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Photo Credit: Christopher Hanewinckel-USA TODAY Sports

William Nylander: Undervalued Superstar… that the Leafs should underpay

Recently, Matt Cane released the 2018 version of his free agent contract predictions. 

Naturally, when this was released last month, Leafs nation immediately started obsessing over William Nylander’s estimated $7MM X 5 yrs contract. Matt does great work and this is a good reference tool when trying to gauge approximate salary expectations but it’s important to recognize that Matt’s projections are a view to what a player is likely to make, not what a team could get away with paying if they really held out in negotiation.

William Nylander is one of my favourite Leafs ever. His playing style is exactly the kind of hockey I like to watch. He can carry the puck as well as almost anyone in the league. He is a skilled playmaker but also boasts an incredible shot that can beat an opposing goalie with ease. Put simply, he is a joy to watch and I expect we have barely scratched the surface of what he can bring to the Leafs. All that being said, Toronto should make every effort to get him on as low an AAV as possible for as long as possible.

The sad reality for RFAs like William Nylander is that the system is rigged against them.The NHL CBA is built specifically to help teams drive down prices of young superstars. There are several key factors that could help the Leafs keep Nylander’s contract below the $7MM X 5yr that Matt’s model predicted. In this article, I’ll walk through the the three most impactful ones: arbitration rules, offer sheets (or the lack thereof), and low market comparables.

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Arbitration Rights:

Nylander is a restricted free agent and can, therefore, only negotiate a new contract with the Leafs. This puts Toronto at a great advantage because Nylander does not have the ability to drive his price up with a bidding war. One recourse that RFA players have to improve their salary is arbitration. Arbitration is a process in which a team or eligible player asks a neutral arbitrator to decide a fair price for a player’s next contract. This isn’t a great situation for teams because it generally gives the player slightly more money and also shorter term (either one or two years). However, this process is also set up to help teams underpay young stars.

A player requires four years of service in pro hockey in order to be arbitration eligible. But depending the player’s age, what counts as “a year of service in pro hockey” differs. For players that are 18, 19, or 20 years old, only NHL seasons count towards their years of service; while older players can count AHL seasons as well. For Nylander, that means that even though he has played 4 full years in the Leafs pro hockey system, only 3 count toward his years of service because he was under 20 years old while he played for the Marlies. This is the Leafs last chance to negotiate with Will before his arbitration rights kick in so they need to make the most of it.

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The Death of the Offer Sheet

Offer sheets are one of the only mechanisms in the CBA that are designed specifically to benefit RFAs. Players who have completed their entry level contract but have not yet signed an RFA extension as of June 26 are eligible to be signed to an offer sheet. A team other than the team holding this player’s RFA rights can make this RFA player a contract offer. If that player agrees to this offer, the team holding his rights has the choice to match the offer or accept draft picks as compensation from the team that signed their RFA. The compensation differs based on how much the RFA is signed to. This passed year’s compensation structure is listed below. These dollar values will increase at the same rate as the salary cap. Next year’s cap has yet to be announced so, for simplicity, I will refer to the 2017/18 compensation structure. Just know that all of these numbers will likely be ~6% higher for 2018/19.

Offer Sheet Compensation (range A-G)

A: $1,339,575 or below – No compensation

B: $1,339,576 to $2,029,659 – Third Round

C: $2,029,660 to $4,059,322 – Second Round

D: $4,059,323 to $6,088,980 – First Round and Third Round

E: $6,088,981 to $8,7118,641 – First Round, Second Round, and Third Round

F: $8,7118,642 to $10,148,302 – Two First Rounds, Second Round, and Third Round

G: $10,148,302 – Four First Rounds

If a team were to offer sheet Nylander, they’d likely be offering in range E ($6,088,981 to $8,7118,641). Any less than that, Nylander wouldn’t sign. Any more than that, the team would be paying far above market price and giving up multiple first round picks plus lower round picks (a steep price). In range E, the team signing an offer sheet would be giving up a first, second, and third round pick. That’s well below value for a player of Nylander’s caliber which would seem to imply there is good incentive for teams to sign offer sheets.

