Dion Phaneuf Contract Extension Almost Done

Dion Phaneuf Contract Extension Almost Done

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Dion Phaneuf / Phil Kessel

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.

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

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339 comments
Bon Scott was a Leaf fan
Bon Scott was a Leaf fan

Was shopping in downtown Ottawa yesterday....looking for a Canada Goose jacket.  Nice jackets....but was blown away at the prices (starting at $695).  Will remain with my leather from Moores for the time being.

Zep2
Zep2

The road to the SC 


Doormat -Respectability-Contention


Leafs are hovering around Respectability. 

mcloki
mcloki

Ha LOL. All these people bitching about players getting paid to play hockey should read the Prime Ministers book on hockey. It's actually a good read. Got it for Christmas. Part way through it. Hockey in Toronta started off as an Amatuer only sport.

mcloki
mcloki

Merry Christmas gents. Hope you all had a great holiday.

mr_hanie
mr_hanie

Leafs allow point shots..this bugs me so much...

Burtonboy
Burtonboy

So Nolan said he intends to plunk John Scotts ass in front of the net on the PP eh . 

Mind Bomb
Mind Bomb

@wiski Man I would love Koro in the game tonight for Buffalo

MaxwellHowe
MaxwellHowe

@mcloki Fascinating book , isn't it?  Clearly, at the turn of the last century, the stress on amateur "purity" was really about maintaining class structures.  Athleticism was for the elite, who had the leisure time and finances to practice and excel.  ?The lower classes were a little too busy working and living to develop elite skills.  Making hockey professional disgracefully permitted the undesirables to play.

Mind Bomb
Mind Bomb

@mcloki You as well Bro, It was great here got my Heritage Classic Jersey :)

Bon Scott was a Leaf fan
Bon Scott was a Leaf fan

@wiski

if I'm not mistaken, this is the longest Bolland has ever been injured.  Was very happy with the trade last summer....and was quite happy with is production and input prior to his injury.  Hoping he re-signs for 3 or 4 more years.  Love what Bolland brings to the Leafs.

darthNihilus
darthNihilus

@Burtonboy Good, so lets not give them any powerplays and lets make sure we spend all of our time in front of THEIR net, where he's useless!

wendelsfist
wendelsfist

@wiski It sounded like some folks were more pissed about his walk in shoe closet and Bentley.  Phaneuf hasn't won over fans as much as Kessel has and even then people are not crazy about Kessel's contract and as part of the core.  

mcloki
mcloki

Nice igot the Bobby Orr book and the Leaf book by Harper.

Ryan
Ryan

@Leafs rule @Burtonboy 

Speaking of enforcers sad to see Parros go out like he did. 2 knockouts this year alone 

Burtonboy
Burtonboy

@TheCanucksnaphook @Burtonboy McLaren might not be in according to Henny . Seems he was taking extra work after the skate . Then again you never know till game time with RC

Burtonboy
Burtonboy

@Alec Brownscombe @wiski Callers? How about announcers as well. O'Neil said we should dump Phaneuf and get a shut down dman to replace him . LMFAO 

ShiftyD
ShiftyD

@wendelsfist@wiskiThat's funny. People do realize he is a multi millionaire and his wife is also one in her own right as an actress? LOL

Mind Bomb
Mind Bomb

@mcloki Sweet bro, I know its the age of Digital, but I have 5 Bookshelves crammed with Books, I still love em, they can keep their e reader lol

darthNihilus
darthNihilus

@wiski @darthNihilus sorry I meant what asshole made that diagram of Bolland being glass, not being tough and never having the puck? Dreger? 

darthNihilus
darthNihilus

@wiski @darthNihilus @TheCanucksnaphook what happens when you turn out to like the friend better than the wife? LOL D-I-V-O-R-C-E (then the wife gets the leaf tickets and takes some young guy next time instead of you! lol)

wendelsfist
wendelsfist

@Burtonboy @Alec Brownscombe @wiski I'm fine with upgrading the leaf defence but I don't see a low risk to accomplish this without Phaneuf.  That said, I'm a bit surprised at the lack of discussion around the different possibilities to improve the leaf defence on here. 

Burtonboy
Burtonboy

@Alec Brownscombe @Cameron19 @Burtonboy @wiski Never a dull moment for sure . Wish I had the stats handy about just how many goals the big stars of the League score when Phaneuf is on the ice . O'neil would have gotten a text message real fast.

Alec Brownscombe
Alec Brownscombe moderator

@Cameron19 @Burtonboy @Alec Brownscombe @wiski That's this market for you. Part and parcel with an intensely passionate, huge fan base. You see something awesome like Maple Leaf Square and I rather have it this way than liking a team that no one gives a shit about. 

Cameron19
Cameron19

@Burtonboy @Alec Brownscombe @wiski Some days I just can't even tolerate the number of people who are morons and either report on the Leafs, or claim to be fans of the Leafs. Just completely fucking brainless people everywhere shooting their mouths off.