Logan Couture: The Sharks got a great deal

June 15, 2012 by Leave a Comment

Last summer Doug Wilson, GM of the San Jose Sharks, announced that he had re-signed Logan Couture for a 2 year deal which kicked in when his entry-level contract was completed at the end of the 2011-12 season.  Couture had just come off a great first full-year campaign with the Sharks and finished second for the Calder Trophy voting for rookie of the year.  It made sense that the Sharks wanted to lock him up for a longer period of time and address the contract before he reached RFA status.

What was very surprising to me at the time was the size of the contract.  Couture’s first year stats were impressive, ranking #66 in overall point with a +18 plus-minus. When you factor in his playoff performance in 2010-11 (14 points in 18 games) it was clear that even if he just maintained that level of performance he was a Tier 1 player in the NHL.  When I looked at the numbers of the two-year contract of $2.75M and $3M ($2.875 cap hit) it seemed rather low. Now that the 2011-12 year is done (which included an All-Star game appearance), it seems even more obvious that Doug Wilson and the Sharks are getting a smoking deal for the next two years (assuming he stays healthy and continues to perform at a similar level).

Logan Couture
GP G A Pts Cap Hit ($M) True Value ($M)
2010 25 5 4 9 0.30 0.59
2011 79 32 24 56 1.24 3.72
2012 80 31 34 65 1.24 4.57

Keep in mind these numbers are regular season only and do not include playoffs (see the Puckonomics methodology for an explanation) so adjusting for playoffs would likely make his True Value even higher than the amounts shown above.

While Couture would have only been an RFA at the end of the 2011-12 season and probably not been able to capture the full amount of his True Value like a UFA would, it is clear that he is worth significantly more than the $2.75M & $3M he will be earning the next two years.  I certainly hope that whoever is the GM of the Sharks at the end of this contract is ready to compensate Logan Couture not only for his future value on the ice, but also recognize that the organization underpaid him since day one on the team.

 

 

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Zach Paries – How much will he get?

June 15, 2012 by Leave a Comment

Zach Parise is probably this year’s biggest UFA name. Even though he has said he wants to stay in New Jersey, there will be many teams lining up to make him an offer.  Former GM Lou Nanne has said the Minnesota Wild will make him the highest offer.  What makes his comments interesting are how they must factor into Parise’s value.  Zach Parise’s on-ice performance is pretty consistant, with his true value worth about $5M during the regular seasons for three of the past four years (he had a significant injury in 2010-11 which kept him out most of the season):

Zach Parise
GP G A Pts Cap Hit ($M) True Value ($M)
2008 81 32 33 65 3.13 3.49
2009 82 45 49 94 3.13 5.33
2010 81 38 44 82 3.13 5.03
2011 13 3 3 6 3.13 0.46
2012 82 31 38 69 6.00 4.96

Then when you look at his performance during the playoffs, his leadership and captaincy and the supply/demand of this elite level UFA he will surely get at least $6M per year.  But in a market like Minnesota where his father J.P. Parise played for many years, Zach’s value is even greater as his presence could be directly tied to increased revenue for the Wild (TV viewers, ticket sales, ticket prices) as people come to games specifically to watch him play. If only 150 people become season ticket holders because of Zach Parise, that could easily allow the Wild to pay him an additional $1.5M (150 x 44 games x $200 (2 tickets/gm)).

We shall see how this all plays out, but it would not be surprising if Zach Parise gets up to $7.5M per years if he goes to a market where he will be the center-piece player (compared to NJ where he shares the spotlight with Martin Brodeur and Ilya Kovalchuck).

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Brad Stuart – What’s he worth?

June 13, 2012 by Leave a Comment

Brad Stuart was traded from Detroit Red Wings to the San Jose Sharks this past weekend. Given the Sharks need for help on the penalty kill and a reliable, mobile defensemen it seems like he would be a good fit for a second tour with the Sharks. Since Brad Stuart makes his offseason home near San Jose and his family remains in the area during the season, it is nice to see that this could be a good match for both parties (I have seen his kids skating at Sharks Ice with their Stuart Red Wings jerseys on several occasions).

The Sharks have until July 1st to negotiate exclusively with Stuart. So the big question is how much is the 32 year old worth?

Looking at his performance the last five years shows the consitency of his game year in and year out. While he puts up a reasonable number of points he isn’t known for his offensive ability, but he does log over 20 minutes per game.

As you can see from the table below, Brad Stuart consistently rates at about a $3M value each year (when you adjust for injuries) but has been paid at $3.75 per year in this last contract with the Red Wings.

