Tuesday, July 10, 2007

Making Restricted Free Agency Work For You

Here's a question - given the contract extension that Sidney Crosby just signed and depending on how negotiations go, could it conceivably make any sense to buck the conventional wisdom, not seek a similar extension for Alex Ovechkin and actually allow him to become a Restricted Free Agent?

Here's the background: Crosby signed a 5-year deal for $9m per year - $1.06 million less than the maximum salary (i.e. 20% of the salary cap). At the end of those five years, Crosby will become an unrestricted free agent (due to years accrued in the League) and can go to the highest bidder. Assuming some growth in League revenues over the next six years (Crosby's extension doesn't kick in for another year), it's not unrealistic to think that the maximum salary will be in the $12-$15 million range. To me, the length of Crosby's deal says "I want the chance to get out of Pittsburgh, if I choose to, almost as soon as possible. I'll take a little discount now in order to become a free agent sooner."

You can't blame him for wanting to maximize his profits and opportunities, and you'd think that Alex Ovechkin would be in a similar boat. What if during the Ovechkin negotiations the dollars become less important and the length of the contract becomes the sticking point (which will almost certainly be the case) - Ovechkin wanting free agency sooner, the Caps wanting to sign their superstar to a long-term deal (hey, if Danny Briere is worth signing for 8 years, you'd think Ovechkin would be worth signing for longer).

Here's the theory: allow Ovechkin to become an RFA next summer and match whatever ridiculous offer sheet is thrown his way. Say the cap goes up another $4.7 million next year - a not unreasonable assumption. The maximum salary would then be $11 million per year, and someone would likely offer that to AO for, say, 10 years (the assumption is that any offer made to an RFA would be in the best interest of the offeror and not just an effort to jack up the market price or push the other team closer to the salary cap, so it would be at least marginally sane). If that was the case, the Caps could simply match the offer and while they'd be paying $2 million more per year for the first five years of the contract than if they'd signed him to a Crosby-like extension, they'd a) have him locked up for an additional five years and b) likely be saving more than $2m per year in the out-years. The one caveat is that a new CBA will be in place (god-willing) before the 2011-12 season, and that may change the assumptions on which this theory rests.

Of course, I wouldn't suggest this strategy with just any player (Alex Semin, for example). But this isn't just any player - this is Alex Ovechkin. And I'd love to see AO signed to a longer-term deal via more traditional methods. But maybe there's a point at which the chance to lock him up long-term at what will likely eventually be below-market price is worth the risk to make sure he can't leave town in five short years (or sooner) .

This theory is just that - a theory. It's a very high-risk/high-reward proposition, and not the kind that people in positions of responsibility would ever seriously consider (long-term deals haven't necessarily worked out in the Caps' favor in the past - one in particular comes to mind). Furthermore, it doesn't take into account how something like this might impact the player/franchise relationship. But you can see how, on paper, it at least raises an interesting question, no?

10 comments:

JR said...

Dude:

You do not let some other team dictate the terms under which you sign Ovechkin. Sure the Caps will match, but what if some team says you're getting $40 million up front? The extension gets done before 1/1/08.

Anonymous said...

Here's the problem that I see with your logic: AO doesn't have to sign the other team's offer sheet, hence the Caps lose negotiating leverage. Using Edmonton's offer as a negotiating ploy worked in the case of Vanek because the Oilers were willing to give him a better contract than he otherwise would have gotten from Buffalo. With AO, this is likely not going to be the case. He (like Crosby) holds all the cards and can effectively dictate the terms of the contract--$ and length. If he wants a near max contract for a relatively short duration, there's not much that the Caps can counter with. If another team offers him a longer term contract than the Caps, he would probably not sign it. Why? Because then the Caps could match the competing offer and he would be contractually bound to the Caps for a longer term. Unless the contract was really out there, say $10 million per year for fifteen years, I don't see the Caps not matching. Anyway, I think that this is moot becasue I think that AO will sign a contract for something in the $8.5-$9.5 million range for seven years or so.

wilbur

JP said...

Ideally, yes. Of course.

