A Bridge Over Troubled Water – Gaudreau’s Contract

September 1st, 2016 | Posted in Commentary
By: D'Arcy McGrath

This wasn’t supposed to happen.

A team in a rebuilding cycle with two young stud forwards up front, both due contracts, would simply sign their star players and get back to the work of moving up the NHL ranks with a young roster. The players want to be in Calgary, the Flames want them here long term. Easy peasy right? Think again.

Seems nothing in life or hockey is ever as simple as it seems.

And that could be a good thing, trust me.

The future of an organization is often embodied in one or two young individuals on a roster but like dust in the wind, they are only here for a blink of an eye for a franchise that has been in Calgary for 37 years, and will likely be having similar arguments with future players in 37 more.

All too often GMs either through job security or the excitement of the “moment”, open the vault for young players, signing them to whatever their agents want in order to keep the good times rolling. A mistake that inevitably comes back to bite them in the collective butt. Up in Edmonton, Kevin Lowe and Craig MacTavish’s Oprah like contract negotiations; “You get 6 years x $6M!, and you get 6 years x $6M!, and you get 6 years x $6M!”, resulted in a Taylor Hall trade to adjust a team built up front with similar players, and a tight cap situation to fix the blueline. Something had to give.

The Flames have to be prudent, a firm statement that will never be popular with hockey fans that want the club’s “face”, Johnny Gaudreau signed and ready for action when the puck drops in the preseason shortly after the World Cup.

Rumour vs. Fact

To delve into this I think it important to first state that only a select few truly know what is going on. You hear things, and with that certain assumptions can be made, though often they are incorrect. If I was to believe the Mark Giordano contract situation rumours offered up by Nick Kypreos of Sportsnet then the captain would have been a UFA this summer and likely playing in Pittsburgh or Washington this coming season. They were either proven false, or they were interpreted incorrectly. A demand for $8M a season could have been an opening position, one that the agent knew would morph into a more reasonable landings spot for example.

Recently Sean Monahan landed at a contract that seemed all to predictable after the likes of McKinnon, Forsberg and Scheifele all signed in July. Yet it took almost 7 weeks longer to get Monahan signed to a dollar amount that seemed obvious most of the summer.

Did the Flames finally cave after insisting on $5M per season for weeks on end? Did Monahan’s agent finally concede after attempting to push the contract into the $7M range? Was term the issue for one or both sides? We will likely never know. But it got done, as they often do.

Rumblings have Gaudreau wanting term and dollars and with that the discussion begins on how best to get a contract done in time for training camp.

RFA/UFA Structure

The Gaudreau contract is a very unique one to negotiate for a few performance and structural reasons.

He’s young, and has only played two seasons with his 2nd season putting him in the top ten in NHL scoring. Generally players don’t drive to this level of performance on entry level contracts, and certainly not when the entry level contract only spanned two years (third year was burned with one game played two plus years ago).

As a result you get a dominant NHL player looking at a max term deal that is comprised by a majority of RFA years instead of UFA. This leads to a problem in mathematics in order to get an average or AAV (average annual value) that makes sense for both parties.

If Gaudreau was 26 and exploded in year 5 of his NHL career it would be much simpler. He’d have 2 years left of RFA team control and would be able to tack on 6 years of UFA to drive the contract value up. In a league where open market wingers are getting $6M per year (Lucic and Eriksson) with all 30 teams available to bid it’s hard to justify $8 or $8.5M per season for a player with only two years of experience. Now clearly Gaudreau is the better player, but part of that better player status is accrued based on his age, which returns us to that RFA argument once again.

While he may not outwardly agree, I would guess Brad Treliving understands the $8.5M number for Johnny Gaudreau if he was a UFA, it’s the RFA years that are holding this whole thing up.

If you give a player a lot of money in RFA terms, say $5.5M per season, and then the $8.5M per year of UFA years, Gaudreau’s contract comes in at an AAV of $6.6M. That deal would get signed today if the Gaudreau camp was in agreement. That same structure with Gaudreau three years older would come in at $7.75M AAV with three less RFA years dragging the average number down.

The problem is the kid got too good too quickly, it creates a sticky contract situation that the Flames can’t afford to bend.

Comparables

The problem with comparables in contracts are often they come out of different eras. Sure Patrick Kane signed a contract only a handful of years ago, but the climate changes year to year and the lines can get blurred quickly.

However for the sake of analysis lets look at Kane’s contract history. Coming out of his entry level contract, Kane negotiated a solid deal, but in the end given the term of only 5 years it amounted to what looks like an expensive bridge deal. His first three (to Gaudreau’s two) years were impact and he was already one of the league’s best players. He could have asked for say Crosby or Ovechkin dollars and term but didn’t. His bridge deal was expensive at $6.3M per season for 5 years, especially since it only bought one year of UFA from his future.

