• Covenant contract

    by  • June 24, 2011 • Post, Uncategorized • 22 Comments

    Getting married young is a hell of a thing. There’s some evidence suggesting that divorce rates for those who marry young are higher. You can, of course, get out of a bad marriage. Short of death or a buyout though, you can’t get out of a contract that you regret signing as a player.

    One wonders if today marks the end of the long tail contracts for young players. Pursuant to the NHL CBA works, guys who aren’t yet of UFA age can’t have no-trade clauses. They can be included in the contract but they won’t kick in until the guy is of UFA age. Jeff Carter and Mike Richards both signed long-term deals at a young age that had no-trade clauses like this. They both also agreed to tag some years on to the back end of the contract that reduced the value of the deal. In Carter’s case, if his deal was calculated on the first eight years only, it would have a cap hit of $6.375MM. He agreed to tag three more years, when he’ll be 35-37, at $3MM, $2MM and $2MM. This reduced the cap hit to $5.273MM. Richards gave up a little less – if his cap hit was calculated on the first ten years of his deal, his cap hit would be $6.3MM. Two years (age 34 and 35) were tagged on at $3MM per, dropping the cost to $5.75MM.

    Both Carter and Richards ended up getting burned. In Richards’ case, the landing is soft – he ends up in Los Angeles on a good team. In Carter’s case…ouch. He’s now a Columbus Blue Jacket. They own his rights for the next eleven years. His best case scenario is probably that the franchise folds and his contract is nullified. Otherwise, barring a trade that he has little leverage to force, he spends his career in a non-hockey market that can’t afford to be a cap team. It must seem like a nightmare to him and understandably so.

    I assume that Carter and Richards made these deals in the first place because they could see themselves spending their careers in Philadelphia. Things soured and they now have no control over where they spend their careers. The net effect of Carter and Richards signing long-term cap friendly deals was to make them more valuable in a trade – Carter at a $5.273MM cap hit beats Carter at a $6.375MM cap hit.

    I don’t know how an agent can ever recommend that one of his clients sign one of these deals. It is, ultimately, the player’s decision, but I’ve got a hard time seeing how it makes sense for the player unless he refuses to carry any risk of injury (which can be mitigated through insurance) or a downturn in play and wants to be certain that he can afford to someday retire to a castle on a moon. In Carter’s case, he’d already made close to $18MM in his career when he signed that contract. He is, presumably, set for life financially. I don’t know what the Flyers would have done on a three year deal but presumably they would have given him at least $15.75MM. By agreeing to this long term deal, he collects an extra $3MM in the next three years, money which probably has little marginal utility to him. He also took on the risk of being traded to somewhere that he’d rather not be and being stuck there forever.

    There’s some payoff for the agent of course. As I understand things, the agent generally collects his 3% or so over the life of the contract. There’s a heck of a lot less work involved in doing one contract than in doing four and that way, as the agent, you don’t carry any risk of the player getting injured or suffering a downturn in play. The $1.74MM (assuming a 3% rate) that Rick Curran and The Orr Group collect is locked in.

    If you’re a young star watching this unfold, you’d be foolish not to wonder if it could happen to you if you signed a sweetheart deal and things soured. All you do by giving the team concessions that lower the cap is make yourself more valuable in a trade, with zero protection against being traded somewhere you don’t want to be. What was once an abstract risk is now a reality. “Don’t drink and drive” has become “Don’t drink and drive or you might die like your good friend Jeff.” It’ll be interesting to see what becomes of these types of deal – I wouldn’t have the stomach for this risk if I was a 24 year old hockey player.

    * * *

    The desire to shower wealth on Ilya Bryzgalov that prompted this decision seems pretty crazy to me. He’s got some track record as a pretty good goalie but he’s not transcendentally good or anything. I’m not wild about these trades because I’m not convinced that Philadelphia got any better and it seems to me that they took on a lot of risk, with little in the way of upside.

    Before today, by my count, there were six teams without someone who they clearly intended to play as a number one goalie signed (Chicago, Colorado, Florida, Philadelphia, Phoenix and Tampa). Chicago, Philadelphia and Phoenix all had a Plan “B” of sorts – Philly could run with Sergei Bobrovsky, Phoenix has the great Jason LaBarbera under contract and Chicago has Corey Crawford as an RFA, as well as some cap troubles that probably preclude them from blowing their brains out on a goalie. The Blackhawks are probably also a little gunshy when it comes to throwing big money on goalies. Colorado, Florida, Phoenix and Tampa are all, to a degree, budget outfits. The list of UFA goalies included Jose Theodore, Josh Harding, Dwayne Roloson, Tomas Vokoun, Ilya Bryzgalov and Mathieu Garon. I’ve got a hard time believing that the Flyers couldn’t have come up with one of Vokoun, Bryzgalov or Roloson, the “proven” options, with a lesser financial commitment than they did for Bryzgalov. Strange times.

