Tuesday, July 10, 2007

Penguins lock up Crosby

The Penguins signed Sidney Crosby to a five-year contract extension worth about $45-million that will keep in Pittsburgh through the 2012-13 season.

Crosby, who turns 20 next month, became the NHL's youngest MVP since Wayne Gretzky when he was awarded the Hart Trophy last month.

The three-year contract Crosby signed as a rookie lasts through the coming season. The extension keeps him under contract for the next six seasons.

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18 Comments:

At 10:38 AM, July 10, 2007, Blogger Rand said...

I find it interesting that his contract is up after his age 25 season... just when he would have been an UFA

 
At 11:07 AM, July 10, 2007, Blogger Hossim said...

Maybe this is the second lesson in avoiding RFA's 101?

 
At 11:43 AM, July 10, 2007, Blogger Paul said...

This is nothing at all like the Vanek scenario. Crosby is clearly the best in the game, and getting better. Pittsburgh would match any off, no matter what it is. Only a ridiculous 15 year, $150 million offer might make them blink. But it wouldn't be in Crosby's best interests to sign such an offer sheet since he could get a higher annual salary in 5 years.

 
At 11:48 AM, July 10, 2007, Anonymous Anonymous said...

How long until Ovechkin signs a similar deal?

 
At 12:07 PM, July 10, 2007, Blogger jorach said...

Wow, Crosby isn't the highest paid player in the league? I wonder if he took this deal to try and keep the core of Crosby, Malkin, MAF, and Staal together as long as possible.

 
At 12:07 PM, July 10, 2007, Blogger saskhab said...

Obviously Sid is confident in Pittsburgh going forward for the next 6 years. This deal actually takes him to Age 26, rand, so he's forgoing one year of UFA with this deal. It signs him through his 8th NHL season (3 year rookie deal plus this 5 year deal).

Depending on where the cap goes, he could be leaving a fair amount of money on the table. If the cap goes up by about an average of 5% per year (a pretty modest figure) then we're looking at individual salary maxes of $10.815m for 2008-09, $11.35575m in 2009-10, around $11.9m for 2010-11, over $12.5m in 2011-12, and nearly $13.2m in 2012-13. Locking in at $8.7m a year for that length of time leaves a lot of money on the table.

Think there's any significance for #87 to sign at $8.7m per? A little superstitious, maybe?

 
At 12:59 PM, July 10, 2007, Blogger FAUXRUMORS said...

1) Its both true that its a HUGE sum for a 20 year old, BUT at the same time is a bargain for the player.
2) By the time the contract is up and Sid is UFA eligible, he will probably be due a slight raise to about 12-15 mil/year.
3) As someone mentioned, look for Ovechkin's deal to be finalized before the seaso starts! GMGM isn't Kevin Lowe!

 
At 1:33 PM, July 10, 2007, Anonymous Dennis Prouse said...

Of course, Crosby is one of those rare athletes for whom his playing salary is secondary to the endorsement money he makes. This doesn't mean that he is going to play for wildly below market value, but it also means that he is unlikely to move based on salary considerations alone.

 
At 2:00 PM, July 10, 2007, Anonymous Kevin M said...

Saskhab, just to correct your math I think you are taking a 5% increase in to account for Sid's raises, when you are assuming the cap would go up 5%. But individual players can only make 20% of the cap.

In 2008-09 if the cap went up 5% from $50.3 it would be 52.815, making the max salary $10.563. 2009-10 would be a cap of $55.45575 with a max salary of $11.09 and so on.

 
At 2:45 PM, July 10, 2007, Anonymous Frank said...

Following up on Saskhab's analysis, the contract Crosby signed today (assuming a straight $8.7 million each year with no front loading) has a Net Present Value (or lump sum prepaid amount for the five years)at Jan. 1, 2008 of $37.67 million, assuming a 5% discount rate (today's interest on a 5 year US Treasury).

However, had Crosby negotiated a variable salary contract that paid him 20% of each contract year's maximum salary cap - and assuming the cap increased 5% each year - the Net Present Value of that contract (or lump sum prepaid amount for the five years) on Jan. 1, 2008 is $50.30 million.

Therefore Crosby walked away from the equivalency of a lump sum amount on Jan. 1, 2008 of $12.63 million (50.30 - 37.67).

Or looked at another way he accepted only 75% of the hypothetical maximum, providing the Penguins with a 25% discount.

