Saturday, January 12, 2008

It Has Begun

Capitals fans had to know, as soon as Ovechkin's monster 13 year, $124 million contract was announced that there would be pundits who would decry the deal and as it turn out one of the first was The Hockey News (this was originally linked to from Japers' Rink).

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Let's begin, shall we?

Well, isn’t this interesting.

Well, aren't you a smug little sportswriter? Surely with that attitude you must have insightful and valuable analysis for us, right?

Didn’t we have a year-long lockout a couple of years ago because teams like the Washington Capitals couldn’t afford to pay runaway salaries like the one they’re going to be giving Alex Ovechkin for the next 13 seasons?

Yes and no. What the owner's primarily wanted was cost certainty, so they could have some idea of what payroll expenses would look like, especially with regard to revenues. The result of the lockout were limits on what individual teams could spend what individual players could make, each based on the league's total revenues. This is kind of the opposite of "runaway salaries" since the salaries are in fact limited by the new CBA. I'm pretty sure that by definition the fact that salaries are limited means they aren't runaway. Plus, if you don't think team salaries or individual players salaries for the stars would be higher if there were no cap, you're nuts. Know who I know? Because they were higher before the new CBA, before inflation. Plus the nine million that Ovechkin will make for the next six years and ten million for the seven after that are not going to be the top salaries for their time unless the NHL suddenly starts losing money.

So this is what you must do the next time Capitals owner Ted Leonsis, or any one of his cronies complain about their financial state...
Ignore them, laugh at them, look incredulously at them with your mouth agape, but please don’t buy their malarkey for a second.

Important just for reference.

You could say the Capitals had little choice but to offer Ovechkin somewhere near the fully mandated $10 million and they did. After all, he’s one of the league’s most talented players and the prospect of losing him was far more difficult to fathom for the Capitals than the prospect of paying him a minimum 20 percent of the team payroll.

So, point #1 was "it's bullshit that owners like Leonsis may have difficult with their finances, and this deal proves it!" and Point #2 is "the Capitals had no choice but to sign Ovechkin to a contract paying him this much"? Also, I don't think there's any way Ovechkin will exceed 20% of the Capitals payroll for very much of his contract and he may not at all - the Capitals payroll is $39 million this year (with Ovechkin making about $3.8 million). If everyone resigned for the same amount (which won't happen) payroll would go up to about $44 million, with Ovechkin making $9 million. This would be 20.45% of the payroll.

The cap hit will be $9.53 million, about as close as you can get without hitting double digits without the decimal point.

Very good observation! Nine is the closest single-digit whole number to ten! Gold star for you today, Ken!

But they did have a choice on the term. Thirteen years is simply preposterous for any player, regardless of his star quality. And now that he’s throwing that kind of money at Ovechkin, does it make sense to stop there? Well, no it doesn’t.

No one is going to insist that a thirteen year contract is without risk. But, one of the "problems" laid out earlier was that the Capitals were paying Ovechkin a "runaway" salary. You know what, Ken? One of the ways to mitigate cost over the long term is to fix it in nominal dollar amounts and watch the actual (real) value decrease as inflation occurs.

Or perhaps it is that Ken Campbell is actually an economic genius and think that the United States in headed for its first period of deflation since the late 18th century.

Leonsis and the Capitals will now have to join the arms race and spend to the cap. No sense in paying one of the best players in the game that kind of money and not surrounding him with any kind of talent.

Indeed, that Capitals should build around Ovechkin. Maybe get him a tough, playmaking center in the Peter Forsberg mold, another sniper to take the heat off of Ovechkin, some solid offensively skilled veterans and a number of gritty, tough, checking-line players.

It's not all about offense though, as I'm sure Ken must know. The Caps probably need a good defenseman too, one who can compete for the NHL lead in goals from that position, or a guy with a rocket shot who can also get helpers and a solid, tough defenseman to balance things out. Don't forget the need for a true number one back there, maybe a guy who can lead as well.

And then there's the net. Well, the current goalie, a former Vezina Winner, is getting a little long in the tooth. If I were the Caps I'd a young gun, maybe someone tearing up juniors who could start at the World Junior tournament or a young guy already making his mark in the RSL. Yeah, that sounds good, get that Capitals and maybe then you can have Ovechkin weave his magic on your ice!

Oh wait, the Capitals already have all of those.

In a likely best-case scenario, Ovechkin will average 50 goals and about 100 points per season through the life of this contract. Could they not have signed three players for $3 million each, which could have given them more than that?

Maybe, maybe not. What three players could have been signed from this past year's free agent class for nine million dollars who would give than kind of production? How would you have gotten all of them to sign with the same team? Would they all contribute the same to the physical game as Ovechkin does? Would the opposition have to account for each of them every time they stepped on the ice? Would they, collectively, become the face of the franchise? Would their merchandising sales be enough to significantly defray the cost of their contracts in the same amount that having one of the inherently most marketable players in the league will?

And so it goes on. The more we see deals like this, the more two things become clear.

First, the Rick DiPietro contract is looking better with each passing deal and secondly, the league will most definitely insist on limiting the term of deals in the next collective bargaining agreement.

Because keeping player costs down and keeping marketable, fan-favorites with one team is no way to make fans of the game, of course.

1 comment:

usually frustrated caps fan said...

dmg: Once again all good points. Here's my comment back to Ken the Cynical Shortsighted Fool Hockey News Writer that I poast in reply:
"Mark, from Washington DC- January 1, 2008 6:01 PM EST
There's just so many uninformed people on this topic; you need to understand and look at the facts. First Ovechkin is going to make 10M a year wherever he plays in the NHL each of the next 3 years - as some have said the CBA and his talent assure that. He would have gotten that in an offer sheet as an RFA and the Caps would be fools to not match it. The 13 year deal isn't a bad idea on either Ovie or Management's part. No doubt the first 6 years are already insured if the league approves the contract. Second, if he gets hurt it's not a Cap hit. Smart money says each year Managment will insure another year of the contract as long as he isn't hurt so financial risk is probably at a max of 50 of the 124M right now. Second as far as a Cap issue if he's hurt and can't play they get the Cap room back. With OV in his 13 year contract the Capitals as a franchise are worth more than with almost any other single player in the league right now so that further lessens the risk from a financial perspective if you analyze it from a business investment Net Present Value aspect. Finally, he's the foundation of the franchise and last Thursday night I bet I wasn't the only season ticket holder who decided to reup my seats next year and for the next 13 years assuming I still live here. Get over it Canadian Hockey fans and be glad the schedule change next year means that regardless of where you live and who you root for over the next two seasons every hockey fan will have the option of seeing Ovie play the game. LETS GO CAPS!!!!!!!!!"