Free Agency: It’s a $70 million Cap World, Now

Jonathan Willis
July 01 2012 08:04AM

It’s difficult to wrap one’s mind around the economics of an NHL with a salary cap ceiling of $70.2 million. It was just a little over six years ago, after all, that the ceiling was $39.0 million coming out of the lockout, and salaries have escalated apace.

The contracts signed today are going to seem crazy, but the trick is to view them in the context of the salary cap (often, they’re still crazy, but typically much less so).

Take, for instance, the Paul Gaustad deal. My initial, immediate reaction was that the dollars were crazy, but it’s not nearly the overpay I thought it was. Let’s compare it to the (admittedly rich) deals that the Oilers offered Fernando Pisani and Ethan Moreau.

Moreau was signed to a four year contract extension early in the 2006-07 season, a deal with an annual cap hit of $2.0 million per year. The salary cap that season was $44.0 million – and as we learned in the fallout of Ryan Smyth’s first departure, the Oilers didn’t really expect it to keep escalating. That $2.0 million represented 4.5% of the Oilers’ cap room - $3.2 million in today’s terms.

The Oilers signed Pisani to a four-year extension in the summer of 2006 on a deal with an average cap hit of $2.5 million per year. Again, we’ll use the $44.0 million salary cap for the season ahead, and once again we need to realize that the Oilers didn’t expect things to keep going up. That deal represented 5.7% of the Oilers’ cap room - $4.0 million in today’s terms.

Paul Gaustad is a better player today than either Moreau or Pisani was on the day the Oilers signed him (though the Oilers’ vision was likely clouded by Pisani’s insane shooting percentage in the 2006 playoffs). He inked a deal with an annual cap hit of $3.25 million – easily in the same range as those two players, and I would argue less of an overpay than either Moreau or Pisani received from Edmonton.

It’s the same logic that got Ales Hemsky $5.0 million per year. What would he get as a free agent today? It’s going to be worth watching what the UFA wingers sign for – it’s a thin class, and as players get inked it will thin out even more. Players with talent are going to get paid because it’s a limited marketplace, teams are trying to reach the salary floor, and other teams suddenly have tons of cap room thanks to the rise in the ceiling.

The dollars are going to seem crazy. It’s just important to keep them in perspective.

This week by Jonathan Willis

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Jonathan Willis is a freelance writer. He currently works for Oilers Nation, Sportsnet, the Edmonton Journal and Bleacher Report. He's co-written three books and worked for myriad websites, including Grantland, ESPN, The Score, and Hockey Prospectus. He was previously the founder and managing editor of Copper & Blue.
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#1 eastcoastoil
July 01 2012, 08:06AM
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fist on fist, stealing from the last post.

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#2 rob
July 01 2012, 08:09AM
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thats a good jump for sure,but think when we have to extend hall,eberle,rnh,yaks and schultz over the next 1-3 years,do we have room for a suter type defenceman?if not who do you see them targeting

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#3 eastcoastoil
July 01 2012, 08:11AM
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Mr Willis,

Do you think Smyth gets done before the deadline?

Why all the talk of S. Doan, isn't he a RW?

What back up goaltenders(1B) are out there and who is playing in OKC?

Thanks Happy Canada Day!

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#6 The Oilers Shot Clock
July 01 2012, 08:39AM
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i turned thirty the day Pisani scored that goal.....what a night. Never noticed the trainer hitting the glass with the towel. Who's hand is that that swatted at him to wise up? UFA's..... whether signing one or loosing one, its the scariest acronym in sports.

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#7 Walter Sobchak
July 01 2012, 09:42AM
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Good read JW

With the constant rumors of Bouwmeester being on the market do you think the Oilers should make a play at him?

I think he’s got to be one of the better D-men available?

Also, would you take a risk on ether Armstrong or Latendresse?

I also read Ottawa’s could move Bishop.

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#8 Walter Sobchak
July 01 2012, 09:43AM
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Smyth signed! 2 years 4.5 million, not bad at all!

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#9 Clyde Frog
July 01 2012, 09:47AM
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So TSN is reporting Smyth signed 2 years at 4.5 mil!

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#10 Walter Sobchak
July 01 2012, 09:56AM
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Is there going to be a live chat room tracker during the day?

NM it's on Flamesnation

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#11 PaperDesigner
July 01 2012, 11:40AM
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Willis, As incredibly unlikely as it is, I think you could make an excellent GM. Mostly because I tend to agree with you.

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