• $3.3MM Worth Of Advice

    by  • July 25, 2012 • Hockey • 8 Comments

    Elliotte Friedman interviewed Kevin Epp, Shea Weber’s agent after the Predators matched the Flyers’ offer sheet for Weber. I found this exchange amusing:

    Friedman: “You understand one thing about the CBA…for a non-lawyer, relative meathead like myself, it’s very dfifficult to undrestand at times. WHen Jarrett was on last week, he talked about the possibility of an addendum, putting a no-trade clause into the finalized contract that is not there in the offer sheet. I checked, I was told that couldn’t happen, but now today people have shown me an article in the CBA which indicates it could happen. Will you guys and the Predators put a no-trade in Weber’s deal?”

    Epp: “Yeah, I mean we definitely plan to. I think as an organization, I think when you sign this kind of commitment to a player, I think it should go with the territory. I mean they’re making their commitment long-term and I think the player wants to have the same commitment that if he’s gonna stay there long term he should have a no-movement/no trade clause in the contract and you know that’s everybody’s wishes I believe.”

    Friedman: “OK, so has Nashville told you they’re willing to do it?”

    Epp: “Y’know we haven’t had long discussions with them today, it’s just been short and kind of sweet…”

    LOLZ, as the kids say. Weber was entirely within his rights to sign an offer sheet and consider playing elsewhere. He was entirely within his rights to cause Nashville some problems by structuring a deal that pays him $27MM in the next year.

    With that said, there were trade-offs, one of which was that he couldn’t force Nashville to match an NMC/NTC. “I think the player wants to have the same commitment that if he’s gonna stay there long term”? My goodness. He didn’t make any sort of commitment to Nashville, he tried to structure a contract that they couldn’t match and now he wants them to give him an NMC/NTC to show their commitment? Wow.

    An interesting side point. It’s widely believed that Weber didn’t want to return to Nashville – his agents said as much. Signing this deal, which has the obvious upside of guaranteeing him $110MM, including $54MM over the next four years, came with the considerable risk of tying him to Nashville for the next 14 years, something he could have avoided by waiting a year, albeit at the risk of a worse CBA.

    I always wonder about the conflict of interest that agents find themselves in on these situations if they’re being paid on commission. There was a thing a few years back, in the summer where the market was saturated with goalies, where Dwayne Roloson and Martin Biron had the same agent. Considering they were competing for the same jobs, I wondered how an agent chose as between them. What if a team said “We’ll give Roli X or Biron Y?” How do you negotiate in those circumstances?

    3% commission is pretty standard for player agents. If you’re the agent who negotiates the contract, you’re guaranteed 90% of that amount, even if the player leaves you – the new agent gets 10%. I’ve always thought that this would place you in a tremendous conflict of interest. If you’re Weber’s agent, where he lives for the next 14 years isn’t really your problem. Sure, he’s a client, he’s probably someone you regard as a friend, but if he has to live somewhere he doesn’t want to live, does it really affect your life? Maybe you think it does. Weigh a guaranteed $1.62MM over the next four years against that – that’s the agent’s cut if Weber signs the deal.

    If Weber doesn’t sign the deal but signs his qualifying offer, you’re guaranteed something like $230K. Sure, if you continue as his agent for his next deal, you might cash in then but everyone expects that it will be for less money, due to changes in the CBA. Worse, he might decide to change agents during the next year and then you’re left with nothing when he does sign the UFA deal. Given that your commission is relatively small, even the possibility of adding another 10% to the deal if you wait probably doesn’t make sense – you’d only be increasing your own fee by 0.3%. In Freakonomics, I think, there’s a discussion about how real estate agents are better at extracting that last $5K or $10K when it’s their own home; the financial incentive for them is greater there than if it’s someone else’s house. In hockey, the agent’s interest is probably always in doing the long term deal as soon as possible.

    It’s hard to tell if your judgment is being affected when you’ve got a conflict, particularly when you’re dealing with situations that aren’t entirely black or white. Conflicts of interest do crazy things to a person. When you weigh the potential risk to Weber in terms of Nashville matching and him not having an NTC, it can cause the calculus to change slightly, as your brain imperceptibly throws the $1.62MM you make over the next four years on the scale.

    These agency deals are effectively contingency agreements – the agent gets a cut. What makes them unusual is that the interests of player and agent are less aligned than they once were. The protection of the agent’s share, even if he gets fired, along with the possibility of getting fired before a big deal gets done creates an incentive for agents to convince their client to sign the big deal and take the attendant risks. Will Nashville give you an NTC if they match? “Sure; I mean they’re making their commitment long-term and I think they know that you want to have the same commitment that if you’re gonna stay there long term you should have a no-movement/no trade clause in the contract and you know that’s everybody’s wishes I believe.”

    To be clear, I’m not saying that Weber was poorly advised. I don’t know what was said. The thinking on Nashville handing over an NTC/NMC seems optimistic in the extreme though and you wonder if Weber was similarly advised. If he was, he was probably not particularly well served, given that there’s no reason in the world for Nashville to limit their flexibility more than the contract already has. The other tricky thing about conflicts is that you can get away with them a lot of the time; in the sense that if nothing goes poorly, nobody really cares. When stuff blows up though – it can put you in a very difficult position, because it’s very difficult to defend the suggestion that you were affected by the conflict and preferred your own interests. It’ll be awfully interesting to see what happens the first time Weber’s in front of a camera after this.

    (Incidentally, as a general rule, I think “Don’t do commission deals with people whose interests aren’t perfectly, or nearly perfectly, aligned with yours” is a good one. The beauty of the hourly rate is that you get independent advice. And, frankly, if you’re a star NHLer, you probably would pay a lot less in fees too.)

    About

    8 Responses to $3.3MM Worth Of Advice

    1. Darrell
      July 25, 2012 at

      I heard that interview as well, and I also found Epp to come across as a complete idiot and if he represented me I would fire him on the spot. As you say, there is absolutely no reason for Nashville to give Weber a NMC, and since Nashville has very competent management, there is no way that they are going to do so. For the agent to assume that Nashville would add it in just boggled my mind, especially since the team is unlikely to want to trade him over the first few years to get a return on there investment (I mean they are on the hook for $27 mil even if they traded him the second they are allowed too).

      All in all, Mr. Epp came across as a complete idiot, and it certainly makes you wonder what advice he was giving the client during this process.

      • July 25, 2012 at

        While I wholeheartedly agree that the Predators should not give Weber a NTC, I wouldn’t be so quick to dismiss the idea of Poile giving one to Weber. If Poile has shown us anything in the way he handled Radulov, Suter, and Weber, it’s that he’s been great about handling things in the public arena so as to maintain relationships. He kept things cool (at least publicly) in all of those situations, and made sure not to get caught in the trap of bashing players and going public with anger and frustration. While it might bite them in the ass later on if Weber ever decides he wants to leave Nashville, I could actually see Poile potentially giving Weber an NTC as a way for Weber to save some face and let things be spun in a positive manner. It gives everyone a soft landing.

    2. Triumph
      July 25, 2012 at

      “(Incidentally, as a general rule, I think “Don’t do commission deals with people whose interests aren’t perfectly, or nearly perfectly, aligned with yours” is a good one. The beauty of the hourly rate is that you get independent advice. And, frankly, if you’re a star NHLer, you probably would pay a lot less in fees too.)”

      Martin Brodeur did this for his 2002 and 2006 contract negotiations and the NHLPA threw a fit. He also retained an agent for when he was negotiating with multiple teams this off-season. I think, yeah, if you are definitely going to sign with one team and interest on both sides is mutual, going without an agent makes sense, but otherwise, it’s good to have someone around even if his interests *might* not align with yours. I just don’t think that if it comes out that Weber is really unhappy both in Nashville and with Epp that that can be good for Epp’s future business, as this is a really high-profile client signing the 2nd largest contract in NHL history.

      Sidenote, if UFA rules change, we don’t know if Weber would’ve had to wait a year to sign a long-term deal.

    3. Garnet
      July 25, 2012 at

      Either Weber or Epp were sufficiently pleased the financial terms the Flyers offered that they didn’t push for a NTC/NMC. Those things always come at a cost, and in Philly’s case maybe a substantial one – that franchise has, of course, absolutely no compunction about trading their stars and probably would strongly prefer to keep its options open.
      It’s a helluva steep price financially for the Predators this season, given how the deal’s frontloaded, but we can be sure the front office consoles itself with the notion that once an early year or two is off the deal, Weber becomes extremely tradeable if his play holds up, no?
      And to Darrell’s point, looking foolish in public is not a firing offence for an agent. This is probably just a weak effort to put pressure on Nashville – but, honestly, what else should he have said to the question? “No, we wouldn’t that kind of power over Shea’s future, even if the Preds are open to it.”

      • Darrell
        July 25, 2012 at

        The Flyers could have put in a NMC (I actually believe they did), but Nashville is under no obligation to match the NMC part of the offer sheet (and in fact, they would be batshit insane to do so).

    4. PopsTwitTar
      July 25, 2012 at

      Tyler asks an important question about agents, but even ignoring his question of potential conflict here, there are four things his agents seems to have clearly done wrong here.

      1. This interview (if you read it to assume that the guy doesnt understand why Nashville wouldnt give a NMC/NTC clause at this point in the process).

      2. Recommended Weber sign an offer sheet that allowed Nashville a say in matching, if he really didnt want to play in Nashville anymore.

      3. Spoke publicly about Weber’s desire to not play in Nashville anymore [if that was true, and it was intended to influence Nashville's willingness to match or not, why air in out in public, where is can only make your client look (1) petty or (2) dumb?]

      4. And most importantly, not getting a NMC/NTC from Philly in the offer sheet. NMC/NTC clauses are almost de facto in these mega-deals. There’s no way Philly didn’t expect to have that added as a request, and there’s no reason to assume that they would not have agreed. Not only would they expect it, but Philly adding any sort of NMC/NTC just makes the contract even worse for Nashville, because it makes a “bad cash/good cap” deal into a “bad cash/bad cap” deal.

      I’ll admit I don’t follow the different agents/agencies that closely, but Weber’s sound, and appear to act, uneducated, and inexperienced.

      • July 25, 2012 at

        #4 on your list is not allowed on offer sheets, it’s all about years and money, that’s it.

    5. JLC
      July 26, 2012 at

      So much confusion about the NTC/NMC — the answer is this:

      -offering team can include it in an offer sheet, which if not matched becomes part of the contract.
      -matching team only has to match principal terms (which are term and compensation). NTC/NMC is irrelevant for the match.
      -upon a match, if the NTC/NMC is in the offer sheet, it doesn’t come back, only the term and compensation do.

      If NTC/NMC was not in offer sheet — this would have been even more egregious on agent’s part.
      Appears they did no know the consequences of this while preparing the offersheet and calculating their fee.

      Clear that if you don’t want to stay in NSH — offer sheet was not the way do go.

    Leave a Reply

    Your email address will not be published. Required fields are marked *