Salary Cap: Gambling With the Cap

[smackdaddy]

I found this over on the business board. I have to say, the projections are a little over the top. But let's say that the cap does follow this trend. We're looking at an $80M cap in 2 years.

Luckily, we have guaranteed our team remains competitive as we push $90-$110M within the next 10 years with the arena that's being built. Winnipeg, among others, are a team that could very well suffer the same fate it did 20 odd years ago if they cannot make the $70-80M cap floor. But that's a diff topic.

The question is, should this team anticipate the cap hike and trade for/sign players accordingly? If we manage to lock up our top 5 talents to around $35M, that leaves us with $45M in cap space in 2 years under an $80M cap. Pittsburgh will be rolling with $34.65 for 5 players in 2014-2015. That would make it 46% of their cap in 5 players (estimated; $75M cap for 2014-2015). We know it's doable.

If we are truly ready to compete with the big markets in terms of salary, we should be looking to grab those players we need aggressively. Despite the fact that Clarkson is a glorified grinder, the more I look at the reasoning in which Nonis justified the contract, the more I believe it to be more forward thinking than this short-sighted 2-year foresight most managers post-2004 seem to be caught up in. They got their man and that's all there really is to it. The cap implications are non-existent. His cap hit will be a fart in the wind for a team as rich as Toronto in 2 years. The length, however....

It is a shame it took so long for us to get this arena project going, because it has put us into a very crappy scenario in terms of the revenue/salary ratio we have to live by until the financial situation of the Oilers/Katz stabilizes. Quite frankly, the reason we seem to be unable to attract FAs seems to be our historic desire to buy low (Clarkson notwithstanding), or be thrifty. It's an economic reality for Canadian teams.

Setting our sights on a projected salary cap of $80M by 2015 and gambling on that fact is a risk I believe the Oilers should take. As contrary as it sounds today, we need more signings of the Boyd Gordon variety - where we pay a premium for an asset we desperately need. This BS with Gagner is upsetting me. $5M for a center is the high rate right now and takes no consideration for the cap rising for the duration of his contract. We should look at it as a percentile rather than raw dollar figure, and the reality of the fact is every players' cap percentile is going to go down over the next 5 years guaranteed. Nickle and diming Gagner over what amounts to a NTC and $0.500M is ludicrous. It's not about dollars, it's about whether or not we see Gagner a core member of this team. If not, trade him. It's pretty simple stuff.

I believe we should start being a forward thinking team and that starts with bold moves like trading for high end players like Vanek, taking premium cap dumps from top teams today, and signing the FAs we need to the contracts that make sense 2 years from now rather than today. If we go into this important phase of our rebuild and plug in a bunch of crappy thrift store NHLers, the rate in which those players turn into true gems and those who don't are never as high as signing the premium player to begin with.

That being said, I'd be interested in hearing how your strategy moving forward changes and who you'd target today if we embraced the fact that we would be a cap team with 80M in payroll in 2 years.

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[Draiskull]

When was the last time the Oilers spent anywhere close to cap?
Katz has been one of the lowest spenders and if it wasn't for rookie bonuses we would be a cap floor team.
I do agree that signing J. Schultz and Nuge right now would be the most cost effective..

 

[Delicious Pancakes]

When was the last time the Oilers spent anywhere close to cap?
Katz has been one of the lowest spenders and if it wasn't for rookie bonuses we would be a cap floor team.
I do agree that signing J. Schultz and Nuge right now would be the most cost effective..

Katz said he would spend to the cap. Although that was when the cap was significantly lower. However MacT apparently had the green light to overpay for Clarkson above what Toronto offered (according to Dreger).

It all depends on revenue though and as the OP said with a new arena Katz should have plenty of quiche. The rich get richer, owners and players.

 

[Tarus]

When was the last time the Oilers spent anywhere close to cap?
Katz has been one of the lowest spenders and if it wasn't for rookie bonuses we would be a cap floor team.
I do agree that signing J. Schultz and Nuge right now would be the most cost effective..

Why would the Oilers spend to the cap when they were intentionally tanking?

They were a cap team under Katz right up until they publicly announced the rebuild.

 

[voxel]

I vaguely recall compliance buyouts reducing the cap (players share) next year so it will not rise so quickly. I could be wrong.

