the devil in the details

The New Jersey Devils inked a precident setting deal to sign All-Star forward Ilya Kovalchuck today.

Is your head spinning at just that thought?

One of the least offensively minded teams in the history of hockey just signed one of the more prolific scorers in the game a franchise defining deal.

One of the traditionally, reluctantly shy teams when it comes to both player salary and long-term commitment just brought a guy on for 17 years at $102mm.

In some ways the deal makes complete and total sense for New Jersey and here’s why despite all the more seemingly obvious reasons why people are still questioning him coming over at the deadline last season in the first place.

The star factor.

Martin Brodeur is the current face of the franchise. Since 1991 he, along with a handful of other Devils helped take a struggling for respect third-wheel in the New York market franchise and turn it into a three time Stanley Cup Champion. Going into a twentieth season, Brodeur is still a force to be reckoned with but how much longer does he really have between the pipes as a premier goalie?

It is not a matter of if, but when, this will occur. Sure, the Devils can probably subsist in a few lean years of life without Marty as a starter, and much like with the hyped retirement of Scott Stevens they can probably string along the special game nights for a while. then what? Kovy gives them a quantifiable replacement, at least on paper, for the star power Marty commands. It will transform a new generation of Jersey kids into fans and continue to beg, borrow and steal from the Flyers, Rangers and Islanders next generations of fans locally. It will keep the national spotlight on a franchise it seems like everyone outside of North Jersey loves to hate. It will make sure seats are still filled, now for sniper as opposed to a net minder.

Players of Kovy’s power are few and far between and for an extremely business minded and cost conscious franchise this kind of deal makes sense for potentially ensuring the long term stability of the franchise.

The player factor.

The last few seasons, despite the popular notion the Devs are a D-only team, saw them emerge with scoring potential. The explosive development of Zach Parise alone turned heads when his name pops up among the likes of Ilgina, Ovechkin and Crosby among the league leaders and they aren’t done there with solid scoring players coming up through the system.

Kovy compliments this strategy in play. His possesses great vision of the ice, great poise in executing and has a scoring tough, while developing from his youth into a solid two way player. He can open up more ice for guys like Parise and Gionta by forcing opposing teams to focus on him. He can impart some of his developed wisdom on the ice to the rest of the guys still developing their own offensive style. And, yet, he can still fit into a more conservative system that emphasizes puck responsibility and control because he understands those elements well enough too.

The Win factor

Since the 1987-1988 season, their first playoff appearance, the Devils ran off 20 playoff appearances (only missing 88-89, 95-95 and the locked out 04-05 seasons) that include 9 regular season division 1st place, 6 conference final appearances, 4 Stanley Cup appearances and 3 Cups. 2009-2010 capped off 13 straight appearances, however it’s been six years since the last Stanley Cup appearance, which they won back in 2003. They have yet to return even to a conference final since and exited in the first round each of the last three seasons.

The Devils ower Jeff Vanderbeek, who joined the ownership group in 2000 and gained controlling interest in 2003, spearheaded their recent move to a new stadium in Newark, NJ in 2007, desperately wants to win. Despite all the success since Lou Lamoriello took over as GM in 1987, including the 3 Stanley Cup wins in 4 appearances in only a 10 season stretch, the patience might be waning for the current owner who has yet to experience anything as dramatic as of late especially since the move.

An acquisition like Kovy, on paper at least, looked to be an attempt at bridging the gap in the playoffs to re-attain the Cup. By seeking to hold him long term it would be an establishment of a return to dynasty status in success rather than being a one-and-done success. If ever there was a time to make another run at their former glory, now seems to be the time for everyone involved, including their new coach.

The Pure shock of it all

Kovalchuk is to earn 6MM each of the next two seasons, 11.5MM for the following five seasons, 10.5MM in the 2017-18 season, 8.5MM for the 2018-19 season, 6.5MM in 2019-20, 3.5MM in 2020-21, 750K the 2021-22 season, and 550K for the final five years that are to run through the 2026-27 season, when Kovalchuk will be 44. The Cap Hit for the Devs is 6MM for an 102MM 17-year epic.

