Dion Phaneuf Contract Extension Almost Done

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Dion Phaneuf / Phil Kessel
Photo: NHL.com

Darren Dreger is reporting that a contract extension for Dion Phaneuf is near completion, as in it could be signed and sealed before the New Year. The long rumoured figures have The Captain’s new deal in the neighbourhood of 7×7. Phaneuf would join David Clarkson, Joffrey Lupul, Phil Kessel, James van Riemsdyk and Tyler Bozak as ‘core’ members of the team locked up through to the end of the 2018 season (or beyond). 

Here’s an important point of consideration when analyzing the upcoming extension for Phaneuf – Relative Compensation under a rising cap.

 

C. The Rising Cap and Leafs Contracts

Leaving aside last off-season when the Upper Limit of the salary cap shrank from $70.2 million to $64.3 million (which was CBA mandated and which we can thank for having Mason Raymond on a $1 million contract), salaries for free agents escalate year-over-year. This is simply the economic reality of professional hockey, and generally speaking, professional sports. In 2007-2008, the average salary of an NHL player was $1.9 million; in 2013 it’s about $2.5 million. That is an increase of 32% in six seasons, one of which included a half-season lock-out.

To put that in context, the Upper Limit is projected to increase about 25% in the next 3 seasons, and 55% by the end of the CBA in 2022, which suggests that the cap is set to rise at a rate that is about fast as the recent historical rate of salary increases for NHL players.

Why am I telling you this? I’m telling you this because it means we have to think about player contracts differently. Given the (rapidly) rising salary cap, the important number in evaluating a player’s value to the team is not the player’s average cap hit as a dollar figure, but the percentage that dollar figure makes up of the Upper Limit in any given year. This amount tells us not only what the player’s value is to the team, but also the impact of the player’s salary on the team’s ability to surround him with other talented players. Let’s call this figure the player’s “Relative Compensation”.

(i) Relative Compensation

The Relative Compensation figure makes sense for a team like the Leafs because it indicates what percentage of the Upper Limit (and as a cap team, the Leafs’ will spend to the Upper Limit) the player accounts for, and how much of the Upper Limit will be left to sign other players. Based on what we know, for every year of term on a player’s contract it is safe to assume two things; first, that his Relative Compensation will decrease as a function of the rising cap, and second, that the cost of acquiring a similarly talented UFA will increase as average salaries continue to rise. That being the case, and as long as a player is performing consistently, he’s providing greater relative value in each following season.

The trick if you’re a GM trying to sign a free agent is to figure out a salary number and a term that allows the player’s Relative Compensation to be less than or equal to his level of play for as many of the contract years as possible. When a UFA is signed it’s not unlikely that his cap hit and Relative Compensation will exceed comparable players in the short-term, this is just the reality of signing a new contract, especially with UFA’s. However, as time progresses the player should become relatively more valuable than a comparable player as his Relative Compensation decreases and the cost of signing a comparable player as a free agent increases – all of which assumes that the player’s level of play has not suffered significant regression at the time of comparison.

The Relative Compensation statistic is also useful because it allows us to make historical comparisons between players who are making different salaries across a number of seasons, based on the percentage of the Upper Limit the player’s cap hit accounted for during any given season. By doing this comparison we can estimate whether the cap hit associated with a player in a current season is, relatively speaking, of equal value to a player of comparable talent in a previous season, as well as roughly estimate what a player of comparable talent should cost (in cap dollars) in the future. All of which allows us to determine whether the player being compared is providing value to his team relative to his cap hit.

(iii) Relative Compensation: Dion Phaneuf

This season Dion Phaneuf is making $6.5 million in the last year of a 6 year deal. His Relative Compensation is 10.1%. At 10.1%, Phaneuf’s Relative Compensation is not far removed from a player like Zdeno Chara – he of the Norris Trophy and Stanley Cup. So is Dion Phaneuf overpaid by a little? Probably.

Now let’s assume for the sake of argument that Phaneuf signs the $7 million times 7 year contract that Kypreos reported last month. Let’s assume also that by year 3 (the 2016-2017 season) that a 31 year old Phaneuf has not seen any significant regression in his game, which I would argue is a fair assumption given his play this season and his relative durability over his career.

