Monday, July 23, 2012

The Shea Weber offer sheet--an overview, Sabres-parallels, and Sabres-centric selfishness

This isn't about a pity party for the Nashville Predators

Nor is it about a disdain for the Philadelphia Flyers and their attempted poaching of Preds d-man Shea Weber (although, that sentiment has a tendency to creep into the conversation.)

Nor is it about the defenseman himself as whether or not he wanted to stay with Nashville when he decided to sign that 14 yr. $110M offer sheet.

It's businesss, plain and simple. The Philadelphia Flyers wanted Weber, as would any number of teams, and they're doing everything they can to land him.

Although, it is an striking example a of a big-market predator preying on a struggling small-market team. Something that occured fairly often prior to the 2004/05 lockout.

What was the lockout all about?

The disparity between wealthy franchises and the struggling franchises pre-lockout, had grown to the point where the league cancelled an entire season trying to narrow the gap and bring everything in line.

The lockout in 2004/05 was an attempt at cost certainty for the owners. It was also an attempt at creating a level playing field for small-market, "have-not" franchises which they deemed important to a healthy league. And it was an attempt to keep player salaries in check. All of this had been accomplished for the first year or two, before money started flowing and the cap began to rise and teams started to explore loopholes in the Collective Bargaining Agreement.

In Nashville, GM David Poile had been doing a masterful job of putting a consistent winner on the ice while staying within whatever small market financial mandates ownership laid out for him. The team has drafted very well and was been able to remain consistently competitive through a well-coached team that predicated itself on team defense. That defense was anchored by goalie Pekke Rinne, Weber and defenseman Ryan Suter. Unfortunately, Poile would have the unenviable task of trying to re-sign all three this past year.

In November, 2011 he re-signed Rinne to a long term contract effectively getting the ball rolling, and if there were any doubts about commitment of the franchise, the team dropped a a 7yr./$49M contract on him.

With Rinne in the fold long-term, the question now focused upon whether or not Poile would be able to keep his two cornerstone defensemen. On July 4, part of the question was answered as Suter left for Minnesota and a 13yr/$98M contract.

It wasn't all that shocking to the hockey world. It was assumed that financial mandates predicated a loss of at least one of the three. They had their goalie, but had lost a very important piece in Suter and now they needed focus on re-signing their captain.

Talks about extending Weber had begun last off season without resolution and the two sides wound up in arbitration with the defenseman being rewarded a record $7.5M for one year. Having taken him to arbitration the previous year, Nashville was not able to take Weber to arbitration this year. Which left the offer-sheet opening.

Whether or not it was a calculated move on the part of Weber and his agents (both old and new) going back to 2011 is up for debate. But when you look at the second round exit this year and the subsequent the departure of his d-partner Suter, it wouldn't be too far-fetched to believe that Weber was beginning to lose faith in the team's ability to build a Stanley Cup contender.

The impending uncertainty of the 2012/13 season--due to the expiration of the collective bargaining agreement on Sept. 15--would also play a part. It would add a sense of urgency for the Weber camp as they surely wanted to get a lucrative, long-term deal done now before a new, probably more restrictive, CBA was in place.

Weber is also in his prime years and is considered one of the best d-men in the league. With the dearth of top-notch free agents this off-season, the open market would surely land him a contract on par with, or better than, his former partner Suter. In an effort to maximize the contract, Weber and his agent were said to have visited Philly, Vancouver, Detroit, San Jose' and the NY Rangers--the heaveyweights of the league who have had some pretty successful seasons.

The money being thrown around the last few seasons by wealthy clubs and the loopholes they used to get around the previous agreement left the current CBA in shambles. Small market teams like Nashville are bearing the brunt of the onslaught and the question that's been thrown around by everyone in the hockey community is, "Why, exactly, did we lose an entire season? For this?"

One loophole closed, but another emerges

As the NHL and the NHLPA hit the bargaining table, the NHL fired it's first salvo with a focus upon controlling long term, front-loaded contracts as a means of cap circumvention.