That is a rattling set of numbers any way you look at it. Doesn’t matter what team it is, it is going to put you on the map.

In comparison on the age and length of deal front for some recent contracts (rounded):
Roberto Luongo inked a 12 year 64MM deal, Cap Hit 5.3MM. Final 3 Years of his contract 1.6MM, then 1MM final two; contract expires at age 43
Marian Hossa inked a 12 year deal 64MM, Cap Hit 5.3MM. Final 4 Years of his contract 1MM per season; contract expires at age 42
Chris Pronger inked a 7 year 34MM deal, Cap Hit 5MM. Final 2 Years of his contract 550K per season; contract expires at age 42
Mattias Ohlund inked 7 year deal 25MM; Cap Hit 3.5MM. Final Year of his contract 1MM. contract expires at age 40

And for good measure, Alexander Ovechkin inked a 13-year contract at $124MM. The deal comes with a healthy annual salary cap hit of roughly $9.5 million and releases him around age 35 to UFA status.

Put yourself up there in competition with Ovie or Zetterburg as a league super-elite and it’ll certainly garner attention as a player and for the franchise you go to. Put yourself in the shoes of franchises like the Hawks and Wings or to a lesser degree the Canucks or your rival Flyers and it’ll get attention. After all their success over the last 20 years and still not garnering respect around the league a signing of this nature is a catapult in status.

It won’t stick

The differences between these contracts, and say, the Kovy one are several and fairly straight forward. Run the numbers calculated below for Kovy and the Devils on any of the above contracts and you can see exactly why this is such a standout that isn’t about the extravagantly high totals. There is no way the league, or other owners for that matter, will stand for this kind of salary distribution. It sets a dangerous precedent of circumventing the cap well beyond what the league sadly turned a blind eye to already. It won’t be good for the league when it cannot enforce the cap any longer. It will not be good for the teams when they end up finanacially strapped because of these types of deals. It will not be good for the players as salaries become more and more disparaged between those who might command and those who don’t.

With the number of players coming up for UFA over the next few seasons and the assumed caliber of play and marketable status, contracts structured like this will re-enforce the problem and probably push it into incalculable territory as players demanding money and owners willing to pay it to win work even further in the shadows outside the established system.

Skewed Contract Terms

Dissecting the shear numbers of the contract alone would get this one red flagged as it is plagued with inconsistencies, setting the tone for any number of other voidable arguments.

The established Cap Hit on the contact is 6MM based on the 17 year 102MM totals. The breakdown of the actual salary helps establish some interesting trends… Six of those years he earns near the league maximum, while in six years he earns close to the league minimum, while only 3 seasons fall within the average Cap Hit during the contract and two fall somewhere else.

1 $11.5 million 5 season, 5.5MM above cap, 27.5MM
2. $10.5 million 1 season, 4.5 above cap & total
3. $8.5 million 1 season, 2.5MM above cap & total
4. $6.5 million 2 season, 500K above cap, 1MM total
5 $6 million, 2 seasons, AT CAP
6. $3.5 million 1 season, 2.5MM below cap, & total
7. $750,000 1 season, 5.25MM below cap & total
8. $550,000 5 season, 5.45MM below cap, 27.25MM total

9 seasons over Cap Hit for a total of 35.5MM in salary exceeding the Cap Hit, average 3.9MM per season
2 seasons equaling Cap Hit, average
7 seasons below Cap Hit for a total loss of 35MM of salary spent below Cap Hit, average of 5MM per season
Aprox imbalance of 500K of gain over the length of the contract but a 1.1MM difference in yearly average loss.

Note, the final 7 years of the contract, 42% of its total time, is only 7MM or 7% of its cost, or only 1MM higher than the actual contract average. Meaning the remaining 93% of the cost, 95MM, falls in the other 58% of the time, first 10 years.

