Thursday, July 21, 2011

The Dustin Penner effect: Why NHL teams don't make qualifying offers to Restricted Free Agents

In the 2007 off-season, Edmonton Oiler General Manager Kevin Lowe made two monumental contract offers to RFA's Thomas Vanek of the Buffalo Sabres and Anaheim Ducks forward Dustin Penner. Lowe got Vanek to sign a 7 year/$50 million offer sheet, which was then matched by a Sabre squad that had extra cap space with the departures of Chris Drury and Danny Briere. The Ducks, on the other hand, weren't so well off financially, having just won the Stanley Cup with a team that was already up against the cap. Facing a tough decision, Anaheim GM Brian Burke allowed Penner to walk and sign with the Oilers for a 5 year deal worth $21.5 million. In return, the Ducks received Edmonton's top three picks in the 2008 draft (1st, 2nd, and 3rd rounders).

The following that ensued is exactly why signing RFA's is a bad idea.

Burke publicly called Lowe "an idiot" and accused him of "colossal stupidity", blaming him for an inflation in player salaries. The previous season, Penner scored 29 goals and had a total of 45 points -- hardly $4 million a year statistics (at the time). Not only that, but the power forward only scored 3 goals in the 21 playoff games Anaheim played on their run to the Stanley Cup. In his 3 and a half years in Edmonton (before being traded to Los Angeles), Penner peaked in 2009-10 with 32 goals and 63 points, which some could argue was worth his contract. But to earn that type of money before performing up to that level, it makes me wonder if Lowe's original signing of Penner had influenced several other contracts offered in the past.

Here are a few examples:

2008 - Shawn Horcoff re-signs with the Edmonton Oilers for 6 years/$33 million. Career highs -- 22 goals and 73 points in 2005-06 with the Oilers.

2008 - Ryan Malone signs with the Tampa Bay Lightning for 7 years/$31.5 million. Career highs -- 27 goals and 51 points in 2007-08 with the Pittsburgh Penguins.

2008 - Michael Ryder signs with the Boston Bruins for 3 years/$12 million. Career highs -- 30 goals and 58 points in 2006-07 with the Montreal Canadians.

2010 - Matt Stajan re-signs with the Calgary Flames for 4 years/$14 million. Career highs -- 19 goals and 57 points in 2009-10 with the Toronto Maple Leafs and the Flames.

2010 - Alexi Ponikarovsky signs with the Los Angeles Kings for 1 year/$3 million. Career highs -- 23 goals and 61 points in 2008-09 with the Maple Leafs.

Ryder struck gold again three years later.

2011 -- Ryder signs with the Dallas Stars for 2 years/$7 million. Statistical highs in Boston -- 27 goals and 53 points in 2008-09.

Why did I show you all these signings?

Each of the players above are forwards with decent size and skill, and each deal was inked after Penner signed with Edmonton.

What I'm trying to explain is that even four years later, the ripple effect of Dustin Penner getting a ridiculous offer from the Oilers is still being felt in the NHL. Forwards across the league were getting paid like first line superstars, despite putting up statistics that looked like they belonged to second liners on a Cup winning squad. The Penner signing set a precedent that if a player similar to him was available, $3 million was the absolute minimum.

If a team thought that one player was worth a certain amount, and that player was a wanted commodity, then the value automatically went up. If a team was desperate to improve their squad, as well as possess extra cap space, then the ability to sign them to long term/bloated deals was easy.

General Managers were frustrated. Players agents were ecstatic. Parity was becoming apparent and teams needed to compete. Owners were telling management to spend on players, allowing them to offer monster contracts to free agents. The way that contracts were designed was changing too; deals were now front-loaded, having most of the cash in the first few years of the deal. The fact that the yearly cap hit wasn't changing didn't matter, it was that the players were getting all their money early.

Correct me if I'm wrong, but wasn't the point of the salary cap, and the waste of an entire NHL season, to fix player contracts and not allow teams to spend copious amounts of money for the sake of satisfying owners and fans that giving away a lot of cash automatically meant the player was a stud?

Contracts are getting out of whack. Maybe another lockout will fix that.


  1. I think it's more about
    a) GM relationships not only with the team you are poaching from but also the other teams around the league.
    b) The high cost of draft pick compensation for the big names that have been available. (4 #1 picks)

    I think that the contracts you cited have less to do with Penner and more to do with the overall economics of the league.