Loopholes in the previous agreement had lead to players like Chris ProngerMarian Hossa and Ilya Kovalchuk signing long term deals that were heavily front loaded with a severe drop-off in the latter years to eventually be bought out. Kovalchuk's 17 yr. contract in particular was so egregious in it's cap circumvention that it was rejected, then amended and the New Jersey Devils were ultimately penalized.

As the league was plugging that loophole, another one was emerging. Teams with the financial wherewithal now started to use up front bonuses to stay within the "letter of the salary cap."

The Sabres, under new owner Terry Pegula, did that with the Christian Ehrhoff contract last off season. He received a 10 year contract worth $40M for a $4m cap-hit. Bonuses for the first two seasons totaled $13M ($8M, $5m.) That figure represents 32% of the total value of the contract.

When the team re-signed Tyler Myers last season, they used the "bonus-plan" as well. Myers received a $10M signing bonus on a seven year, $38.5M contract ($5.5M cap-hit) which represents 26% of the total value of the contract.

Andrej Sekea signed a four year, $11m contract--a $2.75M cap-hit--that was bonus laden as well. He was paid $4.75M in bonuses or 43% of the total value of the contract.

Suter and former NJ Devils forward Zack Parise signed identical contracts that pay them $25M in bonus money over the first three years, or about 27% of the total value of the contract.

The offer sheet to Weber also used bonuses, but like the Hossa and Kovalchuk contracts, the deal is way beyond anything before it.

Weber's offer sheet is off the charts

The Weber offer sheet, like the ones before it, was front loaded with a heavy emphasis upon bonuses.

But Philly dropped a bomb by handing out $68M in bonuses over the first six years of the deal, which represents a whopping 62% of the total value of the $110M contract. And that's not the worst of it, the kicker is that Weber will receive a $13M bonus upon the finalizing of the deal, plus another $13M bonus on July 1, 2013. His salary for the upcoming season (if there is one) is $1M for a grand total of $27M for one season of hockey.

Nashville reportedly has been losing money over the last few years, although it's also been reported that they were willing to match what Minnesota offered Suter, which means they were supposedly ready to dole out a huge chunk to Weber.  But no one foresaw the immediate financial commitment laid out in the offer sheet.

Right now it's safe to assume that Nashville's brass is huddling with their lawyers trying to see if the contract can be fought on either cap circumvention or that the contract is not within "the spirit of the salary cap." The league is presently looking it over as well.

LA Kings blog, McSorley's Stick, brings up some very good points concerning the contract and whether it's "legal" or not. To the letter of the CBA, the contract seems to work all loopholes magnificently but they make this argument:
"One interpretation of Philly’s offer sheet is that they’re trying to make it actually impossible for Nashville to come up with the money. They’re not trying to force Nashville into a cap-crisis (which is a strategy the CBA anticipates). They’re trying (if you believe this interpretation) to force more money into season one of the deal than is allowed by the CBA, for the (arguable) purpose of undermining Nashville’s ability to compete.
The CBA makes specific reference to its intention of striking a balance between the cash-rich and cash-poor teams, making it easier for the poorer teams to compete."

Adam Proteau of The Hockey News pretty much sums it up when he says although the offer sheet is not cap circumvention by the letter, "it is a blatant 'spiritual' circumvention nonetheless and a giant middle finger from [Flyers Chairman Ed] Snider to all small-market teams."

He continues by saying, "Snider must know what will happen if the Predators fail to match their offer sheet for Weber. He has to be aware crestfallen Nashville fans will be justifiably soured on the way the NHL conducts its business and as a consequence will be less likely to invest their time, emotion and money in the league. He can’t be ignorant of the fact small-market teams functioning as de facto feeder systems and farcical versions of parity will be a drag on large markets and the overall profitability of the game. He also has to know if Nashville does match his offer, the financial strain on the franchise will make it next to impossible for the Preds to improve the team around Weber."

