tag:blogger.com,1999:blog-7538581476815588047.post575367936221045767..comments2023-10-15T05:13:49.839-04:00Comments on Offside Sports Law: NHL Contract Landscape: Analysing 58 Long Term NHL Player ContractsEric Macramallahttp://www.blogger.com/profile/14322995124306036839noreply@blogger.comBlogger17125tag:blogger.com,1999:blog-7538581476815588047.post-81925173015567186802010-09-01T18:25:35.159-04:002010-09-01T18:25:35.159-04:00Thanks for the compliment Matt.
I agree with you...Thanks for the compliment Matt. <br /><br />I agree with you that Briere is not as an obvious example of this problem as other players.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-48199134578131281032010-09-01T15:51:48.705-04:002010-09-01T15:51:48.705-04:00Eric,
I agree completely. In the intitial Kovalchu...Eric,<br />I agree completely. In the intitial Kovalchuk deal there were clearly throw away years at the end. And to your example of Savard, one could argue that given his personal history of concussions he may choose to retire rather than play for those throw away years at a reduced salary.<br /><br />But for Briere, I don't see him retiring at 35 and would not consider his last two years to be throw away. <br /><br />Thanks, and I must say I enjoy your blog.Unknownhttps://www.blogger.com/profile/17472077164816692353noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-46649850941515156502010-09-01T13:14:03.815-04:002010-09-01T13:14:03.815-04:00Matt
Determining whether a year is a throwaway ye...Matt<br /><br />Determining whether a year is a throwaway year is really a function of age, salary and how the salary changes over time.<br /><br />You are right that a player's productivity declines over time and that player should expect to earn less as his productivity decreases. The problem is that in some of these contracts the drop off in salary between one or two seasons is substantially more than the likely drop off in their play.<br /><br />For example, between year 4 and year 5 of Marc Savard's contract, he goes from making $5 million to $1.5 million. It is unlikely that in year 4 he will have the production of a $5 million player and year 5 his production will drop dramatically to that of a $1.5million player. Most players decline in production on a more gradual basis than that.<br /><br />So if you are a 37 year old Marc Savard and you've made roughly $25 million in the first four years of your deal you aren't going to be as eager to play for $1.5 million, even if you still have the production of someone worth more because you are older, beat up, have a family, etc. and the value is not there. After all the money he will have made, why would someone like Marion Hossa play at age 42 for $0.75 million or even someone like Briere, who'll make $47 million in the first six years, play for only $2 million at age 37?<br /><br />This is where it becomes problematic because there is a reasonable probability that all parties know the player won't play out the last, lower salary years on his contract because the value isn there for him. So presumably the only reason for these cheap years on the end is to circumvent the cap.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-17310124690376290702010-09-01T11:21:46.777-04:002010-09-01T11:21:46.777-04:00Eric,
How do you define a throw away year? Daniel ...Eric,<br />How do you define a throw away year? Daniel Briere's contract will end when he is 37 and you have indicated that he has 2 throw away years, so are you suggesting that he is not reasonably expected to play beyond age 35?<br /><br />The notion that the salary cap is circumvented because a player is paid more upfront than he is towards the end is patently false, UNLESS he does not play for the entire duration of the contract. For example, there is no difference between a player being paid $10M one year and $1M the next compared with being paid $5.5M one year and $5.5 the next. The difference to the team would be a (sort of) cap savings in the first year but then an equal cap penalty in the second. <br /><br />It is reasonable to assume that a player's productivity will decline with age. Even Wayne Gretzky had his best years early so if one expects a player to earn relative to their performance, a long term deal would pay a player less in the later years than it would in the begining.Unknownhttps://www.blogger.com/profile/17472077164816692353noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-16018129795147998732010-09-01T10:26:54.247-04:002010-09-01T10:26:54.247-04:00Thanks for your interest Gerald. Your point about ...Thanks for your interest Gerald. Your point about the economic downturn and players become more risk-adverse is interesting. Whether players are feeling pressure to lock themselves into long-term security, who knows. Even with the economic downturn of the last couple of years, the salary cap and maximum player salary have continually increased. A maximum player makes roughly $4 million a season more now than in the first year of the cap. <br />The money is still there to be had, which suggests that players aren't necessarily giving up dollars for years. Even lower tier players like Nick Schultz or Tom Gilbert are making around $4 million with long term deals. Top tier guys are still getting around $7-10 million on longer deals. So if a player can get near the max of what he could potentially make and for a longer term, its a win-win.