Impact of likely 5 year contract limits would have on the Penguins negotiations with Letang and Malkin

A lost season is expected to lead to a run off of contracts, therefore, players who were entering the final year of their contracts for the 2012-2013 season would become free agents in summer 2013, like they were suppose to regardless of whether there is hockey this season. For the Penguins, unrestricted free agents to be include Matt Cooke, Pascal Dupuis, Craig Adams, and Ben Lovejoy.

There are no significant names out of that group but the money Cooke, Dupuis and Adams would be losing from a lost season is money they will probably never get back. Cooke turns 35 in September and Dupuis coming off a career year, turns 34 in April. Adams who turns 36 in April, could see his Penguin and NHL career come to an end if there’s no hockey this season. Despite GM Ray Shero regarding Adams as a great locker room guy, he will struggle to find work.

The buzz among several former players who have been through this before is how can players see any gain from losing millions of dollars this season for the sake of young players down the road. That has many wondering what is Don Fehr’s end game as he seems prepared to lose this season and while I’m on the side that the players need to accept a deal now and get what they can as they are never going to win, the owners are a bit out of line regarding their hard line stance on contracts.

“The owners made it clear that there is no give with respect to any of their proposals,” Fehr said on Sunday. “That unless players are prepared to take and this is my phrase, not theirs down to the comma, that there’s nothing to do.”

The NHL seeking a contract term limit of five years was a few weeks ago believed to be open to negotiation but the league has suddenly taken a very hard stance on this issue among other contractual issues.

Larry Brooks reports on the hard line the owners are taking with insight from last Friday’s session.

“Near the end of the meeting, Don [Fehr] said to Gary [Bettman]: ‘Let me get this straight. Even if the players agree to every single component of the league’s economic plan, we still don’t have a deal unless we also agree to every one of your proposed changes to player contract rights?”

To which, both of our sources reported, “Gary said: “Yes.”

The impact of five year contract limits will be significant as teams won’t be able to circumvent the cap with 12 to 13 year deals to keep cap hits feasible for star players, while players absolutely hate the idea as they would be losing several million in guaranteed dollars due to shorten contracts.

What type of impact will it have on the Penguins resigning Kris Letang and Evgeni Malkin? Let’s take a look:

Cap space won’t be a huge issue for the Penguins as the Penguins have just four players signed (Sidney Crosby $8.7 million, James Neal $5 million, Paul Martin $5 million, Marc Andre Fleury $5 million) for the 2014-2015 season but the Penguins are likely going to be forced to commit at least $15 to $17 million combined to keep Letang and Malkin.

Under the NHL’s proposal that has a 50-50 revenue split and when a new CBA is agreed upon it’s going to be a 50-50 split, the salary cap for 2013-2014 season is projected to be $59.4 million. That would put the maximum salary allowed around $11.8 million per season and the NHL is also demanding that a players salary cannot decrease or increase by $500,000 from their year 1 salary.

Letang and Malkin are scheduled to be free agents following 2013-2014 season, although Letang’s status could change if free agency is pushed back. However, the Penguins will be able to begin negotiating with both players in summer 2013, assuming we have a CBA in place.

A five year contract term limit would impact Letang’s current cap hit of $3.5 million likely doubling under his next deal. The Penguins have had the luxury of Letang playing under a bargain deal but the team will be hard pressed to sign him for anything under a 5 year deal in the $32 – $35 million range.

The fascinating situation to watch will be Evgeni Malkin’s negotiation if a five year contract term is enacted. The Penguins were only able to keep Sidney Crosby’s new contract at an $8.7 million cap hit because they had the benefit of doing a 12 year deal. That is surely not going to be the case with Malkin when a new CBA is in place.

When examining Crosby’s deal, he’s scheduled to earn $57.8 million in the first five years of his deal, which averages out to $11.56 million per season over the first five years.

Malkin has a smart agent in J.P. Barry of CAA Sports who will surely be looking at the money Crosby is making in the first five years of his deal but Malkin also loves it in Pittsburgh and despite being regarded by some as the NHL’s best player, he likes taking a backseat in the spotlight that gets to happen in Pittsburgh due to Crosby being around.

It’s hard to imagine any scenario where Malkin would take $8.7 million over five years but I think the Penguins will be able to get him locked up to a deal in the 5 year – $50 million range.

Some hypothetical Scenarios of $$$ Pens could have committed for 2014-2015: Evgeni Malkin $10 Million Cap Hit (5 years – $50 Million); Sidney Crosby $8.7 million Cap Hit; Kris Letang $6.5 million Cap Hit (5 years – $32.5 million); James Neal $5 million Cap Hit; Paul Martin $5 million Cap Hit; Marc Andre Fleury $5 million Cap Hit

We could be looking at a likely scenario where the Penguins will have over $35 million committed to Malkin, Crosby, Letang, Neal and Fleury for 2014-2015, if the NHL gets their way of five year contracts.