Have I got a deal for you...

Robin Brownlee
January 26 2009 11:09AM

It wasn't long ago that the rationale for handing out lucrative, long-term contracts to players like the pact the Edmonton Oilers signed Tom Gilbert to was: "It might seem like an overpayment now, but it will be a bargain two years from now." At the time, it seemed a reasonable argument.

A lot of contracts, Gilbert's and countless others around the league, were inked with the NHL salary cap spiralling upward with no sign, apparently, it would stop, even though common sense dictated -- didn't it? -- there had to be a correction at some point.

Well, as anybody who has watched the value of their stock portfolio and house plummet over the past 18 months or so can attest, the correction is here, even if there's been a lag in seeing the results of a troubled North American economy come to roost on the NHL's doorstep.

With projections the NHL salary cap could drop from $56.7 million to close to $50 million for 2009-10 and escrow payments by players set to almost double, a lot of those contracts signed not so long ago will be anything but bargains. Yesterday's slight overpay becomes a millstone when it comes to general managers, like the Oilers Steve Tambellini, trying to move players.

While you and I can choose to take a $100,000 haircut on selling our house now as opposed to 18 months ago if we really must downsize to make ends meet, Tambellini and his peers don't have that option in moving players -- short of trying to give them away on waivers.

If they have to trade the "bargain" forward they signed to a $24-million deal over six years in July 2007 to clear cap space, they can't take the same kind of haircut just to move the player. The contract remains. How is Player A, who really isn't worth a $6-million cap hit when the ceiling is $56.7 million, going to be a bargain if the cap drops by $5 million?

Tough times

The Oilers, for instance, already have about $44 million committed to 17 player salaries for the 2009-10 season, according to NHLNumbers.com. Included in the $43.854 million figure is one bargain -- Ales Hemsky's $4.1 million cap hit. After that? Not so much. Didn't anybody, specifically former Oiler GM and now president of hockey operation Kevin Lowe, have an inkling a market change was coming?

What teams, for instance, would be interested in Dustin Penner and his $4.25 million cap hit? Or in Shawn Horcoff, who'll earn $26 million over four seasons starting in 2009-10. Any takers on Gilbert, who'll earn $3.5 million again next season, then $5.5 million, $5 million and $3.5 million? I can't imagine those contracts looking any better a year from now. Can you?

That's not to say the aforementioned players aren't good players, and I'm no economist -- as my wife and banker will confirm -- but as any financial analyst with half-a-clue will tell you, when the bottom falls out of any market, yesterday's bargain can turn into tomorrow's while elephant in a hell of a hurry. That's the situation the Oilers and a lot of teams -- again, didn't anybody see this coming? -- are going to find themselves in over the next two years.

No bargains

It looks to me like there's going to be a lot of GMs sitting on assets they can't move as they try to adjust to a changing salary cap.

One analogy I can draw on based on something I know, even if it is a bit ham-handed, unfolded last summer when I was looking for a car to replace the one that was written off after some dummy ran a red light and T-boned my Escalade at about 60 clicks, doing almost $30,000 damage.

I went to a local dealer. At the used end of the dealer's lot, there was a like-new 2007 Escalade with low mileage. The sales guy tells me he can make me a smoking deal -- if I play my cards right, I can get it for $64,000. Decent value, considering the vehicle stickered at $83,500 new.

The problem is, down at the new vehicle end of the very same lot, I could get a new 2008 Escalade for $59,900. Because of increasing gas prices and a big drop in demand, the market had changed drastically and people weren't buying without significant factory incentives -- incentives that didn't apply to the previous model year. How are you going to sell that used 2007 Caddy when a new one is cheaper? You're not.

In today's drastically different market, a lot of teams, the Oilers included, will be sitting on the equivalent of that big, used gas-guzzling SUV whether they like it or not as they wait to find out what the 2009-10 salary cap will be.

-- Listen to Robin Brownlee every Thursday from 4 to 6pm on Just A Game with Jason Gregor on TEAM 1260.

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A sports writer since 1983, including stints at The Edmonton Journal and The Sun 1989-2007, I happily co-host the Jason Gregor Show on TSN 1260 twice a week and write when so inclined. Have the best damn lawn on the internet. Most important, I am Sam's dad. Follow me on Twitter at Robin_Brownlee. Or don't.
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#51 RobinB
January 26 2009, 08:10PM
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@ mwhite.dking@nf.sympatico.ca: Fair question on the cap number.

I don't see a drop to $50 million. Instead of saying "close to $50 million," I should have used the same wording I used before.

As information began to trickle out a few months months ago -- a player rep told me about the increased escrow that's just being talked about now -- I said I wouldn't be surprised to see the cap "closer to $50 million than to the $56.7 million" it's at now. Something in the neighborhood of $52-$53 million (or a drop of 8-9 per cent) for 2009-10 would qualify.

I wouldn't be surprised to see it drop to $50 million or slightly below by 2010-11, though.

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#52 Travis Dakin
January 26 2009, 09:02PM
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TV wrote:

Maybe it’s just me, but you seem to take this issue on a personal level & not the puck biz side of it. .?