<br /><br />Another issue that could be the cause of younger players locking into longer term deals is that the age to qualify as an unrestricted free agent has become lower. Under the old CBA, a player had to be 31 to be an unrestricted free agent. Currently, a player that is 27 or has 7 years of service can become one. So you'll see from the chart that a bunch of these players with long term deals will be 31 or under when their contract expires. (Vanek, Staal, Kopitar, Dustin Brown). <br /><br />What they have done is let their team "buy" up the years where they would be a restricted free agent or under team control for a premium and then they will hit the market during their prime and can take advantage of another big money deal.<br /><br />Look at Anze Kopitar for a second. He signed a 7 year deal when he was 21 for an average of $6.8 million a season. Typically you would not see a 21 year old make that much that early, so by locking in with the Kings he's making good money. And, he'll hit the market at 28 and will probably be able to cash in with another big money deal. So for a certain type of player, a long term deal makes sense.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-34401077001891777422010-08-30T19:04:23.309-04:002010-08-30T19:04:23.309-04:00While I know that people love to slag the NLH when...While I know that people love to slag the NLH when it comes to, well, just about anything, one must keep in mind that the NHL does not exist in a vacuum (the point of which I will get to in a second). <br /><br />I applaud Eric for putting together this assembly of long term contracts which include both "cap dodge contracts" (a term Tyler Dellow and I were using in a discussion) and straightforward long term contracts.<br /><br />What seems to be extremely clear to me now (formerly just a feeling) is that NHL players have become substantially more risk-averse in recent years. In any contract negotiation, there is a balancing of risks between the various parties. One of the key areas of risk allocation is contract length. For the player, it is a question of whether one wishes to secure longterm dollars at the cost of losing out on potential higher salaries (due to cap increases, or increased performance by the player, or simply a more favourable market).<br /><br />Based on Eric's table, there seems to be a rush of many of the NHL's top players (for whom there is a sufficient demand to allow that player to make their own decision on the risk allocation, instead of having it imposed on them by the marketplace) to make their decision in favour of longterm security.<br /><br />THe question is why that is.<br /><br />My theory (and here we come back to my point about the NHL not being in a vacuum) is that they are making this decision because they have been affected by the dramatic economic global downturn. After the Great Depression, it is reasonably well documented that an entire generation became much more fiscally conservative, having had the suffering caused by the Great Depression seared into their consciousness. I believe that what is happening among elite NHLers is a small example of what will be happening to a lot of people over the long term. NHL hockey players and their agents have (rightly, IMO) become far more uncertain about the economic future. The necessary outcome of this is that elite players will no longer want (or, at least, will want less) to sign multiple contracts, since if Doomsday does come, having your contrsact come up during a period of deflation (or worse) will not be very pleasant.<br /><br />THe point of this is that, much like the rest of the world, the NHL would not have seen an externality of this magnitude coming down the pike. In assessing the likelihood of players signing contracts of 8-12 years, this had not happened before (Gretxky 21-yr contract excluded). The NHL would have reasonably expected that players would time their contracts more like Crosby, with their next contract coming up while they were still in their mid-twenties, and then perhaps one more kick at the UFA can around age 30 or 31. That has traditiionally been the tactic used to maximize earnings. The fact that the 2007-09 asskicking that the global economy took, with all of us teetering on the cliff closer than anybody wants to admit any more, has made longterm contracts look pretty sweet. That was not predictable by any of the parties.Geraldnoreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-170513241529378052010-08-30T08:49:54.927-04:002010-08-30T08:49:54.927-04:00Thank your Aaron and Daniel. We appreciate your co...Thank your Aaron and Daniel. We appreciate your comments and interest.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-30930351223760466112010-08-30T08:25:55.280-04:002010-08-30T08:25:55.280-04:00Yes, as an Islanders' fan, I always want to be...Yes, as an Islanders' fan, I always want to be reminded of the DiPietro contract. To be honest, it is a good contract and decent to pay a top notch goalie only $4.5 million a year. Only problem is damn injuries which have made this contract look so bad. I still prefer this contract over the stupid Yashin contract the Islanders had.Daniel Gilbeauhttps://www.blogger.com/profile/04718490780895789896noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-62213880571308702362010-08-27T15:54:26.572-04:002010-08-27T15:54:26.572-04:00Point taken. Also, I love anything that reminds me...Point taken. Also, I love anything that reminds me of Rick DiPietro's existence.Aaron Gordonhttps://www.blogger.com/profile/04175846141529653785noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-60150056883439335012010-08-27T14:50:45.277-04:002010-08-27T14:50:45.277-04:00You