Among other random things during the hockey dog days of August, one of the places I have spent some time is CapFriendly which is easily among the most underrated resources available to us as hockey people. My browsing started me thinking about a few interesting situations for the Hurricanes both now and also looking into the future.
For anyone who needs a refresher on some of the legalese related to contracts especially for prospects and young players, here are a few resources.
Followed by a fairly detailed legal prelude, here are a few situations that come into play for our very own Carolina Hurricanes.
The significant financial advantage of having players on entry-level contracts at the NHL level
One of the advantages with the structure for prospect contracts is the fixed amounts for these contracts. Players like Connor McDavid who are elite at age 18 or 19 can tack on a bunch of bonuses that escalate total salary including bonuses to the $3 million range, but the vast majority of even good young players earn $800,000-900,000 per year for their first three years of their NHL career on their entry-level contracts. The three years of the entry-level contract basically start when a player starts playing professionally either at the NHL level or at the AHL level (though players earn a lower AHL salary if they play there). The result is that players like Elias Lindholm, Noah Hanifin, Jaccob Slavin, Brett Pesce and Sebastian Aho who make a quick jump to the NHL are often incredible bargains for a couple years while still playing out their entry-level contracts.
Can you believe that all of Noah Hanifin, Jaccob Slavin, Brett Pesce and Sebastian Aho earned a TOTAL of roughly $3.6 million in 2016-17. Further, they will earn the same amount in 2017-18 before the price jumps significantly when Slavin, Pesce and Hanifin start their new contracts. The total for Slavin and Pesce is already set at over $9 million for 2018-19 with the contract extensions that they signed this summer. Hanifin will increase that total with his new deal also starting in 2018-19, and Aho will increase it further for 2019-20.
How the entry-level slide works
The rules for how all of this works creates some opportunities to ‘manage’ prospects such that these advantages are gained more regularly. The biggest factor is the “entry-level slide.” In simple terms, though a 3-year entry-level contract is often signed by highly-drafted prospects shortly after being drafted (as happened for Jake Bean, Julien Gauthier and Martin Necas from the past two drafts), the first year of the contract does not kick in until a player plays 10 games at the professional level.
This plays out a little bit different for Canadian junior players versus European players. By agreement/rules between the NHL and the Canadian Hockey League, NHL draftees who are 18 or 19 years old (so basically the first two years after being drafted for most players), can stay at the NHL level if they make the NHL roster for opening day (Eric Staal is an example of this), but if they do not make the NHL roster, they must be returned to their Canadian junior team and are not allowed to instead make the jump to the AHL. The result is that the majority of Canadian junior prospects who do not jump to the NHL in their first two years after being drafted end up returning to juniors, not meeting the 10-game hurdle to count as an entry-level contract season and have the first year of their entry-level contract slide forward a year. So in a Carolina Hurricanes prospect context, Nicolas Roy was drafted in 2015 and earned a contract last summer, but because he returned to juniors for the 2016-17 season, he will be playing the first year of his entry-level contract in 2017-18. For Canadian juniors there are a couple oddball scenarios, but in general the slide is generally limited to two years after which time they start playing out their entry-level in year three if they did not jump to the NHL early.
The situation with European draftees is fairly similar. For the sake of not diving too deep into the minutiae and less commonly relevant details, I will not review the details but instead will just note a few key differences. NHL teams can maintain rights longer than two years for European players who remain in Europe versus the standard two years for Canadian junior prospects. European players have the option of jumping straight to the AHL at any age whereas most Canadian junior players must return to juniors for the seasons after being drafted. Finally, it is possible to get entry-level bargains later for European prospects depending on how the whole contract and move the pro hockey in North America plays out.
Finally, there is the case of NCAA players in the United States. They actually cannot be signed at all because they would then lose their amateur status. But because an NHL team owns an NCAA-draftee’s rights through the year when his class would graduate, the potential is there for a player to sort of have his entry-level contract slide four years though the term on the entry-level contract would also shrink from three to two such that the net is potential to have years five and six still be entry-level contract years whereas Canadian junior players general max out at five years post-draft still on their entry-level contract.
Long preamble aside, if anyone is still awake and reading, here is a short list of Hurricanes players and situations that come into play with regard to maximizing the cost benefit of having NHL players on cheap entry-level deals.
Hurricanes prospects with entry-level slide consideration
Jake Bean
He is a Canadian junior player who will be in his second year after being drafted and still be underage. As such, he cannot play in the AHL. Either he makes the Hurricanes roster, or he returns to the Calgary Hitmen in the Western Hockey League. If the latter happens before he plays ten games at the NHL level, his entry-level contract will slide again such that when he jumps to the AHL (or NHL) in 2018-19, he will still be in year one of his entry-level contract with the potential to be a cheap NHL player like Slavin, Pesce and Hanifin if he can jump to the NHL and be productive during those three years of his entry-level contract.
The upshot: Unless Bean is significantly better than the other options available for the third defense pairing, Francis has significant incentive to let him develop at the Canadian junior level again in 2017-18 and keep all three years of his entry-level contract still in hand.
