Thursday, 1 March 2007

Contracts - Part 2 (a Smyth Continuum posting)

The best contract of the 2005-06 off-season was that of Colin White in New Jersey. A straight $3 million /yr for 6 years.

For those who don't know, White is a big guy with decent mobility who plays the game as if he is perpetually angry. What Lowe and MacT hope Green turns into one day. White plays 22 or so minutes a game and very little of it is on the power play. Plays best as a complement to a pairing and, if doing so, can even play top-line minutes. Good, solid d-man who is, as of now, 30 years old.

$3 million is pretty fair. White is worth that even if all he does is continue performing at his current level. For the next 6 years however New Jersey management won't have to worry about inflation (not in terms of salary and not in terms of the cap) and they won't have to worry about contract years.

Fantastic contract.

Contrast to the Pisani contract. Where inflation is neutralized in the White contract it is built into the Pisani contract from year #1. A decent, not great, deal on Pisani would have been $2 million /yr for 6 years. There would have been a bit of an overpay (as much as 250k) given how he normally performs in the regular season but at least the contract is inflation and career year protected.

This brings me to the real topic I want to discuss today: most people who discuss contract value in the NHL under the new CBA have it all wrong.

Or, to be more polite, most of them only have it partially right.

Where Conventional Wisdom Has it Right

The conventional wisdom has it that contracts should be short term. Any contract longer than 2 years is considered a long term deal. Avoiding the dead-weight of a bad contract (i.e. Yashin) allows you to have the flexibility needed to react to a changing market. This is, of course, exactly right.

The Sykora signing was a perfect example of this.

What Conventional Wisdom Needs to Learn

I am a big believer in a different type of budget paradigm. I believe in 5 and 6 year contracts as much, if not moreso, than short-term contracts. If you know the player is good then why mess around? Sign 'em. Before salary inflation kicks in and before they have a career year. The effective playing range of NHL players, in terms of age, seems to be between the ages of 25 and 36 so work with that.

When you have a guy like Moreau doing what he does, and you know he will do it again, you don't sign a $2 mill /yr deal for 4 years - you try to sign a $1.6 mill /yr deal for 6 years. If you end up at $1.75 mill /yr then you are still ahead of the game because it means you got the last two years at a substantial discount. Anything less than that is icing on the cake.

For a guy like Moreau, 30 years old and injuries are a fact of life, a 6 year deal is worthy of serious, serious consideration. And if he gets injured... well... that is what insurance is for.

Likewise you don't waste time with 2 year deals for players who are known quantities who are desirable to you. You are only asking for trouble. Not only do you pay inflation creep you also risk a young guy having a great season and blowing your budget out of the water.

Enter Mr. Pisani. Even at the end of 2003-04 season it was obvious he would be no worse than a solid 3rd line guy with some scoring punch. Guys like that earn somewhere in the $1.0 to $2.0 mill range. Offer it. His last contract, before the rollback, was for ~ 800k. Try to get him to sign a long-term extension that tops him out at $1.5 mill or so.

For a guy like Pisani, soon to be UFA but not having the stats he needs to get the big dollars, getting a 4 to 6 year extension that averages 1.2 to 1.4 would be very tempting.

Again: as a team you already know that Pisani's category of player gets those kind of dollars anyways - you are simply protecting yourself from inflation and career year'itis'.

Contrast Pisani with a guy like Torres. I love Torres. Too bad the guy has the confidence of wet toilet paper. He is not the sort of guy who you sign long term hoping he gets it together.

The keys to this way of thinking are simple: know your player and know your market. Any time you have a guy who makes far more than he should because of a one-year spike in performance you trade him (Pisani and Lupul come to mind) sooner rather than later.

My last example is Horcoff. The $3.6 is pretty good. The only problem with it - should be a 4 year deal. Not a 3 year deal. A prime example of where the dollars are in the right spot but the term is the problem.

Rare it is that a guy who projects out to 15-20 goals and 18-25 assists becomes a regular 24-30 goal and 28-40 assist scoring machine. Common however is the guy paid as such who has ever only done it once.


At the end of 2003-04 the Oilers knew exactly what they had in Ryan Smyth. 30+ goals, 30+ assists, some of the best EV strength play any LW in the league can give and the kind of intangibles that would make him the unquestioned captain of Team Canada. He is only 30 years old.

In my opinion they should have, and probably could have, pushed for a long-term deal that averaged around $4.2 mill /yr. Instead they played hard-ball and got him to agree to a two year deal at $3.5 mill /yr. - the proverbial home town discount.

Two years later, after handing out a whack of bad contracts (see my last post), the team asked him to sacrifice his position again. He asked, quite reasonably, "why?".

They had no reasonable answer. I do not believe they ever will.


Last thing. Lowe did not trade any of his other UFA's at the deadline. Not Tjarnqvist, not Peterson, not Markkanen and not Sykora. Not Sykora. Obstensibly we are to believe it is because Sykora wants to play here. Fine.

Sykora sat on the sidelines last UFA season for a reason. He just is NOT good enough to go early. Lots of guys in line ahead of him.

My prediction: not only did Lowe mess up by not trading him for a 2nd and a 4th (probable return) he will mess up again by signing him to a deal of ~ 3.25 mill /yr for 3 years.

No insult intended Sykora but he is a guy who should be signable at ~ $2.75 /yr over a 3 yr deal. And he is not the guy you point to as a replacement for Smyth. Do the math.


Have a great evening everyone.

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