Survival of the fittest

For Snider and Holmgren, the plight of other hockey teams doesn't matter. It's about winning. The Flyers have not won a Stanley Cup since 1975, a span of nearly 40 years.

Holmgren did have a great run three years ago with Hall-of-Fame shoo-in Chris Pronger, despite sub-par goaltending. They lost to the Chicago Blackhawks in six games in the 2010 Stanley Cup Finals.

Pronger has been felled by injury the last two seasons and it looks as if his career is over. He was lost due to injury in Feb. 2011 and the Flyers lost in the second round of the playoffs to the eventual cup-winners, Boston. Pronger lasted 13 games this past season before bowing out for the year due to post-concussion syndrome. The Flyers were bounced in the second round again, this time by Stanley Cup runner up, New Jersey.

Adding Weber to replace Pronger should put them in the Stanley Cup conversation once again. This, of course, at the expense of Nashville.

As for struggling, small-market Predators, they have a number of options, but all of them seem to put them in a losing situation.

Do they bite the bullet and match, thereby retaining their solid, slowly growing fan base? Or do they cut and run presumably receiving four first round picks from the Flyers for the next four years? Picks, by the way, that are expected to be extremely low first round picks.

There are a couple of other options as well, although neither of them very appealing either.

One would have the Preds wait one full year after matching the offer and put Weber on the block. This would presumably allow them to get a much better return on investment than the four low first round picks. But, they'll be eating $27M from the time they match to the time they're allowed to trade him--one full calendar year from the match date.

The variables involved, not to mention the threat of a work stoppage where no revenue would be incoming, would make for a big gamble on the part of Poile should he choose to sign and eventually trade. It makes that scenario unlikely. And the thought of paying a player $27M for one season only to trade him doesn't seem to make a lot of sense on the surface.

The other scenario would be for them not to match, take Philly's four first rounders, then trade a couple of them back for players. This, though, is rather unlikely. First off, the return would be in the hands of the Flyers. In light of their poaching a weaker team, why would they do them any favors by giving up any key parts to their team?

The Predators, representative of small-markets, are now the prey.

An unappealing flashback

The Buffalo Sabres fan-base is surely empathetic to the plight of the Nashville Predators, having been through that movie before. Before Pegula bought the team they were considered a struggling, small-market team.

We all know the debacle of the 2007 off season for the Sabres.

After a highly successful two seasons post-lockout, the Sabres had a trio of their own to re-sign for the upcoming 2007/08 season. And finances played a big part in how the team would look moving forward.

Co-captain Daniel Briere, apparently not part of the Sabres' future plans, signed a very lucrative deal with Philadelphia. Co-captain Chris Drury, who was supposedly a part of the Sabres future, signed a very lucrative deal with the NY Rangers. And the other of their "cornerstone triumvirate," Thomas Vanek, signed a 7yr. $50M offer sheet from Edmonton.

Although there are some basic similarities between the Vanek and Weber scenarios, there's a big difference between the teams that did the offer sheets.

At the time of the Vanek offer sheet, Edmonton, unlike Philadelphia, was reeling from a dismal 2006/07 season. The Cup Finals team that they iced the previous season was turned upside down as Chris Pronger demanded a trade and was moved to Anaheim. Former Sabre Michael Peca was also lost as he fled to Toronto. Defenseman Jaroslav Spacek signed with Buffalo.

And with the season going down hill after a strong start, Edmonton proceeded to trade impending free agent Ryan Smyth to the NY Islanders. They finished the season last in the division, 12th in the conference.

The rebuild for Edmonton began that with three 1st round picks in the 2007 entry draft. But those picks (their own plus first rounders from Anaheim and the Islanders) would still need time to develop.

Having lost out on quality unrestricted free agents July 1st, Oilers GM Kevin Lowe, smelling blood in Buffalo due to the Drury and Briere fiasco, went after Thomas Vanek with the offer sheet.

Unlike the offer sheet to Weber, where the Flyers are attempting to go from conference contender to Stanley Cup contender, Lowe was simply trying to bring in quality talent to anchor his rebuild.

