It’s a new economy

Photo: Michael Miller/Wikimedia

If new contracts handed out to Anaheim Ducks forwards Ryan Getzlaf (earlier this month) and Corey Perry (last night) are any indication, the economics of signing a star player under the new collective bargaining agreement are going to be significantly different than they were under the old one.

The new order of things is something that is being noticed in the upper echelons of team management, at least if the veteran executive quoted by the Edmonton Journal’s Jim Matheson on Sunday is any indication:

A well-respected, longtime NHL executive, raising his eyebrows at Anaheim giving centre/captain Ryan Getzlaf a whopping $8.25 million a year in a new eight-year deal: “That’s almost as much as Crosby’s getting (on average).” Still not sure why Perry hasn’t just signed the identical $66-million contract. They are tied at the hip, aren’t they? Perry, I hear, goes home to Ontario every year so not married to California like Getzlaf is.

While many speculated that Perry might be interested in spending his seasons a little closer to Ontario, he ultimately did sign a very similar contract to Getzlaf, one worth $69 million, with the Ducks on Monday night.

The question, though is this: why are (admittedly excellent) players like Perry and Getzlaf getting as much per year as Crosby?

The Answer: They Aren’t, Really

While a breakdown of Perry’s deal wasn’t available while I was writing this, a quick comparison of Crosby to Getzlaf shows that there really isn’t much to compare. Over the eight years that Getzlaf is under contract, Crosby is going to earn a little more than $20 million additional dollars than the Ducks’ captain.

After Getzlaf’s contract ends, Crosby still has another year of his deal at $9 million. Only in the summer of 2022 – at the age of 35 – does Crosby’s annual salary drop to $3 million per year.

Despite the similarities in cap hit, Crosby’s deal is better in two highly significant ways for the player: the front-loading means that he’ll out-earn Getzlaf by a sizable margin in the mid-term, and the length of the deal offers him security against injury, something that has real value to any NHL player and especially one with a history of concussion.

But Crosby’s deal is also better for the Pittsburgh Penguins in terms of cap management. The back-diving in later years means that Crosby’s deal is more easily fit under the cap than it would be if it ended after eight years as currently structured (the cap hit would be more than $2 million higher). In later years, when Crosby’s cap hit is higher than his salary, the cap will also presumably be higher (and assuming no major drop-off, Crosby will still be worth the money).

The Ducks can’t negotiate a similar deal with Getzlaf now, though. The new CBA limits the contract term to eight years – it would have been seven for a team other than the Ducks – and variance caps prevent similar back-diving even if it weren’t for the term limits. So the Ducks don’t have the option of getting Getzlaf under the salary cap at a modest cap hit – the cap hit must more accurately reflect what he’s being paid. This is almost certainly going to be the new normal for players in the Getzlaf/Perry range – higher cap hits on (relatively) shorter deals. It’s not that they’re being paid the same as Crosby, it’s just that teams now have more difficulty finessing the cap hit.

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  • DSF

    he’s obviously talking AAV. Perry making 8.625M a year compared to Crosby’s 8.7 is pretty close and pretty ridiculous. Perry’s great but not worth more than Stamkos’ 7.5 or near crosby’s 8.7!!

  • remlap

    It’s a tough call for GM’s with their best players. You want to keep them, but it’s risky to sign a guy well into his thirties at big dollars when forwards usually peak in their late twenties.

    I suppose there is usually a market for reputation now that contracts aren’t generational.

    It seems Anaheim will have it’s work cut out for it. A lot of their vets who are carrying the load are not going to be around for long or still playing really well, and their youth don’t seem to have stepped up yet.

    So they’ll have the one good offensive line and a good two way line, and a hurting defense?

    • DSF

      Anaheim has some tremendous young players coming up as well.

      Peter Holland, Emerson Etem, Devante Smyth-Pelly, Patrick Marroon, Sami Vatinen and Hampus Lindholm are all high end prospects.

      They’re in very good shape.

