The perfect compromise

In a negotiation that took longer than anyone thought it ever would, Johnny Gaudreau and the Calgary Flames agreed to a pretty sensible six-year contract extension on Monday afternoon. Sure, the six-year, $40.5 million deal could have been better for both sides. Taking everything into account, though, what was agreed upon Monday ends up being the perfect compromise.

When I say “taking everything into account”, I mean all of what has transpired. The Flames were on the verge of seeing their superstar forward sitting out meaningful games; conversely, Gaudreau was dangerously close to missing regular season action and, as a result, his first cheque of the season. While both sides had to move off their ideal stance, this extension makes a lot of mutual sense.

For Gaudreau

This isn’t as good as it could have gone for Gaudreau because the market suggested a higher AAV had he signed for seven or eight years. However, Gaudreau still signed for market value; it just so happened he signed for what the market suggested over six years as opposed to longer. He hasn’t taken a massive hometown discount here.

From everything I’ve been told about the negotiations and from everything we’ve learned from NHL insiders far and wide, the Gaudreau camp was asking for somewhere in the $8 million range. But it’s important to remember two things on that front.

First, that $8 million figure was always understood to be on a max (eight year) deal. Second, and equally as important, that was the high water mark on a negotiation. In cases likes these, one side sets the bar high and the other sets the bar low to get to a final number. As such, a fair number was always in the $7.5 million range over an eight year term.

That figure meshes well with Gaudreau’s best comparable in Vladimir Tarasenko. As many of us know, the Blues forward signed an eight-year, $60 million extension last summer that carries an AAV of $7.5 million. While Tarasenko is not a perfect comparable for Gaudreau, he was always the closest, most recent, and most relevant one to fall back on. Right from the get go of these negotiations, Tarasenko’s number was a part of the conversation behind closed doors.

Knowing that, then, let’s do some rough extrapolating. With the way NHL economics work nowadays, the AAV is closely correlated to how many years of unrestricted free agency are covered in a deal. UFA years are a player’s prime earning years, so the younger you can get there the better. As such, each year bought up is going to carry with it a premium.

In Gaudreau’s case, anything over five years was going to buy up UFA years setting a four-tier market. The numbers below are just estimates, but they do paint a decent picture.

Screen Shot 2016-10-11 at 2.12.19 AM

In this example, I accounted for around $350,000 for each UFA year purchased in an extension. I’m not sure what the price would actually be to buy UFA years in Gaudreau’s case, but I think my estimate would at least be somewhere in the ballpark. As you can see, targeting Tarasenko money would have been realistic on a max deal. 

In this situation, though, one of the big hangups seemed to be Calgary’s hesitance in pushing the AAV too high on a long term deal. We’ll get to the team side of things in a second, but that chart above is the best way I can illustrate how Gaudreau is still getting what the market suggests he deserves.

The downside for the player is a slightly lower dollar figure. The upside, though, is getting to true free agency sooner with the potential for a bigger payday. In the end, it’s a pretty solid middle ground for Gaudreau.

For the team

I still believe the most ideal thing for the Flames was getting Gaudreau signed to an eight-year deal. Even with the premium on UFA years jacking up the AAV, having a player of Gaudreau’s caliber signed for as long as possible always made the most sense to me. That said, what Calgary ended up signing is still something that works well for them.

As was reported by a few different insiders, the Flames had a desire to keep Gaudreau’s cap hit under an “internal cap” set by Mark Giordano’s extension last summer. Whether you agree or disagree with the logic, this deal satisfies that desire. Gaudreau now joins the captain as Calgary’s highest paid player, both at $6.75 million annually.

More importantly, Gaudreau’s cap number gives the Flames some flexibility as they try to lock up some other key pieces in the next few years. While the team sacrifices the stability of buying up as many UFA years as possible for Guadreau, they also save a few hundred thousand dollars per year in the process. While it might seem insignificant now, those dollars could turn out to be crucial in the years to come.

