At the end of a hockey season, so many off-season activities such as trades and signings happen. One abbreviation that always comes up when a player signs a deal with a team is AAV.
What Then, Does AAV Mean In Hockey?
For starters, AAV is an abbreviation that stands for Average Annual Value. It does not apply to a hockey player’s stats but the salary he is making.
The AAV of a player is calculated by dividing the total value of his contract by its length or term. Hence, the value gotten is applied to the team’s salary cap.
AAV is calculated by simply diving the total value of the contract signed by a player by its terms or duration for which the contract will last. In a nutshell, AAV = contract sum divided by the number of years for the contract.
In the NHL, players can sign a length of contract that ranges from 1 to 8 years. Let’s take a quick and simple example of how to calculate AAV.
If a player signs a $30 million contract for 3 years, then his AAV will be calculated as:
AAV = $30 million/3 years = $10 million/year AAV
Also, if the player decides to sign a $40 million dollar contract for 8 years, then his AAV will be = $40 million/8 years = $5 million/year AAV.
The AAV is not compulsorily the exact amount paid to the player each year. But it is a calculation that shows the average amount that the player can make per year over the period of the contract.
Why Does NHL Use AAV?
Unlike other popular sports, the NHL and its players have a collective agreement that governs how the league operates.
The terms of this agreement include a clause that states that; players and the league will share revenues on an approximate scale of 50/50 between themselves.
Hence, the AAV of the player will be used to determine how much the NHL will get from the player’s earnings.
The NHL also uses the total Average Annual Value (AAV) of a team to assess the team’s salary cap.
A salary cap is a rule that places a limit on the amount of money that a team can spend on players’ salaries. This implies that Each team in the NHL has a minimum as well as a maximum amount of money they must spend on salaries.
Every season, the NHL sets a salary cap floor (minimum) and ceiling (maximum) that governs every team in the league. Hence, each team will have to use the cumulative AAV of all the players on their roster to know if they fall within the NHL’s salary cap.
Let’s take an example for better understanding:
In the 2019-20 season, the salary cap floor was $60.2 million, and the ceiling was $81.5 million. To determine how much each team is spending and if they are under the salary cap range, the league will add up all the AAV of the players on the team’s roster.
This does not include players in the minor league, but only the 22 to 23 players that are in the NHL. It is expected that the cumulative of player’s AAV in each team for that season should fall between $60.2 million to $81.5 million.
What happens when an NHL team goes over the salary cap?
If the cumulative of a team’s AAV exceeds the salary cap ceiling of $81.5 million, the team will be compelled to get rid of players through waivers, trade, or by putting them in the minors.
Nonetheless, teams are literally unable to exceed the cap. Before any deal or signing takes place, the league examines the contract and determines the salary cap implications for the teams involved.
Each team also has its own cap specialist, who, of course, performs the calculations beforehand. The league will not approve a deal if it will make the team exceed the salary cap.
So do players get paid another amount besides their AAV?
It will interest you to know that the amount of money a player takes home in a given year is not always their AAV. However, a player will always get the complete amount of money stated in their contract in the end.
The way the players are paid is not often divided up as neatly as the AAV amount. Well, let’s analyse two actual contracts and see how they are paid out as compared to their AAV. The example below is an analysis of Mitch Marner and Matthew Tkachuk contract structures.
Mitch Marner:
The contract Marner signed for $65,358,000 over six years is shown below. The first point to make is that Mitch is paid more at the beginning of the contract than at the end.
What is the reason for this? A dollar today is more valuable than a dollar tomorrow, as the old adage says.
He doesn’t have to wait four or five years to collect that money and invest it however he sees suitable. He’ll be fine as long as he surrounds himself with good financial folks.
| Year | Base Salary | Signing Bonus | AAV | Yearly Cash |
|---|---|---|---|---|
| 2019-20 | $700,000 | $15,300,000 | $10,893,000 | $16,000,000 |
| 2020-21 | $750,000 | $14,300,000 | $10,893,000 | $15,000,000 |
| 2021-22 | $750,000 | $9,608,000 | $10,893,000 | $10,358,000 |
| 2022-23 | $750,000 | $7,250,000 | $10,893,000 | $8,000,000 |
| 2023-24 | $750,000 | $7,250,000 | $10,893,000 | $8,000,000 |
| 2024-25 | $750,000 | $7,250,000 | $10,893,000 | $8,000,000 |
Matthew Tkachuk
Tkachuk signed a three-year contract worth $21 million in 2019. As you can see, the contract pays out more in the end.
Unlike Marner, whose deal allows him to negotiate with any team during his unrestricted free agent years, Tkachuk’s contract will expire while he is still a restricted free agent.
This means he will have to negotiate with his current team, the Calgary Flames. On this note, Tkachuk was wise to negotiate his contract in this manner because the Flames will have to ‘qualify’ him when his contract expires in order to keep him for his final restricted free agency season.
To qualify him, they must offer him at least a one-year contract at his previous year’s wage. As a result, Tkachuk will be guaranteed a $9 million contract for the last year of his restricted free agency status.
| Year | Base Salary | Signing Bonus | AAV | Yearly Cash |
|---|---|---|---|---|
| 2019-20 | $1,000,000 | $4,000,000 | $7,000,000 | $5,000,000 |
| 2020-21 | $4,000,000 | $3,000,000 | $7,000,000 | $7,000,000 |
| 2021-22 | $9,000,000 | $0 | $7,000,000 | $9,000,000 |
How Does AAV Help Teams Reach The Salary Floor:
The AAV can also be used to help a team pay a lot less in actual salary than the salary cap number allows.
The most common case is that the team is rebuilding and opts for a youth movement. They’ll remain poor for a few years, but perhaps they’ll be able to snag a few strong draft picks and establish a core capable of winning a Stanley Cup. For Pittsburgh and Chicago, this rebuilding strategy worked.
It can be difficult to hit the cap floor when you’re rebuilding your club around a group of young players. On this note, Talented veterans or superstar youngsters signing their second contracts are mostly given expensive contracts.
Young players which make up a rebuilding team are usually the least expensive players in the league.
How Does A Rebuilding Team Reach The Cap Floor?
You can trade for players on other teams that are in the final year of their contracts and have high AAV contracts with the majority of the money paid upfront in prior years.
Teams with these contracts are often keen to get rid of them since the older player is either not living up to the contract’s value or is unable to fulfil it due to injury.
Arizona, a cash-strapped franchise, has made several of these types of deals over the years. The best example was when they traded Sam Gagner and a fourth-round pick to Philadelphia for Niklas Grossman and Chris Pronger, who was injured and unable to play.
Pronger’s contract included a 5-million-dollar AAV, yet he was only owed 750K in real money. That’s a significant amount of money saved.
Is AAV The Same As Cap Hit?
Yes, AAV is literally the same as the cap hit. A player’s cap hit is calculated as the average annual value (AAV) of their current contract.
As earlier explained, the AAV or Cap hit is determined by dividing the total salary plus signing bonuses of a player’s contract by the contract’s length/duration. Hence, there is no difference between AAV and Cap hit.
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