Signing young stars to bridge deals would be a daft decision for the Edmonton Oilers

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.

Balanced Risk

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:

  • Locking them down…cap going up… ensures you can actually keep this drafted team and reap the rewards after all the losing… otherwise it wasn’t worth it.

    once you sign Yakopov for the same…leaves you tons of room to fill around them.

  • Romulus' Apotheosis

    “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.”

    Not to mention, when the cap goes up substantially and GMs continue to spend like drunken sailors.

    This kind of media hectoring (“Old Manning” as LT calls it) is par for the course. A lot of these guys aren’t really presenting arguments (which are there for the taking up) so much as grumbling about a variety of typically off-ice grievances.

  • BK

    Even if RNH was willing to take a bridge deal at say 2 years x 4. When he signs his next contract for 7 years you could be looking at 7. In the end what’s the difference. All you end up doing is fighting, creating I’ll will and the dollars in total would be similar. I hate the idea of paying based on draft status potential, but I kinda agree that it was a no brainer deal. I do think it could of been done for 5.5-5.75 later on and there was no rush.

    I think Montreal wishes they had Subban locked up to a 7 year x 5 mil deal, cause he will command 7.5-8 in a couple years.

  • The Oilers Shot Clock

    In 4 maybe even only 3 years time….those contracts are going to seem like a drop in the bucket.The second half is extreme value even for Eberle, and already value for Hall.

    • 24% body fat

      The thing is all teams have contracts that are going to look like deals in four or five years so it is relative to that. Hall and Nuge are fine, but it is squeezing dollars else where that gives a GM the ability to make a solid team. We did not do this with Eberle and we messed up the Gagner situation as well. Oilers gave away all leverage and they could have came out of it with close to 2M in savings if done properly.

      • pkam

        I don’t know how you can sign Eberle to a lesser contract than Hall when Eberle outperformed Hall 2 years in a row when they signed their long contract.

        If Eberle outperformed Hall again last year, today we may be saying that we overpaid Hall.

        Until the contract is over, all are just speculation and gambling. Just like Taveres’s and OEL’s contract are a bargain and Tyler Myers’ contract looks like a bad one.

      • Romulus' Apotheosis

        Eberle is a fence-sitter regarding the “value” of his contract.

        It’s well within his capability to cover the bet. That said, as JW notes, his contract is much more high risk and tethering it to Hall’s number never made much sense.

        The one smart thing Tambo did with Eberle was staggering his and Hall’s contract expirations.

        Tambo completely effed up Gagner and put MacT in a right pickle. Given the circumstances MacT finessed a very favorable contract out of Gagner.

        The other “bridge” deals on the Oilers to watch (Petry and Dubs) will be interesting… and will be quite a tell on how MacT intends to manage the lesser lights of the team.

        • 24% body fat

          If Eberle covers his 6 Million in two or three years good for him. Doesnt mean he should be paid the same as Hall. A good GM would have gotten better value. I mean Tavares is 5.5M. Getting good value is what would allow the oilers to keep all these stars together. Eberle may cover his contract but it is not good value.

          • Romulus' Apotheosis

            I won’t entirely disagree with you.

            but if he covers the bet value wise… he covers the bet. The fact that Hall manages (probably) to wildly over-perform his contract doesn’t take that away.

            Or, put it this way: If you get incredible value on bananas but only good value on oranges… does the incredible value on bananas invalidate the good value on oranges?

            No.

            Eberle’s contract remains and is going to remain the high-risk of the big contracts. He may clear the bet, he may not. Tambo could have gotten better value here. There is no question about that.

          • pkam

            The problem is Eberle has outperformed Hall 2 years in a row, it is very difficult to justify paying Eberle less than Hall at that moment.

            Potential do play to a certain degree, but you can’t ignore stats at the moment of signing.

          • pkam

            The first 2 years of their ELC?

            Eberle
            10-11 43 pts in 69 games
            11-12 76 pts in 78 games

            Hall
            10-11 42 pts in 65 games
            11-12 53 pts in 61 games

            Hall only outperformed Eberle last year (the 3rd year of their ELC) after they signed the contracts. Right?

          • #ThereGoesTheOilers

            2010-11

            Hall = .64 ppg w/ 22 goals
            Ebs = .62 ppg w/ 18 goals

            2011-12

            Hall = .86 ppg w/ 27 goals
            Ebs = .97 ppg w/ 34 goals

            2012-13

            Hall = 1.11 ppg w/ 16 goals
            Ebs = .77 ppg w/ 16 goals

          • pkam

            I think we have to realize that we signed them at the end of 2011-12. At the moment, stats for 2012-13 was not available unless you have a crystal ball.

            So year 1 they had very similar stats, year 2 Eberle was better. And based on the stats of those 2 years, you signed Hall to a bigger contract than Eberle?

          • pkam

            We signed them to the long term contract at the end of 2011-12, before 2012-13 even started. Right?

            So unless you have a crystal ball, how can you get their stats of 2012-13 at the end of 2011-12?