This gap between offer sheet compensation and player value has prompted fans to push teams to utilize offer sheets far more than is currently done. The common sentiment around hockey twitter seems to be that GMs are too cowardly to take advantage of offer sheets and if they were smart, they’d employ them regularly. While I agree that fear of retribution is a contributing factor in why offer sheets rarely happen, I don’t agree that teams should be employing offer sheets more readily. Discouraging their use helps teams on aggregate in the long run.

To explain what I mean, I’d first like to walk through a common thought experiment in the study of game theory, the Prisoner’s Dilemma. Many of you may already be familiar with the Prisoner’s Dilemma but for those that aren’t, the scenario goes something like this:

The police arrest two suspects that they know have committed a series of robberies. They know they committed the crime but don’t have enough evidence to prove it. They do, however have more than enough evidence to convict them for breaking and entering. The penalty for robbery is 10 years in prison while B&E holds a 2 year sentence. The police separate the two partners and offer them both a deal.

“If you confess to robbery/rat out your partner and your partner doesn’t, you will get no jail time and your partner will get 10 years. If you don’t confess but your partner does, they will get no jail time and you will get 10 years. If both of you confess, you will each get 5 years in prison.”

Below is a breakdown of the possible outcomes if you confess or not and the likelihood of each of these outcomes.

Scenarios if you confess: Jail Time Odds of Occurring
And your partner doesn’t confess 0 years 50%
And your partner also confesses 5 years 50%


Expected jail time if you confess is 2.5 years (50% x 5 years + 50% X 5 years)

Scenarios if you don’t confess: Jail Time Odds of Occurring
And your partner does confess 10 years 50%
And your partner also doesn’t confess 2 years 50%

Expected jail time  if you don’t confess is 6 years (50% x .10 years + 50% x 2 years)

In a world where the expected outcome is unknown (you can’t trust your partner), a logical person would confess because the expected jail time is far lower (2.5 years) than if you keep your mouth shut (6 years). However, if you make a pact with your partner to not rat on each other and know that you can trust them 100%, you could reduce that expected jail time even further to 2 years. You take the “no jail time” option off the table but you also eliminate the possibility of getting either 5 or 10 years in jail. In other words, if you cooperate, you can all benefit on aggregate.

A similar situation is at play when it comes to offer sheets. A team might look at a player they could get (Nylander) compared to the assets they’d have to give up in an offer sheet and be tempted to take a risk on the best possible outcome (acquiring top end talent for a below market return). However, this only benefits the team if their partner (rival GMs) don’t do the same. If other GMs offer sheet your players, or teams all have to start overpaying RFAs out of the fear of an offer sheet, all GMs suffer.

If teams start to use offer sheets regularly, more high comps get added to the market. Every GM suffers because everyone now has to pay players market value for fear of losing them to an offer sheet. However, if all teams cooperate by never signing offer sheets, it eliminates the biggest threat a player has to force teams to pay them a higher AAV. Essentially, by creating a culture where offer sheets are “against the code” you all agree to forego the best possible outcome (acquiring an RFA at a low cost) to avoid the possibility the worst possible outcomes (you lose a pending RFA and/or the cost of RFAs increases). This helps every team on average.

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Low Comparables

Many fans and even some GMs *cough* Chiarelli *cough* make the mistake of confusing what a player is worth with what a player deserves. Nylander is a Swedish hockey god who DESERVES only good things but he is WORTH what the market says a player of his type should be paid. Nylander is a skilled RFA winger with multiple 60+ point seasons, coming out if his ELC. So to determine his worth, we need to find similar comparable players who have signed their own deals recently. If we focus on long term deals, the below three players stand out as most similar.

William Nylander: RFA deal – TBD

Season Age Salary GP G A Pts
2015-16 19 ELC 22 6 7 13
2016-17 20 ELC 81 22 39 61
2017-18 21 ELC 82 20 41 61

Johnny Gaudreau: RFA deal – $6.75MM X 6

Season Age Salary GP G A Pts
2013-14 20 ELC 1 1 0 1
2014-15 21 ELC 80 24 40 64
2015-16 22 ELC 79 30 48 78
2016-17 23 $6.75 72 18 43 61
2017-18 24 $6.75 80 24 60 84

Johnny Gaudreau is an interesting case as he is a little older than the other comps. He played in college before joining the Flames and burned a year of his ELC with just 1 game played. That being said, his next two years, he put up 60+ points and 70+ points, including 30 goals in his contract year. That being said, he was also one year closer to his prime than Nylander.

