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5 Year Contract Limits

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Old
11-23-2012, 04:13 PM
  #1
Bender
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5 Year Contract Limits

Maybe I'm stupid but I just don't get how this would be BAD for players. In my mind, this would be worst for the owners than it would be for the players.

Example :

Let's say -

Ryan Getzlaf becomes a UFA and signs a 10 year - $70M contract ($7M/yr)

instead, with the proposed 'restrictions', he signs a 5 year - $35M contract ($7M/yr)

At the END of that 5 year deal, with the supposed 5-7% increase in HRR and consequent salary cap increase, combined with the fact that Getzlaf is still only around 32 years old, wouldn't he be potentially signing for MORE than $7M per year and somewhere near $8 or $8.5M if his value stays relatively the same???

Obviously, this is just an example with round figures but in theory it works with any player.

Now I'm no 'mathamagician' but I really don't get how players would be upset about this and why owners would actually WANT this (except to get rid of the backdiving deals, that part I get)...

Please, enlightened me...cuz I just don't get it.

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11-23-2012, 04:19 PM
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The league dont want it on it's own. They want the 5 year limits along with changes to free agency and arbitration to keep down second contracts and leverage for young players negotiating a contract. Stamkos, Doughty, etc. dont get huge contracts if they arent giving up any free agency years

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11-23-2012, 04:19 PM
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DL44
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Quote:
Originally Posted by Bender View Post
Maybe I'm stupid but I just don't get how this would be BAD for players. In my mind, this would be worst for the owners than it would be for the players.

Example :

Let's say -

Ryan Getzlaf becomes a UFA and signs a 10 year - $70M contract ($7M/yr)

instead, with the proposed 'restrictions', he signs a 5 year - $35M contract ($7M/yr)

At the END of that 5 year deal, with the supposed 5-7% increase in HRR and consequent salary cap increase, combined with the fact that Getzlaf is still only around 32 years old, wouldn't he be potentially signing for MORE than $7M per year and somewhere near $8 or $8.5M if his value stays relatively the same???

Obviously, this is just an example with round figures but in theory it works with any player.

Now I'm no 'mathamagician' but I really don't get how players would be upset about this and why owners would actually WANT this (except to get rid of the backdiving deals, that part I get)...

Please, enlightened me...cuz I just don't get it.

Players are more concerned about the flip side of the equation... the risk they take if something happens in yr 4 or 5 of the deal not enabling to actually cash in as large...

Their priority is to curtail risk and be able to reap the benefits of their work now over a long term period... Rightfully so.


Supporting the owners stance:
Simply looking at the evidence of how long term contracts have worked out for their teams historically... handful of costly mistakes or gambles gone wrong. They wish to protect themselves from those.. Lecavlier, Dipietro, Savard, Pronger, Gomez, Drury (if he didn't retire)...
Also because of the high risk contracts.. insurance companies have also responded in kind... reducing their max coverage from 7 yrs to 5 yrs...


Last edited by DL44: 11-23-2012 at 04:26 PM.
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11-23-2012, 04:21 PM
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The argument against is the injury/decline in play argument. Quotes from agents indicate that they advise to take the largest package rather than looking at the per year rates as paramount.

Beyond other issues, the leagues point for 5 years is the insurability issue. Crosby has $104mil remaining on his contract. There was a link that it would cost $400k/month to insure his contract. Roughly $2.4mil/year on top of his $8.7mil average salary.

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11-23-2012, 04:36 PM
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Stewie Griffin
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There are several aspects to this. OP does a good job of showing how a player could actually benefit from a 5 year cap on contracts. For example, a UFA signing a 5 year deal worth $25 million in 2005, a deal might be signed again in 2010 for $7.5 million in 2010 (using the same ratio which saw the cap midpoint increase 1.5x in those 5 years) and possibly earning that player an extra $12.5 million because he didn't sign a ten year deal worth $50 million.