  • DSF

    The Ducks couldn’t afford to let Perry or Getzlaf go but those cap hits are going to take a major cut out of their salary cap room. It’s one thing for Pittsburgh to pay Crosby and Malkin with huge cap hits but Perry and Getzlaf are at least a notch below them. I am glad that they nipped the bogus front-loaded contracts in the bud but, unfortunately, the lucky teams who managed to sneak them in before the latest lockout have set themselves up with a huge advantage.

  • DieHard

    Since 2007-08 getzlafs 23 year old season
    At even Strength
    he played 4646.5 minutes 38G 117A with

    Forwards:
    Perry 88.2% 65G
    Ryan 49% 38G
    Kunitz 13.8% 8G
    Belesky 9.6% 6G
    Hagman 5.4% 2G
    this forward group covers 83% of his play.

    Defence:
    Vishnovsky 21.6% 7G
    S. Niedemeyer 21.1% 3G
    Lydman 19.8% 9G
    Fowler 19.5% 2G
    Whitney 9.6% 1G

    Sam Gagner
    At even Strength
    he played 3814 minutes 36G 75A with

    Forwards:
    Hemsky 24.6%
    Penner 20.0%
    R. Nilsson 19.8%
    T. Hall 15.3%
    Paajarvi 13.8%
    Eberle 13.2%
    Cogliano 10.5%
    R. Jones 8.6%
    Omark 8.0%
    E. Cole 7.7%
    P. Osullivan 6.7%
    Brule 5.3%
    Belanger 4.9%
    MAP 4.9%
    Moreau 4.6%

    Getzlaf got 1p more on every 222 minutes 18.5Games with alot better supporting cast.

    8.25M and same # of goals as gagner.
    Set-up centers assist count is dependent on the finnishing ability of there wingers

    • DSF

      With Letang and Karlsson both injured, I would think Suter is the odds on favourite to win the Norris.

      Parise is 3rd in the league in SOG and in the top 15 in scoring among left wingers. He may not currently be top 5 but he’s damn close.

      Considering that both Crosby and Malkin have a cap hit $1M higher than both and that Crosby and Malkin would be considered generational players, I would think Suter and Parise are about right where they should be.

      Koivu has never been a big scorer (currently 24th among centres) but he is one of the best 2 way players in the game.

      • DSF

        Ryan Suter G2 A21 P23 -3
        Sheldon Souray G5 A5 P10 +19
        Francois Beauchemin G4 A14 P18 +19

        Not to mention Chara is having a great year. Suter is not the best defenseman in the league he’s not even the best in his conference.

        • DSF

          Suter leads the league in TOI/G, playing in all situations.

          Suter – 27:20

          Chara – 24:21

          Beauchemin – 23:31

          Souray – 21:13

          While I agree the other 3 are having fine seasons, Suter is likely more valuable to his team and his performance from game 11 on has been far superior to the others.

          Remember he’s on a new team and had to learn new systems.

          • Agreed on Suter having a good season.And if he can keep it up for the rest of the year I believe he’ll be in contention.
            But Sourays 3.6 million cap hit and Francois Beauchemin 3.5 is pretty good value. If only the oilers could find one or two Dman like these….

            Oh Yeah Right.

      • remlap

        I didn’t realize Suter was 2nd in defenseman points right now. That’s crazy. You might be right about him being in talks for the Norris.

        Same with Parise and Koivu. I’m not arguing that they aren’t solid players, or that they aren’t valued right where they should be.

        The original argument was about the reproducability of the Pittsburgh model. You used the Wild as an example of them reproducing it. There are many teams with players of the caliber of a Suter, a Koivu, and a Parise.

        Kronwall, Datsyuk, Zetterberg

        Keith, Toews, Kane

        Doughty, Kopitar, Brown/Carter

        No one else in the league has 2 of the top 5 players. Hell, even 2 of the top 10. At any position.

        • DSF

          Oh, I agree the actual players Pittsburgh has is a special case but I was talking about the model of playing your top 4-5 players big money and filling in the rest of the roster with cheap but effective players.

