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Wednesday, January 16, 2008

Wednesday Editorial: Examining the length of the Alexander Ovechkin contract

With the recent signing by the Washington Capitals of superstar Alexander Ovechkin to a thirteen year contract, many people around the hockey world are wondering if this term is too long. Before examining the Ovechkin contract, we must first note that both Rick DiPietro of the New York Islanders and Mike Richards of the Philadelphia Flyers signed contracts longer than ten plus years prior to the Ovechkin deal. Therefore, it should be pointed out that Ovechkin’s contract was not the first of its kind. That being said, we will still examine this contract from the perspective of both parties.

Is the contract too long for the Capitals?

When examining the contract from the Washington perspective, there are a number of factors that have to be taken into account. First off, if the Capitals didn’t give Ovechkin thirteen years on his contract, would he have re-signed with them? That question seems stupid seeing as how his rights are owned by the Capitals until he is 25 (thus giving them the right to match any offer from another team) but if he really did not want to play for the team, he could have held out. Using that line of thinking, the Capitals may have been in a very poor bargaining position.

Secondly, the Capitals are paying Ovechkin a lot of money now; however, they are also avoiding having to worry about Ovechkin becoming an unrestricted free agent (UFA) down the road. Often times, especially in baseball, teams will pay a higher starting salary, in order to pay-off the player for any loss he will incur for having passed up on unrestricted free agency. So, even though the NHL takes the player’s average salary per year and counts that number against the salary cap, there is a reason why Ovechkin is being paid more money than Sidney Crosby starting next season.

Thirdly, how can the Capitals be sure Ovechkin will stay healthy? The fact is--they can’t. That, in my opinion, is the biggest risk that comes along with this deal. What if Ovechkin sustains a career-changing injury? While I hope this doesn’t happen, and understand the unlikeliness of it occurring, anything is possible. It is possible that an injured Ovechkin will not be the player he is now; thus, leaving the Capitals with an annual cap-hit of almost ten million dollars without justifiable production.

Is the contract too long for Ovechkin?

Alexander Ovechkin has to be thrilled that he just signed a guaranteed thirteen year contract; that being said, his guarantee of $100+ million does carry with it some possible drawbacks. First, we must examine the possible loss of money Ovechkin will incur because he passed up unrestricted free agency during the prime of his career. Unrestricted free agency not only carries with it a bidding war for a player’s services (many times from big-time markets like New York or L.A.) but also the ability to make a lot of money through endorsements. If the young Russian superstar were to have passed on this contract and played the rest of his time out until he reached UFA status in his mid-twenties, then almost every team in the NHL would have been salivating to sign him. Assuredly, a number of those teams would have been in big markets, which carries with it big time endorsement money. Never mind the fact that the NHL in four-to-five years could have a far higher cap than it currently does (therefore allowing for a higher maximum per-year offer).

Secondly, one has to wonder what the NHL salary landscape will be in 2017. Ovechkin will still be in his early 30’s, and with the way athletes condition themselves these days, he will most likely be playing at a very high level. Consequently, if you factor in inflation, the average NHL salary in 2017 will almost assuredly be significantly higher than it is today and Ovechkin may be worth far more than the almost $10 million average he will be paid at that time. If that is the case, then Ovechkin may be losing out on a fair amount of money. On the other hand, if the NHL struggles and the cap shrinks, then Ovechkin will be quite happy with his new contract.

Finally, what if Ovechkin wants out of Washington in a few years? That possibility is realistic. It is not as if the Capitals have been a successful franchise this decade; and while they have some young players to be excited about, this is not the second coming of the Ottawa Senators or Detroit Red Wings. It is very possible Ovechkin gets sick and tired of losing in the U.S. capital and wants out. Now, I realize he did negotiate a modified no-trade clause as part of his contract, but that doesn't kick in until 2014. Moreover, after 2014, he can only list ten teams to which he doesn't want to be traded to. One must wonder if Ovechkin may have been better off signing a six-year deal at his current price, leaving himself the ability to re-evaluate his surroundings and the success of the Capitals at that time.

Conclusion

In the end, the contract carries with it many negative risks and may very well be too long for the Capitals. Nonetheless, it also carries with it some positive risks and that is the way contract negotiation should be. The fact of the matter is, risk on both sides isn’t a bad thing; so long as the parties involved are able to deal with the possible consequences that lie therein.

For Illegal Curve, I’m Richard Pollock.

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4 comments:

]effadams#2 said...

Hey Curves,

Love what you are doing with you're site.

I believe that you have missed one KEY agruement on this issue.

This signing has given the Capitals a legitemacy that they have lacked in all of their existance.

What price do you put on that?

Thoughts.

Richard Pollock said...

In reality, I think the biggest thing that gives the Capitals legitimacy is a winning franchise. Ovechkin obviously will play a role in that success, but if the team continues to struggle, I am not so sure how much legitimacy is worth?

cdd04 said...

Second coming of the Ottawa Senators? I know that this was posted almost two months ago, but you might want to check out those NHL standings more often. In terms of dynasties (and I'm pretty sure that's the point you were trying to make) the Senators are - and were - nowhere the level of the Red Wings.

Methinks the Canadiens, Islanders, or Oilers might have been a better analogy as far as making comparisons to dynasties.

Anyway, not a bad post. It's nice to see a professional athlete put the team first and sign a long-term hometown contract that gives the club stability and legitimacy.

Richard Pollock said...

cdd04: This post was made January 16, 2008. That is two years and 2 months ago.

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