Also, according to Capgeek, there are currently 89 players with a contract longer than 5 years (and 42 with a contract longer than 6 years). 89/700 = 12.7%. The cap on term would affect approximately 12.7% of the PA's membership, and would not benefit 87.3% of the rest of them. This goes to what guys like Hamrlik and Neuvirth are pointing out - not a lot of players will be affected by the contract limits.

I know, someone's going to try and bring up injury. I'm trying to think of how many career ending injuries have occurred in the past 5-10 years - to a star player who would have had a 5+ year contract. Maybe a handful of names come to mind, probably less than five; and I'm not sure if there is supplemental insurance that would cover that eventuality or not. (note to Don Fehr, maybe that's what you need to be trying to get for your membership)

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11-23-2012, 04:41 PM
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Quote:
Originally Posted by Stewie Griffin View Post
There are several aspects to this. OP does a good job of showing how a player could actually benefit from a 5 year cap on contracts. For example, a UFA signing a 5 year deal worth $25 million in 2005, a deal might be signed again in 2010 for $7.5 million in 2010 (using the same ratio which saw the cap midpoint increase 1.5x in those 5 years) and possibly earning that player an extra $12.5 million because he didn't sign a ten year deal worth $50 million.

Also, according to Capgeek, there are currently 89 players with a contract longer than 5 years (and 42 with a contract longer than 6 years). 89/700 = 12.7%. The cap on term would affect approximately 12.7% of the PA's membership, and would not benefit 87.3% of the rest of them. This goes to what guys like Hamrlik and Neuvirth are pointing out - not a lot of players will be affected by the contract limits.

I know, someone's going to try and bring up injury. I'm trying to think of how many career ending injuries have occurred in the past 5-10 years - to a star player who would have had a 5+ year contract. Maybe a handful of names come to mind, probably less than five; and I'm not sure if there is supplemental insurance that would cover that eventuality or not. (note to Don Fehr, maybe that's what you need to be trying to get for your membership)
It isn't just career-ending, it is also decline in play injuries. The counter to decline in play is that a lot of GMs go into Pollyanna mode with "proven" stars, paying with the foolish hope that the "star" will return to form.

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11-23-2012, 05:16 PM
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Originally Posted by Halibut View Post
The league dont want it on it's own. They want the 5 year limits along with changes to free agency and arbitration to keep down second contracts and leverage for young players negotiating a contract. Stamkos, Doughty, etc. dont get huge contracts if they arent giving up any free agency years
Thank you all for the responses and shedding light on this for me.

Regardless of the structure they decide to put in place, there are ALWAYS going to be GMs that pay players based on potential. There's NO system anyone could put in place to stop silly mistakes made by bad GMs.

Matt Duchene just signed a 2 year - $7M deal coming out of entry level and if he had put up 60 pts+ last season, he would have probably gotten longer term and $5M+ per year. (and rightfully so based on his first 3 years in the league)

I still don't see it as THAT big of a deal. If the player plays and plays WELL, generally, the team will be salivating to get them under contract...Jordan Eberle is a perfect example here.

If you get 'certain' players that play well only at times and are more up and down, THOSE are usually the players that actually GO to arbitration.

There were only 16 in 2012:
Nick Bonino, Anaheim Ducks
Jamie McGinn, Colorado Avalanche
Richard Bachman, Dallas Stars
Mark Fistric, Dallas Stars
Kyle Quincey, Detroit Red Wings
Sam Gagner, Edmonton Oilers
Kris Versteeg, Florida Panthers
Raphael Diax, Montreal Canadiens
Sergei Kostitsyn, Nashville Predators
Mark Fayne, New Jersey Devils
Anton Stralman, New York Rangers
Kaspars Daugavins, Ottawa Senators
T.J. Oshie, St. Louis Blues
David Perron, St. Louis Blues (player has since signed a new contract)
T.J. Galiardi, San Jose Sharks
Dale Weise, Vancouver Canucks

Exactly the kind of players I was suggesting are 'protected' by having arbitration rights. Most of these guys eventually agreed on a deal with their team before even going to arbitration. So how much is this actually going to affect players? Is the 'threat' of arbitration really that big of a deal? It's very rare that a superstar needs to even have an arbitration case (Shea Weber notwithstanding - it should have never gotten to that point)

In general terms, I haven't really seen too many teams be really satisfied with a player and keep low-balling that player with horrible, unfair qualifying offers. Whenever, such a situation presents itself, the player in question usually ends up unhappy and it's not long before he's sent packing elsewhere.

