Monday, 4 July 2016

Are they Crazy or is it Just Me?

Oh, Crap the Oilers signed Milan Lucic to a 7-year, 42 million-dollar deal they are going to regret the last 2 years of that contract! This was the common refrain from Oiler fans and around the league when the news broke. These shouts and concerns were being voiced even before he signed the deal in Edmonton.  Though this was not the only long term deal signed on July 1st, Andrew Ladd, Kyle Okposo, Loui Ericsson, and Frans Neilson all signed deals for either 6 or 7 years. 

So this prompts some questions. Why would they be willing to take this risk? Are all the General Managers just crazy? The answer most fans give is “hell yeah!” Hold on now, there is actually another answer and it is simply cost analysis.  Hockey is a business, and general managers feel that the benefits outweigh the risks.

Lets first look at the risks associated with signing a free agent to a long-term deal.  

  • v Risk of injury - as players age and the wear and tear of the body increases the risk of injury becomes more common.
  •  v Reduced Point Production – There is fear that the free agents are signed at an age where they may have already reached their peak.  In today’s NHL this comes at an earlier age. 
  • v The Diminished Asset - the team may not be able to trade this player because that production is so low.  They will either be saddled with the cap hit, or trade the player for a reduced price, or have to include an asset to dump the contract. 

Obviously all of these are a risk are a concern and some might happen, none may happen, or all may happen.  The key words though are might and maybe.   General Managers are willing to take this risk because of the benefits the player provides.   Lets look at these benefits. 
  • v They don't have to draft and develop the player.  Using Lucic as an example the Oilers can put him into the lineup, and immediately on the 1st line.  A player like Lucic is plug and play.  They didn't have to wait, they already know what type of player he is and they didn't have to take the risk that he doesn't develop.  
  • v They didn't have to trade an asset to get the player.  Trading for a 55 point player is going to come at a price, it may mean robbing Peter to pay Paul, or using a lessor player to fill the hole you created elsewhere.
  •  v It's the market price.  Multiple teams were willing to sign Lucic for 7 years.  If you don't play the game someone else will. 

The player himself may also mitigate the risk.   Let’s use Lucic as an example:

v Lucic has never had a significant injury - he does play a game that is considered more high risk but injuries have never been a concern. 
v Lucic keeps himself in great shape, he is known for being physically fit and works hard in the off-season and during the season to keep himself that way. 
v Lucic eats properly - Peter Chiarelli noted this, during his press conference. I don' t think I need to explain that eating properly is going to decrease the risk of the body wearing down and reduce the effect of aging on the body.

Obviously there is risk, but they are all mights and maybes.   The benefits are all real; there are no mights and maybes.  The team didn't have to develop the player, they didn't have to trade an asset and it is a certainly that another team would have signed Milan Lucic.   Lucic is taking the proper steps to take care of his body.

We would probably agree that paying any hockey player 7 million dollars is crazy.   In weighing the risks and the benefits, Peter Chiarelli paid no more than market value in today’s NHL.

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