NHL’s new salary cap landscape creates a big opportunity for the Colorado Avalanche

Over the past week, the NHL and NHLPA have been working tirelessly to take the next steps towards not only getting back on the ice to finish the 2019-20 season but to also map out the framework for the next few seasons. The largest part of those negotiations has been centered around modifications to the Collective Bargaining Agreement that would account for changes in the future financial landscape of the league.

Like with most aspects of the business world, the COVID-19 pandemic has wreaked havoc on any financial projections the NHL had for the coming years. A lack of ticket sales and a shortened schedule will result in revenues being a fraction of what was expected - meaning the players’ salaries already paid for this season are significantly higher than the 50% split mandated by the current CBA. With no changes to the system, the cratering revenue would create either a salary cap level much lower than it was in 2019, or an astronomically high escrow percentage for next season.

In order to rectify this, the two sides had to work on a new plan that would spread escrow levels out over the next few seasons while keeping the salary cap ceiling flat. The deal has not been announced, but there are multiple reports that suggest the two sides have mostly everything worked out.

Elliotte Friedman outlined the key aspects of the plan as follows:

Some stuff to look forward to in modified CBA: Flat salary cap (unless changed, numbers were $81.5M next two years, $82.5M in 2022-23); cap on escrow (starting at 20 per cent next season, moving down after that); return to Olympics (pending agreement with IOC). Ten per cent of next season’s salary deferred; language for right to opt-out of Return to Play. Also, NHL fought for changes to contract structure — limits on signing bonuses and less salary fluctuation on a year-to-year basis. We’ll see how that looks. This will mean next couple of seasons are going to be extremely tight for clubs without cap flexibility.

A salary cap ceiling of $81.5m is terrible news for a lot of NHL teams. It’s great news for Joe Sakic and the Colorado Avalanche.

Thanks to some tremendous cap management over the last few years, the Avalanche have more financial flexibility that nearly everyone else in the league, and significantly more than any other contender.

As things sit currently, only the Los Angeles Kings, Ottawa Senators and New Jersey Devils have more salary cap space than the Avalanche. That creates a number of opportunities for front office to take advantage of a cash strapped market, both through trade and free agency.

Currently, more than half the teams in the NHL have a payroll greater than $80m. With the cap ceiling remaining stagnant, that is going to create a ton of issues when it comes to re-signing key players over the next few years. Teams are going to need to dump salary and Sakic is in the perfect position to pounce when players become available.

The Avalanche can weaponize their cap space to either trade for a good player on a less desirable contract or to acquire a high-end restricted free agent that another team will be unable to sign to an extension.

There is a strong probability that impact players like Shayne Gostisbehere, Rickard Rakell, and Kasperi Kapanen becoming available via trade as nothing more than a cap dump. There also exists the possibility that RFAs like Anthony Cirelli or Ryan Pulock price themselves out of their current teams because of cap constraints. Regardless of who it is, more than a few impact players are likely to be on the move because of cap constraints, and the Avalanche are in the perfect position to scoop them up for pennies on the dollar.

Further to the players already under contract, over the next two off-seasons, teams are going to have a lot less money to spend on the free agency market. Free agents are going to be offered far less money than they would have otherwise been expecting. This could create a situation where players weigh other factors more heavily when deciding where to play. The chance to win a Stanley Cup could become a much bigger influence since many guys will have to take a financial discount anyway. That would make signing with this young Avs team incredibly appealing. If you have to sign for less anyway, you might as well do it in a situation where you can play with Nathan MacKinnon and Cale Makar.

An unrestricted free agent like Taylor Hall could opt to sign a shorter-term deal for slightly below market value in order to hit the open market again in two years once the league’s finances are getting back to normal.

The Avalanche have some contracts of their own to sign. Andre Burakovsky is an RFA this offseason and we are a year away from Makar and Gabriel Landeskog needing extensions, but that shouldn’t scare Avalanche fans. The financial flexibility is still there.

The Colorado Avalanche are a legitimate Stanley Cup contender right now - exploiting the new cap era will give them the possibility to be even better.

Salary cap flexibility is only an asset if you use it. Sakic and his front office have been hoarding cap space in an attempt to make a big splash. They wanted to make a pitch to John Tavares two summers ago and they did make a pitch to Artemi Panarin last offseason. Neither of those stars came to Denver, but now the Avs have that cap space to exploit an uncharted market.

There is still a ton of uncertainty when it comes to how the business of the NHL will proceed over the next few years. The inability to sell tickets has had a very negative impact on the bottom line and teams will feel that through cap and salary constraints.

The one thing we do know is that a large percentage of teams will feel the cap crunch and be forced into making a ton of hard decisions when it comes to roster construction. The Avalanche are not one of them. In fact, Joe Sakic & Co. are set up perfectly to pounce when the opportunities present themselves.