Thanks to our friends at General Fanager, below is Calgary’s updated cap situation with Gaudreau’s deal on the books. As you can see, there’s not a lot of wiggle room.

Screen Shot 2016-10-11 at 2.33.08 AM

In the short term, the Flames will be able to get some space under the collar by putting Ladislav Smid on LTIR early in the regular season. They’ll also get some cap relief in the coming years with the following deals coming off the books.

Screen Shot 2016-10-11 at 2.48.18 AM

The problem is, as nice as having those contracts drop off the cap, Calgary will likely use all of that relief on getting extensions for other key players done. In the immediate future, both Sam Bennett and Brian Elliott need contracts for next season. While Bollig, Wideman, and Engelland combine for $9.5 million in new money, it’s a good bet the duo of Elliott and Bennett will command that much or more.

A little further down the road new deals, and raises, will be needed for the likes of Mikael Backlund (2018), Matthew Tkachuk (2019 or 2020) and yes, even T.J. Brodie (2020). Having Gaudreau signed at $6.75 million as opposed to $7.5 million will give the team some flexibility to get those deals done, too.

Yes, the Flames would have been best served to Gaudreau signed to a deal longer than six years. However, whether it be because of reported (and unfounded in my eyes) questions about durability, a self-imposed internal cap, or the desire to keep some future cap flexibility, paying the price for that eight-year deal wasn’t in the cards.

Much like Gaudreau satisfied his wish to get paid at market value, Calgary was able to keep his cap hit reasonable while still getting a crucial player signed over a sizeable term. No, it’s not 100% ideal, but much like the player made some concessions, the team had to, too; that’s how a compromise works, after all. In this case, it means Gaudreau is going to suit up to start the season. For most Flames fans, that makes this the perfect compromise.

    • wot96

      Truer words were never written.

      Before the end of the Lucic deal, Oiler’s fans will be moaning about what an albatross that deal is on their cap. By the end of the Gaudreau deal, Flames fans will be cursing it wasn’t longer and possibly even forgetting the cap challenges that may have curtailed the length of the agreement between the Flames and Johnny.

  • Backburner

    I was hoping for a 7 year deal like Monahan’s.. but I wonder if it has been part of Tre’s plan to stagger out the contracts, so they all don’t become UFA’s at the same time?

    • Greg

      I think they would have taken the 7th year if they could have gotten it at $6.75m, so I doubt it was planned. But, I’m sure they’ll be glad to have the stagger when the next contracts come due.

  • Wheels

    The contract length is perfect, re-signing wise. Gaudreau and Gio’s expire at the same time ($13M in 2022). Same with Brodie’s (Brouwer and Frolik expire in 4 years as well). Tre has left tons of cap room for the core players still in their prime when these current deals expire. Perfect.

  • Longshot1977

    I read one yet claiming that the last year of Johnny’s contact includes a simple NYC clause, giving Johnny some control over where he might end up if traded in the last year of his deal.

    Can anyone verify this? If so, how common is this on an RFA’s first extension?

    Perhaps this was a small concession from the Flames to help get the price down?

    • piscera.infada

      Yes. There is a modified NTC in year six. He can provide a list of 5 teams he will accept a trade to.

      I don’t think this hurts the Flames in year six, if it seems that Gaudreau won’t re-sign, or if the Flames don’t want to re-sign him, though. His teams are likely to include the 5 teams that would be most likely to outbid each other for his services (Phi, NYI, NYR, NJ, and Bos).

  • Greatsave

    Kucherov just signed for $14.3m over 3 years. AAV of $4.767m. He was offer-sheet-eligible. He was arbitration-eligible. He remains an RFA after this deal, with one year left before UFA.

    What does that tell us about Gaudreau’s deal? I’m not suggesting we already have buyer’s remorse, but… if Gaudreau’s being paid $6.5m per RFA year, that number is 36% higher than Kucherov’s. Is he worth 36% more than Kucherov?

