On Why Entry Level Contracts Are More Valuable Than Ever

I guess I should make this a regular feature here at Driving Play - Pointing Stuff Out You Might've Known But Have Forgotten. I'll work on the title. The first entry in this series was about the decline in goal scoring since the lockout. This one is about the effect a rising salary cap has had on entry-level contracts.

Every player who is drafted and signs with their drafting team signs an entry-level contract (ELC hereafter). The rules about entry-level contracts are fixed - there's certain bonuses that can be given out, but there is a clearly defined maximum salary that depends on what year the player was drafted. Here's the list:

2005: $850,000

2006: $850,000

2007: $875,000

2008: $875,000

2009: $900,000

2010: $900,000

2011: $925,000

So, from 2005 to 2011, the maximum salary in an ELC has increased by nearly 9%. That sounds almost substantial, but we have to remember that the salary cap has increased by 64%, from $39 million to $64 million. Leaving bonuses aside, a player making the rookie maximum in 2005 would be making 2.1% of their team's possible salary allotment. In 2011, that player will make 1.4%. That sounds insubstantial, but in effect, it serves as a large pay cut. The difference in the two percentages (.7%) is almost enough for an additional minimum salary player on the roster (.82%).

Okay, so you might say, 'Well Triumph that all sounds well and good, but what if teams are paying pretty much everyone that maximum, thereby reducing that effect?' But they're not. I did a study on 15 teams and the ELCs they signed that go into effect next season. I chose 15 teams because it took a long time and because I'm kinda lazy, but I can assure you the numbers won't change much if I did all 30. Here's what drafted players are getting paid, on average (numbers courtesy of capgeek.com):

1st round: $909,000

2nd round: $797,000

3rd round: $631,000

4th round: $677,000

All Others: $625,000

Not only will any of these contracts provide a substantial discount if the players make it to the NHL, but we've seen that negotiating a 2nd NHL contract can be very tricky. If the player has only played 3 years in a professional league, he does not have arbitration rights. This means that his only negotiating recourse is to get an offer sheet from another team, which are rather rare. We saw recent RFA Karl Alzner sign a contract at a massive discount because he essentially admitted that he had no choice.

We shouldn't expect to see this situation change in a future CBA, either. Players who are draft-eligible aren't part of the union, and no doubt teams don't want to give young, unproven players more money. The value of entry-level contracts should increase in the NHL going forward, making the NHL Entry Draft even more important than it already is.