 If you’ve stayed plugged into the NHL’s news cycle during this shutdown, you’ve no doubt read the reports about the players’ final paycheck and the debate over what to do with it. The response I’ve seen on this topic on social media has often been something along the lines of “Who cares if the millionaires don’t get their money?” which is understandable in the context of the unprecedented economic conditions we’re in right now. A lot of people are hurting financially, others are dying and health-care workers are putting their lives on the line fighting this pandemic. Whether or not pro athletes are getting paid is very low on the concern list. There’s more to this story, however, than simply NHLers forfeiting — or potentially forfeiting, as the decision has been punted to next month — some of their pay. This issue is tied directly to the financial health of the league, hockey-related revenues, the salary cap and the collective bargaining agreement. It’s also directly tied to what the NHL might look like when the games come back, whenever that may be. What I wanted to do here was take a more granular look at the difficult business situation hockey is facing right now and try to map a path forward for the NHL’s various stakeholders. Let’s start with the paychecks. How NHL players are paidFirst of all, when we talk about players not getting a paycheck, it’s worth pointing out that they’re not complaining about this situation. In the conversations I’ve had, they understand there’s going to be serious financial consequences due to COVID-19 and that, because of the way the NHL’s CBA works, that will significantly impact their contracts. The debate right now is over how that impact will be felt. NHL players are paid for every day they are in the league. This facilitates things like call-ups and demotions from the AHL, as if you get sent down and you have a two-way contract, you’re paid a different salary than in the NHL. NHL players receive 13 paychecks in a season, and they begin to accrue on the first day games are played and end on the last day of the regular season. Those checks vary based on how many season days are included in them. This year they ranged from between six days and 20 days per check. This table outlines players’ pay schedules for 2019-20. 1 02-Oct-1907-Oct-19615-Oct-19 14% 2 08-Oct-1923-Oct-191630-Oct-19 14% 3 24-Oct-1907-Nov-191515-Nov-19 14% 4 08-Nov-1921-Nov-191429-Nov-19 14% 5 22-Nov-1905-Dec-191413-Dec-19 14% 6 06-Dec-1919-Dec-191430-Dec-19 14% 7 20-Dec-1908-Jan-202015-Jan-20 14% 8 09-Jan-2023-Jan-201530-Jan-20 14% 9 24-Jan-2006-Feb-201414-Feb-20 14% 10 07-Feb-2020-Feb-201428-Feb-20 14% 11 21-Feb-2005-Mar-201413-Mar-20 14% 12 06-Mar-2023-Mar-201830-Mar-20 14% 13 24-Mar-2004-Apr-201215-Apr-20 TBD So the pertinent paycheck is the final one, lucky No. 13. The NHLPA and its players decided to defer a decision on what will happen to it until May 15, exactly one month from when they were supposed to have received those funds. This season, there were 186 days in the regular season and the pay schedule. The 12 days in that final pay period represent a little more than 6.45 percent of a player’s pay for the season. For a player like the Leafs’ Mitch Marner, who was to receive $16 million this season — a league high — on his front-loaded contract, that one check is the equivalent of more than $1 million* ($1,032,258, to be exact). That’s before 14 percent escrow and other deductions come off. (If you’re not familiar with escrow, here’s a primer on some of the issues the NHL has had with it in recent years.)  Why players didn’t take their payIf the NHL doesn’t play the playoffs in 2019-20, it’s going to have a massive impact on league revenues. Talk in hockey circles is the damage will likely fall somewhere between $1 billion and $1.2 billion.