Fearing full alienation from the Sabres faithful because of the Briere/Drury fiasco, Regier and Co. matched the offer sheet without thinking twice and the Sabres managed to salvage one of their big three.

Although the poaching clubs are usually held up as the villains, it's players who ultimately make the decision to sign an offer sheet.

Both Weber and Vanek and their agents could have signed a long term extension with their club throughout the last season of their contract. But they didn't, preferring to hit July 1 and beyond to maximized their earnings.

It's an free market and agents look out for the best interests of their clients.

In the case of both free agents, money was the "best interest."

All was not well beginning in 2007
Having come out of the lockout, the 2005/06 and 2006/07 seasons were pretty stable financially for the league and a majority of its teams. Cost certainty seemed to be working as all teams seemed to be on a pretty level playing field. Revenues were up, players were making a good amount and teams seemed to be financially secure.

Although the cap had gone up from $39M for the 2005/06 season to $44M in 2006/07, it wasn't as if a majority of teams were getting left behind. Strong merchandising and the strong Canadian dollar lead to the jump in revenues and the rise in the cap. As for the Sabres, they were actually at the cap ceiling and had to trade backup goalie Martin Biron (to the Flyers) for a draft pick to become cap-compliant in the 2006/07 season.

For the 2007/08 season, though, it was announced that the cap would increase to $50M. Although it wasn't dramatic year-over-year, the 28% increase from the first to third years post-lockout began to put a strain on some budgets, and in particular, Buffalo's.

Golisano's "just break even" mandate was beginning to emerge. That internal cap, along with other pressures, eventually lead to the trade of soon to be free agent Brian Campbell to San Jose in 2008.

In a report from Forbes via, the team was said to have lost $5M in 2007 and $9M in 2008. This was not the "cost certainty" Golisano had signed up for when he bought/rescued the team in 2003.

In December, 2008 rumors began to swirl that he was selling the team.

WROC out of Rochsester, Golisano's home town, reported that there were "exploratory talks" about selling the team. The report was based upon an upcoming article for WNY Hockey Magazine penned by it's managing editor, the late Jim Kelley, who had been covering the Sabres since 1981.

"Golisano," the report said, "is one of several owners upset about rising costs," and it mentions that Canadian Billionaire Jim Balsillie had offered to buy the team from Golisano in 2007.

Balsillie had tried to purchase the Nashville Predators in May of 2007 only to eventually be rebuffed by then owner Craig Leipold who sold the team to a consortium of local interests. Leipold would then turn around and buy the Minnesota Wild less than a year later. The Wild, be it known, signed the Predators Suter and New Jersey's Zach Parise to matching 13yr./$93M contracts this off season.

The years 2007 and 2008 were turning points in the NHL as the separation between haves and have-nots began to widen. Both Golisano and Leipold sensed that they would be hard pressed to maintain financial stability while icing a competitor without losing money on a yearly basis.

Nashville, a franchise similar to the Golisano-era Sabres, was also able to play with the big boys those first two seasons because of a level financial playing field. But the team began to fall into the red in 2007.

In an April 29, 2012 article from The Tennesseean, author Nate Rau says that the team has been losing money and that, "the leader of the local ownership group said members have been forced to put $60 million of their own money into the operation over the past five years, largely to cover losses. The city has given the Predators $38.6 million in the same period."

This does not look like a franchise that will, or even can, match the Weber offer sheet. Doling out $27M in one year, $68M over the first six years is something that only a handful of teams would be able to absorb.

Barring an annulment of the deal by the NHL (which is unlikely) or an amendment (which is possible) the Predators have until Wednesday to make their decision.

It's not my money

Yeah, sure. It's easy to say that Nashville should match the offer sheet. You could argue that it will keep the franchise legit for their fan base by retaining their best player. You could add in that it was courageous to stand up the the big-market bully. But for a team that's slowly bleeding money, $27M in less than one calendar year is a knife to the artery.