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    22 Responses to Covenant contract

    1. June 24, 2011 at

      It’ll be interesting to see what becomes of these types of deal – I wouldn’t have the stomach for this risk if I was a 24 year old hockey player.

      Yes but, to put it bluntly, you’re a lawyer.

      Players sign contracts that seem to be against their long-term interests all the time. These are guys who are being led around by agents (whose interests may conflict with theirs) and whichever advisors they’ve scraped up, who almost certainly have no post-secondary schooling and who very likely didn’t do much of anything in high school, who twice fail trivially simple open-book boat license exams. These are not bright people.

      I don’t expect this to much change how contracts are negotiated.

    2. June 24, 2011 at

      Someone posted this stat the other day:

      Bryzgalov: .92587
      His primary backups: .92589

      I haven’t confirmed it myself (I’m assuming it’s total/career, not EV-only or anything like that), but if it’s the case, the Flyers just blew their brains out for no good reason. They probably did anyway, because I’d have stuck with Bobrovsky for another year, signed one of the cheap vets on the above list to back him up, and just let the kid develop. Either way, doing this to a team 12 months removed from a Stanley Cup Final, even if they got pounded by the eventual champs because of improbably bad goaltending, is insane. Full stop.

      In other news, I want a castle on the moon. Someone needs to make that happen.

    3. June 24, 2011 at

      “Someone posted this stat the other day:

      Bryzgalov: .92587
      His primary backups: .92589″

      It was actually a stat I sent over to Wyshynski. Had I known it was for publication, I’d have elaborated a bit more on it to clarify, so I’ll do it here: that’s the past three seasons’ worth of Even Strength SV% of Bryzgalov and his primary backups (the single goalie who played the second-most games behind him in each of those seasons, namely Labarbera, Labarbera, Tellqvist).

      The caveats here, of course, are that Bryz carried a substantially larger workload, and almost certainly faced tougher competition. But I thought it was an interesting stat to show that, at least insofar as this metric goes, Bryz didn’t significantly outplay his (far, far cheaper) backups.

    4. June 24, 2011 at

      I’ll second Ben’s comment. I like that you’re a cynic, Tyler (in the true sense of the word; i.e. someone who largely believes other people act out of self-interest), but I think the issue is that much of the time people just don’t know where their self-interest lies.

    5. June 24, 2011 at

      And of course a long-term, big-money contract to a goaltender is a crazy thing to do in almost every case for so many reasons. One gets the sense Philly’s owner got tired of hearing that they never had a quality goaltender and went way in the opposite direction.

    6. Tach
      June 24, 2011 at

      Isn’t the risk reward matrix on this stuff a little more complicated than all that?

      A) You assume he would have got a contract with the $6 to $7 million numbers in the early years without accepting the “tail” years. I don’t know that he necessarily would have got $6 to $7 million in the early years if he hadn’t accepted the tail. Isn’t the more reasonable assumption that the alternative contract was the $5.75 cap hit for his RFA years?

      B) What if he doesn’t get hurt, but just sucks? There is no insurance for that. If he keeps showing up, he keeps getting paid – subject to getting bought out. Look at Wade Redden or Chris Drury.

      C) If playing in Columbus is not worth $3 or $2 million in 2019 he can just retire.

      I just think it would be really, really hard as a player to be offered a contract that says we will pay you $6 to $7 million for the next 7 years, but we need to you tag on a few extra years for $5 to $2 million at the end and say “Yeah, but you might trade me to Columbus so I’ll just take $5.75 for the next two and take my chances after that.”

    7. Tangotiger
      June 24, 2011 at

      Tyler: what if Richards was offered these two deals:

      12/69
      12/64, with a no-trade clause

      In fact, everything is up for valuation and negotiation. If Richards wanted a no-trade, the Flyers would have asked for money.

      This is no different than a player having a no-trade contract, and then being paid to waive it, immediately preceding a trade.

    8. Tyler Dellow
      June 24, 2011 at

      Tango –

      Richards had an NTC; they just can’t kick in until you’re UFA age per the CBA. If you’re under UFA age and you sign one of these long term deals with an NTC, you are rolling the dice that the team stays in love with you until UFA age.

    9. Tangotiger
      June 24, 2011 at

      Ty, my point still stands. This would have been the deal then:

      12/69, with a limited no-trade clause
      12/64, with a full no-trade clause

      So, Richards accepted 5MM$ more money to give the Flyers the right to trade him in the first few years.

      (All numbers for illustration purposes only.)

    10. June 24, 2011 at

      Tango -

      It is against the rules for Richards to have a NTC before he is UFA age. Richards has a NTC in his contract for the maximum time allowed under the CBA.

