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.
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:
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.