If the players are adamant about keeping arbitration rights, I don't see why the owners don't get the exact same opportunity to take an underachieving RFA to arbitration as part of their rights. For example "we like you, we want to keep you but not at $3M per season". In those cases, the teams currently can only qualify that player or lose him outright.

Bottom line, this affects a very small amount of players each year...not a big deal in the grand scheme of things.


Last edited by Bender: 11-23-2012 at 05:21 PM.
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11-23-2012, 06:05 PM
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I don't think this is really complicated (as in players haven't put a lot of thought into it).
Would you rather have 7m in the first 5 years, and 3m in the next 5 years (total 10m),
or 5m in the first 5 years, and 7m in the next 5 years (total 12m)?

I think the right answer is the first case. The increase in the 2nd case I think isn't large enough to overcome the fact that money today is much more valuable than money tomorrow.
I doubt the players think about that, but prefer the first case because they get more money earlier, but for owners who are businessmen, they rather give up money slowly.

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11-23-2012, 07:11 PM
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It's bad for the poster boys lining up behind Fehr. They're the only ones getting contracts like that.

I think it would be positive for the league to have max length for contracts, even if the only reason is to save GMs from themselves.

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11-23-2012, 07:18 PM
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Decline in play. Look at Wade Redden. Think he regrets it?

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11-23-2012, 07:21 PM
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Daniel Alfredsson was a 30 yr old rfa still forced to fight and sit out for a 1 yr contract. Havlat in his 4th yr had to hold out to get a contract higher than the 1st year rookie max. Arbitration is the opposite of a threat - its an agreement to compromise.

Players have lately been forgoing the big pay increases by keeping their cap hits relatively the same low level. Front loading, but still not exceeding the individual player cap allowed them to not really get more money than before but the same cap hit over a longer period. They took security over money. And this allowed them to build better teams around them. Which fans loved.

In fact i dont think this cba had been published for more than 24 hrs before some hf'er came up with the idea of front loading contracts to get better cap hits to try and build a winner. To be willing to take that risk for that opportunity.

We could take away those backdiving contracts that have already been largely fixed by the Kovalchuk precedent and are only a worry in theory that there are large numbers of players dying to retire early from their contracts, and as you note, that would probabkly increase the total amount some players would make.

But why is it important to control player salaries at all? There is a cap. Isnt it important that every player be paid exactly according to his worth otherwise we lose parity when forcing teams to spend the same. What's the importance of controlling 2nd contracts and floating 4th ones. What if the guy on his 2nd contract is worth more? There is a cap; there is no need for such contracting restriction controls in that environment. Unless they are hoping to get the same sort of advantage from it as backdiving contracts give.

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11-23-2012, 07:53 PM
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Quote:
Originally Posted by thinkwild View Post
Daniel Alfredsson was a 30 yr old rfa still forced to fight and sit out for a 1 yr contract. Havlat in his 4th yr had to hold out to get a contract higher than the 1st year rookie max. Arbitration is the opposite of a threat - its an agreement to compromise.
r.
Not sure what you're referring to here. Alfie came late to the NHL but not that late.

His rookie year n the NHL was 95/96 and the only time he sat out in a contract dispute was in 97/98 when he would be about 25 after which he signed a 4 year contract.

This was all in pre cap days of course but the Sens didn't have very much money in those days. With no cap we would be right back in the situation that the league was in back then.

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11-23-2012, 07:58 PM
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Fugu
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Maybe I'm stupid but I just don't get how this would be BAD for players. In my mind, this would be worst for the owners than it would be for the players.

