• Bridges and the Nuge

    by Tyler Dellow • September 18, 2013 • Hockey • 20 Comments

    Darren Dreger has a note up on TSN that mentions Ryan Nugent-Hopkins:

    The brass in Edmonton loves RNH – he’s their guy. He’s considered a big part of the Oilers’ future.

    An eight-year extension to complement Jordan Eberle’s six-year, $36 million dollar and Taylor Hall’s seven-year, $42 million deal (agreed to last August) aligns with an Oilers source who says, “longer is better” – specific to Nugent-Hopkins.

    It’s not the model other teams around the NHL are using when addressing their players and their second (bridge) contracts, but Edmonton is clearly banking on its youth when it comes to a brighter future.

    For those of you who are unfamiliar with the NHL’s system of contracts, the way it basically works for guys drafted and signed at 18 is like this: your first contract is an ELC, subject to the rookie terms outlined in the CBA. When it expires, you don’t have arbitration rights – you need another year of service. The team can qualify you and you have no leverage to force anything better other than withholding your services. If the team’s going to give you something better than your qualifying offer, it generally wants something in return: one of your years when you’re eligible for arbitration. After that second contract, you’re arbitration eligible, which gives you considerably more leverage. You can now force a contract that’s comparable to what comparable players make.

    In theory, if you sign a player to a bridge deal, you’d expect the third contract to have a higher cap figure. Assume, for the sake of discussion, that RNH isn’t signed in the next week or so and plays out his ELC. The Oilers enter into discussions with him next year and he wants a long term deal. As he has no arbitration rights, his leverage isn’t great: holding out hurts the Oilers but it also prevents RNH from getting paid and he’s going to have to make some sort of a deal to get his service time to get to arbitration.

    How, then, does RNH get that big money deal? He gives the Oilers something, in the form of years and price. If he can’t make a long term deal, he either takes his qualifying offer or signs a bridge deal that takes him into arbitration. Now, in theory, when he’s arbitration eligible, he has much better leverage, which should result in more favourable terms to him.

    Anyway, it’s the last sentence of Dreger’s piece that caught my eye because, frankly, it seems incorrect. While the Maple Leafs and Canadiens have both had high profile cases in the last twelve months involving disputes with Nazem Kadri and PK Subban and their second contracts (and they tend to suck up a lot of the media oxygen in Eastern Canada), my gut feeling was that this wasn’t really the case since Lockout II for highly drafted forwards who have produced. I don’t have any sources to tell me how the world works, so I went and looked.

    Screen Shot 2013-09-18 at 3.06.11 AM

    It’s probably easier to summarize it: forwards drafted in the top five who’ve taken fewer than five years on their second deal are Matt Duchene, Kyle Turris, Jordan Staal, Benoit Pouliot, Blake Wheeler, Andrew Ladd, Nikolai Zherdev and Eric Staal. Everyone else got five or more years. Outside of the Brothers Staal and Duchene, those guys are all pretty easy to group as guys about whom there were still some doubts after their ELCs had expired. The Penguins couldn’t really go any higher with Jordan Staal, given that they were close to the salary cap. In retrospect, I bet that they wish they’d found to tack some more years on the deal – failing to get a fifth year on his contract might have cost them the Stanley Cup last year.

    (Parenthetical: you’ll recall that when the Oilers signed Dustin Penner, Brian Burke complained about many things, including Kevin Lowe wrecking bridge contracts. Bridge contracts were already dead, in that players might think they could get better – just look at the deal the Blue Jackets did with Rick Nash. They weren’t dead in that you could still say to a guy that he wasn’t getting more than two years at a low price.)

    Looking at the guys on whom teams went long right away, it’s hard to find any cases where the team would be unhappy with how the contract worked out. The Ovechkin deal has some potential to be a stinker but Washington could have done a deal for half that length and Ovechkin would probably have a lot of value in a trade right now if they had, what with just having won the Hart Trophy.

    There’s some Bayesian logic at work here, I suspect, although the people doing these deals probably don’t think about it in those terms. A forward who’s selected in the top five is a guy who’s expected to be a star in the NHL. If he comes into the NHL and shows that he’s an above average player at a young age, amongst a couple of the best players his age, well, you already thought he was going to be a star and there’s more evidence of it.

    As you start to get further from the top picks, you get into players about whom there were more doubts when they were drafted – if they’ve got a short resume in the NHL because they spent some ELC time in the AHL, like Nazem Kadri or Logan Couture, it makes more sense if you’re a team to resist a request for a longer term contract, because the NHL performance jibes less with previous thought about the guy. Your certainty that he is what his numbers are is lower.

