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What is the NHL escrow system, and why is it relevant right now?

The NHL and NHLPA need to address how owners and players split revenue before play can resume.
Empty arenas are a hit to the NHL's budget. The league and players figuring out their escrow system is part of how they address that hit.
Empty arenas are a hit to the NHL's budget. The league and players figuring out their escrow system is part of how they address that hit. [ DIRK SHADD | Times ]
Published Jul. 3, 2020
Updated Jul. 4, 2020

According to his massive contract that kicked in this season, Nikita Kucherov is due $12 million. But the Lightning’s star wing won’t see that whole amount — and he wouldn’t have even without the NHL’s shutdown because of the coronavirus.

In addition to typical deductions such as taxes, union fees and agent fees, a chunk of all NHL players’ paychecks is held in escrow each season.

Related: Why is it taking the NHL so long to announce it play to resume play?

Under terms of the collective bargaining agreement that ended the 2012-13 lockout, owners and players divide hockey-related revenue 50-50 each season, and in case player salaries would exceed that split, a certain percentage is withheld in escrow.

After the season, total revenue is calculated, and if the league is not at its 50 percent share, it gets escrow money to make up the difference. Anything left over is returned to the players.

It has never worked out that players are the ones owed money back from the owners because of the way revenue is forecast and thus the salary cap is set.

In 2013-14, the first full season under the current collective bargaining agreement, 14.7 percent of the players’ salaries was withheld, and at the end of the season, the players got 3.8 percent back, according to hockey statistics website Hockey Graphs, a total salary loss of 10.9 percent.

Last season, 12.9 percent was withheld and 3.25 percent refunded, according to ESPN, a total salary loss of 6.65 percent.

This season, after continually deferring their final paychecks, the players allocated their entire checks toward the escrow holdings, according to the Gavin Group, which specializes in hockey wealth issues. That brought the total withholdings from 14.00 percent to 19.55.

Predictably, players are not huge fans of this system.

“For nearly two decades, the players have protected the owners income with escrow, including throughout this pandemic crisis, even as owners’ equity continues to grow exponentially,” Rangers star forward Artemi Panarin posted on Instagram last month. “It’s time to fix the escrow.”

Fixing it might be a tall order given the league’s financial state — an estimated loss of between $450 million and $1 billion this season, depending on whether the season is concluded. The plan is to resume it this month.

Related: How do athletes feel about playing in empty venues?

But addressing the system and the weight it would put on the players to account for that revenue loss are part of what the league and players association are negotiating in their current talks for a new labor deal. The current deal is scheduled to expire in 2022.

A reported proposed solution would be temporary.

The escrow percentage and salary cap would be capped rather than linked to hockey-related revenue. The salary cap would be $81.5 million next season and remain there until revenue hits $4.8 billion and then calculated using the numbers from two years prior, Canadian TV network Sportsnet reported Friday.

Escrow would be capped at 20 percent next season, then between 14 and 18 percent the season after. It would go down to 10 percent in 2022-23 and 6 percent for the remainder of the new labor deal, which would carry through 2025-26 with a provision for a one-year extension, Sportsnet said.

An expected boost to revenue (a new contract for U.S. broadcast rights and expansion Seattle entering the league in 2021-22) with a fixed salary cap could result in a dropping escrow payment. But that assumes typical revenue from ticket sales returns to pre-pandemic amounts.

Depending on revenue levels, after this bridge labor deal — being negotiated as part of the league’s return-to-play plan — there probably would be another attempt to fix the escrow system permanently,

Contact Diana C. Nearhos at dnearhos@tampabay.com. Follow @dianacnearhos.