Passionate about the business of hockey, CBA and sports analytics, I’ve built a platform inspired by my professional experience and skills working in the Sales, Finance and Technology industries. Over the past few years, I have developed a process to optimize salary negotiation for NHL players. My capologist consulting services have already helped some player agencies and hockey executives sign better hockey deals and streamline the negotiation process.
I was so pleased when Jack Han asked me to collaborate with him! He asked me to use Dermott’s extension with the Leafs as an example of how I look at deals.
Recognizing that every situation is different, it’s important to research and find the right information to build a ‘case’. There are many elements I value when preparing a contract analysis and recommendation, namely assessing a combination of:
- Player status and comparables;
- Career trajectory and on-ice impact by digging into CBA-approved statistics;
- CBA leverage and recent signings analysis;
- Club internal cap structure, front office and agency culture & tendencies.
Intangibles such as leadership, grit, resilience, competitiveness and character are important and hard to assess numerically. I’m very deliberate in disclaiming that my negotiation analysis and contract recommendations do not take into consideration ‘intangibles’. To adequately assess desirable attributes like culture fit, it’s important to communicate and trust with coaching staff as they can monitor day-to-day interaction and report first hand what the player brings to the group in a variety of settings (i.e. on-ice, on the bench, at practice, between periods, on the road, etc.). When the right information circles in the organization, better questions can be asked, and better decisions can be made.
Represented by Wasserman’s Jeff Jackson, the 23-year old has played over 157 regular season NHL games and registered valuable postseason experience at the pro levels (14 NHL playoff games and 26 AHL playoff games).
The CBA will grant various amounts of leverage to the Club and Player based on status. In this case, Dermott’s ELC contract expires this season, and he will be an RFA without arbitration rights. In this round, the tone is set by the Club.
The Maple Leafs have the option of forcing Dermott to accept a one-year deal by simply refusing to negotiate any other term. This position could be seen as very defensible, given the Leafs’s well documented top-heavy cap structure and current proximity to the ceiling (projected cap space $4.5M for 2020-21 as per @capfriendly).
Perceiving a one-year offer as a sign that the Leafs does not yet completely trust the player, or have confidence in Dermott’s game/long term potential, would likely not be the case but it is worth mentioning that every person is different and decisions have different impacts on different people. Hockey is a people’s business, it’s part of an agent’s role to help the player accept and understand the business rationale behind contract extension decisions.
Despite finally seeing Nathan Horton’s and David Clarkson’s Long term injury reserve (LTIR) money coming off the books, Leafs are still on the hook to pay $1.2M in retained salary from the Kessel transaction for another two seasons.
Due to rigid cap limitations, a longer term commitment to Dermott from the Leafs should prove challenging at this time:
- A 4-year term is highly unlikely, as this would walk Dermott straight to free agency, which is generally better for the team to avoid. The franchise would also have to address deals for pending UFAs Matthews, Nylander and Muzzin.
- A 5-year term matches Tavares and Marner’s free agency eligibility;
- Offering 6, 7 or 8 years for a young defensemen who still has lots to prove is inadvisable.
As the franchise is in a win-now mode, Leafs can benefit from slow playing Dermott’s career management by exploring bridge options. This negotiation will need short-term creativity and long-term awareness from GM Dubas. Leafs are a front office focused on building a winning culture, and this includes ensuring that their players are treated fairly, valued and respected. As such, it is the the team’s best interests to offer a 2-year or 3-year term as this achieves a number of desirable outcomes:
- Grants player some security, which allows them to focus on fulfilling their on-ice and off-ice responsibilities to the highest of their capabilities;
- Opportunity for the coaching staff to continue to develop the player and increase confidence in the assessment of Dermott’s role on the team, performance ceiling and limitations/weaknesses;
- Setting clear precedent of ‘bridge first, long commitment later’ for Leafs’ upcoming wave of defenseman who were drafted in the early rounds (i.e. Liljegren, Sandin, Kokkonen);
- Delaying no-move conversations, a form of compensation offered by management to core players;
- Retaining the opportunity to set internal cap structure by signing UFA ace-defenseman Morgan Rielly;
- Control future costs as Dermott will retain RFA arbitration eligibility once his contract expires. It is very rare for a team to elect arbitration, generally this is a tool leveraged by the player to ensure continual negotiation with the Club towards reaching a fair outcome.
Dermott and Wasserman agent, Jeff Jackson, have an opportunity to defer security and dollars in the short term by demonstrating flexibility and focusing on giving Dermott every opportunity to grow and win with this Leafs core led by Coach Sheldon Keefe.
Other notable intangibles which will influence this negotiation from the player’s side include playing for his hometown and childhood team, familiarity with teammates, staff, organisation, facilities, city and fans.
Travis was part of the Marlies’ AHL championship team, a culture of winning is strongest sustained in the NHL when it starts from the development league. The partnerships between Detroit/Grand Rapids and Tampa Bay/Syracuse are great examples of organisations who have succeeded, at times, in implementing such a strong culture of competitiveness and winning. Sometimes, management’s answer to “what else is on the market” is in-house cheaper and younger options. In this case, what is best for Toronto happens to align with Dermott’s best short-term interests.
Financially, there may be a reward for Dermott. By accepting a lower cap hit in the short-term, Dermott could request a front-loaded contract containing signing bonuses. Numbers don’t lie and time value of money has been documented by Matt Cane, now Director of Analytics for the New Jersey Devils. A contract with a lower cap hit may be more valuable than a higher cap hit, especially as earning more upfront is fiscally advantageous as the player can invest those earnings sooner, rather than later.
Some Ownership groups across the league have a management culture where it’s preferred to defer salary payments (i.e. no signing bonus, all base) for cash flow reasons, hence why we’re expecting the CBA to contain language around tighter contract structure. This would be essentially restricting the playing field by removing a competitive advantage from financially dominant ownership groups around the league. Montreal’s offer sheet to Aho last summer is a great example of this.
Toronto has heavily leveraged signing bonuses as a tool in recent negotiations of contract values of $10M or more and I don’t expect Dermott to secure an investment of that size during this round of negotiations. For a player of Dermott’s caliber, on a 2-3 year term, Leafs can expect to spend $7M – $9M.
Player comparables within an organisation are usually valued at a premium from the Club’s perspective. Count on the Agent to make sure to point out to other deals across the league as he negotiates the deal on behalf of his client’s best interest. Negotiations can be positive for all involved – of course not all the time! From having managed long deal cycles, let me tell you that some deals can certainly become exhausting emotionally when things drag on because the roadblocks are real. I found that adopting a win-win mentality helps, and this powers the lens I prefer to use when analyzing situations and generating solutions.
In the cap world we live in, the rules of the game and status of the league have changed according to the recently announced CBA extension changes.
Front office executives have a lot to juggle on a day-to-day basis and access to data is greater than ever before. My continued focus is on empowering hockey executives with insights and cap management tactics to help them sign better hockey deals.
Questions and Future Work
To learn more and request negotiation report analysis, hockey executives are welcome to reach out directly to Idriss by email at firstname.lastname@example.org.