Example :

Let's say -

Ryan Getzlaf becomes a UFA and signs a 10 year - $70M contract ($7M/yr)

instead, with the proposed 'restrictions', he signs a 5 year - $35M contract ($7M/yr)

At the END of that 5 year deal, with the supposed 5-7% increase in HRR and consequent salary cap increase, combined with the fact that Getzlaf is still only around 32 years old, wouldn't he be potentially signing for MORE than $7M per year and somewhere near $8 or $8.5M if his value stays relatively the same???

Obviously, this is just an example with round figures but in theory it works with any player.

Now I'm no 'mathamagician' but I really don't get how players would be upset about this and why owners would actually WANT this (except to get rid of the backdiving deals, that part I get)...

Please, enlightened me...cuz I just don't get it.


If you believe it's worse for owners, why is the NHL asking for the limit-- in your opinion?

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11-24-2012, 12:51 AM
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Most of these guys eventually agreed on a deal with their team before even going to arbitration. So how much is this actually going to affect players? Is the 'threat' of arbitration really that big of a deal? It's very rare that a superstar needs to even have an arbitration case (Shea Weber notwithstanding - it should have never gotten to that point)
Yes arbitration is that much of a threat, which is why GMs do everything possible to come to an agreement before hand. Because once it goes there, it's either sign the player at that amount awarded (and there's been some retarded comparisons), or let the player walk.

Oh and teams already have the ability to take a RFA to arbitration. I can't remember the exact specifics around it, but it was put into the CBA last time around.

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11-24-2012, 01:49 PM
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Another short sighted move by the NHL. Players want long-term deals for security, the NHL wants to get rid of them to dummy proof the system for the teams that can't figure out who deserves those contracts and who doesn't.

Stars signing long-term deals helps the league, it keeps the yearly cost for those players down and allows teams to keep their players and let fans get invested in them. The NHL wants mulligans for its poorly run franchises so they're going to handicap well run teams and make it harder to pay their stars. Very short sighted.

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11-24-2012, 01:51 PM
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Originally Posted by Scurr View Post
Another short sighted move by the NHL. Players want long-term deals for security, the NHL wants to get rid of them to dummy proof the system for the teams that can't figure out who deserves those contracts and who doesn't.

Stars signing long-term deals helps the league, it keeps the yearly cost for those players down and allows teams to keep their players and let fans get invested in them. The NHL wants mulligans for its poorly run franchises so they're going to handicap well run teams and make it harder to pay their stars. Very short sighted.
You didn't even respond to the added insurance expense which doesn't fit your argument. Ultimately, part of that insurance cost comes out of the players' pockets.

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11-24-2012, 02:00 PM
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You didn't even respond to the added insurance expense which doesn't fit your argument. Ultimately, part of that insurance cost comes out of the players' pockets.
Because the NHL's insurance covers contracts up to 7 years, 5 years doesn't fit that argument.

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11-24-2012, 02:15 PM
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Originally Posted by Scurr View Post
Because the NHL's insurance covers contracts up to 7 years, 5 years doesn't fit that argument.
It is no longer 7, it is now 5. It's been posted twice on this forum. I have also referred to the new number several times.

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11-24-2012, 02:24 PM
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Because the NHL's insurance covers contracts up to 7 years, 5 years doesn't fit that argument.
It has been reported that the NHL's group plan now only covers 5 years.

Insurance Coverage for NHL contracts now just 5 yrs? - SHOALTS

Quote:
Another big problem is insurance. Teams have always insured contracts because players are entitled to the full value if they suffer a career-ending injury. But the enthusiasm of insurance companies to underwrite the policies declined as fast as the salaries grew. Insurers will only cover five years of a contract now, which means the Predators are on the hook for $42-million, say, if something happens to Weber in year five of the deal.

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11-24-2012, 02:25 PM
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It's bad for the players because it eliminates options.

Some guys, notably Alex Semin and, arguably, Erik Cole sign a series of 2-4 year deals for as much as possible and likely make out better than they would have had they signed any long-term deal they could realistically be expected to be offered.

Other guys, notably, Mike Richards and Jeff Carter, sign longer term deals trading money in the short term for security in the long term.

So from the players' perspective it takes away a choice that they feel they should be free to make--minimize risk or maximize dollars.

