The effects of a looming lockout

In September of 2020, the NHL players association or owners could opt out of the current collective bargaining agreement, setting the stage for another lockout. How are the New York Rangers preparing for the possibility?

The most dreaded words in the world of professional hockey, labor strike. On four separate occasions since Gary Bettman assumed the job of commissioner, there were lockouts and NHL games canceled. We’re roughly a year away from another looming player battle over a variety of issues. At least in the interim, the New York Rangers are taking a variety of steps.

There are a variety of reasons that both sides (ownership and the players association) plan on opting out of the current CBA. First, the players want to return to the Olympics after missing the 2018 iteration because the owners would not put the league on hold for two weeks in the middle of the season.

Then, there is the matter of escrow which requires that a portion of player salaries be deducted from each paycheck and put in a fund till the end of the season. After the league year is over and there is an estimated revenue for the past season, the escrow money is divided between the players and the teams.

(Chart from Pensionplanpuppets)

So, as the year’s past, the players were required to put more in escrow and received less of it at the end of the league year. Escrow exists to guarantee an exact 50-50 split of revenue between the owners and players as stated in the current collective bargaining agreement. If there is a gap in the two figures, it comes out of the player’s pockets.

The elephant in the room

From the owner’s perspective, player salaries are increasing too quickly for their liking. It’s at least in part why the salary cap for the 2019-2020 season only went up to $81.5 million from $79.5 million instead of the estimated $83 million some had forecasted earlier in the summer.

Even though NHL owners have reaped the benefits of a decade of increased interest and record-high revenues, they still fight tooth and nail for every last dollar when it comes to negotiations with players. While NHL franchises are on average, the least valuable franchises of the four major sports in America, whenever the owners cry poverty it’s a bit disingenuous.

Either way, things are coming to a head when it comes to player salaries. In comparison to the other three major sports leagues in North America, the NHL pays its players the least. While that may change in the not so distant future because of a new TV rights deal in the United States, that won’t go into effect for several more years.

The NHL cannot afford more games to be canceled due to labor disputes. The league is finally making sustainable progress and integrating new markets well. The success of the Vegas Golden Knights is a replicable model that the Seattle franchise should hope to follow down the road.

In addition, the league’s work in new hotbeds like the Southwestern United States, Florida and St. Louis is producing top-flight NHL talent. If the Arizona Coyotes never existed, Auston Matthews may never have picked hockey. The number one overall pick in this years draft, Jack Hughes, is from Florida.

The tangible effects

In preparation for a possible lockout, the players have already taken a notable step the past two years. There are different types of salary, base salary, signing bonus and incentive-based. The signing bonus is due in one lump sum on July 1st of every year. For non-cash strapped teams like the New York Rangers, this is no issue, they can afford to pay big money upfront.

In turn, this means that a player’s salary during the course of the regular season is lower. For example, of Artemi Panarin‘s $14 million salary for the 2019-2020 season, $13 million was a lump sum signing bonus paid upfront. This is a major sticking point for the players in the case a lockout does occur.

If the league were to cancel games, it would do so in September, well after the signing bonus is due to be paid. That way, the players have money to live on when they’re not being paid their game checks. During the last lockout, this was an issue where players didn’t have money aside. Now it’s definitely a first-world problem, it’s something that teams are prepared for.

Of the Rangers under contract for the 2020-2021 season, just six players have any signing bonus due. This is in part due to the number of contracts that will be coming off of the team’s books in the not too distant future. However, going forward, the Rangers will need to be prepared that this is the new normal for contract negotiations.

This does mean that the team will have money tied up whether or not there are games played during a potential lockout season.

If all goes well, this remains purely hypothetical. Unfortunately, the reality is that a lockout is always a looming threat, especially in the NHL.