 

[Oiltankjob Fail]

Why I Think its important to get RNH Yakupov Schultz signed to long term contracts , if cap rises a lot and we have these guys locked up for5/6 million a year we could have ample room in a few seasons to sign some top ufa's to put team over the top.

 

[Oil Gauge]

I don't think salary has ever really been a problem for katz. It seems to me that the money is there is the GM needs it. Over the past 3 years it didn't make much sense to spend to the cap when we all knew that the Oilers were not going to be able to compete with the top teams, so why waste the money. We have also had some sweet deals on our ELC players who were filling our top 6.

Before the Hall/Eberle Year the Oilers were pretty much a cap team.

 

[skorf]

Lock in our guys for long term deals.

Give Gagner, MPS, RNH, JSchultz, heck Belov midseason if he looks decent, Yak, etc 5-7 year deals.

If the cap jumps, free agency will go crazy

And even if a guy like Gagner is signed for 4 million for 6 years. If it does go up a lot then in 2-3 years if his role on our team is diminished then we could definitely find a trade partner for him.

Kind of like the Detroit model, they always sign there guys to long term deals and near the end they have a good deal

 

[The Reasoner]

Of course our top players will be signed for whatever it takes. Any cap casualties will always be the lesser players who can be replaced by rookies. Regardless of any specific projections, you assume the cap will go up on average. So of course sign all your top players as they come up for renewal to long terms contracts. This is how every other team has always operated and how I would expect the oilers to operate as well. The only exception would be if a player wants to leave or if a top player does not have a roster spot because of even better players. The long term strategy is extremely simple when it comes to your top players.

 

[The Reasoner]

It all depends on revenue though and as the OP said with a new arena Katz should have plenty of quiche.

Nice.

 

[Gord]

too much to really read, but I get the impression the OP is saying that the Oilers should take chances on players and vastly overpay, because the assumption is the cap will go up dramatically.

not sure I like that plan.

 

[thadd]

too much to really read, but I get the impression the OP is saying that the Oilers should take chances on players and vastly overpay, because the assumption is the cap will go up dramatically.

not sure I like that plan.

Unless the economic situation in America changes in a very volatile way, I can't see the cap being under 68M for the 14/15 season.

I'm really not worried about the cap when I look at the contracts we've got now.. I'm worried about the cap hit we might take on if we sign a stud #1 d-man 1 or 2 years down the line or what a guy like Justin Schultz or Oscar Klefbom might cost years down the line if they play upto their potential.

 

[Fourier]

I've said on the BoH and I stand by this that these projections are extremely optimistic.

Danishh is a smart guy but I don't see any way that revenues grow this quickly. This is especially true if you factor in a roughly 6% drop in the $CDN that itself will put a drag on revenues of roughly $70M.

There was a comment from Stan Bowman suggesting that the 2014-2015 cap would be $75M. However, I just don't see how you get there. That would be an almost $800M increase in revenue in two years even without including the change in the $CDN.

 

[s7ark]

I've said on the BoH and I stand by this that these projections are extremely optimistic.

Danishh is a smart guy but I don't see any way that revenues grow this quickly. This is especially true if you factor in a roughly 6% drop in the $CDN that itself will put a drag on revenues of roughly $70M.

There was a comment from Stan Bowman suggesting that the 2014-2015 cap would be $75M. However, I just don't see how you get there. That would be an almost $800M increase in revenue in two years even without including the change in the $CDN.

Well isn't the HNIC contract coming up? After that gets done, and the NHL expands into QC and GTA2 that would be a big jump.

 

[I am Lorde]

too much to really read, but I get the impression the OP is saying that the Oilers should take chances on players and vastly overpay, because the assumption is the cap will go up dramatically.

not sure I like that plan.

Maybe you shouldn't reply if you're not gonna read it. Anyways, it's about signing long term deals assuming the cap will rise. At the end of their deals they'll hopefully be underpaid.

 

[Fourier]

Well isn't the HNIC contract coming up? After that gets done, and the NHL expands into QC and GTA2 that would be a big jump.

The CBC contract is up at the end of this year. Technically it would not impact the cap until after the 2014-2015 season, though if it is a large increase, which it probably will be, they could adjust the 2014-2015 number accordingly. However if the CBC number doubles to $200M you would not do much more than cover the drop in the $CDN.