In year 3, when the cap is projected to reach $80 million dollars, Phaneuf’s Relative Compensation would be 8.75%, and he’d actually be more valuable to the Leafs, relatively speaking, than he is during the 2013-2014 season despite his increased cap hit.

For comparison sake, let’s look at what Relative Compensation of 8.75%, which equates to $5.625 million this season, buys you.

NHL Defenseman Currently Making Similar Relative Compensation

Buffalo SabresTyler Myers$5.5 million
Columbus Blue JacketsJames Wisniewski$5.5 million
Calgary FlamesDennis Wideman$5.25 million
Dallas StarsSergei Gonchar$5 million
MontrŽal CanadiensAndrei Markov$5.75 million
Pheonix CoyotesOliver Ekman Larsson$5.5 million
Pheonix CoyotesKeith Yandle$5.25 million
Philadelphia FlyersKimmo Timonen$6 million
Philadelphia FlyersMark Streit$5.25 million
Pittsburgh PenguinsPaul Martin$5 million
San Jose SharksBrent Burns$5.76 million*
Tampa BayMatt Carle$5.5 million
Vancouver CanucksAlexander Edler$5 million
Washington CapitalsMike Green$6.08 million
Winnipeg JetsTobias Enstrom$5.75 million
*Brent Burns signed this contract in August, 2011 and was not converted back to forward by the Sharks until March of the following season. 

Looking at this list, if Dion Phaneuf is making $7 million in 2016-2017 then his decreased Relative Compensation of 8.75% could not be expected to buy a team the equivalent of a Zdeno Chara, so Chara is no longer a fair comparable. As the list above demonstrates, with maybe a couple of exceptions, the defensemen with a Relative Compensation of 8.75% are  not “stud” number one defensemen in the Chara mould, but either good-to-very good second-pairing guys, or offensive specialists with defensive limitations.

Is Dion Phaneuf a high-end second pairing defenseman? In his sleep. This is a player that plays the toughest minutes on his defensively porous team every night, yet still sits at +12. Phaneuf plays both of the special teams, is good for about 40 points a season, and wears the ‘C’ in one of the toughest media markets in the NHL. Add to that his penchant for opportune goal scoring (I count 24 game-winning goals to his NHL resume), and his ability to lay a big hit or fight, and you’ve got the makings of a very good, if not quite elite all-around defenseman. As the list above demonstrates, that description is on the positive side of what a team can expect to get for Relative Compensation of 8.75%.

What’s more, is it reasonable to expect that in 2016-2017, when the Upper Limit has reached $80 million, that a team will be able to acquire a player of 31 year old Phaneuf’s calibre and spend less than 8.75% Relative Compensation (or $7 million); especially in light of rising player salaries?

Either way that you break it down, Dion Phaneuf is likely to provide value to the Leafs at $7 million until 2018-2019 when he’ll be 33 and should be expected to decline. At that point he’ll have completed 5 of his 7 contract years, or 70% of his contract. For a free agent to provide value relative to his contract for at least 70% of his contract  is actually pretty good. In order to achieve the same feat, Ryan Suter will have to be playing up to his $7.58 million dollar contract until the 2020-2021 season.

Furthermore, given that the cap is forecasted to reach $100 million by 2022, which is the year after Phaneuf’s proposed deal would end, his Relative Compensation will also continue to fall for the life of his deal, and it will not be necessary for him to play at his current level in order to provide value relative to his contract.

All of which is to say, if we can get Dion to sign on the dotted line for $7 million or less, for 7 years or less, then that’s a deal the Toronto Maple Leafs can and should live with, and we have Rogers and 6 outdoor games this season to thank for it.

