Just two weeks after the NHL announced a projected 2020-21 salary cap range that would have represented a major boost in teams’ spending power, things could not have gone in a worse direction in terms of meeting that estimation. The Coronavirus outbreak has shut the league down and there is no way to know when or if games will return this season. The league hopes to resume play and even maintains that they would like to avoid missing any games, but with each passing day that reality grows less and less likely. COVID-19 fears seem almost certain to cost games if not the entirety of the remaining regular season schedule and, in the worst-case scenario, possibly the playoffs as well. Missed games are missed revenue opportunities and the board of governors would be highly unlikely to approve a cap increase, especially of the magnitude initially projected, if they continue to suffer losses.
The last time that the NHL was forced to cancel games was in the 2012-13 lockout-shortened season. As the league and players’ association battled over collective bargaining terms, the NHL missed the first half of their season. A 48-game schedule began on January 19th, which for all involved was better than nothing but was certainly a hit to owners’ bottom lines. The 2012-13 campaign was expected to carry a $70.2MM cap hit, but that instead was a pro-rated number that in reality was just $60MM. The following season, given the lost revenue, the cap only meagerly returned to just $64.3MM, the same upper limit as in 2011-12.
Due to the unexpected stagnation of the salary cap for those two years, many teams were left under immense pressure to fit their rosters under the ceiling. In response, the NHL offered a solution: the “compliance buyout”. The compliance buyout follows the same rules as a standard buyout, allowing teams to cut ties with a player at the cost of two-thirds of the remaining value of their contract (one-third if under 26) over the course of double the length of the remaining term on the contract. The one defining difference is that compliance buyouts do not count against the salary cap. The NHL made this option available in the 2013 and 2014 off-seasons, with a limit of two per team over the two summers, and 18 teams took advantage. In fact, a number of teams are still paying off those buyouts – with a ways to go – with standouts including Christian Ehrhoff, Brad Richards, Ilya Bryzgalov, Vincent Lecavalier, and of course Rick DiPietro.
Could the compliance buyout make a return appearance should the Coronavirus outbreak continue to prevent NHL action from returning? If NHL teams end up losing revenue due to missed games, the 2020-21 salary cap limit will at best be the low end of the league’s projection, which is $84MM. And that would still be a $2.5MM increase. More likely in the case of canceled games would be the salary cap remaining at $81.5MM or only increasing marginally. Such a shift in the expected course of action would leave many teams in trouble. A report earlier today named the Chicago Blackhawks as one team that would have to make difficult roster decisions in the event of a stagnant cap, but they are far from alone. 13 teams already have $70MM+ in salary committed to 2020-21, while many of the 12 more teams in the $60-70MM range either have key free agents to re-sign or are working with a small number of signed players. The Arizona Coyotes, who lead the pack with $79.99MM committed to just 18 players, were already hard-pressed to deal with an $84MM salary cap, nevertheless a continuation of the current $81.5MM. They would be left in a nearly impossible situation, unless offered a way out.
As such, it seems like a strong possibility that the compliance buyout could make its triumphant return. While the league does not want to address the “what if” of missed games at this point in time, should it reach the point where that result is inevitable, compliance buyouts will certainly become a hot topic. Whether the league would go about the process in a similar manner as they did last time around remains to be seen. They might instead offer a one-time shot this summer in light of NHL Expansion in 2021 that should get the salary cap back on track. It’s too early to tell, but as we all wait out the Coronavirus, it’s worth wondering whether the league could bring back an old device to mitigate the lasting effect of the pandemic.