But losing Weber for what could turn out to be middle of the road players is a knife straight to the heart of their fan base. Sabres fans know about that.

The team would be doing the majority of NHL fans, especially in the Eastern Conference, a favor by not letting Weber go to the Flyers. Philly is generally a hated franchise throughout the league on a number of different levels from deals like the Weber offer sheet, to their image and the way they've played a bullying brand of hockey, all the way down to their tough fan base.

Not that they really care.

Sabres-centric selfishness in a Nashville match and trade
There is a scenario where Nashville could slight Philly, save face, keep the team competitive for the upcoming season, minimize their losses and get a good return for Weber (all things considered) should they do a match and trade.

It was mentioned earlier that a match and trade scenario doesn't make a lot of sense since the Preds will be doling out 25% of Weber's deal in less than a year. And it doesn't, unless you trade for players who've been paid their up-front bonuses and are to be had for a salary that's less than their cap-hit.

It was also mentioned earlier that the Sabres have three defensemen who signed bonus heavy contracts--Christian Ehrhoff, Tyler Myers and Andrej Sekera.

Ehrhoff is a #2/3 d-man who's signed for nine more years. He's already received $13M in bonuses and was paid a $2M salary for last season. The payout over the length of the remaining nine years is about $2.75M per season with a cap-hit of $4M. His annual salary is not over $4M for any remaining years.

There is a glitch in that there's a No Movement/modified No Trade Clause in the deal.

Erhoff is no Weber, but Nashville could reduce the affect of the $27M by effectively trading for a player like Ehrhoff who has already received a big chunk of his contract.

Sekera is another one with a bonus-laden contract. Of his 4yr./$11M contract, $4.75M has already been paid out in bonuses. Add in his salary from last season at $1.25M and the mid-pairing defenseman will have been paid $6M already. That leaves only $5M left over the remaining three years with a cap-hit of $2.75M.

He does not have a NTC.

Probably the most intriguing Sabres defenseman for the Preds would be former Calder Winner Tyler Myers.

Whereas Ehrhoff and Sekera represent a decent return, Myers might be the type of player that could develop into a bonafide #1 defenseman. He would not only represent part of a solid return for Weber, but the kid could also help heal, the wounded fan base.

Myers also represents a contract that's bonus laden. He received a $10M signing bonus on July 1. He now has $28.5M remaining on his seven year deal. He'll make $2M this season, then no more than $6M the remainder of the deal. That's an average annual remaining salary of about $4M with a cap hit of $5.5M.

Although he does have a NMC/modified NTC, it does not kick in until the 2016/17 season.

Since Ehrhoff is probably not an option, Myers and Sekera would make for an intriguing option for the struggling Predators.

Total contract worth for both players is $49.5M, but at the end of next season, they will have already been paid nearly $20M combined.

That $20M is off the books and would help counter the $27M payout for Weber.

It's understood that neither are of Weber's calibre, but the 22 yr. old Myers, he of three NHL seasons already, is regarded throughout the league as an up and comer with Norris potential.

Of course the other side of the story is whether or not the Sabres would want to give up Myers in a trade for Weber knowing that Nashville would still be over the barrel.

One would think that they would. But, not only that, were Nashville be willing to match then trade, there would be no shortage of teams willing to give up a substantial return for Weber so a player like Myers would represent a huge trade chip. Add in the financial aspects laid out here and the Sabres would be an intriguing trade partner for the Preds.

As we've learned from last off-season, nothing is outside the realm of possibility with Pegula. He's hell-bent upon building a winner, cost be damned, and it's safe to say that they're looking long and hard at the Nashville quandary.

Unless the league steps in, the Weber offer sheet will be finalized at the end of the day on Wednesday.

And for purely selfish reasons, draped in far-fetched hope, matching the offer sheet would be good for Nashville, the league and, possibly Sabres fans. and a list of 10 offer sheets:

the hockeynews:
scott burnside on offer sheet futility from 2011:

winnipeg matches chicago offer sheet for keith tkachuk:

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