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
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.
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.
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.
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.
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?