Now Sidney, a couple of words from someone who has "grey wiskers" and has had a few more life experiences than you have had - NEVER, EVER, EVER, DO THIS AGAIN!!!!

Its very nice being loyal to your team and wanting to keep everyone together to win a cup. But beleive me in two years time when your pal Malkin will be an RFA it will be "show me the money time" and Malkin will run away from Pittsburgh to anyone who offers him a dollar more. And the same will be true of many other of your teammates.

And Sidney, be prepared that once the Pittsburgh arena has been completed, and all the season tickets sold, that that nice Mr. Bettman will engineer a trade to get you to the NY Rangers so that you can showcase the league in the media capital of the world - even though you would rather stay in Pittsburgh.

Finally Sidney, I know your young and you think you are invincible, but you never know when some "goon" will take you into the boards and your leg will be shattered and your career will be over. So always make sure you negotiate the longest guaranteed contract possible, at the maximum amount of money possible.

Now go and have a nice summer.

 
At 4:19 PM, July 10, 2007, Anonymous Anonymous said...

The only concern I have with the substantial dollar amount is that it may mean that further growth for the Penguins - talent wise - may be limited now that Crosby takes up such a huge chunk of the salary cap.

What now happens when Malkin and Staal, etc. come up for renewal? Will it be difficult to keep the team intact, or to further add high priced talent to round out the team?

Hard to say, but I have a feeling that teams that toss insane amounts of money towards such a small portion of the team roster are asking for trouble.

 
At 4:23 PM, July 10, 2007, Anonymous Gerald Carpenter said...

However, had Crosby negotiated a variable salary contract that paid him 20% of each contract year's maximum salary cap

Such contracts are not permissible under the CBA.

 
At 4:31 PM, July 10, 2007, Blogger Paul said...

..had Crosby negotiated a variable salary contract that paid him 20% of each contract year's maximum salary cap..

Just dug through the CBA (article 50.6a if anyone's interested) and this type of contract is explicitly forbidden. The contract has to state a fixed dollar amount, and it can be no more then 20% of the current cap. So Crosby left $6.5 million on the table and likely more had he waited until next year to extend. I imagine this is the course Ovechkin will take.

So these superstars have a fine line to walk here. It's generally agreed that somebody will give them a max contract when they hit free agency at 25. Do you go for maximum length? Or do risk injury/decline for a chance at a higher annual salary a few years down the road? Given that career-ending injuries before 25 are extremely rare, the length of Crosby's deal is probably prudent.

 
At 4:37 PM, July 10, 2007, Blogger James Mirtle said...

Crosby's not due to be a UFA until 26, now, which is probably his biggest concession. At that point, we could easily be looking at a $60-million cap and a $15-million max for individual players.

In essence, he'll be making close to half what he could have signed on for in that final season of this deal.

 
At 5:07 PM, July 10, 2007, Blogger Paul said...

I think whether he's a RFA or UFA is irrelevant. Maybe I'm underestimating the "gentleman's agreement" where GMs didn't touch each other's RFAs, but I don't think many teams would balk at the cost of four draft picks to land Crosby. He'd get max money either way.

 
At 5:13 PM, July 10, 2007, Blogger James Mirtle said...

Whether you are a RFA or UFA changes your bargaining power; there's more of an open market principle at work if you truly can be had by any team for whatever the highest price is.

Draft picks add to the value required in order to get a player, especially one who will command the sort of bids Crosby will.

 
At 5:28 PM, July 10, 2007, Blogger saskhab said...

Plus as a RFA, you can only be bid on by teams who have kept their own draft picks. If you're Columbus, and you traded your 1st round pick but have Anaheim's, you can't bid on RFA's. So the pool of teams is shrunk not only by teams with available cap space, but also by teams who have traded their 1st round picks.

 
At 5:32 PM, July 10, 2007, Blogger Paul said...

For the most part, yes, teams have much more leverage with their own RFAs. But the cap has established a firm upper bound on cost, in terms of salary and picks. If just one team is willing to pay this cost - and I have to believe one would be - what other bargaining power does Pittsburgh have?

Basketball has a system in place for this. Cleveland can offer LeBron James more money and more years than any other team while he's an RFA. Baseball has no RFA system, the players get 3 or 4 years of arbitration as leverage. Football is nutty, I don't know what they do. A far as I can tell, hockey has no similar mechanism.

 

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