Thursday, January 31, 2013

Why P.K. Subban Is Not Underpaid & Why He Got A Good Deal

by Fraser Blair

Restricted Free Agent (RFA) P.K. Subban and the Montreal Canadiens recently agreed to a 2 year $5.75 million contract, and the consensus is that the Habs ‘won’ the deal. Subban was reportedly seeking a 5 or 6 year contract worth an average north of $5 million. It is therefore easy to see how many could view the actual deal as a significant bargain for the Club. 

But I’m not convinced. Before I justify my position, I need to explain how the market for RFAs operates. 

The Collective Bargaining Agreement that governed the market for NHL players between 2005 and 2012 dramatically changed the market for RFAs. The last agreement (as will the new agreement) allowed players to qualify for unrestricted free agency after 7 NHL seasons. Prior to 2004, players could only qualify for UFA status following 10 seasons in the NHL. The major consequence of this new system was an increase in the number, value and length of long-term contracts handed out to players after the completion of their Entry-Level Contracts (ELCs). 

Many of these contracts consumed the entirety of a player’s RFA years as well as a number of his first years of UFA eligibility. For example, Erik Karlsson’s 7 year $45.5 million contract with the Ottawa Senators covered all four of his RFA years as well as first three UFA seasons. Tyler Myers’ 7 year $38.5 million deal with the Buffalo Sabres did the same.

The annual average value (AAV) of these two contracts takes account for the player’s value at several stages of his career: his four individual seasons as an RFA and the block of UFA seasons. As a result, the AAV doesn’t accurately gauge the player’s market value in any respective seven seasons, especially not his value during his first two seasons as an RFA. 

So if we’re going to determine whether or not Subban is underpaid under this current deal, we can’t look at the RFA-UFA extensions. Rather, we have to compare the AAV of Subban’s contract to the AAV of similar contracts signed by similar players. 

In determining who and what was similar, I limited my search to defencemen who signed two year contracts covering the two seasons immediately following the expiration of their ELCs. For the purposes of ensuring salary cap neutrality, I restricted my focus to contracts signed after 2010, when the upper limit was $59.6 million. 

Here are the top 5 most expensive contracts of this type by AAV. Subban’s contract tops the list: 

P.K. Subban (Montreal Canadiens): 2 years/$5.75M ($2.875 AAV) 
Erik Johnson (St. Louis Blues): 2 years/$5.2M ($2.6 AAV)
Michael Del Zotto (New York Rangers): 2 years/$5.1M ($2.55 AAV)
Dimitri Kulikov (Florida Panthers): 2 years/$5M ($2.5 AAV)
Zach Bogosian (Winnipeg Jets): 2 years/$5M ($2.5 AAV)

Even if you think that Subban’s the best player in this class (hint: he is, both by advanced and conventional metrics), he’s still the highest paid player on that list by a significant margin (10% is a big difference). 

Furthermore, the backloaded nature of his contract also insures that Subban will receive a qualifying offer of $3.75M for the 2014-2015 season. No other player in this class was accorded that benefit to that degree. (Players making over $1 million must be offered 100 percent when made qualifying offer).

In conclusion, these players show the two-year value of a top-4 defenceman following the expiration of his ELC. Based on the salaries of these players, it appears that Subban has been paid fairly relative to his peers. He’s receiving more money than any other defenceman in recent history on a 2 year contract following his ELC. The structure of the deal also ensures a healthy salary for the 2014-2015 season. 

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