I have a real bone to pick with Greg Wyshynski (GDub) at Puck Daddy this morning. In an article going into the nuts and bolts of long-term contracts Greg goes off the economic deep end about the salaries being paid to Brad Richards and Christian Ehrhoff in the final 3 years of their contracts, namely $1 million each.
I guess Greg is offended by the idea that such high-profile players will be underpaid in their twilight years.
The Richards deal avoids this by going nine years and avoiding any contract years past 40 years old. Dreger again, from 2010:
Secondly, for long-term contracts that include years in which the player is 36, 37, 38, 39 and 40; the amount used for purposes of calculating his average annual value is a minimum of $1 million in each of those years (even if his actual compensation is less during those seasons).
In other words, the NHL allows Brad Richards to be a $1 million player in the fantasyland of long-term contracts at age 38, despite the fact that a player like Keith Tkachuk was still making $2.15 million at age 39.
And the NHL allows defenseman Christian Ehrhoff(notes) to make $1 million at age 37, despite the fact that a much lesser blue-liner like Sean O’Donnell was making $1.25 million at age 38.
Cap circumvention is alive and well in the NHL. Question is what, if anything, should be done about it?
Greg makes the classic mistake of trying to equate value outside of time and context, when at the moment of the transaction heightened factors are in play which govern the decision. I don’t see why it’s wrong for either the Rangers or the Sabres or anyone else for that matter to overpay the player now and potentially underpay for him later. The economics of the situation dictate that the player will value the money at the front of the contract more than the money at the end of it. That’s a simple Net Present Value calculation. It ain’t rocket science. There is no guarantee that Brad Richards or Christian Ehrhoff will even be worth the $1 million dollars they are due in those years of their contracts.
Here’s the converse of Greg’s position. Ready? Two words.
Let it sink in. Roy signed a 6 year $24 million contract and is right now considered one of the best bargains in the league. Is it cap circumvention for Darcy Regier to be paying him $4.5 million this season when comparable players would be making $6 or more? He’s a #1 center on a playoff team that has averaged nearly a PPG and plays in all situations, doing so in the past 4 years against the other team’s top opposition. In what fantasy world of Greg’s is it right that he be paid only $4.5 million for this year.
Pick any kid over-achieving on his ELC. The same argument applies.
Is it an advantage for cash-rich teams over those that are on a pay-as-you-go system? Yes. Is it fair? That’s an irrelevant question. There is no standard of ‘fairness’ in this. Is it fair for the low revenue teams to take money from the high revenue teams to field their rosters? Again, it’s irrelvant. It is simply now part of the arrangement between the 30 teams that make up the NHL.
And it’s the crux of the trade-off for implementing revenue-sharing. Teams with money will use the leverage of that money in the marketplace for players. The issue surrounding the long-term contract is simple. Like it or not, the Buffalo Sabres, for example, had a perceived need for Christian Ehrhoff’s services in the next 3 years and were willing to pay him $22 million over those three years to play for them. To get that money he had to take the trade-off of a guaranteed lower salary, potentially much lower salary, at ages 37 to39. Interestingly, Ehrhoff will be paid in years 3 through 7 of this deal an average of $3.8 million. Is that too low? Too high? Just right?
Last year Kovalchuk’s contract was planning on over-paying him by $575k or so per year for the fantasy of him playing to age 44. Now we’re complaining that Richards and Ehrhoff are under-paid at age 38. Holy schnike, in the words of the Bucci-man. The Ehrhoff and Richards deals were structured to minimize the money they would be paid over the rest of their careers. Cost certainty has been achieved through the manipulation of mathematics. Greg is now, in effect, arguing that these monster deals are actually putting downward pressure on salaries in the NHL.
And this is a bad thing?
In the end who the hell do we think we are to say what a player should and should not be worth at a particular age. The reductio of Greg’s complaint is that there should be a rigid structure for all contracts at all ages. Of course, that’s nonsense. I know that Greg is reacting to this instinctively. This feels like cap circumvention. But it’s not. The risk associated with a player beyond the age of 35 in the NHL rises exponentially. A player wishing to sign a long-term deal needs to know this. Front-loading the contract is in everyone’s best interest, the teams’, the fans’, the player’s… everyone’s.
Every intervention into the market will require an ever greater intervention to ameliorate the conditions brought about by the previous round of intervention. The CBA has taken a stab at normalizing the resource pool available to all the teams. It’s done a pretty good job, to be honest. Putting the kibosh on deals past the expiration date of a player’s career to get the cap down certainly circumvents the spirit of the CBA. That loophole has been closed. Putting the kibosh on contracts that underpay players approaching the end of said career is just bad business.