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What does Average Annual Value (AAV) mean in the NHL?

AAV

So, you’re into the NHL and came across the term AAV (Average Annual Value) and got confused? Don’t worry; it’s simple to grasp and involves some math. I’m sure you’ve got this, but even if you’re not a fan of math, no worries! I’ll break it down in a super easy way to understand.

In this blog, I’ll break down the concept of AAV, its calculation, its importance in hockey, and how it affects trades in the NHL. Let’s jump in!

What is the Average Annual Value (AAV) in Hockey?

AAV, also known as Average Annual Value, is an essential concept in NHL contracts. It’s all about the average yearly cost of a player’s contract and how it affects salary cap calculations.

Don’t let its simplicity fool you – AAV can seriously impact a team’s financial flexibility and ability to sign or trade players. It’s a big deal!

How is the AAV Calculated?

The AAV is calculated by taking the total value of a player’s contract and dividing it by the number of years in that contract. Here’s the formula:

AAV = Total Contract Value / Number of Years in the Contract

For instance, if a player signs a 5-year contract worth $25 million, the AAV would be:

AAV = $25,000,000 / 5 = $5,000,000 per year

For salary cap purposes, the player’s contract is considered as if they were making $5 million per year, regardless of whether their actual salary changes from year to year.

An Example of AAV in the NHL

Let’s dive deeper into the concept of AAV with a real-world example involving two hypothetical NHL players, Player A and Player B.

Player A

  • Signs a 6-year contract worth $42 million.
YearSalary
1$5,000,000
2$6,000,000
3$7,000,000
4$8,000,000
5$9,000,000
6$7,000,000

Player B:

  • Signs a 5-year contract worth $40 million.
YearSalary
1$9,000,000
2$8,000,000
3$6,000,000
4$4,000,000
5$8,000,000
6$5,000,000

Let’s calculate the AAV for each player:

Player A’s AAV = $42,000,000 / 6 = $7,000,000 per year

Player B’s AAV = $40,000,000 / 5 = $8,000,000 per year

Now, imagine these two players are traded for each other. The AAV remains the same for both players, meaning Player A’s new team will still account for a $7 million AAV, while Player B’s new team will account for an $8 million AAV against their respective salary caps.

This example highlights how AAV allows teams to make player trades while ensuring compliance with the salary cap rules, even if the players have different annual salaries.

Why is the AAV Important in Hockey?

AAV is super important in the NHL because it determines how much salary cap space a player’s contract takes up. You see, the NHL has this salary cap system to ensure teams don’t go overboard with their spending and keep things fair and balanced. That’s where the concept of parity drives from too.

So, each team has a maximum cap limit, and they have to fit all player contracts, or AAVs, under this cap.

Understanding AAV helps teams plan their lineup and make smart choices. They have to ensure they have enough cap space not just for the big-name players but also to assemble a solid and competitive team.

If a team’s AAVs go over the salary cap, they could face penalties, trading, or waiving players to get back under the limit.

How Does the AAV Affect Trades in the NHL?

The AAV plays a significant role in NHL trades. When teams make player trades, they need to consider the players’ AAV. The key is ensuring the trade doesn’t disrupt the team’s salary cap situation.

Team A wants to trade Player Y, who has an AAV of $5 million, to Team B. In return, they want Player Z, whose AAV is $4 million, and a draft pick. Both teams need to assess the impact of this trade on their respective salary cap situations.

If Team A’s total AAV is close to the salary cap limit, they may need Team B to retain some of Player Z’s salary to make the trade work. Alternatively, Team A might need to include another player in the trade to balance the AAV.

Understanding AAV is crucial for teams to navigate the complex web of player transactions and maintain compliance with the salary cap rules.

Can a Player’s AAV Change During Their Contract?

In most cases, a player’s AAV remains constant throughout their contract. However, there are some situations where a player’s AAV can change, but these are exceptions rather than the rule.

One such exception is when players sign a contract extension before it expires. In this case, the new contract’s AAV might differ from the old one, depending on the terms negotiated.

Additionally, if a player retires before their contract ends, their AAV can come off the team’s books, providing cap relief. However, this is rare.

Can the AAV be Different from a Player’s Actual Salary in a Given Year?

Yes, the AAV can differ from a player’s salary in a given year. It’s common for players to have varying salaries throughout their contracts. These variations might be due to signing bonuses, performance bonuses, or other financial incentives.

Let’s illustrate this with an example:

Player X signs a 7-year contract with a total value of $49 million, but the contract structure includes different annual salaries:

  • Year 1: $5 million
  • Year 2: $6 million
  • Year 3: $8 million
  • Year 4: $10 million
  • Year 5: $6 million
  • Year 6: $8 million
  • Year 7: $6 million

To calculate the AAV, we use the formula:

AAV = Total Contract Value / Number of Years in the Contract

AAV = $49,000,000 / 7 = $7,000,000 per year

So, even though Player X’s actual salary fluctuates, the AAV remains constant at $7 million per year for salary cap purposes.

Are There Any Exceptions or Limitations to the AAV Calculation?

While the AAV calculation is generally straightforward, some specific exceptions and limitations can affect it.

One notable limitation is the “35+ rule.” According to this rule, if a player signs a multi-year contract that extends beyond their 35th birthday, the full AAV of the contract counts against the team’s salary cap, even if the player retires or is no longer with the team.

For example, if a 36-year-old player signs a 3-year contract with a $9 million AAV but retires after the first year, the team is still on the hook for the full $9 million AAV against the cap for the remaining two years of the contract.

Why Does the NHL Use AAV?

In the NHL, AAV is a key tool to keep things fair and balanced among teams. Without a salary cap system based on AAV, wealthy teams could sign big contracts with superstar players, putting smaller-market teams at a disadvantage. AAV levels the playing field, giving every team a fair shot at competing.

What Is the Highest AAV in the NHL?

The NHL has seen some eye-popping AAVs over the years as teams vie for the services of superstar players. Nathan MacKinnon signed an 8-year, $100.8 million extension with the #Avs! That makes him the highest-paid player in NHL history with an average of $12.6 million per year. In the past Connor McDavid inked an 8-year contract extension with an annual AAV of $12.5 million.

Final Words

To sum it up, understanding Average Annual Value (AAV) is crucial if you’re into the financial side of the NHL. AAV plays a significant role in managing team finances, ensuring they comply with the salary cap, and even facilitating player trades.

It might sound like a simple calculation, but its impact is huge, affecting NHL teams’ competitiveness and financial strategies. With a good grasp of AAV, fans can truly appreciate the behind-the-scenes complexities that make hockey exciting on the ice and in the front office.


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