Sunday, 5 July 2015

Negotiating Contracts with Young Players is Risky Business

I wrote over at HockeyBuzz yesterday that the Tampa Bay Lightning are likely going to learn that salary cap casualties are a reality in today's National Hockey League.  That's the nature of the beast when a team has so much young talent on affordable, cost-controlled contracts.  Those contracts expire, and costs skyrocket.  Players like Nikita Kucherov, Tyler Johnson, Ondrej Palat, Victor Hedman, Alex Killorn, and Steven Stamkos will all need new deals within the next year or two.

Unlike in the real world, where some frown upon the idea of firing senior employees and replacing them with junior (read: cheap) workers simply for the cost savings, NHL teams rely on a revolving door of talent.  A dynamite core simply can't stick together forever in a hard-cap world.  The Chicago Blackhawks, as mentioned in my HockeyBuzz piece, are a perfect example.  Older, expensive workers (i.e. players) are shown the door when a new crop of cost-controlled talent is ready.  The Lightning know this, as they've worked those aforementioned names into the lineup over the last few seasons at the expense of guys like Vincent Lecavalier, Marty St. Louis, and Teddy Purcell, among others.

The most pressing issue for Steve Yzerman as he navigates this Lightning ship forward over the next few seasons will be minimizing the impact of those "cap casualties" on what looks to be a very formidable core.  In order to do that, and to keep the team's Stanley Cup window open for as long as possible, he'll need to structure contracts in a way that maximizes Tampa Bay's benefit/dollar ratio under the cap.  A big extension for one player could mean that another has to be jettisoned.  But, on the other hand, a short-term bridge deal for one player might mean that his cost will skyrocket just a year or two down the road.  It's a sensitive situation, one that will require some serious predicting and hedging on the part of the Lightning's management team.

Case in point: The Colorado Avalanche and Ryan O'Reilly.  The Avalanche played chicken during O'Reilly's previous negotiations by inking him to short-term deals.  They recently traded him to the Buffalo Sabres, where he just signed a mammoth deal worth $7.5MM per season for the next seven years.  This is a 24-year-old player who has had one (!) 60-point season.  Now, don't get me wrong, O'Reilly is a great player who has solidified himself as a very formidable top-six center, but can you see how this might impact the Lightning?  Both Tyler Johnson and Ondrej Palat outpace O'Reilly in the points-scoring department, and O'Reilly has never scored more goals in a season than Nikita Kucherov did last year.  Further, as Erik Erlendsson pointed out on his Twitter feed, O'Reilly's $7.5MM price tag probably won't help to keep the price down in the Stamkos negotiation, either.  Things could get very expensive for Tampa Bay sooner rather than later.

And that's where the title for this blog comes into play.  Mike Gallimore, one of the many talented writers behind, recently noted on Twitter that there is inherent risk that exists when trying to balance the short-term needs with the long-term plan.  He cited Alex Killorn as a prime example, given that Killorn's contract expires after this coming season.

Killorn, of course, is coming off a playoff run in which he defined himself as a go-to guy.  Fans and national media alike took note of his willingness to do a little bit of everything.  I quipped on Twitter that he essentially brings what the team thinks it's getting in Ryan Callahan.  Killorn hits, Killorn battles in the corner, Killorn puts the puck in the net, and Killorn drives the play forward.  He's been a phenomenal and versatile cost-controlled option on the Lightning bench for a few years now.

Gallimore astutely notes that it might make sense for the Lightning to maintain cap flexibility by holding off on a Killorn extension.  After all, with Kucherov and Stamkos needing new deals ASAP as well, the value of any potential Killorn deal could have a big impact on Tampa's cap situation.  Waiting until there's a much clearer picture of the future might make sense.  On the other hand, though, waiting is a double-edged sword.  What happens if Killorn goes on to explode this season, just as he did in the playoffs?  What happens if he continues to establish himself as one of the Lightning's most valuable pieces?  The price tag on his new deal won't go down, that's for sure.

The issue with the Killorn negotiation becomes even more complicated when you consider that his next contract will be his last with 'Restricted Free Agent' status attached to it.  As Gallimore notes on his Twitter feed, a multi-year deal eats into his Unrestricted Free Agent years.  Contracts that do that don't come cheap.  But, at the same time, short-term contracts that end just as the player is set to hit UFA leave the team open to a future sky-high sticker price.  Again, it's a delicate balance.

Another example is Nikita Kucherov.  He is entering the last year of a deal that has him on the Lightning's books for a whopping $711,667.  For a guy who scored 29 goals last year, the entry-level contract has proven to be an absolute steal.  The question is whether to extend him now, or to wait until the season has started/is over.

Unlike Killorn, Kucherov doesn't have his UFA days sitting right on the horizon.  He will be under Lightning control for the next little while, which bodes incredibly well for the team.  Still, what would another 29-goal season do for his price tag?  Brandon Saad, now of the Columbus Blue Jackets, just signed a new contract with an AAV of $6MM.  This is a player, fresh off his entry-level deal, who has never bested 23 goals or 52 points in a single season; Kucherov has done both.  While the Blue Jackets are most certainly paying for Saad's seemingly limitless potential, the Lightning will be paying Kucherov based on both potential and proven results.  The cost won't be cheap.

So, with that in mind, does it make sense for the Lightning to sign Kucherov to a deal now?  Does it make sense for them to wait?  Should it be a short-term pact or a long-term commitment?  These are the questions that likely keep Steve Yzerman up at night.

Raw Charge's Kyle Alexander floated the idea of a Hedman-like extension for Kucherov; it would almost combine the best of both worlds.  Early in his third year with the Lightning, Hedman signed a five-year contract with an AAV of $4MM.  That now looks like an absolute steal.  It has kept the cost of having a Norris-quality defenseman way down for Tampa Bay, while also leaving Hedman's prime earning years up for negotiation.  Both the player and team are likely satisfied with the arrangement, as Hedman will cash in (big time) with his next deal.  Might the Lightning look at Kucherov and do the same thing?  It could make sense.

The point of this blog is to highlight that there are pros and cons that come with negotiating at a specific time and with a specific style.  Short-term deals generally keep the dollar value lower in the short-term, but send costs skyrocketing in subsequent years.  Long-term deals typically come with more of a burden in the short-term (see: Saad, Brandon), but lock the player in to a lesser value when he is performing well in the future.  Signing a contract now means paying with a heavier emphasis on expected results and potential, while waiting means paying for proven performance that can hopefully be replicated.  It's impossible to know what the 'right answer' is without the benefit of hindsight.  There are risks with every avenue.  The bottom line is that Steve Yzerman has a few decisions to make when it comes to his negotiating tactics, and those decisions could shape Tampa's ability to stay atop the Eastern Conference ladder.

There will be cap casualties for the Lightning over the next few years, but smart management can keep those losses to a minimum.  Smart management means signing young players to deals that allow the team to keep its core together.  But, as outlined, negotiating with young players is risky and complicated business.  The team will have to weigh performance with cost and cost with potential.  There are a lot of variables at play, two of which (time of signing and length of contract) are specifically mentioned in this blog.  Here's hoping Tampa Bay gets it right.

Thanks for reading.

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