Of all the major sports leagues in the North America, the highest paid players can be found in baseball, basketball, and football. Players in the National Hockey League lag behind their counterparts by several million dollars a year. By way of example, LeBron James’ 2017 basketball salary was almost 31 million dollars. Compare that with Sidney Crosby’s almost 11 million dollar hockey salary, and the difference in pay is noteworthy.
It could be argued that the NBA earns more revenue than the NHL, which means that NBA players are awarded higher salaries. But league revenue does not fully explain the discrepancy. In the most recent year when statistics were available, the NBA earned total league revenue of 5.9 billion dollars; while the NHL’s total revenue was 4.1 billion dollars. Yet LeBron makes three times the amount of money as Sidney. So there are other factors in play that explain why hockey players are such a relative bargain.
NHL Hard Cap
The answer comes down to the NHL’s hard salary cap. The NHL is the envy of sports owners because it has a hard salary cap rather than a luxury tax. In the NBA and MLB, teams can get into a salary arms race for the best players as long as they are willing to pay a luxury tax. This is not an option in the NHL.
The NHL imposes not only a maximum team salary (expressed as a percentage of total league revenues), but also an individual player maximum salary. So even though the market value of Sidney Crosby’s services is probably 25 – 35 million dollars per year, his earnings from the Pittsburgh Penguins is much more limited.
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NHL Salary Wars
To be sure, these cost constraint measures were not always the norm in the National Hockey League. Prior to 2004, the NHL had no salary cap whatsoever. Beginning in the mid to late 1980s, player salaries started moving upward. After labor conflicts partially shut down the league in 1992 and again in 1994, player salaries began to skyrocket. Teams that regularly won championships in the 1970s and 1980s, such as the Edmonton Oilers, New York Islanders, and Montreal Canadiens, discovered that they could no longer afford to keep good players. Big market teams with deep pocketed owners could simply outbid the other teams. By the late 1990s, several franchises such as the Harford Whalers, Winnipeg Jets, and Quebec Nordiques were no more.
In the early 2000s, the owners began preparations for instituting a league-wide hard salary cap. This would coincide with the expiration of the collective bargaining agreement at the end of the 2004 season. The owners wanted to negotiate a salary cap into the new agreement with the players union. This led to a lockout in 2004, which wiped out the entire 2004-2005 hockey season. Eventually the players agreed to the hard salary cap, which enabled operations to resume in the fall of 2005. The first two teams to make it to the Stanley Cup Final under the new salary cap was the Edmonton Oilers and Carolina Hurricanes, two teams that were crushed under the strain of the prior NHL economic arrangement.