AAV in Hockey – What Does AAV Stand For & Why Is It Used?

Posted on May 16, 2024 by Dan Kent
What does AAV Stand for

The salary cap system in the National Hockey League is a bit complex. Although players on the roster can be paid various amounts of money depending on the specific year of the contract they're in, this may be drastically different than their actual cap hit towards a team's salary cap.

For this reason, I felt it would be a good idea to create an article talking about the AAV, or Average Annual Value of an NHL contract and explain the many intricacies that are involved with it.

Let's dive right in.

What does AAV mean?

AAV stands for "Average Annual Value." In the National Hockey League and many other pro sports leagues, it represents the yearly average cost of a player's contract. It's important not to confuse the actual salary of a player with their AAV, however, as they can be very different. More on that in a bit.

AAV is in the NHL salary cap system to prevent teams from front or backloading specific contracts to save cap space in a particular year. For example, a player could sign a 2-year deal worth $10 million total in which the team gives the player $1M in the first year and $9M in the second year.

If the NHL were to go off of the player's salary in that actual year, teams would be able to backload contracts to try and win soon. For this reason, they use the AAV, or average annual value of a contract to determine a player's cap hit.

Often, the structure of a player's deal will not be evenly weighted throughout. As a result, many news reports, particularly around the signing of unrestricted free agents, speak not on a particular player's base salary or signing bonus but simply their AAV.

An example of AAV in the NHL

Let's go through multiple examples to give you an idea of how AAV works and why it's necessary in the salary cap world of the NHL.

Let's assume we have NHL Player A, who signs a 5-year, $25M contract. The contract will pay him the following:

  • Year 1: $5M
  • Year 2: $5M
  • Year 3: $5M
  • Year 4: $5M
  • Year 5: $5M

And we have NHL Player B, who also signed a 5-year, $25M contract. The contract will pay him the following:

  • Year 1: $9M
  • Year 2: $7M
  • Year 3: $5M
  • Year 4: $3M
  • Year 5: $1M

How do we work out the AAV? We simply divide the contract's total value by the total number of years on the contract.

For both players, the AAV calculated is $25M/5 Years, or $5M. The AAV of both of these players is $5M. And in this situation, both players would have a $5M cap hit for their respective NHL teams.

Now you might ask yourself, "How does someone who makes $9M in the first year of their deal and $7M in the second year have a $5M cap hit?" And the answer to that is precisely why the AAV was put in place so that NHL teams couldn't front or backload contracts in an attempt to save cap space.

On a one-year contract, the AAV is quite simple. It's just the total amount of money paid to that player in that year. In addition to this, unlike sports like football, NHL contracts are guaranteed in full.

Why would players want to front-load contracts?

From a player's perspective, a front-loaded contract is, most of the time, going to be more beneficial. The reasoning for this is fairly simple. The faster you can get money into your hands, the better.

If your current employer offered to pay you 80% of your salary over the next five years in the first year of your employment and then 20% of your remaining salary throughout the remaining years, it wouldn't make sense to say no, would it? It's much the same from a player's standpoint, which is why a player signs a front-loaded deal.

When would a player not want to front-load their contract?

I won't go much into qualifying offers in this article. Still, a simple definition of a qualifying offer is a standard offer that a team must extend to its RFAs to retain their negotiating rights. This is the primary reason why a player would not want to front-load their contract. Why? 

Suppose they are young players, particularly a restricted free agent. In that case, they must be qualified based on their last year's salary. So, a front-loaded contract would be detrimental to a restricted free agent as a team would have to qualify him for much less than his overall AAV. If he makes the contract evenly distributed or backloaded, it could cause his qualifying offer to go up.

Why would a team want to front-load a contract?

A team will structure a player's contract around potential situations in the future that could occur. In the case of front-loading a contract, the current team may do this to reduce the risk of signing an older player to a long-term deal.

They often offer higher initial signing bonuses and base salaries in the front of the contract and tail them off on the back end.

This is because the buyout penalty of a player is based on the remaining salary they have on the contract and not the AAV of the contract. If a player's performance fades as they get older, the team will face less penalty when being bought out.

In addition to this, some teams in the National Hockey League don't like to spend much money. For this reason, the NHL sets not only a salary cap ceiling, which is the maximum a team is allowed to spend but also a salary cap floor, which is the minimum a team is forced to spend.

As a result, a front-loaded contract may become more attractive as a trade target in the future, as a team who needs to acquire salary to hit the salary cap floor may be able to acquire a player with a very low salary but high AAV.

A prime example of this is Shea Weber, who is being paid by the Arizona Coyotes despite likely never playing another game in the NHL again. Although his AAV of $7.86M is assigned to the team's salary cap, the Coyotes only have to pay him $1M until the end of the 2025-2026 season.

Why does the NHL use AAV?

There are numerous reasons why AAV was introduced into the Collective Bargaining Agreement between the NHL and the NHLPA.

For one, it makes tracking a team's salary cap easier. Secondly, it prevents a team from attempting to circumvent the salary cap by backloading all of their contracts to build a high-powered team of players willing to defer salaries to the future.

And finally, it is the most transparent system possible for fans and NHL executives to understand and comprehend the salary cap and players' salaries overall.

What is the highest AAV in the NHL?

As of August 2023, the highest AAV in the NHL is Nathan MacKinnon. He signed an 8-year, $100.8M deal, and his AAV is $12.6M. Remember that although his AAV is $12.6M, he will be paid $16.5M in the first year of the deal before being paid only $9.9M by the end of it.

In addition to this, virtually all of his salary is in the form of signing bonuses, except for a single year. He makes the minimum salary, for the most part, in all of the other years.

What is the top NHL salary?

Along with holding the highest AAV in the NHL, Nathan MacKinnon also holds the highest salary in the NHL as of August 2023. He will be paid a salary of $16.5M USD in the 2023-2024 NHL season, despite his AAV being only $12.5M. This is because his salary eventually tails off in the latter half of the contract, in which he will earn just under $10M.

Dan Kent

About the author

Growing up in a hockey hotbed (Calgary, Alberta. And yes, I'm an Oiler fan), I decided to put my love and knowledge of the game to work. I started at five and am still playing today into my early 30s. By acquiring Brave Stick Hockey and rebranding it to Big Shot Hockey in 2023, I plan to teach people about this great game and educate them on the best equipment and history of the game. On a career level, I am in finance, running one of the largest financial websites in Canada, Stocktrades.ca.

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