But what if Ovechkin won't agree to an extension that works for the team? Vanek wouldn't even negotiate with the Sabres, his agent saying all along that they were going to see how they could do in restricted free agency.

We all hope that "[t]he extension gets done before 1/1/08," but that's really all it is - hoping.

Anonymous said...

'To me, the length of Crosby's deal says "I want the chance to get out of Pittsburgh, if I choose to, almost as soon as possible. I'll take a little discount now in order to become a free agent sooner."'

Disagree. If so, why wouldn't he take 4 years?

Crosby pretty much called the shots with his deal.

He could have refused anything but a one-year deal at the maximum until UFA hits if he really wanted out.

A 5 year commitment from such a young player is tremendous for the Penguins. As of now, it's way to far-sighted to think he's setting himself up for an exit.

If anything, he's setting the team up to have slightly more wiggle room under the cap to try to make realistic runs for the Cup every year.

JP said...

He gave the Pens one extra year and a fourth-line winger's salary discount - hardly a huge team-first move, imo.

With guys like Briere and Gomez signing eight-year deals, a five-year pact is, well, shorter. I don't blame him in the slightest - he's keeping his options open. But he's clearly saying, "Let's see what we can get done here in the next few years and then we'll see where things are," and not "I bleed black and gold."

Hooks Orpik said...

"He gave the Pens one extra year and a fourth-line winger's salary discount - hardly a huge team-first move, imo."

You theorized the max could be $11 or $12 million in a couple years, which would be about $3 million. That's closer to Ryan Whitney's cap hit than a 4th liner.


There's no point in signing a deal much longer than 5 years for Crosby (or Ovechkin) because who knows what the salary landscape will be in a couple years.

You cite Daniele Briere and Gomez, but those players are less talented and older (especially won't be close to their peaks in 8 years) whereas Crosby and Ovechkin will be in full bloom.

You've mentioned here or at AOL that you hope/expect Ovechkin to be re-signed longer. I know he doesn't have formal representation at the moment, but surely he realizes the downfall of a 6,7,8 year contract.

If Washington can even get him to re-up for 5 years, I would be impressed. That is a big commitment for a player so young and talented to make for an organization.

JP said...

Good point on the discount, Hooks, but the discount will be ~$1.3 regardless of whether the cap goes up or not (i.e. the 20% max salary doesn't increase with each year's cap increase). But I guess if you look at the alternative as having signed consecutive 1-year/$8.7m deals, the discount goes up with the cap.

And you get at precisely my main point - that it's not in these players' interest to sign a long-term deal, even of five years. That's where this theoretical exercise comes in. But where it admittedly falls apart is that the if you're willing to match another team's outrageous offer (which the player has signed), why not make that offer to him directly in the first place?

JP said...

(which was pretty much wilbur's point)

Hooks Orpik said...

I agree with your theoretical application of the RFA exercise. When you see a team like Edmonton make a huge offer for an RFA, all bets are off.

I just wanted to point out that just because Crosby didn't sign a 15 year deal doesn't mean he's setting himself up to leave.

"But where it admittedly falls apart is that the if you're willing to match another team's outrageous offer (which the player has signed), why not make that offer to him directly in the first place?"

Good point. I think Buffalo had no choice to match on Vanek, just because of losing Drury and Briere already. And they had egg on their face for bungling negotiations with the both of them at more reasonable prices.

I guess as the GMs learn the new system, they're already starting to lock up impending RFAs and UFAs with more frequency.

It would also be a guess, but I figure Buffalo didn't really mind getting Vanek for seven years at $7 million a pop if he's going to be a top liner for the duration....But maybe they would have liked to get away with paying him a little less per year, as they would have in year's past when basically no one thought about signing other's RFAs.

Rob said...

Great suggestion JP! Your lawyer background is coming through. LOL!

I know (as you do) that GMGM isn't crazy about the whole restricted free agent market and he's all about keeping a core for a long time. So that might be a bigger stumbling block.

Plus the Caps will outbid anybody for A.O. and hopefully have lots of playoff wins between now and then...