Kovalchuk Deal Should Change Sports!

Ilya Kovalchuk tried to change the landscape of sports with the contract he signed with the New Jersey Devils for 17 years and $102 million dollars. Kovalchuk believed that this was the best deal for him. It gave him security, more money today, and it allowed him to play for a team that had won 3 Stanley Cup Finals over the past 15 years.

Recently, according to ESPN.com, the NHL has rejected the contract, citing that the deal is illegal and that it would be highly unlikely that Kovalchuk would be playing still at the age of 44 for only $550,000. The NHL felt that the sole purpose of the contract was to avoid salary cap rules and to gain an advantage.

Maybe the NHL is correct. Maybe the New Jersey Devils and Kovalchuk were trying to dupe the system.

But what if it is the right way to do business in the current landscape of professional sports? Should other sports look at the structure of this contract and apply some of the same logic?

I think absolutely YES! and here is why...

1. Back Loaded Contracts are Too Risky!

MLB Baseball is notorious for offering its superstars back loaded contracts. Sure, baseball doesn't have to dodge a salary cap of any sort (they do have the luxury tax), but back loaded contracts dominate the sport.

The question is why? Why take the risk of paying a guy $8 million during the next two seasons and then $13 million in years 3 and 4? Won't you know more about what you are getting from a player the first couple of seasons? If you can predict an outcome with a higher probability, wouldn't you be willing to wager more?

A perfect example is Kyle Lohse of the St. Louis Cardinals. Lohse signed a 4 year, $41 million deal with the St. Louis Cardinals before the 2009 season. The salary breakdown is as follows per Rotoworld: 09' $7.125 million, 10' $8.875 million, 11' $11.875 million, 12' $11.875 million.

Lohse has been hurt much of the first two years of this contract, which given his track record would not of been predicted. But what happens when Lohse is hurt again in 2011 and 2012? The Cardinals are on the hook for even more money. They have restricted their resources by paying a guy more money later when he is less likely to be as productive. How does this make sense? Wouldn't you be willing to pay more money in 09' and 10' because it would've been less of a risk?

The "What have you done for me lately" concept should apply in sports. This should result in more front-loaded contracts like Kovalchuk's rejected deal, not back loaded contracts that turn out to be bad ideas five years later.

2. Players Will Understand Money Today Equals Security Later

You heard Kovalchuk say it. The security is what attracted him to this type of deal. So when will players start to realize that if they can make more money now, and have more years at less money later, that it will actually work out better for them in the end?

Professional athletes aren't like businessmen. They reach their peaks much earlier in their careers. So, shouldn't they get paid accordingly? Why wouldn't they make the most money when they have the highest probability to perform at their peak level?

If football players got paid more when they were 26 rather then when they were 35, don't you think we would actually see more players sticking with their teams at the end of their careers? Emmitt Smith would've suited up for the Dallas Cowboys in his last professional game. Same for Isaac Bruce and the St. Louis Rams.

In baseball, players at the end of their careers on perennial losers wouldn't be so hard to trade if their contracts were lower.

If Dan Haren was on target to make $10 million the next couple years as opposed to $12.5, the Diamondbacks may actually be able receive fair value if they trade him this summer because teams wouldn't have to take on this bigger contract.

3. Time Value of Money

It doesn't take a genius in personal finance to understand that more money today is worth more than more money in 5 years.

Like Kovalchuk, players will realize that they can get paid MORE TODAY and have MORE CHANCES to win later at a lower cost to their organization will make similar moves. This will happen in all sports.

Overall, Kovalchuk's rejected deal will open new doors in all sports for contracts that are similar in structure. Front-end contracts will lower risk for teams, provide security and dollars today for athletes, and make for more stability in professional sports.

The NHL was wrong to reject this deal. Other sports should learn from their mistake.

What do you think about the rejected Kovalchuk deal? Do you think that it could change sports? Are front loaded contracts good business decisions? Let us know what you think?