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Elliot is a litigator, media and sports lawyer working downtown Toronto at Bersenas Jacobsen Chouest Thomson Blackburn LLP. He completed his articles at the Toronto office of a national full-service firm before leaving to pursue a media, sports and litigation practice. Elliot currently teaches a negotiation course entitled “Lawyer as Negotiator” at Osgoode Hall Law School, where he graduated in the top 6% of his class, and was a recipient of the McMillan LLP Scholarship. He has written extensively on negotiation, mediation and alternative dispute resolution, and his paper on collective bargaining in the National Hockey League was published in Volume 19 of the Sports Lawyers Journal. Elliot currently represents national level amateur athletes involved in sports related disputes through the Sports Dispute Resolution Centre of Canada. Elliot can be reached at [email protected] Follow him on twitter
  • MLHS_Luke

    Interesting – Thanks Elliot.

  • Burtonboy

    https://twitter.com/jonasTSN1050https://twitter.com/jonasTSN1050/status/416592344901615616
    Jonathan Bernier, coming off a 42-save performance at MSG, starts tonight at home versus the Sabres.

  • Burtonboy

    https://twitter.com/DavidAlter590https://twitter.com/DavidAlter590/status/416593365724299265
    leafs lines during skate: JVR-Kadri-Kessel, Raymond-Holland-Lupul, Kulemin-McClement-Clarkson, D’Amigo-Smithson-Orr.

  • Burtonboy

    https://twitter.com/RobinsonMeganhttps://twitter.com/RobinsonMegan/status/416593352859975682
    Elliotte Friedman told Calgary’s https://twitter.com/Sportsnet960 this AM, an extension for https://twitter.com/search?q=%23Leafs&src=hash Capt. Dion Phaneuf expected to be announced very, very soon.

  • Mind Bomb

    Thanks Elliot, 

    All you Phanuef haters , Suck it :)))

    lol

  • GETTLeafs

    the trade freeze ends today, right?

  • Burtonboy

    Thanks for putting this whole argument into some sort of perspective from a financial standpoint Elliot . Will it have any effect on how  the naysayers and haters view Phaneuf ? Even though the main argument against Dion is the money he makes I still doubt many will listen

  • Burtonboy

    https://twitter.com/DavidAlter590https://twitter.com/DavidAlter590/status/416595420480307200
    Leafs D pairs at skate : Gunnarsson-Phaneuf, Gardiner-Franson, Rielly-Ranger, Fraser-Liles.

  • newkb

    Burtonboy Square peg, meet round hole…..again.

  • newkb

    Burtonboy It is truly mind-boggling that there are those who can’t see his value….even at his current salary.

  • reenergized

    Burtonboy I think Dion is one of the guys you either like or dislike … I don’t see too much middle ground.

  • wendelsway1

    Excellent!…..Dion’s a keeper, in my books

  • newkb

    MLHS_Luke Nope, he’s not saying that….he’s saying that in a couple of years with an escalating cap he will be paid similar to a second pairing D-man if he’s paid $7 million.

  • JMAC17

    Excellent news!

  • Jmessih

    Dion signing coming good news – 7 mil 
    Hockey is back – 71.1 mil and rising
    Paul Ranger playing over John-Micheal Liles – Pricelss

  • MLHS_Luke

    newkb MLHS_Luke  Is that what he’s saying?  “Is Dion Phaneuf a high-end second pairing defenseman? In his sleep.”

  • darthNihilus

    Jmessih fuck that Liles over Ranger for me

  • dlb eh

    MLHS_Luke
    “the defensemen with a Relative Compensation of 8.75% are not “stud” number one defensemen in the Chara mould, but either good-to-very good second-pairing guys, or offensive specialists with defensive limitations.”

  • newkb

    MLHS_Luke newkb Yep….he’s a second pairing D-man in his sleep.  Awake, he’s top pairing all the way.

  • wendelsway1

    Was just replying to a post and…poof…it disappeared…lol        Was just going to say we are a better team with Dion…period.

  • Burtonboy

    wendelsway1 lol me thinks Alec or Dec are lurking

  • newkb

    wendelsway1 You mean Nate’s terd comparison post? lol

  • MLHS_Luke

    dlb ehnewkb OK, fair enough.

    If we have room to add a #1D I’m all for keeping Dion.