          That’s what will eliminate the “middle class” since GM’s now can’t offer term, just cash, to top UFA’s.

      • Romulus' Apotheosis

        at any rate, I think the right marker for this kind of discussion is the Suters, Parises, Koivus, etc. anyway.

        the generic nhl team is going to have “top” players. distribution mandates it. very few teams are lucky enough to get their hands on a top 5 player, especially over several seasons and in multiples.

        the relevant question is how does a generic team manage 4-6 big contracts without being able to smooth out the cap hits and still employ the mid-range players.

        the options of 1) hidden value (the historically undervalued player; the player who “gets hot” at the right time; the player from “nowhere”, ie. some other league; the player who takes a “hometown” discount; etc.); 2) ELCs

        will only get you so far.

        • DSF

          The new CBA will make the necessity of having a smart GM even more important.

          Making a mistake on one of your elite contracts and not being able to find value players will be critical.

          Overpay a couple of Horcoffs and you’ll be dead meat.

          • Romulus' Apotheosis

            the buyout options are presumably there to even the score and give GMs a mulligan on big contracts.

            but definitely the constraints will be felt more keenly.

  • justDOit

    So according to capgeek, the Ducks have about $10M in cap space next year, but have 8 roster spots to fill with that money. An offer sheet to Kyle Palmeri could really mess things up for them, if a ruthless mgmt team decided to play dirty.

  • DSF

    I do not think there is anything shocking about these deals.

    Geztlaf, with age consideration, is probably a top 5 center in the league. Size, PK, faceoffs and offence.

    Perry is a RR trophy winner, has size and plays with as much grit as anyone. The current philosphy in the league is that these attributes are critical to winning.

    If they signed deals that started with a 6, our 6M dollar deals would look pretty bad…

  • vetinari

    Here’s the danger that Anaheim faces in 2013-14: $16.9M/per year will be tied up in this duo, or 26.3% of their whole payroll– a ton of money in just two players when you still need to fill out the rest of the roster. And should one or both of them go down to injury, that’s a lot of money to be watching from the press box.

    Under the new CBA, I think the first year or two will be “business as usual” for most GMs until they lock up their stars or core players and then realize that they can’t surround those players with quality support players unless they dump a salary or two.

    Frankly, I would rather have a roster of six to eight “above average core players” making $4M to $6M each than a roster with two to three “superstars” making $7M to $9M each.

    I’m surprised that GMs aren’t pitching to the players the following: “Sure, I WOULD have paid you $8M/year under the OLD system, but since the cap is going to shrink by 8.5% next year, the most I can pay you NOW is $7.32M/per year”. In other words, Crosby’s salary under the old system and Getzlaf/Perry’s salaries under the new system aren’t that far apart because Crosby got his contract at a time when the player’s share was higher.

  • The Cap is the Cap. It will go up a bit every year (after next) but it isnt going anywhere. If RNH demands 12 million just because he can then that’s his choice, but not every team will be able to accomodate those demands. The Oilers certainly wont be able to.

    Guys like Getzlaf and Perry by luck are able to cash in right now. It will likely come at the expense of Bobby Ryan and any other really high end player that emerges on the Ducks in the next 5 years.

    Any team that has more than 2 good players cant afford to give those deals out, and any player from those teams that demands to be paid like a Corey Perry is doing more to kill 2nd tier player salaries than the new CBA. At some point a team that’s loaded with talent (like the Oilers may one day might find themselves) will have to convince someone to take less than Market Value in order to keep a team together. It happened in Detroit with the “Nobody Gets More than Lidstrom” rule.

    If Perry can look Bobby Ryan in the Eyes and tell BR that he could have taken less so there would be some left over for him but ultimately said “f%#* that” then good for him. That’s his right. But the blame for shrinking 2nd tier player contracts falls on the stars asking for bigger slices of the pie, not the CBA.

    • John Chambers

      That’s the thing – Perry doesn’t have to sacrifice salary, he just has to sacrifice Bobby Ryan as a teammate.

      Anyone willing to give Joffrey Lupul $5.5M / year will easily salivate at the opportunity to pay Bobby Ryan at least 6.