No, I'm just not looking at the issue through rose coloured glasses. Fact is he made these moves because a) He got screwed by CFP and needed to shoe the "fans" that he was trying to keep the team competetive and b) To save face after the Ryan Smyth fiasco (Staples did a great article last summer about the issues Lowe was having after that)

They were done to have an immediate impact on this team but the repercussions of those moves may end up to have a far more negative overall impact.

TV wrote:

he did what he needed to do ‘at that point in time’ to make his Hockey Club more competitive

Exactly, reactionary instead of proactively. That is poor management. (Although I will admit that CFP screwed everything up, but the Ryan Smyth thing should have been handled way before the deadline)

There is nothing personal here. I have always been a supporter of Lowe and I feel that he has been dealt some crappy cards over the years. But I still think that offering a ridiculous offer sheet to other teams young players is and was poor management. It costs too much cap wise, draft pick wise and it has a ripple effect around the league in that it makes EVERYBODY'S free agents more expensive. Even your own (Horcoff and Gilbert) Plus everybody hates you (won't deal with you)

Grow from within and make a few minor trades here and there and know that with the UFA age down to 25-26 now, there is an abundance of talent coming available evey year.

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#53 Travis Dakin
January 26 2009, 09:07PM
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TV wrote:

Although, to say that it’s just ’stupid’ in hindsight only, is playing the arm-chair G.M. game to the fullest.

Isn't that what it's all about?

TV wrote:

He’s not in New York City, if he’s not using every single tool in the tool box, then he’s not doing his job.

Just because you have a chainsaw in the tool box doesn't make it the right tool to use.

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#54 TV
January 27 2009, 01:03AM
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The Cliche' War Has Begun...

Game On...!!!

x6

@ Travis Dakin:

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#55 Travis Dakin
January 27 2009, 08:11AM
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@ TV:

Haha I think I already used every tool in my toolbox.

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#56 Jayamania
January 27 2009, 10:57AM
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@RobinB

You state the following: "Didn’t anybody, specifically former Oiler GM and now president of hockey operation Kevin Lowe, have an inkling a market change was coming?"

Question for you Robin. Where was this article 9-12 months ago if you knew the economy was going to crash as quickly as it did?

Seems to me that you didn't know either.

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#57 mwhite.dking@nf.sympatico.ca
January 27 2009, 11:42AM
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It has to be mentioned that after the awful '07 season, Lowe said he would've signed Smyth had he known the cap was going up.

You know something? I wish someone would track down that f**king guy who's job it is to tell Lowe about cap flucuations!!!

I honestly can't remember the first time I read about an impending recession but I do remember reading early in '07 about the fact that the '08 cap would be expanded.

But Lowe didn't and there we went. And I feel a lot more confidently calling him stupid and/or a liar about the Smyth comments than I would if he came out today and said he didn't see a recession in the future and that's why he perhaps begain a campaign of corner-painting.

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#58 RobinB
January 27 2009, 01:12PM
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Jayamania wrote:

@RobinB You state the following: “Didn’t anybody, specifically former Oiler GM and now president of hockey operation Kevin Lowe, have an inkling a market change was coming?” Question for you Robin. Where was this article 9-12 months ago if you knew the economy was going to crash as quickly as it did? Seems to me that you didn’t know either.
Seems to me that has nothing, zero, to do with the validity of this item. And, when did I claim to know what the economic forecast was? I'm not the one committing millions upon millions of dollars to long-term contracts. I'm not running a multi-million business and publicly trying to sell fans that Contract A or Contract B might look like a bargain down the road when I really have no exact read on what the salary cap will be in the future, as Kevin Lowe did in the case of the Penner, Souray and Gilberts deals. So, did I know for certain? No. Did I write and talk about how unwise it was to make commitments to players for five, six and seven years based on flimsy projections? Yes. Repeatedly and at great length on Total Sports on TEAM 1260 and in various publications. But, apparently, you weren't listening or reading.
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#59 David S
January 27 2009, 05:28PM
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Travis Dakin wrote:

(Although I will admit that CFP screwed everything up, but the Ryan Smyth thing should have been handled way before the deadline)

There was some great talk about this (last summer?) on LT's site. Not sure who brought it forward (perhaps LT), but the thought was that Smyth's fate was decided after the 06 cup run, where Lowe may have drawn the conclusion that Smyth was not going to be in the team's long-term plan (I looked up his stats for that run and they seemed pretty decent, but what do I know). So no offer was made during the summer, when by rights it should have been if the Oil really wanted him. The last-minute offer was rather half-hearted to save face but not serious in that Lowe would only keep him if he could steal him, but not otherwise. Interesting theory.

Travis Dakin wrote:

But I still think that offering a ridiculous offer sheet to other teams young players is and was poor management.

Logically you're right of course. But the rules are different here and will continue to be until we become a true contender. Fact is, every major acquisition for us will probably be an overpay compared to contending teams who have some combination of better weather or better travel schedules or a better overall lifestyle. The overpay is just an equalizer for us not having some or all of those attributes at the moment.

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#60 RobinB
January 27 2009, 09:55PM
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Dawgbone: At least Gilbert stayed hot by picking up a second assist on the 10-2 goal.

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#61 Travis Dakin
January 27 2009, 10:19PM
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@ David S: I agree and about the Smyth thing, I believe Lowe made the right decision in not keeping him but he should have been traded way earlier.

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