Because players’ pay is tied directly to hockey-related revenues in a given season through the escrow system, they will be significantly impacted by that drop — regardless of the dollar value on their contract. A $1.1 billion shortfall, for example, would mean more than 20 percent of NHL revenues weren’t realized, which makes sense given TV contracts will have to be redefined and gate revenues for 15 percent of the regular season and all of the postseason would be lost. (I’m actually surprised the damage isn’t more substantial. The league is lucky in some ways that the season was nearly complete when the shutdown occurred.) A 20 percent revenue shortfall would then be combined with the escrow hit players were already deducting (14 percent), meaning they would theoretically lose roughly one-third of their scheduled pay for the 2019-20 season. For players with heavily front-loaded deals, that could mean huge percentages of their total contracts are lost. Below is a list of the players who were scheduled to make the highest dollar figure this season in the NHL, with a trio of Maple Leafs at the top of the list. I’ve included some estimated losses here that are based on a world where there are no more games played until 2020-21. The NHL's highest paid players (2019-20) Mitchell Marner TOR $16,000,000 $2,240,000 $3,200,000 $5,440,000 John Tavares TOR $15,900,000 $2,226,000 $3,180,000 $5,406,000 Auston Matthews TOR $15,900,000 $2,226,000 $3,180,000 $5,406,000 Carey Price MTL $15,000,000 $2,100,000 $3,000,000 $5,100,000 Connor McDavid EDM $15,000,000 $2,100,000 $3,000,000 $5,100,000 Erik Karlsson SJ $14,500,000 $2,030,000 $2,900,000 $4,930,000 Artemi Panarin NYR $14,000,000 $1,960,000 $2,800,000 $4,760,000 Tyler Seguin DAL $13,500,000 $1,890,000 $2,700,000 $4,590,000 Jamie Benn DAL $13,000,000 $1,820,000 $2,600,000 $4,420,000 Seven others Various $12,000,000 $1,680,000 $2,400,000 $4,080,000 For someone like Auston Matthews, who only signed a five-year contract, this new reality could mean nearly 10 percent of his deal is lost in just this year. What’s complicated about the NHL’s player pay situation right now is the vast majority of the league’s salary dollars — more than 93 percent — have already been given to players, even though a huge chunk of those revenues haven’t come in. While the league has been withholding 14 percent escrow, that has nothing to do with the current shutdown; if revenues are a further 20 percent short beyond that figure, NHL players are going to have to pay owners back that money, too. It’s believed that excess shortfall could fall in the neighborhood of half a billion dollars. (As an aside here, the NBA’s pay schedule is structured differently. Money is being paid out to basketball players throughout the calendar year, so they’re in a less complex situation. That type of pay cycle is something hockey likely needs to adopt in future CBAs to account for unexpected situations like this.) If NHL players ultimately decide not to take their final paycheck, that lessens the giveback that is going to have to occur down the line. That 6.45 percent of their pay from Check No. 13 currently remains with the owners, bringing them roughly $140 million closer to where they need to be. There would still be a shortfall of several hundred million dollars that would have to be paid back to owners if the rest of the 2019-20 season is cancelled, but it wouldn’t be as severe. And, if playoff games are played, the amount players would need to return could fall to an even more manageable level. But there are two particularly tricky things here for the NHLPA to navigate if it turns out players have to pay back a significant share of their salaries. 1. What do you do with players who retire or otherwise aren’t coming back next season, given the natural solution will be to subtract this money from future paychecks? 2. How do you ensure the burden on players is equally distributed and doesn’t come more heavily from star players’ pay in 2019-20? Because so many of the NHL’s top stars have big-dollar salaries due this season, it’s expected that the workaround to all this will be to defer the salary shortfall pain over the next three or four years. This will be made easier if the NHL and the players’ union can negotiate this amount into the next CBA, rather than have it all become additional escrow burden. The trouble with that solution? What if the NHL comes back next season without fans in the building? That would take an even greater toll on revenues than the potential $1 billion hit for 2019-20. Gate revenues — along with in-arena merchandise and concession sales — are a massive, massive part of the NHL’s business. No fans attending games could mean hockey drops from a $5.1 billion league a year ago to somewhere around half of that, which would mean player salaries would have to take similar haircuts. The NHL’s escrow system was never designed to account for revenue drops of billions of dollars like this. If HRR armageddon is coming next season, you have to imagine the league and players try to come up with a more creative solution — whether that’s a salary rollback combined with a salary-cap drop or some other outside-the-box measure to account for a vastly smaller revenue base than in the past. Using new monies from something like the U.S. TV deal — NBC’s agreement expires at the end of next season — to fill the gaps will also be vital. You wonder, however, if all 31 NHL teams will be able to remain solvent long term in this environment. There is already talk of some owners feeling strain, after a little more than a month, given what’s happened to the markets and many of their businesses across North America. What happens if revenues crater further and owners want out? How profitable will some of these teams be if there is no gate revenue, even if player salaries come down dramatically? The reality is that the NHL is far more vulnerable in this situation than the NBA, NFL and MLB, who pull a far higher percentage of their revenues from massive television deals. For now, the primary hope at the league level is that they can get back to playing games in neutral-site locations this summer, which would allow them to fulfill their television and sponsorship deals and ease the revenue shortfall as best they can for 2019-20. Then they’ll worry about 2020-21 and beyond after that point. No matter what happens, some of this burden is going to fall on the players. And the 14 percent escrow they’ve hated for years may start to look pretty good. *- Marner isn’t the ideal example here given much of his salary is paid in signing bonuses in the summer, but this does outline the scale of the NHLPA deciding to forego the final paycheck. For someone like Buffalo’s Jack Eichel, who does not have bonuses as part of his $10 million compensation this year, the final paycheck is the equivalent of nearly $650,000.
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