Doyle Hargraves wrote: ↑Mon Oct 05, 2020 5:47 am
It’s market value Gohmert. Try to keep up.
The "market" depends on more than comparable contracts. The non—arbitration eligible RFA market is determined by three forces. First, the potential of an offer sheet. I know that these are rare, but they keep teams from only relying on force #2: the desirability of having that player on your team and not hold out. The RFA "market" is primarily influenced by this force, which is more like a game of chicken then a function of market supply and demand. Players will use “comparable contracts” in their argument about what’s appropriate, but its hardly a measuring stick until there is arbitration. The third force comes into play when you are considering signing guys into UFA years. That's the speculation of what the natural market will be for this player during those years, subtracting the “overpayment” during the RFA years.
This factor is really large -- that's why 8 year deals after an ELC are so much more expensive than a bridge (or shorter) deal (and it shows how depressed the RFA market is given the rarity of offer sheets and the fact that a team's decision to not match an offer sheet means they get alternate value (draft picks).
It is this third force that is materially different today than it was pre-Covid. The NHL was experiencing an impressive period of revenue growth, goosed a bit by an expansion team. The cap more than doubled over its first 14 years (from 39 million to 81.5 million – that’s about 5.4% compounded annual growth – and I am sure teams were expecting the cap was going to increase annually about 5.4% (the cap more than doubled in its first 14 years -- which included one period leading to the lockout where revenues were experienced some bumpiness.).
So when a guy like Marner is signed to a 10.9 M deal eating into free agency for two years beginning in the 5th year it is signed, it was fair to anticipate the cap would be approximately 30% higher than it was when the contract was signed ($100.6M)-- maybe even greater given an expansion during that period. His cap hit falls as a percentage -- from 13.4% to 10.8% in the first UFA year. If you don’t want to use the overpayment of Marner as the comp, consider the reasonable deal to a comparable player like Rantanen, who signed the same term contract (6 years; eating into 2 UFA years) at 9.25M, or 11.3% of cap in Y1 and an anticipated 9.2% of cap in Y5, the first UFA year.
It is the percentage of cap space, and not the actual dollars, that influences demand for the players’ services. We don’t know what the future holds, but I think that teams are being told to prepare for the cap to remain flat for multiple seasons. So let’s assume that its flat for the next 3 seasons, with this season being Y1. Then let’s assume it goes up by 5.4% again – which is a pretty rosy prediction and will depend greatly on a few things I don’t know about (how are they going to treat carried over losses even after escrow is not paid back to players at all). Under this scenario, the cap in the Pettersson/Hughes years (for a six year deal is: 81.5, 81.5 (4th year of flat cap), 85.9, 90.5, 95.4 (first UFA season). For these guys to have a rough equivalent to Rantanen’s expected impact, the number is $8.78 M – and that’s actually paying more (as a percentage of cap) during the RFA years than the Avalanche expected to be paying Rantanen. For Marner, the number would be $10.3M.
Another comparable is Aho, though his deal only goes into one UFA season. Aho is at $8.45M, or a deal that starts at 10.4% of cap space and ends at what would have been 8.4% of anticipated cap space. And the expected value of the Aho deal if signed during this season to begin next season – presuming the above scenario of two flat years and presuming a 5 year contract to eliminate the complications of estimating the “true UFA” salary (which is to say overpayment spread during RFA years and under payment for UFA years) is $8M.
What’s the bottom line? The bottom line is that you can take about $500K off the “market” price for young stars coming off an ELC, and that’s with a pretty rosy estimate that the hockey economy is going to bounce back and that owners (and existing players) are going to do anything creative to make the players who will lose a ton in escrow whole. I presume that the owners, the NHLPA, and players agents have a far better perspective on likely movements of the cap in future years than some poster like me -- but that's knowledge really is critical to understanding how much the market has changed.
Last bit on this stuff. I don’t understand why people talk about a “hometown discount” when it comes to signing young players off of their ELC’s. Every player is in the same position – having known and grown up in one organization – their hometown team. The “hometown discount” factor might exist, but only for players who have the choice as to where to play. To be sure, it might come in at the margins (those last couple of years), but the team will “pay” with some variation of pay or movement protection for those years. The other kind of “discount” is the “make it work so we can be a Stanley Cup contender” discount. If I were a player’s agent, I’d recommend that no player coming off an ELC factor this in to a decision to sign a 6-8 year deal. You just don’t know what the shape of that team looks like in 4 years – that’s a long time in hockey terms. The Canucks might continue their arc of improvement, but they might not. For its competitive stance NOW, the team will always have an option to control costs in the foreseeable future – a bridge deal (or shorter). Take the bridge and reevaluate the value of the “be competitive” thing when you are closer to being able to choose between competitive teams.
