• The NHL’s New Salary Structure And Paying Stars

    by Tyler Dellow • February 27, 2014 • Hockey • 8 Comments

    I’ve got a piece up on Sportsnet right now talking about the Leafs contract negotiations with Dave Bolland. It includes this graph of how the salaries of the Xth highest paid centre in the NHL have changed since 2003-04.

    The point I’m trying to make is that it’s sort of odd that the big salary growth has taken place down the line – the 20th through 80th highest paid centres or so have all enjoyed salary growth that’s higher than the league average salary growth for centres. If you suspect that this is growth driven by the structure of the post-2005 NHL, in which all teams are required to spend money within a narrow band, it’s reasonable to be suspicious that this salary growth doesn’t necessarily correspond to how good those types of players are. It may be that the NHL’s structure has resulted in the NHL becoming much less efficient at delivering the money to the players who deliver the results (I think it has) and that teams should be leery of committing to guys like that.

    I was curious about how salaries have changed for defencemen and goalies too, so I put together the appropriate graphs. For the defencemen, I took the top 180 guys in terms of TOI in 2003-04 and 2013-14 and then sorted them by salary. That produces the following graph.

    The defencemen have enjoyed much bigger salary increases than the centres, for some reason. The centres are up 26%; defencemen are up 54%. The really massive increases have gone to the D who are between about 45 and 105 on the pay charts. The highest paid guys have enjoyed much less in the way of salary increases, with Zdeno Chara, third in 2013-14 salary, actually making less than Rob Blake, third in 2003-04 salary did.

    Have the guys between 45 and 105 become that much more valuable relative to the top-end guys? I doubt it. The one concern that I have with this comparison is that non-UFA age defenders probably used to be underpaid relative to FA guys and some of this change represents guys in their mid-20s getting paid – Drew Doughty and Alex Pietrangelo. Even with that though, this still doesn’t really make sense to me. There are some nice players in the 45-105 spots on this list but there are a ton of guys who you look at and wonder if they’re anything more than fifth or sixth defencemen.

    What about goalies? Even odder. With goalies, I just compared the 50 highest salaries in 2003-04 and 2013-14.

    The goalie salaries have increased about as much as the centres – 25% or so. Again, the growth isn’t with the stars but down the line, with the big increase occurring from about 28 on.

    On the one hand, this is kind of puzzling. Most people I know who talk about goaltending figure that outside the top five or ten guys or so, the differences start to get pretty marginal and can be easily swamped by chance. It’s bizarre that the top end of the goaltending market, where you can find people you can be relatively comfortable are difference makers, hasn’t really enjoyed much in the way of appreciation post-2005. Meanwhile, further down the line, guys are getting paid.

    I’m not as surprised by the big increase for guys beyond 30 or so on the pay list. What’s the difference between 35th and 20th best goalie in the NHL? Probably not much. I can see an argument that once you’re out of the elite, buying two guys and letting them fight it out makes sense. That may well result in salary charts like this.

    What does this all mean, in the big picture? I’m as convinced as I ever was that real stars are underpaid. I’ll be interested to see if some team ever decides to kind of operate on that premise. Take Phoenix as an example. Over the past four years, they’ve made the playoffs three times, just missing last year by four points.

    They’ve finished each of those seasons with between $9MM and $13MM in payroll room. The question, it seems to me, is what a competent team willing to spend to the cap could do if it paid, for example, Steve Stamkos, $16MM per year. There’s been an assumption in hockey that you can’t win like that, an assumption that’s probably at least partly due to the troubles that Tampa had in the late mid-aughties, when they were spending big money (for the time) on Vincent Lecavalier, Brad Richards and Martin St. Louis. I’m not sure that that’s the case, because I look at Phoenix and I wonder how good they’d be if you plunked Stamkos into their team (this assumes that they could afford to be a cap team).