David Pastrnak: RFA deal – $6.66MM X 6

Season Age Salary GP G A Pts
2014-15 18 ELC 46 10 17 27
2015-16 19 ELC 51 15 11 26
2016-17 20 ELC 75 34 36 70
2017-18 21 $6.66 82 35 45 80

Pastrnak is a long time friend of Nylander who was drafted the same year so it’s tough to ignore the likelihood that Nylander will see him as a comparable. Pastrnak broke into the league a year earlier than Nylander so he signed his RFA deal after his age 20 season. In his first two seasons, his point totals were respectable but not spectacular but he had a huge breakout in his contract year (putting up nearly a point per game). He had an even better age 21 season; scoring 35 goals and 80 points. This dwarfs Nylander’s age 20/21 seasons on both goals and points.

Nikolaj Ehlers: RFA deal – $6MM X 6

Season Age Salary GP G A Pts
2015-16 19 ELC 72 15 23 38
2016-17 20 ELC 82 25 39 64
2017-18 21 ELC 82 29 31 60

 

Of all the comparables, Ehlers is both the most similar to Nylander and the most favorable for the Leafs. This is the contract I’d aim for if I was Kyle Dubas. $6MM X 6 yrs for Nylander would be a huge win and the Ehlers contract sets the precedent for it. He and Nylander have had almost identical seasons the last two years. Ehlers signed last year but his RFA salary doesn’t kick in until next season (the same as Nylander). This helps shut down the argument that Nylander’s agent will inevitably make, that the Leafs should be paying Will based on the percentage of cap used by his comparables when they signed vs. the absolute value of their contracts. Ehlers’ contract will start at the same time Nylander’s will and at the same percentage of cap.

What if Nylander won’t sign for a deal in line with those comps? What if Nylander’s agent pushes that someone like Draisaitl should be the main comp even though Draisaitl has a much better shot at sticking at centre than Will?

Wait. Just wait.

Use the time that you have to negotiate. There’s no sense rushing the process. The only recourse Nylander has is to simply not play in the NHL; sacrificing salary and a year of stat-building. Generally, holdouts will sign by the end of the preseason for a team friendly salary, while August signings can often be substantially higher than deals signed in October. Don’t believe me? Go look at the deals for Hampus Lindholm (October signing) and Aaron Ekblad (August signing) and tell me which deal you’d rather have. Of course, there will be exceptions. I give these examples only to illustrate that waiting until October to sign a player isn’t as dire a situation as the media often makes it out to be.

Agents will always push to use the highest comparable and teams will always push for the lowest. Most of the time, you’ll end up somewhere in the middle. The longer the Leafs are willing to hold out, the better your odds at getting a number close to Ehlers $6MM X 6yrs. Ultimately, Nylander’s deal will set another comp for Marner so it’s doubly important to get Nylander for a fair price.

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One major caveat to all this is that the Leafs need to be sure that they properly manage their relationship with Nylander while negotiating the contract. They can’t low ball Will to the point where he is embarrassed by the deal. That is a sure way to guarantee that he’ll leave the team at his earliest opportunity. There are clear comps for Nylander (Ehlers/Gaudreau/Pastrnak). They all make between 6 and 7 and were all signed recently. Make every effort to highlight the fairness of these salaries and don’t let the conversation be dominated by percentage of cap. Offer a deal in that range and give him the option to go higher ($7MM+) but only if he is willing to go for 7 or 8 years. Then he has choice in the matter.

Players aren’t dumb. It’s a tough pill to swallow if a team is trying to get you for less than you’d get on the open market but it is easier to take if they understand that it’s a necessity. The Leafs aren’t an internal cap team trying to get a bargain on a player they could afford to pay more. They need the cap space desperately to build a cup winner and Will knows that. I have no doubts that Leafs management will be able to come to an agreement with Nylander that works for everyone so don’t worry too much if it takes longer than you may have hoped.



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