This summer saw an exciting and somewhat nerve-racking development in the world of international hockey. The NHL has been the world's premier league for decades, attracting top-tier talent from across the globe. Other leagues, including the Swedish Elite League and the Russia Super League (RSL), could not compete with the NHL's prestige and high salaries.
The new Kontinental Hockey League (KHL), with its roots in the RSL, however, is hoping that favorable economic conditions in Russia will allow the establishment of another top-tier league to compete with the NHL on an international level.
In a way, it is the same old song and dance that NHL fans have heard for years: the Swedes/Germans/Swiss/Czechs/Finns/Russians are going to establish a broad multinational league in Europe and drop a lot of money on NHL stars, diluting the talent pool and ruining hockey for all the good little Canadian boys. It is an old story, but this time there may be some merit to it. The KHL has already shown that it is capable of ignoring NHL contracts, and without a transfer agreement in place between the leagues, mutual poaching of stars will continue.
The KHL has 24 teams across Russia, Khazakstan, Latvia and Belarus. Like the NHL, it is a salary-cap league, so on the surface, the threat of huge contracts enticing NHL stars to defect does not seem very plausible. However, the cap is specifically designed to facilitate the signing of current stars.
There are two important aspects of the KHL cap: about 70 percent must be used to sign 21 players on the active roster, while the remaining 30 percent of the cap is for signing four "star players" to round out the roster. Since KHL salaries are not subject to income tax, this allows a Russian team to offer a very attractive amount of money to a free agent (or contracted) NHL player.
The current highest salary for the 2008-09 season in the NHL is that of Ottawa Senator forward Dany Heatley (F, OTT) at $10 million. After taxes, that is slightly less than $7 million annually. KHL teams can easily afford these types of contracts under their 30 percent star section of the cap.
Of course, no KHL team has offered Heatley a five-year $50 million tax-free contract yet. But there is increasing concern that young Russian stars (the future Evgeni Malkins and Alexander Ovechkins) will eschew the unfamiliarity of North American hockey to play at home for more money. In fact, the beginning of this trend can already be seen, as former New York Ranger Jaromir Jagr chose to sign with Avangard Omsk of the KHL this summer.
Jagr is at the end of his career and no NHL team was seriously interested in retaining his services for the amount of money he would command. But the influence that Jagr has over young eastern European prospects like New York Ranger forward Alex Cherepanov is very strong, and his signing in the KHL will no doubt encourage other players to look carefully at the Russian league as a professional opportunity.
More pressing than the Jagr case is that of Alexander Radulov. His Nashville Predators are a mediocre team in a very weak hockey market. They need young, cost-controlled talent more than anyone in order to build their fan base and eventually contend for the Stanley Cup.
Radulov represented a significant portion of Nashville's future; he was third on the team in goals and points with 26 and 58, respectively, and looked poised to expand on the 2007-08 campaign. Because of his success, Radulov was not satisfied with his approximately $1 million-per-year entry-level deal, which was supposed to last through 2008-09.
Instead, he jumped ship in the offseason and signed a $13-million deal over three seasons with Salavat Yulaev Ufa, a pro team in the KHL. In taxed NHL terms, that is $18.6 million over three years, which represents a lot of money for a relatively poor franchise like Nashville.
The Predators could not afford to match the contract, and they should not have had to try. Radulov was already signed for this season and thus should not have inked a deal with another NHL team, the KHL or any other league. Due to the lack of a transfer agreement between the KHL and NHL, there is no vehicle for arbitration of contract disputes.
After the Radulov debacle, the NHL claimed that it had reached an understanding with the KHL. However, there is still no international transfer agreement in place, in part because the NHL doesn't want KHL teams signing players out of North American Junior Hockey, which a transfer agreement would probably allow.
The lack of a transfer agreement means that there is still no mechanism in place for preventing NHL players from reneging on their contracts to go to Russia. With the preponderance of Russian stars in the league, the NHL may want to worry about the consequences of a guy like Malkin of the Pittsburgh Penguins yearning for some home-cooked borscht.
As such, it appears that the NHL must take the KHL seriously. Russia has a rapidly growing economy and is an avid hockey nation, meaning that the market for professional sports is expanding. The KHL is poised to take advantage of the situation and has shown a disregard for the rules that have governed previous international league interactions.
The possibility of the NHL returning to a predominantly North American league in terms of talent would reduce the overall quality of play and fan entertainment. As the league struggles, the last thing it needs is competition from Russia. It remains to be seen whether the KHL will actually be successful as an alternative to the NHL, but so far, they have shown the motivation and the means to do so.
