Inside The Penalty Box 01.14.08: Ovechkin Signs Richest Contract In NHL History
Posted by Neil Borenstein on 01.14.2008
Just when NHL player salaries couldn’t have made the lockout seem even more pointless, the Washington Capitals signed Alexander Ovechkin to a long-term contract at ridiculous money. In this edition of Inside The Penalty Box, Neil Borenstein examines the extension that granted Ovechkin the richest contract in NHL history!
Russian Star Inks Richest Contract In NHL History
Ovechkin, Capitals Agree To $124 Million, 13-Year Extension
Photo Credit: Yahoo! Sports/Getty Images
Alexander Ovechkin, 22, is signed with the Washington Capitals until the 2020-21 season, when he will be 35 years old.
ed Leonsis is following the current trend of signing players for over a decade, while ignoring his failed history with long-term contracts. Last Thursday, the Washington Capitals' owner handed his 22-year old franchise winger the richest contract in National Hockey League history. And Alexander Ovechkin didn't hesitate to put his signature on the dotted line of a 13-year, $124 million contract that will keep him in Washington until 2021, when he will be 35 years old.
This is reminiscent of 2001, when the Capitals had one of the best players in the league on their roster and handed out the highest paying contract of the time to him. Jaromir Jagr was signed to a seven-year, $77 million contract that included an optional eighth year at $11 million. Three seasons passed, and the Capitals sent him on the first thing smoking to New York with only Anson Carter coming back to Washington in return.
Leonsis didn't let this discourage him from giving Ovechkin the deal that he did. The plan was originally to sign Ovechkin to a six-year, $54 million contract extension that would have allowed them to avoid restricted free agency. Ovechkin is earning $3.83 million this season, with bonuses, in the final year of his rookie contract.
But Leonsis wasn't thrilled with the idea of Ovechkin's contract ending when he would be 27 years old, when players tend to enter their prime and put up the best statistical seasons of their careers.
"If Alex is coming into his best performance at 27, what will he command in the free agent market then and what will the salary cap be then?" Leonsis told the Canadian Press last Friday, according to TSN.ca. "So let's accept the front part of the offer (six years, $54 million), but before we sign the contract, let's say, ‘We accept this, this is a good place for us, but let's negotiate your (unrestricted) free agent years.'"
Essentially, Ovechkin's contract is two deals in one. The first part is that originally agreed upon six-year, $54 million extension that will pay him $9 million per season starting next season through the 2013-14 season. Then, Ovechkin will earn $10 million a year over the remaining seven years of the deal, starting in 2014-15 and going through 2020-21. Despite the contract's breakdown, a player's hit against the salary cap is the average salary of a contract. That makes Ovechkin's cap hit $9.538 million over the entirety of the contract.
On the one hand, this wasn't the worst investment in the world. There is some reason behind Leonsis' logic. He's right; we have no idea what the salary cap is going to be in six years. If the cap continues to rise as it has over the past two years and likely will once again prior to next season, it's possible the 20 percent maximum of a team's payroll a player can make under the collective bargaining agreement will be around $12 million or more. Nobody really knows where we'll be at that point. Ovechkin at a $10 million salary and $9.538 million cap hit could be a steal in comparison to what the maximum could be set at.
But conjecture like that is not always foolproof. In fact, taking risks such as this fail more times than they succeed. Just ask the New York Islanders, who had to buy Alexei Yashin out of the final four years of his 10-year, $87.5 million contract signed in 2001. Yashin, who is currently playing in Russia, signed the richest overall deal in NHL history at the time, and that turned out to be a complete bust. The Islanders clearly did not learn their lesson when they signed Rick DiPietro to a 15-year deal that will take him to the end of his career (40 years old) at $67.5 million – or $4.5 million per season. So far, DiPietro has not exactly earned that deal, and it's questionable whether he ever will.
Photo Credit: nytimes.com
Now playing in the Russia, Alexei Yashin's 10-year, $87.5 million contract with the Islanders turned out to be a bust.
Just one month ago, the Philadelphia Flyers tossed out a 12-year, $69 million contract to Mike Richards based on meeting expectations for 28 games in the third year of his NHL career. It's the richest deal in club history.