are absolutely right that by deciding to calcu...You are absolutely right that by deciding to calculate a player’s cap hit using his average salary the NHL and the NHLPA were seemingly blind to the fact that teams would come to the realization that they could artificially lower a player’s cap hit like the Devils did with Kovalchuk. However, you have to remember that the CBA is an agreement between both sides, the NHL and the NHLPA, which is the product of bargaining and negotiation. This cap system, from the point of view of the players and teams, has benefits, which is why they bargained for it. <br /><br />This system encourages larger upfront payments to players because teams that are cash-rich but cap-poor can afford to pay a player $8 million in cash but don’t have the cap space to fit the player in at $8 million. So a longer deal that is averaged, allows the team to “buy” time and cap space. From a player’s perspective he would rather have $8 million early in his contract and a much smaller amount later, than $5 million every year of the deal because of the principle of time value of money. $8 million today is better than $5 million today and $3 million next year. The downside is that this can be taken to the extreme, like with Kovalchuk.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-79232219206751663972010-08-27T14:44:07.507-04:002010-08-27T14:44:07.507-04:00Thanks, you were right. The chart is fixed.Thanks, you were right. The chart is fixed.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-59035701258674482882010-08-27T14:16:51.790-04:002010-08-27T14:16:51.790-04:00Hossa was 30 at the start of his contract, not 32....Hossa was 30 at the start of his contract, not 32. Thus it will end at age 42, not 44.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-62093048116191399862010-08-27T14:08:28.521-04:002010-08-27T14:08:28.521-04:00Which leads exactly into my point. Even a middle s...Which leads exactly into my point. Even a middle school student could understand that by placing the cap hit on the average salary, teams could simply increase the number of years with a very low salary neither side has the intention of honoring to lower the cap hit. To some extent, I think the NHL did themselves such a disservice and was so negligent in the creation of this rule they should not have the right to nullify the existing contracts.Aaron Gordonhttps://www.blogger.com/profile/04175846141529653785noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-4713974560802177512010-08-27T14:04:38.681-04:002010-08-27T14:04:38.681-04:00It is hard to compare the NFL and NHL cap structur...It is hard to compare the NFL and NHL cap structures because of the reason you mention, one league has guaranteed contracts and the other doesn't. Since NFL salaries are not guaranteed they can't have the cap hit be the average salary over the length of the contract because at any time the player could be cut. So you could have a player with an high cap hit because his contract is back-end loaded but the team has absolutely no intention of keeping the player for the pricier part of his deal. This is why for the NFL, guaranteed payments are averaged out over the life of the contract for the cap but the non-guaranteed salary is counted on a year by year basis. Since the NHL has guaranteed salaries, the player will be paid no matter what, so averaging the salary for cap purposes allows teams to spread the cap burden of a player over the length of his deal.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-26850543254314518332010-08-27T13:29:32.795-04:002010-08-27T13:29:32.795-04:00I don't know how familiar you are with the NFL...I don't know how familiar you are with the NFL's structure, but it is a much more effective method than what the NHL has produced. The non-guaranteed aspect of NFL contracts leaves most of the emphasis on signing bonuses and other forms of guaranteed money, like incentives-likely-to-be-earned (ILTBE) which get averaged throughout the length of the contract. Annual salaries, on the other hand, are counted as such against the cap.Aaron Gordonhttps://www.blogger.com/profile/04175846141529653785noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-31003980780879273762010-08-27T13:09:25.631-04:002010-08-27T13:09:25.631-04:00Very good point Aaron. Agreed - with no cap on max...Very good point Aaron. Agreed - with no cap on max years for a contract together with the cap hit being the average made the Kovy situation entirely predictable. Perhaps the cap hit could be the average of the top five years of a contract. We will have more on the cap hit issue once we are done analysing the various CBAs. Appreciate your comments Aaron.Eric Macramallahttps://www.blogger.com/profile/14322995124306036839noreply@blogger.comtag:blogger.com,1999:blog-7538581476815588047.post-45229594233049179492010-08-27T11:56:18.241-04:002010-08-27T11:56:18.241-04:00Great post. How much of this is the responsibility...Great post. How much of this is the responsibility of poor collective bargaining by the player's association and the owners during the previous negotiations? Isn't it their responsibility to assure there are no significant loopholes? It didn't take a genius to see that averaging the cap hit over the length of a contract was a poor idea. Anyone who had the slightest knowledge of how the NFL cap system works would have known to remedy that instantly.Aaron Gordonhttps://www.blogger.com/profile/04175846141529653785noreply@blogger.com