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A Salary Cap Analysis: Did Bettman Get Parity? | August | 2010 Articles

A Salary Cap Analysis: Did Bettman Get Parity?

Written by Kelly Thomas Reardon on .

Gary Bettman, image via CBC

Image via CBC

The NHL lockout of the 2004-2005 season tarnished the image of the NHL and the lasting effects of the concessions made in the collective bargaining agreement (CBA) are still felt today.  One need look no further than your 2010 Stanley Cup Champion Chicago Blackhawks (*swoon* this will never get old).  The Chicago Blackhawks have had to say goodbye via one method or another to the following players: Kris Versteeg, Dustin Byfuglien, Andrew Ladd, Adam Burish, John Madden, Brent Sopel, Ben Eager, Nick Boynton, Colin Fraser and finally -- and most notably -- Antti Niemi.  That's ten players from the lineup gone, erased, let go from a championship team.

Comparisons were made early and often to the Florida Marlins of 1997.  Literally days after their World Series victory, the dismantling began.  Their owner, Wayne Huizenga, claimed huge losses despite the team's championship run (gee, sound familiar?) and promptly dumped their stars for young, cheap talent.  This particular comparison is completely misplaced due to the fact that Major League Baseball does not have a hard salary cap (teams can go over the salary cap and pay a 'luxury tax') like the NHL does.  The Blackhawks were forced into this mass exodus due to the rules the NHL and NHLPA established in the CBA from the summer of 2005.

The salary cap was implemented mainly as a way to give parity to the league, allowing Bettman's beloved southern market teams smaller market teams an opportunity to be competitive with long-standing franchises that were run with effectively little to no limit on their spending to pay players.  But has the salary cap actually served this purpose?  One could look at the last ten champions and see two two-time champions (Detroit & New Jersey) and take what they would from it.  However, I feel a deeper and broader analysis should be made to make this decision, but how does one base the analysis?

To be honest, I wasn't too sure either.  So I just acquired the necessary data and started plugging things together to see if I could see any type of pattern.  First, some full disclosure: All salary information was acquired from USA Today and comes with some caveats.  Firstly, the dollar amounts are salaries, not cap hits.  I felt this was alright because it was the ONLY information I could find regarding team salaries dating back to before the lockout.  Secondly, the only salaries included are for players who played at least 30 games or would have played 30 or more games if not for injuries.  Again, I felt this was not an issue since the players that wouldn't have played 30 games wouldn't have had significant salaries or cap hits.  All other historical team information and statistics (records, strength of schedule, simple rating system) came from HockeyReference.com.

Now all that is out of the way, onto the analysis.


 

The chart above indicates basic team payroll information by season.  The top half of the chart is indicating the average percentage change annually by team in both median player salaries (blue line) and total team payroll (orange line).  The most obvious thing seen here is the massive dip for the 2005-2006 season indicating the huge drop in spending post-lockout.  However, if you throw that season out, each team on average increased spending around 10%, just to ballpark it.

The bottom half of the chart gives us simply the largest total team payroll (red line) and the smallest total team payroll (green line) by season.  Looking at the pre-lockout seasons, the difference between the largest and smallest payrolls went from about $44 million to nearly $56 million indicating that the teams that could spend the most money were continuing to spend more while the lower-income teams, while still spending more, could not keep up with the amount of increases the big market teams were making.

Post-lockout those numbers come much closer, with the 2005-2006 season having a difference between the highest and lowest payroll of $26 million.  Even just last year the difference was only $32 million.  The salary cap appears to have done its job here, keeping teams closer in terms of how much money they can spend.  However, it is clear that once the cap circumventing techniques (used for the contracts of Marian Hossa, Chris Pronger, Roberto Luongo, etc.) were put in use, the disparity began to widen again.

The chart above doesn't provide much insight, but I thought it was interesting to look at regardless.  It is a team-by-team chart of total team payroll (blue line) and median player salary (orange line) by season.  You can change which franchise you're viewing by hitting the page icon (greenshot_2010-08-06_16-03-22) at the bottom of the chart.  It is just interesting to see the changes in spending policies for each franchise.

Now here's where it gets interesting.  The chart above shows the total team payroll against your place in the division.  So for example, if you have a high payroll and finish in first, your plot will be in the top-right hand corner, and conversely, if you have a low payroll and finish in fifth, you will be in the bottom-left.  Higher your payroll moves your plot up, better finish in your division moves your plot right.  Make sense?  I hope so.