    Put another way: if Phoenix can ice a competitive team with a pile of cap room by shopping after the rich clubs have grabbed all the sexy Dave Bollands off the pile and paid them big money, doesn’t that suggest that, in fact, a Phoenix type team with some real star power added at top end wages could be a contender? I’m inclined to think that the answer is yes.

    Email Tyler Dellow at mc79hockey@gmail.com

    About Tyler Dellow

    8 Responses to The NHL’s New Salary Structure And Paying Stars

    1. Matt Pfeffer
      February 27, 2014 at

      This is some good work. It’s obvious from this NHL management doesn’t have a good handle on value, and are just trying to spend to their budget. From what little experience I have with front offices it seems teams visualize their team from a ‘filling holes’ perspective, which is the big driver of inefficiencies in the league.

      What I’m getting at is that teams don’t think of their teams as a bunch of players providing x number of goals above replacement, but as a bunch of guys who are filling roles within the team. This leads to an inability to assign proper value to players, especially FAs. Of you need a 2C you need a 2C, as opposed to properly calculating the marginal value in adding that relative to the value in upgrading elsewhere.

    2. wheatnoil
      February 27, 2014 at

      Really interesting work. Although I agree with your main point, wouldn’t the fact that there’s an individual salary cap have an effect on the top paid players? The first team salary cap was $39 Mill and the individual cap was $7.8, which is significantly less than the top players were making in 2003/04. Even now, the max player cap hit is something like $12.8 million (20% of the team cap) which puts an arbitrary curb on the elite players salaries.

      Mind you, the top players cap hits don’t hit that 12.8 million I don’t believe, but I wonder if that has an effect on the payouts for the top players.

      (And please correct me if I’m not understanding the CBA around individual player caps)

    3. Tim D.
      February 27, 2014 at

      This might be simplistic on my part, but wouldn’t we expect there to be a greater percentage rise in players salaries in the middle of the graph as a $1 million increase to a $4 million salary is greater percentage increase than a $1 million increase to a $10 million salary?

      I understand that (one of) the problem with this argument is that you would expect to see a consistent increase in the blue percentage line on the graph. Thinking out loud, but would the entry-level system (and the perceived rise that rookies or players on ELCs are more likely to be seeing playing time in the NHL – I don’t know whether the number actually bear this out), which has restricted salary growth through slotted salaries that don’t grow at the same rate that salaries for non-team controlled players grows at.

      To that end, would it be a more accurate reflection of the change that these players have had – and GMs spending habits – to judge it based on the % of the salary cap that they are taking up (and I understand that you are comparing pre-salary cap salaries with salaries now under the salary cap)?

    4. Aaron Luchko
      February 27, 2014 at

      I’m not sure how this necessarily leads to the assumption that stars are overpaid, I might draw the conclusion that the extended RFA period of the previous era led to top RFAs being underpaid and artificially depressing the mid-range salaries that are now rebounding.

      Not sure how to test that idea though, there’s not a lot of top players from which to gain data, particularly not ones who went to free agency. And some like Crosby might take a lower salary with the motivation of allowing better teammates to be recruited.

      • March 5, 2014 at

        “What does this all mean, in the big picture? I’m as convinced as I ever was that real stars are underpaid.”

        He’s not saying stars are overpaid – he’s saying the exact opposite. The entire point of the graphs is that the bulk of the new money coming into the league is going into your mid-lineup centers and defensemen, and that your stars of the league have not increased their earnings commensurate with the overall increase in wages throughout the league.

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    6. ranford4life
      March 3, 2014 at

      Great stuff, as always Tyler. This is a great way of visualizing the inefficiencies created in the market by the salary cap.

      Another way of looking at it would be to consider each player’s salary as a percentage of the salary cap in that particular season. Looking briefly at defensemen in 06-07 ($44m) vs 14-15 ($71.1m), there is a massive gap in the top 20, and they’re essentially equal by about #35.

      My question for you is, where did you pull the comprehensive salary data from? Capgeek limits my queries to only the top 50 results. I’d be very interested to see what the top 200 defensemen look like as a percentage of the cap.

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