Another example is Vladdy Tarasenko who signed an 8 year deal out of his entry level contract with an AAV of $7.5M, the comparable that most jump to for Johnny Gaudreau.

Attempting to assign value to Tarasenko’s years like we did above for Gaudreau scenarios results in an estimate of $6M per year for 4 RFA years and then $9M per year for 4 UFA years. If we rolled that out for Gaudreau (5 and 3 years) you’d have an AAV of $7.1M, and certainly not $8.5M. If the Gaudreau camp wanted just 7 years on the Tarasennko math the AAV would drop to $6.85M.

The problem for the Gaudreau camp just keeps coming back to the 5 years of RFA in his next x number of NHL years.

Agent Factor

Generalizations are dangerous, I’ll be the first to admit.

But having said that I always worry when a Flame’s contract negotiation is being handled by a smaller scale agent. If a firm represents 100s of impact NHLers there just doesn’t seem to be the need for this contract to be the company’s hill to die on. A quick look at the client list for Lewis Gross’s company out East suggests that the Gaudreau contact may just be the most important contract in the firm’s history suggesting two things that may or may not be true.

1. a lack of experience in negotiating NHL star contracts, something that may have been seen in the side’s odd statement of not wanting to negotiate during the World Cup.
2. a need to “kick ass” in order to draw in more clients.

I certainly don’t want to question the man’s integrity but it’s a concern.

Position and Size

For a moment lets call Gaudreau what that level of contract demands, a franchise player.

Is he?

From a marketing standpoint he qualifies, as he’s electric on the ice and a great story with his “aw shucks” mentality and lack of size. He’s a great story that is only getting better.

But NHL clubs in the modern era are built with franchise players that do it all, and at this point it’s hard to argue that Gaudreau is a complete player that helps out in every situation. He’s elite on the offensive side of the puck but won’t kill a big penalty, be deployed to shut things down in a the last minute with his team up, nor lead the team through the trenches with an impassioned speech.

This isn’t to say he’s done developing. Pavel Datsyuk wasn’t large in stature but he became one of the best two way players in the game and Gaudreau could certainly follow in those foot steps. But if I was forced to pick two current Flame’s to build around I think I’d lean towards Sam Bennett and TJ Brodie as being the package that pushes elite players to franchise status.

Flexibility in the Future

The Flames have to be very very careful in how they map out their contract future to make sure they have the right mix of players on the right terms for the right dollars.

The club is assembling a nice young core that could challenge for future championships but only if they are careful to not paint themselves into a cap corner down the road.

With Sean Monahan signed long term, joining TJ Brodie, Mark Giordano and Dougie Hamilton, the Flames have four key pieces locked down. Will they have room to add Gaudreau, Bennett and Matthew Tkachuk? Does 4 forwards making $6.5 or more contracts on long term deals make sense?

Mapping out the future I notice that the 2019-20 season could have roughly $50M tied up on only 9 hockey players. If the cap goes up by 2.5% per year that would give them $28M to disperse between 14 players for $2M per player. Tight, but possible in today’s NHL salary structure. But what if the cap stays flat for the next few years? What if the current exchange rate holds flat and the cap goes down on the backs of Canadian teams leaking money?

Some future flexibility for the Flames on a contract or two might be well advised.

Getting It Done

It seems to me that the best solution to this problem is to insert a bridge deal that works for both sides.

The Flames wouldn’t want a 5 year bridge deal as it would take the player right up to his UFA status, but a two or three year deal could serve both Gaudreau and Flames well in their next contract talks.

Calgary is getting somewhat built, suggesting their presence in the top 5 or 6 of NHL entry drafts may be a thing of the past. If that’s the case the Tkachuk pick may be the last “stud” addition for the next few years without a surprise or two from down the prospect depth chart. Given that the club would have a much better read on the projection of both Bennett and Tkachuk in 2 to 3 years, it would provide a better time frame to leap Gaudreau into a longer term contract.

The Gaudreau camp would burn up three of those 5 RFA years, making the next 8 year calculation weighting much more to the expensive UFA component, driving up the AAV for the biggest years of his career.

To do so you wouldn’t get away with a cheap RFA year as the player is too productive, so a deal like 3 years $15M wouldn’t get it done.

But how about a shorter term replica of the Kane deal paying the player $6.3M/yr on a three year contract ($18.9M).

With World Cup camps opening on Sunday, and the season starting just around the corner time is running out. That is if you believe the rumblings, which I wouldn’t.


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