      The system works!

  • The Soup Fascist

    I think DSF’s comment that the middle class will get squeezed is valid. All the more reason why drafting and the resulting ELC’s are even more important.

    Teams that will be successful will have to have their 4 or 5 top end paid guys (in their late 20’s / early 30’s), actually BE their best players. The teams will be supplemented with lower tier NHLers who teams hope will overachieve. The difference makers will be the talented 1 – 3 year pros (or those who sign reasonable RFA deals) on value contracts who can supplement the high end guys.

    The problem the Oilers have had is that their best players are relative babes in the woods. Obviously, the lack of the top end guys led to all the early picks. The key to success (or not) IMO are the drafts going forward over the next few years when the Oilers young guys start to hopefully earn the big money. If management cannot make picks that contribute, under this system, they will not progress to the level they should.

  • DSF

    I think the better way to look at this is looking at Getzlaf’s stats lately. This is a massive overpay, and he will likely fail to live up to this contract. He is getting older, and moving away from peak production years. With salary cap going down, this makes the deal even worse.

    I think fans get too excited about signing a star for any price. Then only years later when these players screw up their cap, or have some average years do they realize what a terrible deal that was made.

  • interested to see how teams make with new signings. i think that perry and getz are at the top i dont see teams spending as much on star players anymore just cause they cant afford it and still build a solid team with depth unless the players themselves are willing to take a hit.

  • Perhaps this got lost in the jubilance of the lockout ending, but I posted about this phenomenon back in January on NHLNumbers, and more specifically, how the deals we saw under the last CBA were going to come to an end:

    http://nhlnumbers.com/2013/1/5/on-cheat-code-contracts-a-thought-exercise

    Even though the max terms were eventually bumped up to 7 and 8 years instead of 6 and 7, we’re still going to see the same thing result for big UFA contracts like these under the new agreement.

    I’m also not sure the “middle class” will whittle away, as the cap inflator is going to come back into the picture after next season. All these new contract rules do is ensure that teams don’t circumvent the salary cap by throwing fake years on the end of superstar contracts, a goal that I think they will sufficiently achieve.

      • I don’t think this is true. The value of Perry and Getzlaf’s deals are pretty much the same as the cheat code deals signed under the last CBA without the fake years added to lower the cap hits, some of which (e.g. Zetterberg) were signed in similar cap environments. If the cap continues to go up after next year, there’s going to be a breaking off point where it will have increased past the additional percentage of the pie that top-level players will earn in these deals, making room for the middle class once more.

        • DSF

          This is just the beginning.

          As other, even better, players reach free agency, the market will dictate that they will receive massive contracts.

          There is no mechanism that acts as a drag on what teams will pay for the top echelon players.

          The cap limits overall spending but not how those funds will be distributed within a team’s salary structure.

          • “There is no mechanism that acts as a drag on what teams will pay for the top echelon players.”

            Yes there is. There’s only so much a team can pay a certain player or players before it hinders their ability to sign the “middle class” that is necessary to achieve a Cup run. You’re assuming the market value of players will grow at a constant rate with the cap; it won’t. There will be a certain point where the incentive to give elite players boatloads of cash is cut off, and teams as a whole won’t be willing to pay that money. Sure, we’ll always have a team willing to make a splash on one or two players like Anaheim or Minnesota, but the teams that realize where the incentive is cut off are going to be the ones that succeed.

          • Romulus' Apotheosis

            The problem with the PIT model is reproducibility.

            It is highly unlikely another team is going to wind up with the 2 best Cs in the entire league in the same age and development range. That is a completely unique situation.

          • DSF

            They don’t need to be centres…could be a centre, a winger and a stud defenseman.

            Minnesota is now built that way.

            Parise – $7.5M

            Koivu – $6.75M

            Suter – $7.5M

            Luckily, they have a great supporting cast and a ton of high end prospects to fill out the team.

            Be interesting to see how they handle Backstrom and his expiring $6M contract.