Martin Necas
2017 first-rounder Martin Necas signed his entry-level deal shortly after being drafted. As a European player, Necas could jump the pond and play in the AHL if he does not make the NHL squad (which is unlikely). But if he does, he will burn the first year of his entry-level contract without the Hurricanes receiving the nice financial benefit of another cheap NHL player. Further, if he kicks in his entry-level contract in 2017-18, it will automatically click off another year in 2018-19. If instead Necas returns to the Czech Republic or somewhere else in Europe, the first year of his entry-level contract would slide forward at least to 2018-19 and keep all three years in hand. The challenge sometimes for European players is making sure that they are playing in an environment that is good for their ongoing development. Keeping an entry-level contract year but stunting a prospects development such that it is not worth anything anyway is obviously a losing proposition. The other option (and this is what happened with Janne Kuokkanen in 2016-17) is for Necas to play in Canadian juniors which offers another option for his development and preserves all three years of his entry-level contract.
The upshot: Francis and the Hurricanes have significant incentive to steer Necas toward Europe or Canadian juniors for the 2017-18 to keep all three years of his entry-level deal in hand.
Janne Kuokkanen
As noted above, Kuokkanen, who was drafted in 2016 moved from Finland to Canadian juniors for the 2016-17 season and had his contract slide forward a year in the process. But because he was drafted as a European player, he does not have the same requirement to return to Canadian juniors for 2017-18 if he does not make the NHL team like Bean. Kuokkanen could make the jump to the AHL which would start his entry-level deal or he could return to Canadian juniors or Europe which would not. I went so far as to compare Kuokkanen’s development to Sebastian Aho in Tuesday’s Daily Cup of Joe. As such, the issue with Kuokkanen could prove to be that he really needs to jump to the AHL to continue his development, but part of that might depend on how he looks in training camp.
The upshot: Francis has options to have Kuokkanen’s contract slide again in 2017-18, but best bet is that he makes the jump to the AHL simply because it is the right move in terms of maximizing his development.
Julien Gauthier
Gauthier is a little bit similar to Kuokkanen but for different reasons. Gauthier was actually drafted in 2016 as a Canadian junior player like Bean, but he is not required to return to Canadian juniors if he does not make the NHL team because he has an early birthday and will hit an age requirement that most players do not. The result is that Francis does have the option of returning Gauthier to the QMJHL and keeping all three years of his entry-level deal intact.
The upshot: Francis does have the option of preserving all three years of Gauthier’s entry-level contract, but it seems like a foregone conclusion that Gauthier will instead make the jump to the AHL simply because it is the best thing for his ongoing development.
Hurricanes prospects who hopped over the fence for 2017-18
All of Warren Foegele, Nicolas Roy, Steven Lorentz, Spencer Smallman and Callum Booth will jump from Canadian juniors to the AHL for 2017-18 and join the others who played in Charlotte last season and started burning through their entry-level contracts.
NHL legalese reading for a slow August hockey day
For anyone with the time and desire, here are a few more resources with additional details on the NHL’s contract legalese.
Draft rights and entry-level contracts
A deeper dive on Hurricanes’ individual player specifics for the 2017 offseason
Some rehash of entry-level contracts (can skip that) but also information on one-way versus two-way contracts
What say you Canes fans?
1) How much of a factor would you make maximizing the financial benefit of entry-level contracts in deciding where players develop?
2) Is it a foregone conclusion that Julien Gauthier and Janne Kuokkanen jump to the AHL simply because it is best for their development?
3) Might newly-drafted Martin Necas end up in Canadian juniors or back in Europe to preserve all three years of his entry-level contract?
Go Canes!
From a long-term, team-based perspective it is definitely best to maximize those ELC’s (look at what Arizona has done with Strome, who is killing it in juniors). You only turn on the ELC when you have to – or when you think the player has a good shot at making the NHL.
But a major factor is what do the other prospects look like.
I had forgotten that Kuok can go back another year – and I didn’t think that Gauthier had another year possible.
Given that we have a lot of goodness in Charlotte at the forward level, and that RF has stocked the Canes cupboard with “can play now in the NHL” players, I can see both going back to juniors or Europe for one more year – unless they definitively show that can make and be a factor at the NHL level.
For Necas, it is not a “might” but a “will end up in juniors/Europe” unless he completely blows the doors open in training camp and preseason and shows he ready to be really good at the NHL level.
After reading this, I am not necessarily seeing any of these guys in Charlotte this season after all.
Interesting options. FWIW, I think Necas doesn’t start the clock. The question with him is what is the benefit to getting used to North American rinks. For Aho it didn’t seem to matter. My guess is he stays in Europe playing against older players.
