A grim outlook for the off-season

There are many challenges facing the New York Rangers and the NHL, most of them financial

With free agent frenzy due to start on October 9, it’s worth taking a hard look at the NHL and the challenges facing the league.  The New York Rangers will be facing those same challenges and it will affect every decision they make.

Much of the analysis of how teams will be dealing with next season surrounds the flat salary cap and how teams will be managing that crippling budgetary constraint.   That’s not the issue.  The bigger problem is that the COVID-19 pandemic drove a stake into the hearts of the NHL owners.   Loss of revenue was staggering and it will take some franchises years to recover.

Managing to a flat salary cap is the least of the many problems facing NHL teams.  There are organizations that are desperate to shed salary as they cope with devastating financials.   At the same time they are facing the beginning of a new season with limited fan participation.  For a league that generates 50% of its revenue from ticket sales and concessions, having nobody at the games is the least desirable option, but they may have no choice if they want to get the season started. .

The NHL is still a couple years away from a new television contract that should relieve some of the financial burden.  Until that time, the flat salary cap ceiling of $81.5 million may seem like a target that teams won’t come close to trying to get to.

As a result, experts are predicting an off-season like no other in NHL history. There will be an unprecedented number of restricted free agents who will not get qualifying offers.  Teams with plenty of cap space can try to offer sheet some of the brightest young stars in the NHL.  Free agent frenzy may go on for weeks as teams seek bargains instead of falling over each other to sign players on day one.

The Rangers’ situation

The New York Rangers are  the most valuable franchises in the NHL, valued at $1.65 billion by Forbes.  Their parent company, Madison Square Garden Sports, is one of the richest organizations in sports.  However, they are not exempt from the financial issues facing every company in the business of entertainment.

The good news is MSG Sports generates $250 million in local and national media rights fees and they report that their subscription renewal rate for Ranger season tickets is at 80%.   The Garden has reduced costs by laying off staff and cutting other expenses.

What it means is unlike some other teams, the Rangers won’t be looking to shed salary expense and can be expected to spend to the cap ceiling.  With just over $14 million in cap space, the team will probably be able to re-sign their Restricted Free Agents, but don’t expect any spending spree on free agents.

Win now

One way that Jeff Gorton and John Davidson approach this season concerns making the playoffs.   With the odds of the season starting with limited or no attendance, the importance of making the playoffs becomes paramount.  A long playoff run will be revenue gravy and despite their pledges to continue the rebuild, the goal of making playoff hay will become even more important financially as early as next season.

What that could mean is roster moves for the present as opposed to the future.   We all know that the biggest needs for the franchise are at left defense and center.  It’s very possible that the Rangers will deal some of their young assets for experienced help in those areas.    While it won’t resemble the “mortgaging the future” of the mid-2010s, acquiring a couple older, veteran players who make the “team harder to play against” may be what Gorton goes after.

As a result, it is very possible that the Rangers will deal their second first round pick or some prospects.  With Artemi Panarin in his prime and the team committed to “older” players like Chris Kreider and Mika Zibanejad, the time to roll the dice and go for it may be now.

The irony is that when the Rangers won the draft lottery, it accelerated the rebuild so that they can easily go with a “win now” philosophy over the next two years.  Alexis Lafreniere is projected to be so much of a sure thing that he is going to be an impact player within a year or two.  Add a maturing Kaapo Kakko, Vitali Kravtsov and Adam Fox and the future looks bright.  The good news is the Rangers’ organizational depth is so great that they can afford to trade prospects without crippling the team’s future.

The financial health of the NHL

NHL teams are not close to other sports when it comes to value.  Although the Rangers are the most valuable franchise in the league, they are 70th overall when it comes to all sports.

Only six teams are going into this postseason with over $20 million in cap space.  14 teams have less than $10 million.  Though there’s no way of knowing the exact financial health of each franchise, in 2018-19 seven teams reported negative operating income and five more were barely break even.  The Rangers were tops in the NHL with $123 million, followed by Montreal and Toronto.  Still, that revenue was hammered by pandemic in 2091-20.

What it means is that teams like the Panthers, Predators, Coyotes, Blue Jackets, Jets and even the Islanders will be drawing on the deep pockets of ownership to get through this period, but you can be sure that they will be looking to shed expenses.

Ranger fans are lucky that the team has the financial foundation to weather the pandemic and will spend to the cap ceiling as usual, but we may see even the Blueshirts making some moves for short term financial benefit.  It’s going to be a fascinating ride.