Russian Super League: Dynamo Financial Trouble

Soviet Sport newspaper recently reported that last season's champions, Dynamo Moscow, haven't paid out player salaries for the past three months. Rumors of the club's financial woes have circulated all season, in spite of some sizeable acquisitions last summer including that of the top player in Russia and former Minnesota Wild forward Maxim Sushinsky.

Unfortunately, the reports turned out to be accurate as Dynamo (Moscow) became the third club this season to experience financial difficulties after Lada (Togliatti) and Avangard (Omsk). Dynamo's star import, former Los Angeles Kings forward Pavel Rosa, signed a two-year deal prior to the lockout, yet is reportedly still owed funds from last season.

The fall of these giants of Russian hockey leaves only Ak Bars (Kazan), Metallurg (Magnitogorsk) and Lokomotiv (Yaroslavl) as the remaining well-funded Super League clubs. Lokomotiv will likely remain strong as the club largely depends on homegrown talent to limit salaries and avoid extravagant contracts for imported players.

Metallurg (Magnitogorsk) also boast a number of locally-grown stars, including likely future Pittsburgh Penguins' star Evgeny Malkin. In addition, the club has made some astute financial decisions and also enjoys the support of a reliable backer.

AK BARS SPENDING

Ak Bars (Kazan) spent lavishly on NHL talent during the lockout season, yet already tightened the purse strings prior to this season, opting to go with a blend of young players, proven veterans, and some well-paid first-line talent in the likes of Sergei Zinovjev (Bos) and Aleksey Morozov (Pit). By purposefully changing direction and looking for longterm success now through younger players, Kazan remains a competitive and well funded organization.

Unlike some of the other clubs, Dynamo Moscow's situation is more precarious as they don't rely solely on a single sponsor. Instead, Dynamo depend on several top-notch sponsors, none of whom rely on either manufacturing or raw material industries, currently the most profitable in Russia.

Avangard's primary sponsor is the oil company SibirNeft that simply chose to reduce spending while Lada's sponsor, an auto manufacturing company of the same name, cut spending in half.

Conversely, Dynamo's sponsor is a state insurance company and therefore a lot more sensitive to economic downturns. Additionally, this is not the first time such a situation occurred with Dynamo, as the club suffered the same hardships after winning the 2000 Super League championship including severe financial constraints during the 2000-01 season.

SPAWNING OVECHKIN

Still, as in the past, Dynamo has developed a number of talented young players and continues to boast a strong system. The club produced current NHL rookie sensation Alexander Ovechkin as well as talented recent draft picks in Igor Mirnov (Ott) and Enver Lisin (Phx).

In retrospect, it was inevitable that the lack of a strong business model supporting profitable hockey club ownership would force the Super League's biggest spenders to either collapse or look inward to develop young players. Certainly the days of buying proven talent from elsewhere are over.

This re-adjustment period has largely occurred during the season as many of the wealthier clubs making shrewd decisions in order to bring payroll down to acceptable levels to the sponsors.

The re-organization will likely continue in the years to come and is a great thing for Russian hockey.

Over the past decade, the Russian Super League has strived for recognition from the NHL as a partner in the business of developing young talent for the best league in the world. However the NHL hasn't exactly handled itself fairly in this relationship, often ignoring European contracts and offering questionably-small transfer compensation fees.

NHL RIVALRY VICTIMS

It also appears that some management groups have become overly fixated in the rivalry between the two leagues in an effort to prove that the Super League could compete with the NHL financially. Though capable of paying salaries untouchable outside the NHL just two or three years ago, Russia has seen the limitations of its' sponsors this season.

The negative rhetoric and unnecessary rise in tensions between the NHL and the Russian Super League has unfortunately only one group of victims, namely the youngsters looking to someday play in the NHL. Even those already drafted have experienced more difficulties leaving Russia specifically if they are under contract to a Super League club, as was the case with Buffalo Sabres' prospect Artem Kryukov.

Additionally, many of the NHL clubs stayed away from the Russians in the last two entry drafts, overlooking a number of talented kids solely due to the lack of a transfer agreement between the two leagues. In the immediate future, each NHL club would need to negotiate individually with each player.

The 'cooling' of spending will be advantageous for the NHL as the Russian league gets better organized and increases spending on youth. Additionally, there will be more of an incentive to leave Russia if the Super League is unable to effectively compete financially even against the scaled-down NHL pay scale.

To reap the full benefits of the changes within Russia, the two sides will need to sign a transfer agreement that is mutually beneficial. However, The amount of transfer fees received in past agreements have not been in line, even in the current cooled state, with the Russian pay scale which sees capable players making six-digit salaries and future superstars like Evgeny Malkin earning in the millions.

The moving scale proposed by the NHL would pay $1 million dollars for the first top pick, with the fee declining by $25,000 for every selection, and $150,000 for every prospect outside the first round. But this proposal is unreasonable considering the type of talented players that often get drafted outside the first round and how much they project to get compensated in Russia.

It is a good start though, and hopefully the two sides will be able to reconcile and come to an agreement prior to the 2006 NHL Entry Draft in June.