what they called "cost certainty" - in other words, the salary cap they had long sought and the union had long fought against. Salaries were rolled back 24 percent. Team payrolls were limited to $39-million - half of what the high-end Detroit Red Wings had been spending. The players were required to put money in escrow so the owners could recoup some of it for spending above a certain percentage of revenues.

Instead of doomsday, it was the dawn of a new era. The lockout gave the league an opportunity to reinvent itself with new rules that opened up the action, and with the cap came competitive balance. The league added new events like the Winter Classic, the annual outdoor game on New Year's Day. The product improved. The marketing improved. A $2.1-billion business became a $3-billion business.

The salary cap and salary floor rose because they were tied to rising league-wide revenue. Problem was, while the cap and floor rose the same for everyone, the rise in revenue was disproportionate among the teams. The strong became stronger. The Canadian teams benefited from a Canadian dollar that strengthened dramatically after the CBA was signed. But emerging markets were still, well, emerging.

That's not all. This CBA reduced the age for unrestricted free agency from 31 to 27. That led teams to lock up core players with long-term contracts. That led to fewer elite players making it to market. That led to less supply when there would be more demand, with the 2011-12 cap set at $64.3-million, the floor at $48.3-million - $9.3-million above the original cap.

Rich teams could spend more. Poor teams had to. That led to big trades and strange signings.

Limited only by the cap thanks to new billionaire owner Terry Pegula, the Sabres not only signed Ehrhoff to his mega-deal, but they gave a six-year, $27-million contract to Ville Leino(notes), a 27-year-old winger who has one 19-goal regular-season and one 21-point playoff.

Needing to reach the floor, the Panthers not only signed Kopecky to his curious contract, but made a flurry of trades and signings that included four years and $16.5-million for Ed Jovanovski(notes), a 35-year-old defenseman.

Rick Dudley, the former Atlanta Thrashers GM now working for the Maple Leafs, told Toronto reporters some of the deals were "silliness" and "asinine". Both Rutherford and Pittsburgh Penguins GM Ray Shero used the same term to describe the dynamic: "the perfect storm."

"The market was very favorable for the players this year," Rutherford said.

Said Shero: "We're six years into the cycle with the CBA, and so many teams have re-signed their own players. Less and less unrestricted players are available. . . The cap went up $5-million. You see the terms and you see the money that is out there right now, and it's good to be a free-agent player or an agent today. A lot of money is being thrown around."

You can bet the owners will want to get a handle on it - especially those struggling as a business because the floor is so high. They're going to want to give the players less than the 57 percent of revenues they currently do. They're going to want other adjustments, too.

Take the structure of contracts. The league rejected the 17-year, $102-million contract Ilya Kovalchuk(notes) signed with the New Jersey Devils last summer because it circumvented the salary cap - the unrealistic length of the term artificially lowering the cap hit. The league and union amended the CBA to add more specific language to what had been a vague rule. Leafs GM Brian Burke might be opposed to such deals on principle, but others are signing back-diving deals that just aren't as crazy as the Kovalchuk contract. The only solution is to negotiate a stricter standard.

You can bet Fehr will fight all of it, and you can bet one of the keys will be closing the gap between the rich and poor teams.

"I will tell you, I've got a lot of long experience in it," said Fehr, who led the Major League Baseball Players Association for a quarter century. "In my judgment, the lynchpin of the labor peace you've had in baseball for a very long time now is in fact the revenue-sharing agreement. There is no cap in baseball, but it's the revenue-sharing agreement that made it work."

Could it be the lynchpin in hockey, too?

"Is it conceivable that it could be?" Fehr said. "Yes. But I don't know yet."

The NHLPA accepted a cap in 2005 on the condition the league also introduce a revenue-sharing system "intended to enhance the ability of all clubs to be financially competitive with one another." It's written right in Article 49 of the CBA. But it hasn't been effective enough.

Fehr cautioned that the revenue-sharing systems in baseball and hockey are significantly different - from the definitions of revenue and sharing to how they are calculated. A veteran executive with experience in both sports said it also boils down to this: In baseball, there is far more revenue to share - more established teams, more games, more seats, more TV money.

No one really knows what to expect from Fehr. He tells reporters that he doesn't want to extrapolate too much from prior experience, that he's still studying the economics of hockey, that the union still has a lot of work to do before it is ready to outline its positions for bargaining. An NHL executive said Fehr tells Bettman the same thing.

And there are questions as to whether each side has the stomach for another work stoppage. Why kill the league's momentum when you can tweak the system, considering the game has bounced back better than expected, the owners have the cap they always wanted and the players' salaries have continued to rise? Why would the high-revenue teams want to stop generating revenue now, and do the low-revenue teams have enough power to set the agenda? Why would the players want to lose a season of their careers, when many have lost one already? Are the players even engaged, or do they assume everything will be fine now that they have Fehr?

But the threat of trouble is real. Brad Richards(notes), the only marquee name on the free-agent market, signed a nine-year, $60-million deal with the New York Rangers. It reportedly is front-loaded not just to make for a manageable cap hit. It will pay him $20-million over the first 12 months to protect him from a potential lockout or salary rollback.

"All I can say is that, if you can come out with an agreement without a stoppage - or better yet, without the threat of one - that creates the kind of an atmosphere in which everybody pulls together and you grow the game," Fehr said at the Cup final. "That's the best possible result. That, seems to me, goes without saying. Sometimes you can do that. Sometimes you can't."