In comparison the back end of Kovy’s contract is excessively unbalanced compared to similar contracts the league questioned:
Roberto Luongo Final 4 seasons worth 5.8MM or 25% of the time and 9% of the salary.
Marian Hossa Final 4 seasons worth 4MM or 25% of the time 6.25% of the salary
Chris Pronger Final 2 seasons worth 1.1MM or 28% of the time 4% of the salary.
Mattias Ohlund Final season worth 1MM or 14% of the time and 4% of the salary

It is this type of skew that makes the contract so interesting to the league and other players, because it does something few, if any, other contracts manage to accomplish both in eye-popping numbers on the surface and interesting combination of numbers underneath to manipulate the system, especially considering the likelihood of Kovy playing out the entire length of the contract to begin with.

Blatant Underpayment

Kovy’s contract is heavily front-loaded that he is paid zero premium to close out the contract. To begin with, he’ll be earning the $550K, just slightly above the current league minimum for the final five years, beginning at age 39. To give you an idea of how few players are currently earning that little on the 2010-11 rosters 42 out of the 575 currently signed players listed on NHL Numbers will be at or below $550K or 7% of the league. For the final third of his contract he will be in the lower 10% of the league earnings despite the perceived superstar status the contact has. Of the players in the lower 10% only five are at or over the age of 30 and none over 35 at present.

It doesn’t get much prettier backing the contact up a little bit either to a 38 year old Kovy earning 775K. The under a $1MM crowd in total is only 160, or just over 25% of the league and of them only 22 are at or above the age of 30 and none over the age of 35. It takes a six digit salary to find the league’s first low-wage veterans over 35: Mark Recci earning 1MM at age 42 before heading to UFA status, Todd Merchant earning 1.25MM at 37 and 38 before heading to UFA status, Adam Foote earning 1.25MM at 38 and a slated 1MM at 39 before heading to UFA status, Ian Laperriere earning 1.16MM at 36, 1.2MM at 37 and 1MM at 38 before heading to UFA status. At 38Kovy’s earning less than any of these guys currently make at the same age and is supposed to be at or exceeding the caliber player they each were at Kovy’s current age.

None of the guys above with questionable contacts even come close to the gross underpayment Kovy is receiving in the final years of his contract. Pronger comes the closest hitting that 550K mark the final two years or 28% of the contract term, closing out a career at 42. Kovy, at 42 would have already earned 3 years of that same under-payed salary and still have two more coming.

Six years, over one third of the contact, is longer than any other deal is stretched out without paying a premium for a player so far. It is not just the shear length of the contact but the length of the underpayment that will garner the red flag from the league knowing how few players, even elite ones, make it over the age of 40 in the current league.

Recalculated Cap Hit

The underpayment itself is a symptom of the bigger problem and that is how the lengthy underpayment redistributes the Cap Hit over the course of nearly two decades for the team. Over 40% of the contract assists in generating an additional 60-plus% savings each year for the remaining almost 60% of the contact time. That should definitely raise a few eyebrows, since the average hit includes the entire contract by stretching the contract out an additional 7 seasons it reshapes the hit significantly.

Yes, it would seem the Devils catch a break on the average salary the first decade as his average salary would be well above the 6MM cap hit would be overpaying significantly in the final seven years of the contract. But that’s where the catch comes in (if I understand the current Collective Bargaining Agreement). The average player salary only counts against the cap during the years the player is actively on the team roaster, not the years the player is on total payroll.

Meaning, if Kovy retired at 37 when his slated 3.5MM salary dropped below the 6MM average cap hit the contract creates the Devils are off the hook for the Cap Hit from that point forward. Even if he waited an additional year, or even two, it still created ample savings over the time his salary actually did count toward the cap.

If you take the final six years and their combined salary of 3.525MM off the full contract you get an 11 year deal of about 98.5MM, or a Cap Hit of 8.9MM. Compare this with the substantially lower Cap Hit in the current structure of 6MM and it creates a nearly 3MM difference in yearly clearance.