Expansion to Quebec/GTA2 would increase net revenue but only have a marginal impact on average per team revenue which is what impacts the cap. I also do not see this happening next year.

 

[Gord]

Maybe you shouldn't reply if you're not gonna read it. Anyways, it's about signing long term deals assuming the cap will rise. At the end of their deals they'll hopefully be underpaid.

the focus of his argument seems to be the Oilers should pay players the covet more than they are worth or the current market dictates, in hopes the cap will rise and the contract will become a better value.

that's pretty shortsighted thinking in regards to managing your roster and the salary cap. wanting to spend to a maximum cap value that you hope will exist sets you up for failure.
do you honestly believe the cap will be almost $82M in two years, and it's worth risking the future of the team on?

 

[bucks_oil]

the focus of his argument seems to be the Oilers should pay players the covet more than they are worth or the current market dictates, in hopes the cap will rise and the contract will become a better value.

that's pretty shortsighted thinking in regards to managing your roster and the salary cap. wanting to spend to a maximum cap value that you hope will exist sets you up for failure.
do you honestly believe the cap will be almost $82M in two years, and it's worth risking the future of the team on?

I'm recklessly optimistic and I don't see the NHL's revenues growing *that* quickly.

Aside: though if they successfully dissociate royalty rights for direct-to-consumer online streaming (NHL.com) vs traditional broadcasts (NBC, CBC, Sportsnet, TSN), they could see a boost in the percentage of the pie they get as more and more houses get Apple TV & Roku type boxes

But you have to plan for success and manage through challenges. And I don't think it would be as dire as "risking the future of the team". If revenues only grow by half that amount, it can be as simple as trading Yak or Ebs, or whoever has high trade value & contract relative to their worth to our team. That way we trade a high end player for 4 solid assets and thereby ensure longer term, renewing, success.

 

[bucks_oil]

In reference to "quiche".... Nice.

I dunno.... I'm not local to edmonton, but I just don't see it being a big seller at the concession stand. Maybe if it were Greasy Egg and Bacon Quiche it could be a hit on Saturday early afternoon games... Perhaps Donair Quiche for 8pm starts and Poutine Quiche for those rare 2AM starts?

 

[bucks_oil]

The CBC contract is up at the end of this year. Technically it would not impact the cap until after the 2014-2015 season, though if it is a large increase, which it probably will be, they could adjust the 2014-2015 number accordingly. However if the CBC number doubles to $200M you would not do much more than cover the drop in the $CDN.

Expansion to Quebec/GTA2 would increase net revenue but only have a marginal impact on average per team revenue which is what impacts the cap. I also do not see this happening next year.

You know... I hadn't realized it, but your statement gives all the reasons why you would never relocate Pheonix to GTA2 and expansion is always preferable to relocation. Why drive up avg revenue when you could just drive up aggregate?

 

[smackdaddy]

the focus of his argument seems to be the Oilers should pay players the covet more than they are worth or the current market dictates, in hopes the cap will rise and the contract will become a better value.

that's pretty shortsighted thinking in regards to managing your roster and the salary cap. wanting to spend to a maximum cap value that you hope will exist sets you up for failure.
do you honestly believe the cap will be almost $82M in two years, and it's worth risking the future of the team on?

It's shortsighted to only see the market value of a player on a year to year basis rather than using some economic figures and a bit of luck to make an educated guess on the cap over the duration of the contract. There's always risk.

You assume this means spending wildly with no regard. Nothing could be further from the truth. Every year from now on the holes that we need to fill become increasingly more expensive as the cap rises. That #1D right now goes for $7M. In two years, it's going to be $8.5+. That 2LW and 2C is going for $5M. In two years, it's going to be $6M+.

So either you wait until the market dictates your spending on a year to year basis, or you get in the drivers seat and pay that $8.5M now for a #1 D, or a $6M+ for a 2LW/C. Look at Gagner. What a joke of mismanagement in my eyes. We're fighting him on value for this year rather than next year and it could ruin the relationship.

One thing we know, the cap is going up. If we get our core pieces then who cares. Eventually that value will average out.

 

[bucks_oil]

It's shortsighted to only see the market value of a player on a year to year basis rather than using some economic figures and a bit of luck to make an educated guess on the cap over the duration of the contract. There's always risk.

