Wednesday, August 13, 2008

The NHL's salary structure
Part 1: Youth pays off

"In the old system, we had more ways to control the salaries. Now we have to make decisions on where we want to spend, and salaries are jumping younger and quicker."
The idea that players are getting paid earlier in their careers certainly isn't a new one. Heck, Mike Richards getting a $69-million deal prompted this piece here, but I'd been waiting for the off-season in order assess the impact of all these new deals.

Yesterday, I had a small graph outlining the league average salary, which has gone from about $1.4-million in 2005-06 under a $39-million salary cap to more than $2-million per player this season under a $56.7-million ceiling.

And it's the youngsters gobbling up a huge portion of that increase.

Using Oct. 1 as the age marker, I've broken down the four lockout seasons by age and salary with the help of a massive spreadsheet from Chip McCleary at nhlscap.com. Compiling the raw data would have taken ages, so a big thanks to him.

The essential numbers

In 2005-06, the average player 25 and under made $865,000, while players aged 30 and over made an average of $2.07-million.

This coming season, based on contracts already signed, the average player 25 and under will make $1.64-million, nearly doubling the figure of three years earlier. Players aged 30 and up will still get more green than they did in 2005-06, but with an average of $2.82-million, it's only a 36 per cent boost.

What's remarkable about that is that almost no 25-year-old players are eligible for unrestricted free agency, while, under the new collective bargaining agreement, every player 30 and older would have been at some point.

It's essentially a flattening of the league salary structure, where players around age 23 (coming off an entry level contract) and 28 or 29 (entering unrestricted free agency) have received a major pay boost.

Here are the average salaries by age for both seasons:

Maybe the most surprising part of the graph is toward the end, where we see the graybeards still cashing in considerably — and that's without Mats Sundin and Joe Sakic in the fold. What that's really the result of is a small sample size, as with only 10-15 players aged 38 and up in the league, Nick Lidstrom's $7.45-million deal skews things.

The same goes for the under 20s, who are represented by fellows like Patrick Kane making the entry level max.

The biggest changes from 2005-06 to 2008-09 come at age 23 (a 157 per cent jump) and between ages 32 and 35, where salaries have climbed an average of only about 20 per cent.

23 years young

In 2005-06, the highest paid 23-year-old players were the likes of Alex Frolov, Marian Gaborik, Henrik Lundqvist, Anton Volchenkov, Justin Williams, Nick Schultz and Scott Hartnell. Those seven players were the only ones in that age group to make more than $1-million.

Only two, Frolov and Gaborik, cashed cheques over $2-million that season.

Flip ahead to next season: The average 23-year-old will make more than $2-million, with the highest paid in that category beginning with Alex Ovechkin ($9.5-million), Dion Phaneuf ($6.5-million), Mike Richards ($5.75-million), Ryan Getzlaf and Corey Perry ($5.325-million), Marc-Andre Fleury ($5-million) and Jeff Carter ($5-million).

It's an incredible difference, one that's not explained only in the high-end talent.

No more old-age paydays

Some players in the 30-and-over category still receive nice deals in free agency (Brian Rolston comes to mind), but others are, more than ever, settling for entirely reasonable contracts these days.

Or going to Russia.

Good examples of discounted contracts to middle-aged free agents this summer are Andrew Brunette ($2.33-million) and Brendan Morrison ($2.75-million), who both received far smaller deals than we would have seen prelockout.

Flash back to 2005-06, and Bill Guerin was making $6.74-million, Jeremy Roenick nearly $5-million and Alexei Zhamnov $4.1-million.

Apocalypse now?

Are big-time contracts for young stars the end of the world? Not necessarily.

I've addressed this in the past, but, in general, it's a good thing that stars like Sidney Crosby and Alex Ovechkin are paid for putting bums in the seats. The problem comes when players not quite so deserving begin to get those massive deals too early, before they've proven themselves NHL regulars — and 23 certainly applies to the wide majority.

It's only a matter of time before teams are stuck with underperforming youngsters on unmovable, long-term contracts. And things could get ugly.

While the salary graph has begun to flatten in terms of age, it's headed elsewhere when it comes to what I'd call "the salary hierarchy." We've already heard that the middle class is being eliminated, but is that true?

Stay tuned for Part 2.


Salary by age (postlockout)


"In the old system, teams were overpaying or paying a lot of money for the 31-year-olds who were unproductive, [and] not producing up to that level. I really feel that if you're going to pay the big money, it's the 23- to 29-year-olds that deserve the money."
They're getting it.
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11 Comments:

At 8:14 AM, August 13, 2008, Blogger FAUX RUMORS said...

1) Find it a tad ironic that Holland would say that in the non-capped system it was easier to control salaries
2) It would seem to be easier now that each team's budget is being set for them and they have to decide where to spend that finite amount

 
At 8:59 AM, August 13, 2008, Blogger Ben said...

The younger players deserve more money. Just look at Ovechkin, Crosby and Richards. The others guys have got to look at retirement sooner.

It might sound harsh, but this is the way it should be.

 
At 9:36 AM, August 13, 2008, Blogger Rage said...

James, I think it might be interesting if you skewed this by North American pro hockey experience rather than age. I say this because it's experience that seems like experience would govern salary more on the left side of the graph, though maybe not so much on the right.

 
At 10:31 AM, August 13, 2008, Blogger Tom L said...

This is a direct correlative to the dropping of the UFA age from 31 to 28 and lowering the barrier to the Group II RFA Offer Sheet.

23 is the De Fecto UFA age for Top-Tier talent, and if the team's want to get their ROI, they'll have to pony up then as opposed to waiting until the player is about to become a UFA for real.