    • FireScorpion

      You couldn’t have just signed Johnny for any less than what Tre got done.

      Johnny and Monny once said they’d like to just sign the same contracts and get going. In the end there wasn’t a lot between the 2 deals and I think both are happy and ready to ball.
      Would have liked to see Pulkinnen come over bit time will tell now on the final roster decisions. Getting close now..

    • King Quong

      It tells us that Gaudreaus contract is twice as long and that the flames expect him to keep improving. If Kucherov keeps playing at that level and improves even improves (which he probably will) then after his 3 years he will be signed to a much larger contract that will probably bring him in closer to Gaudreau.

      You can’t compare the two contracts as Kucherovs is more of a bridge deal he’s being paid for what he is now and likely to be for 3 years Johnny is being paid for what he’ll be worth for 6 years… Not the same thing. The flames probably could’ve got Gaudreau cheaper on a bridge but they’d end up paying through the nose on his next contract.

    • piscera.infada

      I wouldn’t be entirely surprised if Kucherov took that deal knowing full-well Tampa literally couldn’t afford to pay him more. He crushes this “bridge” deal, and he’s probably making considerably more than Gaudreau in 3-years time when Tampa’s purse-strings are little looser.

      That’s a whole lot of assuming though. That contract in no way makes me think less of the Gaudreau contract.

    • FlamesFanOtherCity

      What it tells you is that no team wanted to offer sheet him, he didn’t elect arbitration, and the team is cash strapped. The last part is the most important. He signed to play in TB. There wasn’t any more money available right now.

      A bridge deal is always going to be cheaper in the short-term. You are not buying any UFA years. You end up paying more if the player continues to be a stud. His next deal, if he keeps up the progression, will be closer to $8m than $4m.

      The difference between the two players is results over the first two years in the league, as well as position (LW vs RW).

      Kucherov
      Y1 – 52 games 9g, 9a, 18 points

      Y2 – 82 games 29g, 36a, 65 points

      Y3 – 77 games 30g, 36a, 66 points

      Guadreau

      Y1 – 80 games – 24g, 40a, 64 points

      Y2 – 79 games – 30g, 48a, 78 points

  • FireScorpion

    Lol..that’s hilarious. Wouldn’t be opposed to that either. Can this week get any sweeter/more funny. (Between the Johnny signing and the Edmonton bungles)

    • #97Train/McDavidCopperfield

      If that’s the case I guess Calgary is a better option for him to make the team.

      Just heard on the radio that Versteeg wanted too six minutes in Edmonton and that’s not going to happen with Draisaitl playing on the wing. Enjoy Versteeg in your top 6.

      • jakethesnail

        Sportsnet News tonight says that Versteeg turned down an offer from the Oilers to sign with the Flames.

        Versteeg is a Lethbridge boy so it makes more sense to sign with Calgary.

        And Ha-ha oilers now need to start 18 year old Finn Pullyou, instead of getting much needed seasoning in the AHL. Another young career ruined!

        If Pullyou starts against the Flames Wednesday he will be shell shocked…this won’t be the Flames AHL lineup like the Split Squad game in D’Edmonton!

  • BlueMoonNigel

    $6.75M per year is a pretty good pay for only playing half the games and being a tourist on roadies.

    Must be insulting to Gio who earns his $6.75M with sweat, guts and leadership. No night off for cappy.

    Monahan must also be pissed with Johnny’s deal as the latter is going to pay Johnny about $2.4M more over the 6 years. It is Sean who has to go nose to nose with the best centremen every night. Moreover, it was Sean as the good company man signing his extension promptly and not dicking around as Johnny did.

  • Skuehler

    Nice to see a fair deal that doesnt place a ton of pressure on Johnny Hockey and leaves money for a nice cast of teammates. Continues the good example set by Gio and Brodie and Monny. This is shaping into a nice young balanced team.