To make the view more manageable, you can click on the season you want to view and it will highlight it and gray the others out.  I'd recommend just going season by season to see how the plots change.  What Gary Bettman would want to see is a nearly horizontal line which would indicate that on average, the payroll of each team does not have an effect on what place they finish in.  However, most of us would think that you would get a line mostly going bottom-left to upper-right indicating spending more money would typically get you a better hockey team resulting in a higher finish in your division.  That's mostly what you get, especially evident in the 2002-2003 and 2003-2004 seasons.

However, if you take a look at the post-lockout seasons, you see plots much closer to a horizontal line, indicating that the amount of money a team is spending isn't guaranteeing a strong divisional finish.  We've gone from a difference between fifth and first place of almost as high as $26 million down to around $13 million.  Once again, it appears that the salary cap has done its job here.  However, if you look closely at the last two seasons, you can see that gap beginning to grow slowly as more teams began to take advantage of using long term deals to create more friendly cap hits while actually spending more cash that the salary cap allowed (thus the team salaries at or over $60 million).

This chart is a scatter plot of team payroll (higher payroll plots further to the right) against standings points earned (in blue) and strength of schedule adjusted standings points (in orange) each including a trend line.  This series of charts is paginated by season.  You can change the season you're looking at by clicking the little page icon (greenshot_2010-08-06_16-03-22) at the bottom of the chart.

Now, again, as with the payroll vs. divisional standing chart above, the league would like to see a near-horizontal trend line, again indicating that payroll has little to no effect on a team's success.  However, unlike the showing of the divisional placing against team payroll, this chart shows that leading up to the lockout, the nearly horizontal line was exactly what the league was getting.  For example, in the year prior to the lockout, you get the two highest spending teams (Detroit & the Rangers) spending almost the same amount of money, but finishing forty points apart (DET: 109, NYR: 69).

Post lockout we see similar results to previous data though.  Once the initial season post lockout passed, you see the trend lines begin to approach a more horizontal state until the 2008-2009 and 2009-2010 seasons where the trends start to move to a 45 degree angle as teams began circumventing the salary cap.  So, again, we see that the salary cap did its job until franchises wised up to the loopholes in the current CBA and exploited them.

Our last chart shows a scatter plot of team payroll against Hockey Reference's simple rating system (SRS) including trend lines.  The simple rating system is just that, a simple rating of each team taking into account goals scored and goals allowed.  Just like the previous chart, this is a series of charts paginated by season.  You can change seasons by clicking the page icon (greenshot_2010-08-06_16-03-22) at the bottom of the chart.

The trend lines mirror the previous scatter plot where as we approach the lockout, the trend lines become more and more horizontal.  Post lockout, the trends again mirror the previous plots, becoming more horizontal, yet becoming more vertical after cap circumvention becomes more effectively used.

Conclusion

So, did the salary cap give us parity?  Yes and no.  The salary cap certainly aided in curbing spending, thus making a more level playing field for the smaller market teams to compete with the alpha dogs of the NHL.  However, the current version of the CBA allowed for a loophole to be exploited by the teams with larger budgets, allowing them to spend beyond the salary cap while small market teams have to increase their budgets beyond capacity just to meet the salary floor.

The salary cap cannot help the smaller market teams that still cannot spend much more than the league's salary floor.  Low attendance, low merchandise sales and an unwillingness of free agents to stay in small markets (*COUGH* KOVALCHUK IN ATLANTA *COUGHCOUGH*) have kept the low income teams from utilizing the advantages that the salary cap provides them.

So what does it mean?  It means the NHL is going to drag us through hell attempting to get the cap circumvention methods that have become popular the last two years explicitly disallowed in the next CBA.  Does it mean a lockout?  Depends on how hard the NHLPA wants to fight it.  With the rumors swirling around that Donald Fehr (he of the 1994-1995 Major League Baseball strike) is set to become the head of the player's union, we, as fans, could be in for a very bumpy ride come 2012 when the current CBA expires and needs to be renegotiated.

I can certainly see a lockout coming from this, but I'm hopeful that Bettman realizes the amount of growth that the NHL has experienced since the last lockout and how much a second lockout in less than ten years would absolutely murder the fan base.

I guess we can only hope that Bettman will close these loopholes because he subscribes to the same centuries-old proverbs that George Bush does:

"There's an old saying in Tennessee - I know it's in Texas, probably in Tennessee - that says, fool me once, shame on - [pauses] - shame on you. Fool me - [pauses] - You can't get fooled again."

...or can you?

You can follow Kelly on Twitter via @blinkfink182.
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