Add in a seventh year, at 3.5MM and it brings the contract down to 10 years of about 95MM, or a cap hit of 9.5MM and 3.5MM difference. That is a significant savings in Cap space over a possible 10-year span, allowing between 30-35MM in additional salary spend total.

Then consider these recalculations
Roberto Luongo original Cap Hit 5.3MM over 12 years. Revised contract 8 years at 58.2MM. Revised Cap Hit 7.25. Savings 1.9MM yearly or 7.9MM over the contract.
Marian Hossa original Cap Hit 5.3MM. Revised contract 8 years at 60MM. Revised Cap Hit 7.5MM. Savings 2.2MM yearly or 8.8MM over the contract.
Chris Pronger original Cap Hit 5MM over 7 years. Revised contract 5 years at 32.9MM. Revised Cap Hit 6.58. Savings 1.58 yearly or 3.16MM over the contract.
Mattias Ohlund original Cap Hit 3.5MM. Revised contract 6 years 24MM. Revised Cap Hit 4MM. Savings 500K yearly or 1MM over the contract

Overall Perception

The Luongo one is probably the head-scratcher for a couple of reasons and yet the league, after a lot of fuss, ended up letting that atrocity go through too. Odd to see anyone commit to a goalie for any real length of time, forget about an additional 12 seasons on top of what he already played. Then again, he’s the captain and there’s probably a thought too he’d be a solid perennial backup in his twilight years as a mentor / coach type of guy based on his leadership early on. Will Luongo probably be over-payed still making 1MM at 43 if he survives as a backup that long? Perhaps, but in terms of how the contract logistically breaks down it falls within the scope of others in the league even if it is almost as erroneous as Rick DiPietro’s epic 15-year debacle.

Hossa’s contract drew the ire of the league and was essentially the last straw. When it was signed the league threatened but when all the numbers were laid out it was not as awefully misguided as perhaps the hype would have hoped. After all, some of the stunning nature came from Hossa himself and the inability to stick with a team in what seemed like a cursed quest for the cup, bouncing from rival to rival for a shot. To suddenly settle down from hired gun to franchise face seemed out of character and shed a spotlight on him and the contract. Will be play through it till 42 or retire at 38 and provide a 4MM cushion to the Hawks at the end, who knows. As with everything Hossa, it’s anyone’s guess at this point as he’s been so full of surprises.

But Kovy it was more the drama not resigning with the Thrashers to join the Devils and be a contender while not wanting to have that perception of being a mercenary. Re-signing with the Devils made sense but when the ridiculousness of the contract made it seem more like Ovie-envy and less about playing hockey it immediately became the league’s business to be scrutinous, especially after the Hossa contract.

Voidability

Everyone knows what’s coming next and if the league doesn’t crack down on this one they will lose more than face in the matter, they will lose control itself as it undermines the cap, the next collective bargaining agreement (or two, or three for that matter), and what little faith might be left in the league to police itself. This isn’t the first one that circumvented the cap, but it was certainly one of the most patently blatant ones by the shear numbers of it all and after all the warnings and all the hoopla and all the speculation, here we are, waiting to see if the league.

It’ll be as much about conspiracies like how much Bettman and the league hate the Devils and how the league wants to crush the players union and so on. Yeah, theory aside as to why Hossa and the Hawks were allowed leeway (does the league really like Hossa or the Hawks that much? maybe after that Stanley Cup win one might imagine a perfect storm of conspiracy) or Luongo and the Canucks (wait, doesn’t the NHL not like Canadian teams AND goalies as captains, so huh, explain that one) or Pronger and the Flyers (league never liked Pronger who are you people kidding and the Flyers fight, Bettman doesn’t approve of violence it scares the passive fans away)… the real reason this one should and most likely will get rejected is purely in how you play the numbers.

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About thedoormouse

I am I. That’s all that i am. my little mousehole in cyberspace of fiction, recipes, sacrasm, op-ed on music, sports, and other notations both grand and tiny: https://thedmouse.wordpress.com/about-thedmouse/
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