    My thinking has always been that the five and six year deals are a win for the team because you’re buying out some UFA years. In effect, you pay more before a guy is arbitration eligible in order to pay less when he’s a UFA. Assuming your team has no cap problems, that will extend your window of (hopeful) contention. I have to admit though, that while writing this post, I happened to catch a look at Matt Duchene’s third deal. You’ll note that Duchene is one of the rare guys who was a) very good and b) signed a bridge deal.

    Duchene, who went third overall in 2009, is heading into the second and final year of his bridge contract. He signed his big contract with the Avalanche and got five years at $6MM per.

    That’s big money but let’s contrast what Duchene will earn in the first seven years post-ELC with what John Tavares and Evander Kane, drafted in the same year, will earn:

    Screen Shot 2013-09-18 at 3.06.02 AM

    As it stands, Duchene’s guaranteed more money but Tavares and Kane both get to become UFAs in 2018-19. It wouldn’t surprise me in the least if top level guys are making north of $10MM a year then, so when it all washes out, I won’t be surprised if they make an extra $5MM+ over Duchene for the same period of time.

    That seems to contradict my theory of how this stuff will work. Duchene had leverage that Tavares/Kane didn’t have, in that he could have said “To hell with signing a long term offer – I’ll go to arbitration in 2014 and 2015 if I need to and then I’ll go UFA and get my $8MM a year.” Duchene would have had to be qualified at $3.75MM in 2014 – it’s hard to see him earning much less than $5MM for his last two RFA years. Then he’s a 25 year old UFA looking at, what, max years and $8MM per? At least?

    So at least in Duchene’s case, I’m not sure that the theory worked out. The Avs look to me to have a screamer of a deal on him. I wonder the extent to which not yet having got enough money to build a castle on the moon plays into that. If you’re Matt Duchene and the Avalanche have just offered you $30MM for five years, that’s “Never work again and do pretty much anything imaginable” money. He’s done well to this point – he’s probably made $10MM or so – and while that’s a pile of money, by the time you pay your taxes, you’re left with a pot of money that lets you live very well for life but not incredibly so.

    $30MM though – that’s a life changing amount of money. So you’re faced with a choice: do you try to get every dollar possible by going year to year on your contract or do you take the $30MM and not worry about the fact that maybe you could make $40MM over those five years (with another five years of big money after that) if you took more risk? Tom Tango has pointed out repeatedly that baseball players seem to sell their early years too cheaply in exchange for that first huge contract. It strikes me that that’s a pretty reasonable explanation for what we’ve seen here.

    It may be that the temptation of that set for life contract is something that I’ve been underweighting – I’ve always figured that if you do a bridge deal and let a guy get to arbitration, it’s going to cost you substantially more than if you do a long-term deal when he doesn’t have the leverage of arbitration. Maybe, if a guy isn’t set for life beyond his wildest dreams (and that line is probably different for everyone – Eric Staal’s third contract, signed when he was one year from UFA status and had already earned $17MM or so, was worth almost $58MM), you can still get a deal at a great price even if you do a bridge contract first.

    What does this all mean for RNH and the Oilers? Well, I think that the ship has probably sailed in Edmonton in terms of how you treat high draft picks coming off of ELCs if they’ve produced, as it has in the rest of the NHL. RNH has the fifth highest pts/gm of any NHL player who played at least 100 games as a teenager since 1990, and he did this with a bum shoulder on a terrible team (albeit he generally played with skilful linemates). There’s reason to think that he’s going to be a really good defensive player as well, a guy who gets it done at both ends of the ice.

    So he’s produced. My hope is that they go to eight years with him and that if he’s trying to do a shorter deal that they don’t bite. Look back at that list of high draft picks who did five or six or seven years and ask yourself: in how many of these cases would the team have wanted to be able to extend the deal for the same money? I’d suggest that the answer is: all of them. If you’re going to do the contract that sets the guy up for life, you might as well get that extra year tacked on there. Everybody’s different but if he’s looking at castle-on-the-moon money, it’s maybe a bit easier to give up that extra year to get it – we saw Duchene take a pretty reasonable deal for that money and it happens with guys in baseball. Baseball’s not hockey but people are people.

    Anyway, my basic points are these: bridge deals with top five draft pick forwards who’ve produced aren’t really the way that the NHL has gone, regardless of what you might hear. If we can learn anything from the surprisingly reasonable Duchene extension, it’s that you might be able to get a very reasonable third contract even if you do the bridge deal. That said, the Oiler die are kind of cast on this with Hall and Eberle having been paid and getting a third guy into that structure hopefully makes things a bit easier with Yakupov when the time comes. If the Oilers get RNH and Yakupov onto the same sort of deal as Hall and the three of them produce like first overall draft picks, there’s a better than average chance that they’ll end up with a three year window towards the end of Hall’s contract in which they’re paying $18MM for talent that would cost a combined $30MM on the open market.