          • Romulus' Apotheosis

            Parise and Suter’s deals approximate the Crosby Malkin deals (whatever we can expect him to get), but they are still below the outer marker, are the product of UFAs and reflect the old CBA thinking.

          • DSF

            Yeah, Leipold snuck those deals through just in time.

            But, the [riciple remains the same if not the dollrs.

            Under the new CBA, the Wild would likely be paying Suter and Parise $8-9M each which is going to be the new reality.

          • Romulus' Apotheosis

            That’s why I’m not sure PIT, or MINN, are the models here.

            The Pit model/ideal can certainly be emulated (and Minn probably was trying to do that to some degree), but as the case of Minn shows it just isn’t possible:

            Parise/Suter are exceptional. But Crosby/Malkin are in rarefied air. To have both; at crucial positions; in the same age/range of development; from one’s own system; under a CBA that encouraged funky contracts (Malkin will be up for the new game)…

            all that strikes me as being a bridge too far to make comparisons to how teams are going to be operating going forward very fruitful.

            Your last sentence is the right one. The future is to imagine a team like Minn being constructed under the current CBA (i.e., 3-6 excellent to elite talents commanding an outsized portion of the cap of a team, without extended contracts to smooth-over the cap hits).

  • Also, this basically sets the Oilers’ window to contend with the current core: the length of Hall’s deal. Six years, starting in 2013-14. Once that deal expires, the kids are going to start getting paid UFA rates and things will be very difficult.

    • John Chambers

      & @ DSF

      Hall’s contract is for seven years, but otherwise you’re bang on here.

      DSF is correct in stating that with RNH, Yak, and Schultz (not to mention a the rest of the roster) due up for raises, the Oilers won’t have the luxury of adding any expensive pieces outside their core.

      But while Hall, Eberle, and the rest are under contract, maturing, and beginning to outplay their opponents every night at a $6M cap hit or less, this is when the team needs to go for it.

      Management, however, has not proven an ability to find good value contracts to make it all work.

      • DSF

        Totally agree with you. Smid had an amazing season last year, yet this year he struggles. If they overpay for him, that is just going to hurt the rest of them team as his overblown salary will push us up against the cap.

        Same goes for the other players on your list. If you are just willing to sign them for their max, and pay for their best year, we will be pushed right up against the cap. If we sign all these assets, their contracts have to be reasonable enough that they are tradeable if needed.

        • Phixieus666

          I think from a team perspective they should have salaries based on position similar to any other job. If your a top line player you get paid the most if your a middling defense man you get a middle ground wage. It the same as being a junior, senior, or manager, the pay scale goes up with each new position. I’m sure if you spell it out that way for the players they would respect that and wouldn’t argue much

      • Ducey

        Yes. Best to avoid overpayments like Ballard, Booth and Luongo.

        NB: This was done to rib DSF given his traditional support for the Canucks. However, it is noted that DSF now seems to support the Wild more than the Canucks. It would appear that DSF actaully may not be a fan of any team (although I suspect he is a closet Oilers fan) and instead just choses to promote the virtues of which ever team (normally the Canucks, Florida, or the Wild) serves as a useful foil to the Oilers.

        Have I got it right, DSF? 🙂

        • RyanCoke

          He is not a closet oilers fan, he is an oilers fan. He loves the oilers just hates the current state they are in and hates how management mismanaged this team. He has his point as we have finished last or almost last 3 years running and do nothing to solve it. Management just places used old bandaids on the problem and expect everything to be ok. You will see, one day we will have a contending team and more than likely it will be under new management then you will see his love of the team come out. He will compare other players to oilers and say they got nothing on our oilers(or not…)

        • DSF

          As I’ve stated more than once, I am a “Free Agent Fan ®”.

          After supporting the Oilers since their WHA days and being a season ticket holder for many years, the incredible bumbling of the Oilers “brain trust” that drove the team into the ditch and has kept it there for the better part of two decades led me to become a fan of the game as opposed to just blindly supporting one dysfunctional organization.