Brad Stuart
GP G A Pts TOI Cap Hit True Value
2008 72 6 17 23 21.2  $            3.50  $            2.31
2009 67 2 13 15 20.2  $            3.75  $             2.11
2010 82 4 16 20 23.2  $            3.75  $             3.00
2011 67 3 17 20 21.5  $            3.75  $             2.53
2012 81 6 15 21 21.1  $            3.75  $             3.00

In our analysis UFAs clearly receive contracts above their true value due to supply and demand issues and restrictions on entry level contracts.  Given Brad Stuart’s pending UFA status, his consistency year in and year out and tremendous experience of being in the Red Wings organization it would not be surprising if he once again signs for somewhere between $3.5M and $4M, with the amount varying on the term of the contract.  The Sharks probably want to sign Stuart for 2 years, and he would probably be asking for 3 or 4 years.  We shall see where the two sides net out.

Next up:  Zach Parise

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Congratulations to the Los Angeles Kings – not what we would have predicted

June 13, 2012 by Leave a Comment

This first year of applying Puckonomics to playoff predictions has been a big learning for us. It is clear that at a macro level, using team performance for the entire season is not a good leading indicator of how a team will do (note: keep in mind our analysis ignores actual team standings, just aggregate performance of team players).

Over the next coming weeks I will dive deeper into the regular season statistics of individual players on both the Los Angeles Kinds and New Jersey Devils to see if there was some leading indicators that would have predicted these two teams would have met in the finals. I am sure there will be some nuggets that would have some clues that both of them would have a good run. Stay tuned.

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2012 NHL Playoffs – First Round Predictions

April 11, 2012 by Leave a Comment

This is our first attempt to predict the outcome of playoff series based on our analysis of the value of the players on the team.  Since our approach looks at the body of work of team over the entire year and does not adjust for any other factors other than injuries it will be interesting to see how good our methodology is a predictor of success.  Because our methodology only determines the total value of the team (as the sum of its players) we will not be in how many games a team will win by, since that would be replacing data-driven conclusions with opinion. Please keep in mind that injuries to key players, in particular any top goalie will likely affect the outcome of a series by the reducing the true value of a team.

Eastern Conference

Ottawa Senators ($59.6M) over the New York Rangers ($57.2M)

We have to admit this one immediately surprised us, in fact we had to go back and double check our numbers to make sure this wasn’t a mistake.  But despite some questionable goaltending, Ottawa has some a balanced offence compared to the Rangers excellent goaltending, but weaker defence and overall offensive threat.

 

Boston Bruins ($64.7M) over the Washington Capitals ($56.2M)

Even without Nathan Horton, the Bruins balance and depth is quite impressive.  Tim Thomas’s performance this year was just okay, but given the team in front of him, the Bruins will put the puck in a lot more then they will take the puck out of their net. Washington’s injuries at the goalie position and below-average scoring ability really don’t bode well for them to upset the Bruins.

 

Pittsburgh Penguins ($65.9M) over the Philadelphia Flyers ($66.1M)

Statistically these two teams are equal in terms of their 2011-12 overall performance.  However when you adjust for the injuries to key Flyers like Van Riemsdyk, Meszaros, Briere (and Pronger even though his absence is already reflected in the numbers) their team isn’t as valuable right now as it has been all year. When you combine that fact with the obvious, that a healthy Sidney Crosby for the playoffs and no key injuries to Penguins, Pittsburgh’s true value for the first round is higher than their regular season numbers show.

 

New Jersey Devils ($58.1M) over the Florida Panthers ($53.4M)

New Jersey has above average goaltending and scoring while the Panthers are below average in each category (Goaltending, Defence and Forwards). In particular, Florida is significantly challenged on offence and will likely struggle to score goals.

 

Western Conference

Vancouver Canucks ($61.5M) over the Los Angeles Kings ($46.8M)

The strength of Vancouver was not a surprise, but the weakness of the Kings was more than just a little shocking.  Our analysis showed not only the obvious, the lack of scoring ability for L.A., but also a lack of depth on the blue line.  The Kings have by far the lowest value defensive corps due to the departure of Jack Johnson.  Despite their quality goaltending, the Kings will continue to struggle to put the puck in the net.  The Canucks have the best goalie tandem in the league and solid defense. The only question for Vancouver is around scoring.