    That’s a hell of a first step towards having enough money to have a perpetually contending team.

    Email Tyler Dellow at mc79hockey@gmail.com

    About Tyler Dellow

    20 Responses to Bridges and the Nuge

    1. Dennis Laurie
      September 18, 2013 at

      Nice piece. Your analysis is much appreciated.
      Random, smile-inducing point: #12 on that list of top PPG teenagers = Sam Gagner.

      Here’s to hoping that the Hall and Eberle examples, along with new management (in part) and a (I’m projecting) good new coach, will convince RNH and Yakupov (don’t forget about J. Schultz) to lock in long term at around $6M as well.

    2. Brad
      September 18, 2013 at

      The Dreger comment is clearly about Lockout III, in my opinion. That’s when Subban and Kadri’s deals were signed, after the new CBA. So I think that all the data from before lockout III is kind of irrelevant. NYR are trying to do the same thing with Stepan.

      • CJ
        September 18, 2013 at

        Tyler’s comparison is more relevant than yours. He is comparing top 5 picks. The players you mentioned were drafted outside the top five. Two are actually drafted outside the first round.

        • Brad
          September 18, 2013 at

          And they’re all from a different CBA. There’s more than one important variable at play here.

          • Tyler Dellow
            September 18, 2013 at

            I’m not sure how this being a new CBA matters. The system is basically the same – this isn’t a change like 2005. The trend was pretty clear under the old one. We’re seeing the first players who were top 5 F picks sign under this one and it’s the same thing.

            • Brad
              September 19, 2013 at

              One of my interpretations of the lockout was all the owners hand-shaking on what their ELC players should get after the deals expire.

              That’s why I thought this post kind of missed a major point.

    3. speeds
      September 18, 2013 at

      I’ve always found the Couture bridge contract interesting, in that he signed a 2 year bridge contract one year prior to his ELC expiring. Tyler, did you come across anyone else that signed a short bridge contract 1 year prior to his ELC expiring?

      • Seamus
        September 18, 2013 at

        Sean Couturier also did this, which means that it must only be something players whose last names start with ‘Coutur’ do.

    4. speeds
      September 18, 2013 at

      “How, then, does RNH get that big money deal? He gives the Oilers something, in the form of years and price. If he can’t make a long term deal, he either takes his qualifying offer or signs a bridge deal that takes him into arbitration. Now, in theory, when he’s arbitration eligible, he has much better leverage, which should result in more favourable terms to him.”

      The only thing I would add to this is that he potentially could look at an offer sheet as well. I realize I talk about offer sheets more often than they actually happen, but the potential is there even if it’s not as likely as I think it maybe should be were RNH to become an RFA next summer.

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    6. Seamus
      September 18, 2013 at

      Hard to know where Dreger gets his information – bridge deals really aren’t a good idea unless you expect A: your player to not continue to improve B: you expect the salary cap to go down/stay about the same or C: you simply can’t spare the cap room in the upcoming season. Then again, it’s not Dreger’s information I necessarily suspect, more his motives.

    7. Roke
      September 18, 2013 at

      There certainly seems to be a media affinity for bridge contracts these days (as you mentioned, the large media markets have a lot to do with that).

      I’m interested in seeing if they will still be viewed in a favourable light next summer when the Subban bridge blows up. As things stand, he’s probably in line for a record arbitration award given that Weber got his record $7.5 million for his UFA-2 year award without a Norris trophy to his name.

    8. Mike
      September 19, 2013 at

      The wildcard with Nuge is the shoulder surgery. You made the point that young players will potentially take a lower annual salary if the total amount of guaranteed money is high enough. If there was ever a time to leverage that in negotiations, it’s with a kid coming off a major surgery. It would take brass balls to turn down $48MM over eight years, especially if the deal was front-loaded.

    9. JustWatt
      September 19, 2013 at

      Very interesting stuff Tyler. If it works out like you are projecting then I think that the Hall contract may stand out as the single verifiable feather in Tambo’s cap.

    10. JDM
      September 19, 2013 at

      Tyler, I re-posted your article as a quote on the CP forums with a link to this site. Let me know if that’s not okay and you want me to take the text down, and I’ll do that.

    11. Mac
      September 20, 2013 at

      A note on a stat you included in this article –

      Ryan Nugent Hopkins didn’t play 100 games as a teenager.

      He’s played 102 career games – 99 as a teenager and the last 3 games as a 20 year old (check his game log).

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    13. David
      September 25, 2013 at

      A consideration is that the Oilers currently don’t have any sort of cap squeeze, so it makes sense for them to pay more for RNH in the next couple of years more so than down the road in his UFA years, when they expect to have a contending team. They’ve front-loaded his cap hit, in a sense.

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