Archives for July 2016

As further evidenced by today’s signings of Nathan MacKinnon and Mark Scheifele, short and relatively inexpensive contracts for young restricted free agents in the NHL are going the way of the dinosaurs. MacKinnon, the first overall pick by the Avalanche in the 2013 NHL draft and still just 20 years old, agreed to terms on a seven-year, $44.1MM contract. Scheifele, a tad older at 23, signed on for eight more years with the Winnipeg Jets for $49MM. Around the league, contracts such as these have become the norm for players who are not yet even old enough to rent a car.  It’s a trend that is considered troublesome to some and encouraging to others. For NHL owners, it is burning a hole in their wallets, and sooner or later, a stance will be made.

Last summer, after playing less than 200 games in the NHL, the Blues signed 23-year-old Vladimir Tarasenko to an eight-year, $60MM dollar contract, keeping him in St. Louis into his 30’s. Elsewhere, the Boston Bruins and Chicago Blackhawks were forced to trade young stars Dougie Hamilton and Brandon Saad, respectively, due to their contract demands. The Calgary Flames were happy to give the 22-year-old Hamilton $35.5MM over six years, and the Columbus Blue Jacket went just one step further, inking the 22-year-old Saad to a six-year, $36MM contract. The Bruins had already succumbed to the pressures of signing a star RFA, giving 20-year-old Tyler Seguin a six-year $34.5MM deal in 2012, and then panicking at the perceived sunk cost and trading him to the Dallas Stars a year later. In 2012, the Edmonton Oilers rewarded 21-year-old Taylor Hall with a seven-year, $42MM deal, and then gave fellow first overall pick Ryan Nugent-Hopkins an identical contract the following summer, again at just 21 years old. The Colorado Avalanche were no strangers to this scenario when completing the new MacKinnon deal; they signed Matt Duchene for five years, $30MM at 23 in 2013 and traded Ryan O’Reilly to the Buffalo Sabres last summer, where he signed for seven years and $52.5MM at 24 years old.

If the past few years weren’t enough to convince the hockey world that young talent is no longer synonymous with cheap talent, the past calendar year has put the debate to rest. Now including Scheifele and MacKinnon, over ten players aged 25 and under have signed contracts for five or more years and $20MM plus. This includes four players on the Florida Panthers alone, who have locked up Aaron Ekblad, Aleksander Barkov, Vincent Trocheck, and Reilly Smith long-term, but at $23.15MM dollars per year, starting in 2017. That is nearly a third of this year’s salary cap limit, spent on only four players, and only Smith has played over 200 games (285). More astronomical deals are certainly on their way, with players like the Flames’ duo of Johnny Gaudreau and Sean Monahan, Nikita Kucherov, Chris Kreider, Mike Hoffman, Jacob Trouba, Mat Dumba, and more still remaining unsigned as restricted free agents. The most likely trade victim this year is none other than Tyson Barrie, yet another member of the Avalanche, who is likely asking for more than Colorado can give him, as their tight cap room was squeezed even tighter by the MacKinnon deal.

Some argue that this is just a natural progression in the game of hockey. As the game grows and the NHL makes more money, players expect to be paid more. As the game grows smaller and faster, younger players are able to excel and make a greater difference quicker than they used to. The next logical step is that young players begin to demand more money. The trend began with young superstars like Sidney Crosby and Alexander Ovechkin, but has now grown to include all contributing young players. Gone are the days when production from players under 25 can come cheap as a reward for good drafting and development. Owners and general managers have begun to realize that the entry-level contract is now the only surefire affordable contract, as the “bridge” to a players first big-time contract at 27 or 28 is all but burnt. The “prime” age in hockey is getting lower and lower, and the young players want to be paid like a prime-time contributor. At this rate, a player like Connor McDavid might make $10MM a season by the time he’s ready to sign his second contract, a value that was completely inconceivable not long ago.

The owners have two choices about how to handle this issue. The first would be to simply accept it, a decision that would be greatly helped by the continued growth of NHL revenue and the subsequent growth of the salary cap. The second choice is much more dire: the owners could make limiting the second contract of young players the rock on which they stand in the next NHL Collective Bargaining Agreement negotiation. If contracts continue to swell for young players, and the growth is not consistent with revenue, the NHL could reach a point where an increasing salary cap is hurting owners’ bottom lines, or possibly even worse, the cap does not increase and young players salaries are forcing veteran players out of the league prematurely. Just looking around the league right now, there is an argument to be made that capable older players, like the many unrestricted free agents still remaining, would not still be unsigned at this point in the summer only five or ten years ago.

It is always good for young athletes to be paid their market value and to not be taken advantage of, and there is no argument that the majority of these players deserve the contracts that they are getting. However, if unregulated contract growth, especially among players under 25, continues at a rate that is greater than NHL revenue growth or salary cap increases, there will be consequences. Owners cannot be expected to dump more money into less established assets at their own expense and at the expense of veteran players. That is the reality of the NHL currently, but things seem likely to change, one way or another. The bridge deal is dead… for now.