          As you likely know, I have become much more interested in how winning teams are built and the GM’s that build them which is why the off season moves of the Wild were of particular interest.

          Most observers focus exclusively on the Suter and Parise signings without looking at the supplemental moves Fletcher also made last off season.

          He also added Torrey Mitchell, Zenon Konopka, Mike Rupp as well as slowly adding a very talented mix of their draft picks in Brodin, Coyle, Zucker and Granlund.

          He’s built a team that will be a contender for a very long time.

          The issues in Vancouver are very different and I expect Vigneault will pay the price although I expect Gillis to make a big move before the trade deadline.

          Both Booth and Ballard have played quite well although the results aren’t there but I’m sure Gillis would like a mulligan on the Luongo contract.

          However, I doubt there’s a GM in the league who hasn’t made more mistakes than that.

          Wouldn’t it be something if Souray and Cogliano got a cup ring in Anaheim?

  • DSF

    Both are good players but neither one deserves the dollars they got……….IMHO. I suddenly like the way we handled our Fab Four……….and the bench mark we set……….good for Tamby and Lowe.

    Thats not an endorsement for them either……….but good work none the less. Now if they pull off a good trade that bolsters our back end and adds a power forward, I might be inclined to compliment them.

    • wiseguy

      The glaring difference is that Getzlaf and Perry won cups when they were the value contracts and Niedermayer and Pronger were the “Star” contracts. Now the cycle continues for the ducks as Getzlaf and Perry are the stars and you have to pay them as they are UFA’s.
      Hall and Ebs (I love them) have not won anything and Ebs has had 1 good season. They would also have been RFA’s which reduces the need to pay them the big dollars. I think that the contracts are uneccesary overpays but since the salary cap is not an issue for us at this time, it makes no difference what Katz wants to pay them.

  • DSF

    This is an indication that Steve Fehr was correct when he said the new CBA would eliminate the middle class in the NHL.

    Since teams now have to use raw dollars, rather than term, to lock up star players, more money will flow to the top echelon of players leaving fewer dollars for the middle tier.

    Teams will have to get value contracts and ELC’s to fill out their rosters.

    In the long run, this may trigger the exodus of many mid level players to Europe as the dollars there will be superior.

    • On the first point, I completely agree – though I’m not 100% sure it’s a bad thing. Salaries have been squished the last few years, with the top players capped and the second-tier guys earning more as a result.

      I can’t say I really mind a system where the pay is scaled more fairly relative to talent.

      But yeah: value contracts, ELCS, and to some small degree second contracts (where UFA isn’t an option) are going to be places where savings are found.

      And for players in that second-tier range, especially marketable European stars, Russia’s doubtless going to be more appealing than it once was, money-wise.

    • Phixieus666

      yes this is true, however, if those top players weren’t so greedy demanding these huge contracts they wouldn’t be stealing jobs away from the middle tier. Just another perspective. A team that can convince their stars to take less to field a more competitive team will be the successful ones.

    • OilClog

      I think the glory of battling for the Stanley cup will keep most middle and lower tier players from North America in the NHL. It’ll be the “almost” star players and lower ends from overseas that will stay overseas for the money. Nothing less nothing more.

      • DSF

        I’m sure that will be a factor for most and will this will likely affect European players more than North Americans.

        But the dollars available for middle and lower tier players will shrink dramatically.

        • DSF

          I’m okay with that though as the contracts that I will term the “Chris Gratton” contracts will now be gone with the exception of economy teams filling in their team with inflated deals to make the cap floor like Tallon did. But yeah the Ducks will have to find useful role players, but the Penguins have survived by doing this and drafting role players as well. The Ducks will have to do the same to continue to be competitive.

  • RyanCoke

    Unbelievable. Thank God we had the lock out to control this $-hit. Where would we be be at on the old CBA?

    I disses me off that we as fans are financing this. Some of us dream to win a lottery. Corey is wining the lottery 8 times a year – for 8 friggin years.

    I havn’t been to a game this year as per my commitment during the lockout. Been watching on the “Freenet”, with hardly a care.

    Unbelievable.