  • darthNihilus

    I neither love nor hate Dion. I am glad he’s getting resigned though because his skills are unquestionable. I still think he needs help and should not be playing 28 minutes a night (especially if we want him effective in the playoffs). 7 x 7 is a fair deal in my opinion though I wish he would have went 7-7.5 x 5 instead. Not sure I would want him as the captain for another 7 years.

  • Nate

    newkbwendelsway1 Lol I thought I worded it gracefully my bad.

  • newkb

    @Nate newkb wendelsway1 It happens!  lol

  • Burtonboy

    darthNihilus Help is on the way for Dion in one young Morgan Rielly

  • wendelsway1

    Burtonboy darthNihilus Yep…can’t wait!

  • darthNihilus

    Burtonboy darthNihilus thats putting a lot on the kid’s shoulders ( I see Reilly as having a higher ceiling than P9)

  • Burtonboy

    darthNihilus Burtonboy He does imo

  • newkb

    MLHS_Luke dlb eh I’m all for upgrading at any/every position.  What concerns me is that Burke was attempting to stockpile assets and trading chips, and now Nonis is cashing them in on sidegrades – expensive ones.

  • Nate

    I think he’s an NHL defenseman but I don’t think he’s a good fit as an NHL captain especially for a franchise like the Leafs. His gaffes are about as big as anyone in the league and hes not especially mean or menacing to the other team nor does he seem to be potent enough to change the game. I think Lupul, even with his injury woes, makes a better leader by example.

  • darthNihilus

    -Keon- I wouldnt go that far (hundred some odd points per season-we’d all be ecstatic lol)

  • dlb eh

    MLHS_Luke
    i think it would have made more sense if it said second tier instead of second-pairing
    there are the future hall of famers, perennial trophy contenders (i.e. Norris)
    the perennial all-stars, occasional trophy contenders
    the occasional all-stars, never on the ballet
    Phanuef is 2nd tier in this regard, and an important player for us

  • Burtonboy

    https://twitter.com/HennyTweetshttps://twitter.com/HennyTweets/status/416598979124543488
    4th line rush indicates that frazer mclaren could be back tonight with colton orr and jerred smithson. https://twitter.com/search?q=%23TMLtalk&src=hash https://twitter.com/search?q=%23SEAofBLUE&src=hash

    Fight night in TO ?

  • darthNihilus

    -Keon- who’s the guy who compared Kessel to Bret Hull? Yeah when Kessel scores 86 goals a season we can make that comparison. lol

  • newkb

    Burtonboy So playing right into the Sabres hands.  Chalk up a W for the Sabres if that is the case….

  • Cameron19

    Burtonboy Good God, you’ve got to be kidding me….That is probably the worst line in the NHL.

  • Cameron19

    Is Bozak back tonight at least?

  • darthNihilus

    newkb Burtonboy carlysle has lost his fucking mind

  • Burtonboy

    Cameron19 Nope …Sunday

  • Nate

    darthNihilusnewkbBurtonboy I figured that when he bolstered our powerplay with the likes of Gunnarson and Clarkeson

  • dlb eh

    @Nate
    i disagree on every point.  strongly.

  • Cameron19

    Burtonboy Cameron19 Ugh. Expecting our standard low effort post-Christmas, turkey special in that case….I’m going to the Jets/Wild game tonight though, so i won’t see the debacle at least.

  • darthNihilus

    @Nate I was one of the few who was very happy with the trade but not happy with Burke for making him the captain. But whatever – lets see what happens

  • Burtonboy

    darthNihilus -Keon- Do you think Hull could score 86 in today’s League ?

  • Cameron19

    darthNihilus The room made him the captain, and Wilson simply obliged.

  • Nate

    dlb eh Then you must have not seen any of the times that he gets beat and makes no effort to skate back and catch his man :(

  • darthNihilus

    Cameron19 Burtonboy Kidnap Kane and bring him to the Leafs!

  • newkb

    darthNihilus newkb Burtonboy Not a smart call to make this game the payback game.  Leafs are barely hanging onto the last playoff spot.  Unless this means the Leafs are packing it in for this season.