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Tuesday, October 1, 2013

Kessel's Big Contract the Norm Under New CBA

phil kessel leafs
Hours before the start of the regular season, Phil Kessel re-signed with the Toronto Maple Leafs for $64 million over 8 years.

With a number that big there are sure to be people losing their minds. To help you understand I put together a handy guide to answer any concerns you might have about the richest deal in Maple Leafs history.

Wow, $8 million a year!? That's elite money and Phil Kessel is not elite.

Over the past two seasons Phil Kessel has scored more points than anyone other than Steven Stamkos, Evgeni Malkin, Claude Giroux, and Martin St. Louis (who has scored as many as Kessel). The only players to score more goals than Kessel over the past two seasons are Stamkos, Alexander Ovechkin, James Neal, Malkin, and John Tavares.

Since coming over to Toronto, Kessel's 119 goals are only surpassed by Stamkos, Ovechkin, Corey Perry, Patrick Marleau, Jarome Iginla, and Ilya Kovalchuk. Of those snipers, only Stamkos is younger than Kessel. In terms of points, Kessel's elite production is only semi-recent, but he still is one of only 21 players to crack 250 points since 2009-10.

Kessel is elite.

Ok, that's the regular season. What about the playoffs?

In his career Kessel has scored 13 goals and 21 points in 22 playoff games. Over 82 games that works out to 48 goals, 29 assists, and 77 points. Essentially there has been no drop in Kessel's production from the regular season to the post-season.

Even more encouraging, after last year's playoffs Kessel buried the narrative that he shrunk under the pressure of playing the Boston Bruins. Allow me to quote myself:

"Most importantly, the much-maligned Phil Kessel was more productive against the Bruins than Sidney Crosby, Evgeni Malkin, James Neal, Patrick Sharp, and Marian Hossa were combined, silencing many of his most vocal critics. He was even more productive against the Bruins than either Jonathan Toews or Patrick Kane."

Fine, Kessel is elite and that doesn't change in the playoffs. But he's making $8 million a year; Steven Stamkos is only making $7.5 million a year. What gives?

Stamkos signed his deal when he was coming off an entry-level contract and was still a restricted free agent. That means he couldn't freely negotiate a contract with any team he wanted, which would obviously drive up his price substantially. The Tampa Bay Lightning didn't really even have to worry about the threat of an offer sheet, because GMs have a wink-wink-nudge-nudge agreement to never use those.

Alright, but Sidney Crosby re-signed an extension when he was about to hit unrestricted free agency and he's only making $8.7 million. He's more than $700,000 better than Kessel.

Sidney Crosby signed his deal when back-diving contracts were still allowed (although the league did limit just how badly teams could circumvent the cap by the time Crosby signed). Crosby earns $86.4 million through the first eight seasons of his 12-year deal. Under the new CBA, that would mean a $10.8 million cap hit. Because teams can no longer tack on extra years with lower cap hits on the end of deals the cap hit over an eight-year term has gone up.

Here's a chart of some of the players who signed mega deals before the lockout and what their cap hit over their deal's first eight years would be under the new CBA.

NameCurrent Cap HitSalary years 1-8Revised Cap Hit
Ilya Kovalchuk$6.67m$79m$9.88m
Shea Weber$7.88m$92m$11.5m
Zach Parise$7.54m$80m$10m
Ryan Suter$7.54m$80m$10m
Duncan Keith$5.54m$57.75m$7.22m
Sidney Crosby$8.7m$86.4m$10.8m
Henrik Zetterberg$6.08m$60.65m$7.58m
Mike Richards$5.75m$53m$6.63m
Roberto Luongo$5.33m$57m$7.13m
Marian Hossa$5.28m$59.3m$7.41m
Vincent Lecavalier$7.73m$78.5m$9.81m
Jeff Carter$5.27m$51m$6.38m
Johan Franzen$3.95m$39.5m$4.94m
Jonathan Quick$5.8m$52.5m$6.56m
Christian Ehrhoff$4m$38m$4.75m
Brad Richards$6.67m$59m$7.38m

In general, tacking on a few extra years at the end of a deal saved teams about $1.76 million in cap space. So under the old CBA a Kessel extension would probably be for 11-12 years at a cap hit around $6.24 million.

But $8 million is still a big number. You can't deny that.

Yes, $8 million is definitely big, but the salary cap has increased so much since it was first introduced that an $8 million cap hit is nothing like an $8 million cap hit was in 2005-06 when the cap was $39 million. And it certainly won't feel so big when the salary cap climbs higher in the future.

Instead of looking at the raw number, it's better to look at Kessel's cap hit as a percentage of the cap limit (12.44%) and compare what that would look like in raw salary in previous seasons.

YearCap LimitKessel's Comparable Cap Hit
2005-06$39.0m$4.85m
2006-07$44.0m$5.47m
2007-08$50.3m$6.26m
2008-09$56.7m$7.05m
2009-10$56.8m$7.07m
2010-11$59.4m$7.39m
2011-12$64.3m$8.00m
2012-13$70.2m$8.73m

So yes, right now Kessel's cap hit looks huge. But not if you consider what his contract would have looked like in other seasons.

Hmmm, so what will Kessel's contract look like in the future? Locking in at $8 million right now feels like a lot but maybe it'll look like a steal down the road.

Now you're getting it! James Mirtle of the Globe and Mail did some estimates of what the salary cap might look like in the future and estimated that by the time Kessel enters the final year of his deal in 2021-22, the cap could be as high as $96 million. That was based on an estimated league growth of 6% a year. But even with a more conservative estimate Kessel's contract could still look plenty reasonable in the future.

Below is a chart with the estimated cap limit assuming league revenue grows 5% a season. The chart also shows what it will cost to sign someone to a deal like Kessel just received. In addition, the chart shows how Kessel's cap hit percentage drops as the salary cap goes up, and what a comparable contract would look like under today's salary cap.

YearEstimated Cap LimitCost to sign a Kessel ContractKessel's Cap Hit %Comparable Current Cap Hit
2014-15$64.3m$8.00m12.44%$8.00m
2015-16$66.1m$8.22m12.10%$7.78
2016-17$69.5m$8.65m11.51%$7.40m
2017-18$73.1m$9.09m10.94%$7.03m
2018-19$76.9m$9.57m10.40%$6.69m
2019-20$80.9m$10.06m9.89%$6.34m
2020-21$85.1m$10.59m9.40%$6.04m
2021-22$89.5m$11.13m8.94%$5.75m

That's where salaries are going? Why was there a lockout again?

You can ask the owners during the next lockout in 2022.

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