September 30 2013 08:38AM
The contrast between the in-market and out-of-market reaction to the Edmonton Oilers’ signing of Ryan Nugent-Hopkins to a seven-year, $42-million contract has been interesting to watch. In the market, there’s broad support; elsewhere harsh criticism.
So who is right? Are the in-market people blinded by partiality, or is this a case where the out-of-market guys just don’t know what they’re talking about?
The Bridge Contract
The idea behind a bridge contract is simple: once a player finishes his entry-level deal, he gets a short-term offer that a) keeps him motivated and b) pushes back his real payday to his third contract. The advantage for teams is that it gives them a few years of high performance at a bargain price, and it allows them to be surer of the player before committing big dollars. The disadvantage is that if the player is really good, he may a) resent being underpaid relative to his actual ability and b) make the team pay for it in a big way when the bridge contract ends.
Conventional thinking suggests that bridge contracts are low-risk, and long-term deals high-risk, because if the player goes south the team is protected from the damage of a long-term contract. Conventional thinking is wrong, though: this is about balancing risk. The bridge contract protects against the risk of a player underperforming, but exposes the team to extreme risk (in the form of a massive third contract) if the player performs well. A long-term deal exposes the team to the risk of a player underperforming, but protects them if the player posts excellent numbers.
Also well worth noting: because of how NHL buyout rules are structured, long-term deals to young players are in many ways lower risk than long-term deals to older players. For example, compare the possible 2015 buyouts of Taylor Hall and the Maple Leafs David Clarkson. Despite Hall’s higher salary, the Oilers would pay less in real dollars ($10 million vs. $18.3 million) and have a significantly lower cap penalty. If a team is going to make a big mistake on a player contract, it’s far better to do it with an under-25 player because salaries can be bought out at one-third their cost rather than two-thirds.
There is no ‘one size fits all’ option here. Whether the bridge deal or the long-term contract makes the most sense depends heavily on both the individual player and the individual team.
A team contending now may be well-advised to force the bridge deal to gain the maximum benefit immediately, because it’s more important to win the Stanley Cup now than it is to worry about the cap implications three years down the road. A bad team, on the other hand, cares less about the immediate cap implications and needs to try and make their salary situation as favourable as it possibly can be for when their window to contend opens.
At the individual level, the ability and likelihood of a player living up to potential matter a lot, too. If the player has an indifferent record in leagues below the NHL but suddenly produces in the majors, that’s a much bigger signing risk than a player who has dominated at every level. A good question ask too is whether a player’s point totals driven by linemates, on-ice or personal shooting percentage, or some other highly variable factor? If they are, the amount of risk involved escalates.
The Edmonton Oilers
Using the factors we outlined above, would bridge contracts have been a good idea for Nugent-Hopkins, Hall or Eberle?
At the team level, the long-term deal is the obvious play. The Oilers have been bad for years and are trying to turn things around; it makes no sense to try and pinch every penny at this stage of the rebuild – what matters is putting the team in a solid salary cap footing three, four, and five years from now.
At the individual level, both Hall and Nugent-Hopkins are unquestionably good bets. John Tavares is often cited as an example of strong contract work - he recorded 0.75 points per game over his first two NHL seasons, a total that Hall and Nugent-Hopkins both matched. Additionally, being a consensus first overall pick says something too: it says that pre-NHL these players were projected to be difference-makers at the highest level. With that projection, and with both players living up to that projection over their first two seasons, these deals aren’t especially risky.
The Eberle contract is the lone deal of the three that stands out as a significant risk. Eberle’s pre-NHL resume is less impressive, his breakthrough NHL season was powered to no small extent by personal and on-ice shooting percentages, and because he got the contract closer to his peak years there’s less room for him to improve. Eberle’s 2012-13, despite lowered scoring totals, was reassuring in that his numbers in other areas (on-ice shots, specifically) improved. I’m personally not wild about the deal but don’t see it as a real problem. In any case, even in the very worst scenario (the extremely unlikely case of the player completely imploding) Eberle can be bought out for a total of $8 million in the summer of 2015, with an extremely modest $1.0 million cap hit – the same amount the Leafs paid to buy Darcy Tucker out of a $3.0 million/year deal.
Put shortly: it would be stupid and short-sighted for a team that’s bad in the here-and-now to insist on signing short-term deals with players that are extremely good bets. No amount of criticism from the chattering classes can change that basic reality. And a year from now, when P.K. Subban cashes in on his Norris Trophy after Montreal foolishly insisted on a bridge deal, even that criticism is likely to be muted.
Recently around the Nation Network
The year is off to a rough start in Winnipeg, where the preseason was not kind to them at all:
After back-to-back losses to the defending Eastern Conference Champion Boston Bruins, the Jets finished their third preseason in Manitoba with a 1-4-3 (Wins-Losses-Overtime/Shootout losses) record– last in the new Central Division. This isn't exactly what one would expect from a team looking to make that final push into the postseason for the first time in six years, but the operative word–preseason– says there's little reason to start panicking.
Click the link above to check it out, or feel free to check out some of my recent stuff below: