• Stay in School

    by Tyler Dellow • April 8, 2010 • Uncategorized • 32 Comments

    I’m not really a prospect guy but I’ve found the whole Riley Nash situation from the perspective of negotiations and leverage and all that interesting stuff. Nash was an Oilers’ first round pick in 2007, taken with the 21st pick, which they acquired with the 30th and 36th picks of the draft from Phoenix. Guy Flaming has a quote from Nash on his blog about Nash’ future:

    When you’re 3 years in it’s obviously something that crosses your mind. I like Edmonton, I like what they’re doing and I think that they have a lot of good years ahead of them but… at the same time I’ve got to see what’s best for me. My main goal is to play in the NHL in the next few years and that’s what it comes down to. I want to help an organization in the NHL and fulfill that dream so i have to look at all aspects of it. I’ve talked to my advisor and we kind of go around in circles about it and what’s going to happen here. Like I said before, I’m in no hurry to sign anything because there is a lot going on but at the same time I’d like to get on with my professional career.

    Flaming goes on to speculate that Nash might not end up being an Edmonton Oiler, something that they went into in a bit more detail on the show. Somewhat aggravatingly, they didn’t ask the key question: are there any circumstances in which Riley Nash is willing to sign a contract with the Edmonton Oilers? They speculate, but, for reasons known only to them, they don’t actually put the question to him. Instead it’s all couched in Soviet-style language that’s fairly impenetrable, with Nash muttering things about not being a priority and some talk that the Oilers website listing him at 174 pounds instead of 191 pounds is an issue of some sort.

    I’m not sold that this isn’t really about money. Unless the Oilers are willing to make an offer that includes the maximum in rookie salary and the maxium in rookie bonuses, I’m not sure that it makes sense for Nash to sign a deal with the Oilers now.

    If Riley Nash were to sign an entry level contract with the Oilers this summer, it would have a three year term. If he were to sign one after next season, it would be for two years. No matter how it plays out, Nash is going to be under an entry level deal through the 2012-13 season. To the extent that this is about money then, it comes down to two questions: how much money is he foregoing by playing next year at Cornell and can he do better with bonuses somewhere other than Edmonton?

    I would assume that the Oilers are willing to give Nash the rookie maximum in salary at the NHL ($875,000) and AHL ($65,000) levels and that they’d be willing to structure his deal so that he gets 10% of the NHL salary as a signing bonus. If he goes back to Cornell then, he’s foregone $87,500.00 plus whatever he would make in salary next year.

    nash1

    Is he a lock to make the Oilers for the 2010-11 season? With management saying that they want to start having people spend some development time in the minors and the Oilers having Shawn Horcoff along with a mess of young centremen, it’s by no means certain. That’s a pretty significant thing – if he spends next year in the American Hockey League, he would get $87,500.00 in signing bonus and $65,000 in AHL salary. I put together a quick chart that show’s what he’ll earn for next season based on various amounts of time in the NHL as opposed to the NHL.

    This, along with the bonuses, is the money that Nash will be leaving on the table if he returns to school next year. If he doesn’t think he’ll play a lot in Edmonton next year, it’s a relatively small amount, before the bonuses are considered. Let’s take a look at the bonuses.

    Generally speaking, guys drafted in the second half of the first round don’t get contracts that include any of the Schedule “B” bonuses. These are bonuses based on finishing in the top five in voting for major awards or the top ten in some offensive categories. For the vast majority of these players, there’s no realistic expectation that they could earn those bonuses, so all they would be doing is creating potential cap issues for their teams if they were to have them included in their contracts, which might make making the team more difficult.

    That leaves the Schedule “A” bonuses. These are capped at a maximum of $850,000, with a maximum of $212,500 per category in categories like goals, assists, time on ice etc. There are minimum levels of productivity that the team and player can agree to, something that’s an artifact of Joe Thornton’s contract destroying the bonus structure in the old deal. I strongly suspect that the vast, vast majority of deals have bonus structures premised on hitting the minimums, although I have no way of proving this.

    I’ve put together a list of all contracts that have been signed by draft picks in the second half of the first round and then sorted them by the average bonuses provided for in the contract. I’ve also sorted the players into three colour coded groups: NCAA players, European players and Major Junior players. The list is below:

    nash2

    If you want to have lots of bonuses included in your first professional contract, going to school is a pretty good route. Jordan Schroeder’s contract is of particular note, as it was just recently signed and he got the maximum Schedule “A” bonuses, the first skater to do that from the second half of the first round under the new CBA.

    What makes Jordan Schroeder so special? He, along with all NCAA players, has a pretty attractive option available to him if he’s not signed after four years: he becomes an unrestricted free agent. If you’re talented enough to get picked in the first round of the NHL draft, you’re almost certainly going to be able to find a contract with the maximum bonuses available if you’re an unrestricted free agent who had the talent to be a first round pick in the draft.

    European players have options that might seem more palatable to them than NA juniors – namely, staying in Europe and playing pro hockey there. This would appear to be reflected in the kinds of bonus that they get.

    UFA status isn’t available to major junior players. If they aren’t signed, they get drafted again. That’s a pretty lousy option, which probably explains why they have much smaller bonuses included in their deals – if they end up being drafted again, they’ll have virtually no leverage in that negotiation. Better to play up the threat of re-entry for all it’s worth and then take what you can get – your position is not going to improve. It’s probably not a coincidence that the two highest major junior players on the list are goalies (who can generally be expected to spend the life of their ELC’s in the minors, rendering the cap hit from bonuses irrelevant).

    If I’m Riley Nash, assuming I’m as happy to play in Edmonton as anywhere, and I figure that my take from the Oilers next year would be somewhere between $100,000 and $200,000, I may well be willing to bet that amount against getting more significant bonuses, assuming that the Oilers are trying to grind him on the bonuses, which strikes me as a possibility.

    Oilers management has not, in the past, demonstrated any particular ability in understanding leverage or markets. It may well be notable that Jordan Eberle, who is considered a better prospect, will average about $300K annually in bonus eligibility. In addition, Andrew Cogliano, who came from university, didn’t actually do that well in terms of bonus eligibility. It wouldn’t surprise me in the least if the Oilers look at Cogliano and Eberle, are unwilling to give Nash the most favourable Schedule “A” bonus structure possible and that that’s why there’s no deal yet.

    Flaming speculates that the Oilers will look to trade Nash’ rights at the 2010 or 2011 drafts. If this is about money and the Oilers trade him because they aren’t willing to give him the bonuses – and I assume we’ll find out what the issue is if he ends up elsewhere at some point – and instead take a second round pick or end up with one as compensation after he leaves as a free agent, it will be a pretty horrible example of understanding how markets work by a team with a pretty poor track record.

    About Tyler Dellow

    32 Responses to Stay in School

    1. Schitzo
      April 8, 2010 at

      What makes Jordan Schroeder so special? He, along with all NCAA players, has a pretty attractive option available to him if he’s not signed after four years: he becomes an unrestricted free agent.

      Not anymore, Tyler. They changed the language in the new CBA to require a player to enter the draft a second time.

      Here’s a cut-and-paste from my post on LT’s site last week:

      Ok, I see the difference now in the Wheeler situation. Under the old CBA, you could not re-enter the draft if you were 21+ and played hockey in North America. The new CBA changes this and says that you are undraftable at age 21+ if you have never been drafted before

      As it relates to leaving school, the old CBA said that a player:

      may be retained on the Reserve List of the claiming Club as an “unsigned draft choice”
      so long as he remains a bona fide college student and thereafter for 180 days plus the period between the end of said 180 days and
      the next June 1; provided always that such a player may at any time by notice in writing delivered to the claiming Club, with copy to the Central Registry, declare his desire to be tendered a Player Contract with that Club.

      (iii) If the claiming Club fails to tender to the claimed player a contract within thirty days of filing of the notice by the claimed player in the Central Registry, the player shall be eligible for selection in the next Entry Draft if he is otherwise eligible in accordance with Section 8.4(a).

      So that’s the old CBA – you could deliver a 30-day ultimatum and either re-enter the draft (20 or younger) or become a UFA (21+). To be honest, I’m surprised that rejecting the Coyote’s offer allowed Wheeler to do this, but apparently it worked.

      Anyways, this is absolutely not the case under the current CBA – there is no 30-day ultimatum, and the 21+ rule only applies to players who were undrafted the first go-around. Nash would for sure re-enter the draft.

      ————————-

      Anyways, the result is that Nash would end up re-entering the draft. He’d likely drop out of the first round, so unless he truly hates the thought of playing for the Oilers organization it’s unlikely that this is to his benefit.

    2. speeds
      April 8, 2010 at

      Great post MC.

      A couple questions I’m hoping someone can help me with:

      (1) Where in the CBA, if anywhere, are the rules for when young players like Nash are UFA? I’ve read that there’s a window where undrafted players can be signed to NHL contracts, I wonder if that’s in the CBA, or just in the NHL rules somewhere?

      (2) I think it’s clear that EDM holds Nash’s rights until June 1, 2011 no matter what, and until Aug. 15, 2011 if he stays in school. Does anyone know exactly how it works after that? My understanding is that, in the first case, Nash would re-enter the draft and be eligible for the 2011 draft. In the second case, he’d be a UFA, but if unsigned by June 1, 2012, he’d re-enter the 2012 draft. Is that how everyone else reads the CBA, or am I mistaken?

      (3) Unrelated to Nash, but I’m kind of curious what would have happened if Petry were to have left school after this draft, but before his senior college season. How do you see that applying, MC (or anyone else)?

    3. speeds
      April 8, 2010 at

      For anyone who hasn’t seen the post Schitzo’s talking about, here’sthe thread.

    4. Schitzo
      April 8, 2010 at

      For reference, the old 8.4(a) read:

      8.4. Eligibility for Claim.

      (a) All players age 19 or older are eligible for claim in the Entry Draft, except:

      (iv)a player age 21 or older who played hockey for at least one season in North America when he was age 18, 19 or 20.

      The new CBA reads:

      (iv) a Player age 21 or older who: (A) has not been selected in a previous Entry Draft and (B)played hockey for at least one season in North America when he was age 18, 19 or 20 and shall be eligible to enter the League as an Unrestricted Free Agent pursuant to Article 10.1(d);

      In both CBAs 10.1(d) reads the same, which is
      (d) Draft Related Unrestricted Free Agents.

      (i) Any Player not eligible for claim in any future Entry Draft pursuant to this Agreement and not on a Club’s Reserve List shall be an unrestricted free agent.

      So adding eligibility for a second pass through the draft will mean no UFA status.

    5. Ted
      April 8, 2010 at

      It’s kind of infuriating as a fan when you watch them throw 5.5 million for 5 or 6 years at guys like Souray and Horcoff, but they nickle and dime guys over 60K here, or 100K there. I don’t really get it, because it seems to be generally more reasonable to take more risk on the smaller deals and less on the bigger ones. If Nash can hit some of the bonuses on his ELC, then as a player he’s probably worth the extra money and maybe he performs well enough that it becomes a value deal. If he misses the bonuses or doesn’t make the NHL, they just don’t have to pay it. The downside just seems pretty small in the relative scheme of things.

      If your speculation is right, and the speculation about the issues around Omark’s situation last year being over 50 to 60K on the AHL side of his contract, the Oilers management is still making what, from the outside, seems like silly mistakes. The sad thing is that it is totally plausible when you look at their overall track record when it comes to contracts.

    6. Schitzo
      April 8, 2010 at

      (1) Where in the CBA, if anywhere, are the rules for when young players like Nash are UFA? I’ve read that there’s a window where undrafted players can be signed to NHL contracts, I wonder if that’s in the CBA, or just in the NHL rules somewhere?

      Free agency is article 10 – Draft related UFAs are 10.1(d). The big requirement to be a draft-related UFA is that you are ineligible to be drafted anymore, which is determined by 8.4.

      In the second case, he’d be a UFA, but if unsigned by June 1, 2012, he’d re-enter the 2012 draft. Is that how everyone else reads the CBA, or am I mistaken?

      It’s interesting, because as you say, we’d lose his rights on August 15th, 2011. 10.1(d) makes it clear that you’re not a UFA unless you’re ineligible for future claim. It looks like 2011-2012 would leave him in limbo and unable to sign.

      (3) Unrelated to Nash, but I’m kind of curious what would have happened if Petry were to have left school after this draft, but before his senior college season. How do you see that applying, MC (or anyone else)?

      8.6(c)(ii) says that you retain their rights until the “fourth June 1 following his selection”. I’d read that as meaning we’d lose his rights instantly and he’d enter limbo for the 2010-2011 season just like I think would happen with Nash. He’d be eligible for the 2011 draft, so apparently he’d sit on his thumbs for an entire season?

    7. speeds
      April 8, 2010 at

      My guess on #3 is that Petry would have been a UFA this summer, but I don’t know with certainty either way. I sure would have looked into it if I were Petry’s agent/advisor, which makes me wonder if maybe he wouldn’t have been a UFA and would have had to wait to re-enter the 2011 draft? Then again, maybe he’s just happy to go to EDM and/or they paid his as much as he couldd have expected as a UFA this summer (if eligible) anyways?

      I think you’re selling short the 150K Nash would be turning away by not signing this summer. If I were negotiating for the Oilers, the guaranteed 150K Nash would be leaving behind is one of the first points I’d be making with his agent.

      The bonuses are an issue, but I’m not sure Nash is the kind of player that will hit them anyways. He may disagree, and obviously one would rather have them available than not so long as they aren’t a reason for you to be left in the AHL longer than you would be without the bonuses (or with less bonuses), a point you make well.

    8. Schitzo
      April 8, 2010 at

      My guess on #3 is that Petry would have been a UFA this summer, but I don’t know with certainty either way

      I just don’t see it, speeds. If Article 10 is an exhaustive list of the ways you can become a UFA, Petry wouldn’t meet any of them.

      Oh, also refer to Article 8.9, which says that you are ineligible for play in the NHL unless you have been claimed in the most recent entry draft, or are ineligible for claim because of Section 8.4 (which includes ineligible because you’re already drafted and on a team’s reserve list).

      Petry would not be ineligible for claim in future drafts, and would not have been drafted in the last (2010) entry draft, so he would be ineligible for play in the NHL.

    9. speeds
      April 8, 2010 at

      Schitzo, good catch. That seems to make sense to me, but even since the new CBA I’ve heard that guys like Nash would become UFA’s, and also that undrafted players are eligible to signed to an ELC before the next draft even if eligible. That said, those reports could be erroneous, assumptions that since that was possible in the old CBA it must still be permissible in this CBA. I guess that’s kind of what I had been assuming as well, although I specifically wrote those sections as questions because I had similar questions about that stuff as you.

      It’s hard to get “answers” for these technical questions without access to a guy like Olczyk.

    10. speeds
      April 8, 2010 at

      I’m not 100% clear exactly what 8.9.b says, now that I read it again. It says you are ineligible to play in the league if you don’t qualify under (a) or (b), but Nash would qualify under (a). Also, my reading is that it suggests you can sign undrafted 18 and 19 year olds, which was partially what I had in mind with my question (1), under 8.9.b.ii.

    11. Schitzo
      April 8, 2010 at

      Right now, Nash would qualify under (a) as he is ineligible under 8.4. That’s because the Oilers own his exclusive negotiating rights.

      What if he finished school in April 2011 and we lost his rights on Aug 15, 2011? He wouldn’t be eligible for league play under either prong of (a). He wasn’t drafted in the last entry draft (note that it says “last” draft, not any draft). He also would not be ineligible under 8.4 as he does not meet any of the exclusions.

      Also, he would not be eligible for league play under 8.9(b) as that would require he was eligible for the 2010 entry draft and undrafted. In our scenario he would not have been eligible for the 2010 draft as he was a college player and on our reserve list (one of the exclusions in 8.4 to draft eligibility).

    12. Schitzo
      April 8, 2010 at

      But really, I think the only meaningful post either of us has made so far is your point that we have no idea whether the reports to the contrary are in error or not. This comes up so rarely that there’s no real life example to look at.

    13. Schitzo
      April 8, 2010 at

      It’s hard to get “answers” for these technical questions without access to a guy like Olczyk.

      P.S. lol Brule waivers.

    14. speeds
      April 8, 2010 at

      Schitzo:

      It hasn’t come up yet because last summer/this draft is/was the first time it could have, as players drafted in 2005 (the first draft in this CBA) are only able to be finished 4 years of college after the 2008/9 season. If the team held their rights until Aug 15th, 2009, and the player were in limbo from Aug 16, 2009 until the 2010 draft, now is about the first we’d hear of this.

      That’s part of why I’m not sure it works the way you’re suggesting it may, because it seems kind of odd/unfair that a 22 year old couldn’t sign with anyone for the 2009/10 season because of some wording in the CBA. What happens if you finish college and the team that drafted you won’t offer you a contract, and 29 others would, but can’t? Too bad, so sad, for that player?

    15. speeds
      April 8, 2010 at

      actually, technically, I think this could have come up earlier if a player was drafted having already played a year of college when drafted.

    16. Schitzo
      April 8, 2010 at

      What happens if you finish college and the team that drafted you won’t offer you a contract, and 29 others would, but can’t? Too bad, so sad, for that player?

      I agree, it doesn’t seem fair, but I’d love to know how you get around it. Those sections seem organized around the idea that if you’re draft eligible, you have to go through the draft. They don’t want players getting around that except in limited circumstances.

      The change in 8.4(a)(iv) in particular seems targeted at closing the “Blake Wheeler option”. I can’t think of another situation besides unsigned college draft picks that the change would affect.

      Honestly, it wouldn’t surprise me if they made the change to close the Wheeler option, without considering that it might create hardship to players in specific circumstances.

    17. Schitzo
      April 8, 2010 at

      Fuck it, now I hope the Oilers screw up getting him signed, just so we can see what happens.

    18. speeds
      April 8, 2010 at

      It took long enough, but I might have found an example here. Matt Watkins was drafted by Dallas 160th OV in the 2005 draft. He stayed in college for 4 seasons. According to the CBA, Dallas should have held his rights until August 15th, 2009. However, he signed an NHL ELC with Phoenix on Sept 30th, 2009, which doesn’t mesh with the interpretation that he should have been in limbo.

      http://www.hockeydb.com/ihdb/stats/pdisplay.php?pid=74941

      http://coyotes.nhl.com/club/news.htm?id=500448

    19. speeds
      April 8, 2010 at

      It took long enough, but I might have found an example here. Matt Watkins was drafted by Dallas 160th OV in the 2005 draft. He stayed in college for 4 seasons. According to the CBA, Dallas should have held his rights until August 15th, 2009. However, he signed an NHL ELC with Phoenix on Sept 30th, 2009, which doesn’t mesh with the interpretation that he should have been in limbo.

      I had included links, but had to take them out as it held the comments until the moderator shows up. There is a link on the Coyotes site though, about the signing, dated Sept 30, 2009.

    20. Schitzo
      April 8, 2010 at

      Interesting. I’d love an explanation of what section of the CBA permits that.

    21. April 8, 2010 at

      One of the reasons Cogliano is on the low side of the bonuses is that he signed after his sophomore year. Many of the college players towards the top signed as juniors (Oshie, Cole) or after their senior seasons (Mitera, Summers)

      Similarly, the guy at the bottom (Pacioretty) signed after his freshman year when he was three years away from his leverage. Pacioretty’s already logged about a full NHL season already, so his move was beneficial financially.

    22. Tyler Dellow
      April 9, 2010 at

      Brian –

      It’s kind of a weird thing. The older you are, the more likely you are to actually hit your bonuses. So by staying in school, you increase the size of your bonus and the odds of getting one.

    23. Tyler Dellow
      April 9, 2010 at

      For what it’s worth, I think speeds is right. I don’t recall precisely what happened with Wheeler but I would assume that he used the Van Ryn loophole of leaving college, which was supposed to be closed in the current deal. This isn’t exactly the same thing and (given speeds’ research, which I didn’t want to do myself) it seems that the league treats it differently.

    24. Tyler Dellow
      April 9, 2010 at

      Also: if the intention was to expose these guys to the draft again, the logical thing to do would be to have their rights expire on June 1, not August 15.

    25. speeds
      April 9, 2010 at

      And that is the case with kids that leave school early? That’s kind of what I would guess as well, Tyler, because there’s no “real” difference between becoming a free agent on June 1st vs August 15th as far as the upcoming season goes if it’s not to avoid draft re-entry. It doesn’t matter if you sign June 3rd or August 18th, you don’t miss any games and can be ready, easily for the start of the next season, either way.

    26. Schitzo
      April 9, 2010 at

      I guess where I’m getting caught up is the change to section 8.4(a). Why would they expressly require players age 21 and older to go back into the draft if it wasn’t an attempt to close the college UFA route?

      And more importantly, why didn’t it work?

    27. Triumph
      April 9, 2010 at

      it does close the route, in that a player has to stay in school for 4 years in order to reap the rewards – that’s not exactly common for drafted players. the van ryn UFA route was to drop out of school and go play junior – that is closed. furthermore, van ryn signed a one-way contract with the blues, iirc – that cannot happen anymore.

    28. Tyler Dellow
      April 9, 2010 at

      I don’t read 8.4(a) the same as you Schitzo. As I read it, it defines who is eligible for the draft, not how you become a free agency. It specifically excludes:

      a Player age 21 or older who: (A) has not been selected in a previous Entry Draft and (B) played hockey for at least one season in North America when he was age 18, 19, or 20 and shall be eligible to enter the League as an Unrestricted Free Agent pursuant to Article 10.1(d);

      On my reading of this, he would be eligible to be drafted at 22, if he wasn’t on some other team’s reserve list by then. Which he will be.

    29. Schitzo
      April 9, 2010 at

      Tyler – combine that with 8.9, which defines when a player is allowed to play in the NHL. The two seem to work together to say that if you’re eligible to be drafted, you’re ineligible to play in the league.

    30. Schitzo
      April 9, 2010 at

      Although 8.9 has to be read in conjunction with Article 10. What are your thoughts on 10.1, specifically 10.1(d)? If it’s meant to be an exhaustive list of how you can become a UFA, I don’t see how Nash qualifies.

    31. Tyler Dellow
      April 9, 2010 at

      8.9 Eligibility for Play in the League. No Player shall be eligible for play in the
      League unless he:

      (a) had been claimed in the last Entry Draft, or was ineligible for claim under
      Section 8.4; or

      As I read this, Nash would be ineligble for claim in 2011 (because he’s on the Oilers reserve list), which would make him eligible to play in 2011-12.

    32. Schitzo
      April 9, 2010 at

      Ah, I see how you’re reading it. I was interpreting it that as of August 16th he would have to be ineligible under 8.4 (which he wouldn’t be, as he’d be removed from the reserve list).

      But it’s in the past tense, so reading it as determined at the time of the Entry Draft makes sense.

      The fact that Nash wouldn’t meet the definition of a “Draft Related Unrestricted Free Agent” still bothers me.

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