 

San Jose Sharks ($61.5M) over the St. Louis Blues ($55.5M)

Even though the Blues swept the Sharks during the regular season, the difference in team value is quite apparent.  Clearly the Blues have excellent goaltending and good defence, but a lack of scoring from their forwards especially compared to the Sharks balanced attack should be noticeable.  Despite average goaltending and a balanced defence, the overall depth of the Sharks should be enough to get by the Blues.

 

Chicago Blackhawks ($62.9M) over the Phoenix Coyotes ($58.3M)

Chicago is above average across the board, although not by much. The offense they can generate from their defence will be the key to their success.  Phoenix has some solid goaltending in Mike Smith, but the Coyotes lack of depth in their skaters is expected to show over the course of the series.

 

Nashville Predators ($63.4M) over the Detroit Red Wings ($62.1M)

This is another one that was closer than we expected.  Nashville has quality goaltending and potent offensive upside from their defence. Despite what most people think, their offence is also above average.  For the Red Wings they continue to be well-balanced across the board.  Detroit is also better than the mean across all three categories.  Nashville gets the nod just by a few hundred thousand dollars in each category, including the best goalie in the league, and is predicted to take the series. However, any injury to a key Predator player will likely make a big difference in being able to win the last game.

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Total Salary Cap Spending by Position 2007/08 – 2010/11

March 6, 2012 by Leave a Comment

To ground everything, let’s look at the basics of how big the pot of NHL compensation dollars was for each of the last four seasons segmented into three buckets:  forwards, defensemen and goalies.

The numbers above are the starting point of our analysis. We take the totals for each type of player and divide them between all the players based on their REGULAR SEASON performance.  For more details on about these calculation, please read our Puckonomics methodology.

Here are some key assumptions that went into these numbers:

1) Two-Way contract players needed to play a material number of games to be included in the analysis. If a 2-way non-goalie player played less than 15 games they were probably not included.  There are about  150 forwards, 50 defensmen and 15 goalies who had a cup of coffee in the big leagues each year who did not play enough games, generated sufficient statistical value or earn enough salary to be included in our analysis.

2) One-way contract players are included in the analysis even if they were hurt and only played a small number of games during the season.  The exception to this assumption are players who did not play a single game all year and were on Long Term Injured Reserved the entire season. Example of players who missed a full year are Mike Rathje in 07/08 and 08/09 or Mark Streit in 2010/11. Salaries for these types of situations are not included. However, Marc Savard who only played 25 games in 2011 had his full $4M  cap hit included. Savard’s 2011-12 $4M cap hit will not be included since it does not look he will play this year.

At this high-level there are a couple of interesting points of note:

– Average salaries seen above are pretty similar between the three groups, but not all that meaningful given it would just be an average and includes a wide range of player quality and number of games played.

– It seems the trend to paying goalies a smaller percentage of overall salary cap is indeed reflected in the numbers.

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Playoff Adjustment

March 6, 2012 by Leave a Comment

There are 1230 regular season games and about 88 playoff games (give or take a couple) each year.  Since the salary cap is directly tied to the total revenue of the NHL, it is important to remember that the pool of compensation dollars is a fixed pie of ~57% of the total revenue (depending on how many teams spend to the cap). Since playoff revenue is disproportionately higher than the 7.2% of number of games it represents, for simplicity sake we assume that Playoff-related Revenue generates ~10% of total league revenues. As a result, if a team/player makes the playoff we will also show an adjusted salary related to their playoff performance (if any).  It makes sense for consistently  deep playoff performers like the Detroit Red Wings to be making 20-30% more than their calculated REGULAR SEASON numbers, but that means that extra amount should be taken out of someone else’s compensation who is not playing or performing in the PLAYOFFS.  So if a player does not make the playoffs, their VALUE is adjusted downward by about 10%.

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The Puckonomics Methodology

March 6, 2012 by Leave a Comment

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.

 

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Why I Started Puckonomics

January 31, 2012 by Leave a Comment

The NHL is not an efficient market.  There are players being paid $5 million who are really worth half that and vice versa.  I wanted to see if I could come up with an analysis which gave a more accurate reflection of what a player really ‘earned’ in a given year based solely on their performance.  There are a number of drivers of this efficient market, just like any other capital market or professional sports league.  Some of the drivers include contract restrictions from the CBA such as entry-level contracts,   Restricted Free Agents and the Salary Cap. As well, other traditional economics factors such as the supply and demand of Unrestricted Free Agents play a big role in player salaries.  This analysis will ignore contract status and other off-ice factors and solely look at regular-season on-ice performance to assess a player’s value.

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