Both Richards and DiPietro were signed to such long-term deals based on Leonsis' logic – who know what these players will be worth years down the road? But again, contracts of this nature have not turned out to be good in the long run. They have inevitably turned out disastrous for the teams that agreed to them.
Ovechkin's contract stands the same possibility. He's one of the only 60-goal threats in the league that plays with an explosive personality and much enthusiasm. This season, he's on pace to score 61 goals, as he's scored 33 through 44 games played thus far. But if his productivity diminishes over the next few seasons or he simply isn't happy playing for an organization that may not be contenders still years down the road, the organization is going to be left with the heavy burden of unloading a huge contract with ridiculous years attached to it (however many of them will be left at the time.)
Alexander Ovechkin has a reputation for scoring some of the most creative goals the NHL has ever seen.
The contract provides some flexibility in the form of a movement clause that never inhibits the Capitals from making a move. Starting July 1, 2014, Ovechkin can name 10 teams he does not want to be dealt to in the remaining years of the contract – a list that can be altered every year following in the month of September. However, the Capitals always have the option of trading him somewhere. But teams have to be willing to take on whatever is left of his monster contract and take the cap hit, in addition to giving up whatever talent and draft picks the Capitals want in return for Ovechkin's services.
The terms also set a horrible standard for negotiations in future contract extensions and free agent deals. When Sidney Crosby signed his five-year extension with the Pittsburgh Penguins over the summer at $43.5 million – or $8.7 million per season, it was hoped that deal would set the bar for future deals involving talent of his caliber. After all, Crosby is the best player in the NHL from an all-around and leadership standpoint. Dany Heatley signed a six-year, $45 million extension earlier this season, which average out to $7.5 million per season. Had Crosby not signed his deal prior to Heatley's signing, it's possible the Ottawa Senators would have been forking over a lot more money and years to their star winger.
Ovechkin surpassed that standard with this contract, though. He should have earned in between what Heatley and Crosby will be making in their respective extensions, as he's better than Heatley but not as good as Crosby. Something in the $8-8.25 million variety would have been more than fair for the Moscow native.
However, Leonsis made him the highest paid player in the league with many more years involved than Crosby's and Heatley's deals. And that was accomplished on Ovechkin's end by representing himself with only assistance from his parents.
On the heels of this extension, other top talent with new deals on the horizon are going to try and follow suit with obnoxiously long terms in the form of both money and years. The New York Rangers need to sign goaltender Henrik Lundqvist to an extension, while the Calgary Flames need to negotiate with Dion Phaneuf over a new deal. Just how much money over how many years will these two impact players make considering their importance to their current clubs?
It was one thing when DiPietro did it because the Islanders are always crazy with contracts. It became a bit more of an option for players when the Flyers did it with Richards. But now that Ovechkin has signed on for over a decade at more money than he really deserves at the current moment, other players will surely follow suit.
It's also ridiculous from a league-wide standpoint considering the NHL cancelled an entire season (2004-05) three years ago because Commissioner Gary Bettman deemed the league in an economic catastrophe that could only be fixed by implementing a salary cap structure to limit team spending and player salaries. When he finally got his way with a $39 million cap and individual player salaries capped at $7.8 million per year, he was considered a hero to the owners he represented. But three seasons later, the team cap has risen $11.4 million and players are able to earn up to $10.06 million per season, only $60,000 more than what Ovechkin received for the latter portion of his new contract. With the cap expect to rise to as much as $54 million next season, with an individual player cap of $10.8 million to go alongside it, exactly how is the new NHL any different than the old one, outside of the fact that contracts with extreme length involved are more apparent with the current CBA?
Leonsis' standpoint is understandable, and keeping the team's franchise player in town for the best years of his career is being done with the best of intentions. But with the way deals like this have backfired in the past, it really wasn't the smartest move. With too many years and too much money involved, the current optimism in Washington could very well disappear in a few years when everybody realizes exactly what they got themselves into with this contract.
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Until next week, you have just been Inside The Penalty Box!
ed Leonsis is following the current trend of signing players for over a decade, while ignoring his failed history with long-term contracts. Last Thursday, the Washington Capitals' owner handed his 22-year old franchise winger the richest contract in National Hockey League history. And Alexander Ovechkin didn't hesitate to put his signature on the dotted line of a 13-year, $124 million contract that will keep him in Washington until 2021, when he will be 35 years old.
