Why the NHL's salary cap could skyrocket in the next 2 years

Let’s face it, the NHL’s salary-cap situation has not been very interesting over the past handful of years.

The COVID-19 pandemic in 2020 crushed league revenues to the point that they dropped close to 20 percent in 2019-20 and then a further 40-plus percent in 2020-21. The NHL had to create a pandemic agreement to handle player pay, which meant severely curtailing cap growth in order to make up for that sudden and unexpected revenue deficit.

That meant that in the five seasons between 2019-20 and 2023-24, the salary cap rose a measly $2 million, causing headaches for team executives and player agents alike. Even when the considerable COVID-19 debt was paid off, cap growth was limited to a maximum of 5 percent per season, which was roughly the bump the NHL experienced this season (from $83.5 million to $88 million).

That era, however, is almost over. And it could end with a bang.

Sportsnet’s Elliotte Friedman reported during the Hockey Night in Canada broadcast Saturday night that the NHL may need to negotiate a much higher cap than what the 2020 agreement calls for beginning as soon as this coming summer. The reason is that, with the players’ escrow debt paid off and a new CBA set to be implemented in 2026, the salary cap will return to being linked to league revenues, the way it was between 2005-06 and 2019-20.

And those revenues are way up.

* expansion years when the Vegas Golden Knights and Seattle Kraken joined the league

As you can see from the figures in the table above, NHL revenues were up last season by more than 20 percent from pre-pandemic levels. The cap, however, has risen by just 8 percent, most of which occurred this past offseason.

In the past (2006 to ’19), the NHL’s salary cap was set directly based on the previous season’s revenue, using a complex formula that divided the players’ 50 percent share by the number of teams in the league.

Using those calculations, based on last season’s estimated revenues of $6.2 billion, the math says they could have pushed this season’s salary cap to at least $95 million.

Next season, assuming revenues take a similar jump of more than 8 percent, the “old style” cap calculations project a roughly $105 million cap.

Based on the 2020 Memorandum of Understanding negotiated with the NHLPA, those figures aren’t attainable due to the 5 percent limit on cap growth. However, there is a provision that the two sides can negotiate a higher salary cap, which is what Friedman is talking about.

Friedman’s report detailed that those pending negotiations could mean a cap of $95 to $97 million next season, or a $7 to $9 million bump — potentially double the $4.4 million we’ve been expecting for 2025-26.

Why would the NHL want to negotiate a higher salary cap than the agreement calls for?

The biggest reason is that at some point the cap is going to get relinked to hockey-related revenues. If the league holds firm on wanting only the 5 percent increase and a $92.4 million cap for next season, in 2026-27 they could be dealing with a ridiculous rise in the cap — one that would cause some serious mayhem.

Revenues next season could easily exceed $7 billion. If the 2026 cap calculation is anything like it was under the previous CBA, that could mean a salary ceiling of $112 million or more — which would mean a staggering jump of roughly $20 million in one offseason.

Like I said: chaos. (And just in time for Connor McDavid to be a free agent, too!)

Now, there are some big caveats here. We’re projecting what revenues will be well into the future, and we’re also projecting how the salary cap will function in a new agreement that the two sides haven’t even begun negotiating. We’re also not factoring in that those salary-cap calculations, in the past, often resulted in players paying huge amounts of escrow — quarterly salary withholdings that rose to as much as 17 percent in some years.

Players absolutely hate escrow and don’t want to get back to the levels of withholding they had six or seven years ago. So pushing for as much cap growth as possible doesn’t make sense for them either.

And that very well could impact how the cap calculations work in a future agreement.

While players are going to be paid the same amount in aggregate no matter what, given their salaries are hard linked to revenues, a higher salary cap does come with some upsides. More cap room each season means more teams can compete for free agents, which gives players more options. Cap room also makes it easier for teams to keep their current players and not have to resort to trades and buyouts to make tough changes.

Overall, a higher cap creates flexibility in the system.

Cap stagnation? That can create pain.

Ultimately, I think what we will see here is a happy medium, where the league attempts to project where revenues might be next season and tries to find a “bridge” cap number for 2025-26 that acts as a midpoint between this season’s $88 million and wherever the cap will be in the first year of a new CBA in 2026-27.

Based on the information we have, that’s likely a higher number than $92.4 million. Friedman’s $97 million mark seems like a reasonable landing spot.

But we’ll need the NHL and NHLPA to agree on how much higher than the built-in 5 percent bump they want it to go.

The good news is, by all accounts this CBA negotiation isn’t expected to be a war. The insiders are calling this a “peacetime negotiation” for a reason; there’s no stomach for a lockout or strike right now when you talk to people behind the scenes, on both sides.

So it feels unlikely the owners will take a run at reducing the players’ percentage of revenues from 50 percent, which means a return to something resembling the old system we know and love from before the pandemic.

And, yes, more regular cap growth, year after year, than what we’ve experienced since 2019.

(Photo of NHL commissioner Gary Bettman: Joel Auerbach / Getty Images)