    11. Jon K
      June 24, 2011 at

      I really, really don’t understand why Philly would make all these moves prior to Vokoun hitting free agency. Obviously there must be some concern that if they sign Vokoun July 1st and place themselves over the cap that they would compromise their position in trying to trade Carter/Richards.

      Other than that though, Vokoun seems like a perfect fit for Philly. He’s got incredible stats, he’s in his prime, and he has never had the opportunity to play behind a team of Philly’s calibre (pre-draft trades). I would also think that he’d be willing to sign an identical contract to that just signed by Bryzgalov.

      The way teams avoid Vokoun one would think that he has some sort of infectious strain of herpes spread by handshakes.

    12. lb71
      June 24, 2011 at

      Tango – you’re still not getting it. He could not sign a “full no trade clause” because the CBA did not allow it. The NTC kicks in when he is of UFA age. So in reality, Richards had this option:

      12/69
      12/64, with a limited no-trade clause

      So he ended up taking $5mn less, with protection on the back end, but with the risk he could be somewhere else before the protection kicks in.

    13. Tyler Dellow
      June 24, 2011 at

      I agree with Tom in general terms on the pricing – presumably, if the Flyers could give him a full NTC at 24, the price would be lower.

      With that said, I’d be willing to bet that mentally, the assumption that players have made is “If they’re willing to commit to me for 12 years, I’ll be ok till I’m allowed to have the NTC.” Tougher to make that assumption now, which is why I think guys might be leery of signing these deals.

    14. Adam D
      June 24, 2011 at

      @Ben Massey

      While you’re right that the vast majority of these guys have no college education, I think that for the most part the NHL would have the same spread of stupid, average and smart people as the rest of the world. They probably haven’t focused on their studies since middle school, but that doesn’t mean there won’t be naturally gifted people there.

      And even stupid people will catch on that their smarter friends are making more money/having better job security/enjoying their lives more/winning more Stanleys than them, if it happens often enough.

    15. tangotiger
      June 24, 2011 at

      Thanks for the clarification.

      I guess I didn’t use a good example.

      My main point, which I think Tyler got, was that the players are not throwing in things for nothing. And neither are the teams. Everything is being negotiated.

      Richards thinks he can get, on average 69MM$ over the 12 years of his contract, be it in a series of 1-yr deals (with a chance of injury) or as a lump. Front-loaded, or back. It’s all being paid for.

      The series of 1yr deals could come out to 100MM$ or it could come out to 20MM$. He figured 69MM$. He didn’t figure he’d be with Flyers the whole time. He could have signed for a shorter term, so that he can control his destination every 3 or 4 years. He didn’t do that.

      It’s all about risks and odds.

    16. YKOil
      June 24, 2011 at

      To expand on a topic mentioned in the thread – the Flyers have incurred an unknown cost with their moves: namely – can you trust them?

      Richards and Carter signed career contracts there and then they got turfed.

      It’s one thing to get a guy like Bryz to sign an end-of-his-career-last payday contract… will Schenn sign the same style contract Richards once did? Maybe. Maybe not.

    17. Triumph
      June 25, 2011 at

      tyler,

      carter is going to a team that was one of the better possession teams in the league, bringing along with him his possession ability. columbus is going to be pretty darn good next year.

      columbus is a single team market – like most of canada, there are no other significant professional sports to speak of. a successful team in a single team market can afford to spend to the cap – see also, carolina hurricanes.

    18. Baroque97
      June 25, 2011 at

      The problem with Columbus is they aren’t a successful team yet, have lost millions, according to reports have a horrible arrangement regarding their rink, and Columbus is indeed a single team market – for college football.

      Unless the professional hockey team is very good, they won’t even be noticed as long as college football exists.

    19. speeds
      June 25, 2011 at
    20. speeds
      June 25, 2011 at

      I’ve always thought I wouldn’t sign a deal like this either, for exactly the reasons you outline.

      Hossa signed his extension, and was traded shortly thereafter to ATL.

      Setoguchi signed a 3 year year deal in the last couple of days, and was then traded to MIN, never seeing it coming from the sounds of it.

      http://www.winnipegsun.com/2011/06/24/setoguchi-traded-day-after-signing-three-year-deal

    21. Bank Shot
      June 26, 2011 at

      meh. They can always demand a trade.

    22. FastOil
      June 27, 2011 at

      I do agree Tyler that what the Flyers have done, and even the Sharks, would seemingly affect how players will react in negotiations.

      How the players view what happens in the league may be quite different than how a fan sees it. I asked a former fringe NHL’er who had a long pro career about the Canucks after they lost, and he felt they basically no showed in the final and couldn’t understand how any player could do that.

      I was expecting more about injuries, the refs, it wasn’t their time, etc.. It may be that players could think that Richards and Carter crapped the bed when the chips were down and the Flyers were warranted in ditching them, and that it would never happen to them.

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