The Puckonomics Methodology

Our entire analysis is based on relative value.  We normalize the REGULAR SEASON statistics with total salaries which are paid based on revenue sharing of both REGULAR SEASON and PLAYOFF revenue.  We divide the entire pool of revenues (which is a function of the annual Salary Cap) into three buckets:

1)      Total salary cap hit for Forwards

2)      Total salary cap hit for Defensemen

3)      Total salary cap hit for Goaltenders

We look at key statistics for each of the 3 types of players, normalize and weight them differently based on a statistical analysis of their importance and correlation to the total pool of dollars. In the end what we should now be able to see is a player’s value relative to another.  For example, all other statistics being equal, a player with half the statistical performance of another (goals, assists, plus/minus, time on ice, etc.) should see that their compensation is about half of that other player.

Since 14 out of 30 teams in the league do not participate in the playoffs and the wide range of outcomes for teams and players in the playoffs, it is very difficult to normalize for both REGULAR SEASON and PLAYOFF results. As a result, some judgment is required in assessing the true value of a player taking their normalized REGULAR SEASON calculation and adjusting up or down based on PLAYOFF appearance and performance.  Therefore, we recognize that not including Playoff performance does not give the complete picture on individual players. Our assumption is that player playoff performance is a continuation of their regular season  performance and solely adjusted based on the number of games they played in the playoffs (since the number of games played drives how much revenue a team/player generates), which may or may not be true.

Please keep in mind that this analysis is intended to look at players over several years rather than a single year, since many players can be injured or have career/off years which can be looked at as outliers.

Salary compensation is not an exact science. We fully recognize that statistics do not fully represent the value a player brings to a team.  For example a talented scorer on a weak team will not have as great numbers compared to an equally talented forward with a highly talented team. Or an average goaltender on a great team like the Detroit Red Wings will put up exaggerated results despite themselves not really being at the elite level.

Also, there are two key elements that will never be reflected in a player’s statistics:

• The impact veteran players have in a locker room. For example, Hal Gill mentoring P.K. Subban over the course of two seasons or a Stanley Cup winner helping a young team learn how to play in the playoffs.
• How much revenue an individual superstar like Sidney Crosby or Alexander Ovechkin generates on their own.

Almost all players should be paid based on their on-ice performance.  However, there are a handful of players that are the primary reason fans buy tickets to a game or watch on TV.  These elite individuals are clearly worth more to their franchises than just the numbers they put up on the ice.  These superstars actually put butts in the seats and eyeballs in front of the television. For example if Sidney Crosby attracts 1000 more people to half the games he plays in (assuming the other games were already sold out, so he did not contribute to those incremental sales). That’s 41x1000x$100 (avg. ticket price) = $4.1 million in revenue directly tied to Sidney playing in those games. Sidney Crosby’s total compensation should be higher than just based on the number he puts up.

As mentioned above, compesation is not an exact science with many factors to consider.  We openly acknowledge that we do not reflect all the factors that go into a player’s true value.  The purpose of this analysis is to show relative value and not exact salary expectations.   We hope to get within 10% of what a player’s preformance truly earned him during a particular year and then look at their body of work to compare their contract to their actual performance earnings.