Thanks for the confirmation, James, of that which I expected to be the outcome.

Ta,

 
At 12:18 PM, August 13, 2008, Blogger savagist said...

"It's only a matter of time before teams are stuck with underperforming youngsters on unmovable, long-term contracts. And things could get ugly."

ugly for the team, ugly for the league? maybe. maybe not. people will use Dustin Penner as a prime example of being overpaid (but since his pay scale stays the same it becomes more of a value through as the contract develops). and his contract is an odd since it was an RFA offer sheet instead of the Oilers just paying "their own" player or picking him up as a UFA. has it inflated other players? maybe, maybe not. if the salary cap was the same each year with salaries increasing, there might a valid point for that but since the cap is increasing, it raises market value automatically (other than the Detroit Red Wings, who pay their team outside of market value because "no one" can be paid higher than Nik Lidstrom, making Holland's comment kind of ironic. we'll see what happens when its Zetterberg's payday coming soon. can they fleece him as bad as they have Datsyuk fleeced through his prime?). so, it seems like theres exceptions to the rules all over the place in the NHL depending on the situation and how the teams negotiate to divide up their portion of the salary cap pie (which is also a skewed perspective since the "cap" is no real measurement of what a team will spend at maximum).

id like to see the names in the mid-30's age group that is spiked during both intervals. i suppose Brodeur, Zubov and others are in there, but what duds are too?

back to the quote above. it might cripple a team for a while but that will just force them to use some pluggers on base-salary contracts or more prospects. oh well.

 
At 6:13 PM, August 13, 2008, Blogger Nick said...

can they fleece him as bad as they have Datsyuk fleeced through his prime

Ha! just because detroit isn't offering Sundin 10 million a year doesn't mean they're ripping anyone off. No one held a gun to Pavel's head

 
At 7:02 PM, August 13, 2008, Blogger Baroque said...

When Pavel Datsyuk signed his contract, no one thought he was being cheated - there were concerns about signing a player who hadn't done much in the playoffs to such a long, expensive contract, and would the team regret it if he continued to be a playoff no-show.

Concerns now answered, but they were pretty loud at the time.

 
At 8:55 PM, August 13, 2008, Blogger J. Michael Neal said...

Is Detroit underpaying Datsyuk relative to the market? Yes, they are. I'll even go so far as to say that it was obvious when the contract was signed that they were underpaying him.

However, this isn't because no one can be paid more than Lidstrom, though it probably plays an indirect role. It's because the Wings organization is smart, and because they offer benefits outside of money. The biggest, obviously, is winning. Running the organization in a way that gives more than lip service to treating the players with respect.

 
At 11:39 PM, August 13, 2008, Blogger Hallock said...

There was a great deal in the Detroit press about how Zetterberg and Datsyuk in particular disappeared in the playoffs for their more formative years. I think, in that light, the value is justified from an outside perspective.

However, Detroit would not have offered him such a long contract had they not expected him to perform long-term. So naturally, they will offer what they feel is reasonable at the time and fits in with their long-term development goals. Plus, let's not forget that Datsyuk explored the possibility of going back to Russia. Surly, Detroit would try to lock him in if they felt that was really a possibility.

Underpaid compared to open market value? Yes, I would agree. Underpaid though? No, I would disagree greatly. Two championships later and the ability to play on a team that is in contention seems quite fair.

 
At 1:08 AM, August 14, 2008, Anonymous Anonymous said...

I quess we should also remember that NHL has never had more young superstars than now.

Crosby, Ovechkin, Malkin, Nash and others are not only young but also the best in business.

 
At 2:33 PM, August 15, 2008, Blogger Bruce said...

I quess we should also remember that NHL has never had more young superstars than now.

I take your point, Anonymouse, but I also take it you don't remember the '80s. Flash back a quarter of a century and here's your leading scorers (age in parentheses, all courtesy Hockey-Reference.com):

1. Wayne Gretzky*-EDM 196 (22)
2. Peter Stastny*-QUE 124 (26)
3. Denis Savard*-CBH 121 (21)
4. Mike Bossy*-NYI 118 (26)
5. Barry Pederson-BOS 107 (21)
Marcel Dionne*-LAK 107 (31)
7. Mark Messier*-EDM 106 (22)
8. Michel Goulet*-QUE 105 (22)
9. Glenn Anderson*-EDM 104 (22)
Jari Kurri*-EDM 104 (22)
Kent Nilsson-CGY 104 (26)

10 of the 11 were age 26 or under, with a mean something under 24. Note the asterisks indicating 9 of the 11 now reside in the Hall, so this particular list was pretty representative of the era.

Fast forward to 2007-08:

1. Alex Ovechkin-WSH 112 (22)
2. Evgeni Malkin-PIT 106 (21)
3. Jarome Iginla-CGY 98 (30)
4. Pavel Datsyuk-DET 97 (29)
5. Joe Thornton-SJS 96 (28)
6. Jason Spezza-OTT 92 (24)
Vincent Lecavalier-TBL 92 (27)
Henrik Zetterberg-DET 92 (27)
9. Daniel Alfredsson-OTT 89 (35)
10. Ilya Kovalchuk-ATL 87 (24)
11. Alex Kovalev-MTL 84 (34)

... where 7 of the 11 are age 27 or above, and the mean age is itself greater than 27.

I know Crosby is not represented and there may be other anomalies, but those differences are not small. Yes it's a younger man's league now than it was a decade ago -- in 1997-98 only one player under 24 (Jason Allison) cracked the Top 30, while Gretzky still finished third in the league as a 37-year-old greybeard and was a trendsetter from the other direction!

I for one welcome the recent trend, but it's not quite the revolution of the post-merger NHL.

 

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