The calculus for Kuokkanen and Gauthier is slightly different. I say that because there are likely to be both a RW and a C position open in 18-19. Stempniak is not going to get resigned and Ryan will have to increase his production significantly to stay on the roster over a prospect. Gauthier is the heir apparent at RW (Matt you are convincing me Zykov might be a borderline prospect) and Kuok will be part of the center discussion with Roy, Saarela, and Wallmark. Having all the players together will make comparing development much easier. As will having the ability to call up a prospect to Raleigh for a “try out” should there be the need.
I have a slightly different take on this: we drafted these players to become productive players in Raleigh to the extent they can grow into that and are capable, so we should be doing everything we can to get them ready irrespective of their contract situation. I would gladly trade one year of an ELC if it meant that player was a season further along and it was the best place for that player to play.
I think players fall into one of two buckets: Budding Stars and Spot Skaters. A Budding Star is someone (Aho, TT, Lindy) who is likely to be a top half-of-the-roster player eventually earning a premium contract. These guys tend not to be late bloomers (other than being rushed ahead of schedule) and you aren’t really “saving” a year with them – they were drafted to get to the NHL quickly and be productive. That’s the whole point with these players: we hope we have to pay them because that means they’re important to the team!!! Amortized over their career, the last year of their most expensive contract isn’t all that expensive for value received a year early. It’s actually cheap if it helps the team win sooner.
A Spot Skater is someone developing more slowly who’s fighting to make and then stick on an NHL roster (McGinn, PSG, Ryan). Spot Skaters almost never develop into a player who earns a premium contract. Saving an extra year with a player like this doesn’t save much either because their contracts aren’t escalating all that much or that quickly, and they can be replaced by another Spot Skater anyway to save money without much loss in production. (Just look at the contracts we offered Ryan, PSG, McGinn for reference.)
My conclusion is that developing our players the right way trumps managing a contract situation. I think it’s short-sighted to manage where a prospect plays by contract status; we’re far better off managing for player growth. In any event, I don’t see any of this being an issue for our prospects this year. I’m betting they will wind up playing in the right spot for their growth.
In the grand scheme of things, I don’t think any of this matters much. The real money issues are when players out-perform: that’s a high-class problem.
For comparison, avoiding one bad UFA contract or one bad extension pays more than makes up for any of this.
David. As always your posts make me think more deeply about this game/team than I should.
The concepts Budding Star and Spot Skater basically correspond with the strong/weak link idea that you referenced last year (which by the way has become a black hole for my time).
However it is not so easy to judge as you imply. Both Pesce and Slavin were Spot Skaters who developed into stars. We are enjoying the ELC benefits now.
That however is not my main point. I fall somewhere between your position and Matt’s. The main reason is your deep dive into the future cap situation. Bottom line is that by 2020 having one “cheap” year of Necas or Bean will matter.
So I think the decision should be based on probability that a player will get time in Raleigh during the coming season. This is especially true for European players as Aho and others demonstrate that professional hockey there is as good for development as AHL.
I understand and appreciate RR’s fairness point. But not sure it is fair to organization or fans when players are part of cap dump because management didn’t use available tools.
I think CTCaniac nailed it. It’s only in retrospect that ‘Budding Star’ and ‘Spot Skater’ becomes known. McGinn and Di Giuseppe were second-round picks just like Aho, and there was a time when mid-rounders Pesce and Slavin certainly rated below Murphy.
That said, developing players the right way makes sense though per my other comment below, I think that also varies by player.
This article is very interesting to me because we can now look ahead and see which of the two methodologies brought forward the Canes seem to practice. There is the one that Matt points out in the article which is maximizing the benefits of the entry level contracts relative to the NHL salary cap. There is the one Matt mentions and dmiller discusses in detail which centers on what’s best for the development of the player without worrying about the future salary cap implications.
Personally, I agree with dmiller’s perspective on things entirely. Put the player in a playing environment which will “best” maximize his development to an NHL player for all the reasons dmiller points out. In addition to what dmiller has to say I would only point out that it is also being fair to the young players who sign with the Canes. They have the right to expect that their future won’t be affected by anything more than their performance on the ice compared to the performance of the other players the Canes have contracted with in trying to make the NHL. Manipulating players because of contract terms is IMO unethical and unfair and as dmiller implies probably will more than likely result in poorer player development and no noticeable savings financially. I realize some will point out the usual “that the NHL is a business…” thus the decision where possible should be to maximize the benefits to the Canes of the entry level contract. My answer to this is including ethics and fairness into decisions that organizations make won’t adversely affect the overall financial operations over the long haul. Just my opinion.
I think critical is understanding if/how big the gap is between different options. For example, the Swedish Elite League is a higher caliber of play than Canadian juniors by virtue of the fact that it is a professional league for grown men. Oftentimes, I think it could be more that there are pros and cons to different options, and it could differ by player based on physical and hockey maturity. It is not always so much that one league is just always better than another.
What is standard practice in the NHL if a player is playing in Europe or in Canadian juniors (in the latter, can either age out to the AHL or return to juniors) if the player is not deemed NHL-ready? I don’t know the answer to that question – what is the percentage of players in that cohort who have their ELC triggered vs. those who do not? Does anyone know? Anyone? Bueller?