Some of the contract stipulations the players oppose are baffling to me (notably, the 5% variance that reduces escrow and puts money in the pocket of all but about 20 guys), but this isn't one of them.

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11-24-2012, 02:26 PM
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It has been reported that the NHL's group plan now only covers 5 years.

Insurance Coverage for NHL contracts now just 5 yrs? - SHOALTS
Okay, well, if that's why the league is pushing this, they aren't likely to move off of it under any circumstances.

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11-24-2012, 02:28 PM
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It is no longer 7, it is now 5. It's been posted twice on this forum. I have also referred to the new number several times.
Sorry to have missed that and thanks for pointing it out. When did that change? Why did it change?

I still think longer term deals are good for the league overall and some kind of give and take on these contracts is in order. These contracts aren't all that common and are generally reserved for star players. Added insurance costs may well be worth keeping your franchise player locked up long term, I don't think unilaterally taking this option away from teams and star players is a good longterm plan.


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11-24-2012, 02:40 PM
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Originally Posted by Scurr View Post
Another short sighted move by the NHL. Players want long-term deals for security, the NHL wants to get rid of them to dummy proof the system for the teams that can't figure out who deserves those contracts and who doesn't.

Stars signing long-term deals helps the league, it keeps the yearly cost for those players down and allows teams to keep their players and let fans get invested in them. The NHL wants mulligans for its poorly run franchises so they're going to handicap well run teams and make it harder to pay their stars. Very short sighted.
Also, it doesn't really help the league. Parise, Suter and Weber are making 14m plus over the next few years. So yes the cap hit is 7.5, but what teams actually have to pay these guys is a lot more. The only way they actually see any benefit is that they can fit more players under the cap - which means they're paying even more money to the players on a yearly basis. Yes I know that the overall share is capped to 50% (we all know this will be the split once a CBA is signed). To which the players moan and ***** that they do not like escrow, and these contracts only increase the players escrow hit.

Capping contracts at 5 years makes a lot of sense to all the teams. It's protecting the GMs from themselves (although signing a 5 yr deal to the wrong person still screws them), and it cuts down on their expenses (insurance). I wonder what part that aspect played in Crosby, Malkin, Stamkos, Kane, Toews, Sharp and Seabrook's deals over the last CBA? As most of those 2nd contracts were all 5 years for big money.

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11-24-2012, 02:44 PM
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Quote:
Originally Posted by Fugu View Post
If you believe it's worse for owners, why is the NHL asking for the limit-- in your opinion?
It's better for certain owners. Big markets are salivating at this, because it will make UFA about location, location, location even more than it already is, while killing the "lifetime second contract" that kept guys like Lecavalier, Staal, Rinne, and (sort of) Nash in smaller markets by paying them UFA salaries over a longer period of time.

Granted, this type of deal fell out of favor the millisecond heinously front-loaded long term deals became the norm, but that can be fixed through better restrictions on signing bonuses and contract structuring without gutting the only way small and mid markets were keeping their talent.

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11-24-2012, 02:46 PM
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Originally Posted by Scurr View Post
Sorry to have missed that and thanks for pointing it out. When did that change? Why did it change?

I still think longer term deals are good for the league overall and some kind of give and take on these contracts is in order. These contracts aren't all that common and are generally reserved for star players. Added insurance costs may well be worth keeping your franchise player locked up long term, I don't think unilaterally taking this option away from teams and star players is a good longterm plan.
I did a rough calc on one such contract, Crosby. It was $2.4mil/year, 25% of his yearly wage. Even if the league gives in, that money will ultimately go to the insurance company rather than the owners or players. Someone did a survey of contracts and found that 12% or so exceeded the 5-year thing. That is a significant dent on costs. Another rough calc would put the expense at around $100mil/year. As a player, I would rather pocket the extra money that would allow than let it disintegrate into the vapor of the insurance company's pockets. Would it be better for Crosby to take to 5 year deals as $11.1mil/year rather than a 10 year deal at $8.7mil/year? The answer is not clear cut, but there is significant weight to the 2 deals at 5 years side.

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