You assume this means spending wildly with no regard. Nothing could be further from the truth. Every year from now on the holes that we need to fill become increasingly more expensive as the cap rises. That #1D right now goes for $7M. In two years, it's going to be $8.5+. That 2LW and 2C is going for $5M. In two years, it's going to be $6M+.

So either you wait until the market dictates your spending on a year to year basis, or you get in the drivers seat and pay that $8.5M now for a #1 D, or a $6M+ for a 2LW/C. Look at Gagner. What a joke of mismanagement in my eyes. We're fighting him on value for this year rather than next year and it could ruin the relationship.

One thing we know, the cap is going up. If we get our core pieces then who cares. Eventually that value will average out.

While I tend to agree with this... and I tend to think that Gags is likely to *appear* a much greater value at $5M in 3 years than he does today, I think this mgmt team is also a bit burned by the Hemsky contract.

There was a 2nd tier young star in the league, signed to a 6 year, $4M contract after 2006 cup run... we (fans) around these parts claimed it was one of the best contracts in the league.

Fast forward to year 5/6 and we couldn't get any value for him at the trade deadline.

 

[smackdaddy]

While I tend to agree with this... and I tend to think that Gags is likely to *appear* a much greater value at $5M in 3 years than he does today, I think this mgmt team is also a bit burned by the Hemsky contract.

There was a 2nd tier young star in the league, signed to a 6 year, $4M contract after 2006 cup run... we (fans) around these parts claimed it was one of the best contracts in the league.

Fast forward to year 5/6 and we couldn't get any value for him at the trade deadline.

Hemsky's $4M contract was a steal, and below market value when we signed him. It wasn't his salary that stopped trades. It was his on-ice performance and constant injury concerns. Us re-signing him to a 2 year $5M contract just magnified his deficiencies. Horcoff was signed to a fair market value based on his performance. It was pure gamble, and it bit us in the ass. It happens. It was a different market then. Now, a $5.5M contract today is going to look like a $3M contract in a couple years. That's some cap value wouldn't you agree? Definitely a worthwhile risk, no?

 

[smackdaddy]

I've said on the BoH and I stand by this that these projections are extremely optimistic.

Danishh is a smart guy but I don't see any way that revenues grow this quickly. This is especially true if you factor in a roughly 6% drop in the $CDN that itself will put a drag on revenues of roughly $70M.

There was a comment from Stan Bowman suggesting that the 2014-2015 cap would be $75M. However, I just don't see how you get there. That would be an almost $800M increase in revenue in two years even without including the change in the $CDN.

Thanks for your insight. I also agree that the figures are somewhat.. hopeful. But I also believe that the cap will raise. The speed at which it raises is the gamble.

 

[Fourier]

Thanks for your insight. I also agree that the figures are somewhat.. hopeful. But I also believe that the cap will raise. The speed at which it raises is the gamble.

I think the cap will rise as well. And faster than some may think so I don't disagree with the main premise of your proposal. What I do question is when the rise may start.

Cap space is an asset but only if it is used advantageously. I think that from the Oilers perspective, long term deals for guys like RNH and Yakupv, even Schultz would pay off. I also think that for the right players paying a little more is the right thing to do, but you do need to be careful.

I actually think there is a reasonable chance that we see at most a modest increase in the cap next year if the $CDN declines from here. That would be a significant opportunity for the Oilers because even many non-traditional spenders have given out big bucks.

Hemsky's $4M contract was a steal, and below market value when we signed him. It wasn't his salary that stopped trades. It was his on-ice performance and constant injury concerns. Us re-signing him to a 2 year $5M contract just magnified his deficiencies. Horcoff was signed to a fair market value based on his performance. It was pure gamble, and it bit us in the ass. It happens. It was a different market then. Now, a $5.5M contract today is going to look like a $3M contract in a couple years. That's some cap value wouldn't you agree? Definitely a worthwhile risk, no?

Actually I'd say that Hemsky's deal was full market value at the time he signed it. It became a steal because the cap rose quickly. Had he stayed healthy his deal would have been the perfect illustration of the point you tried to make in the OP. But injuries are a risk with long term deals, but I think this is a risk that one must take with your best players.