What Is Ryan O'Reilly Worth?

 

The Backstory

It’s time to address that elephant in the room — or perhaps it’s actually a rhino. Ryan O’Reilly is sure to garner a lot of ink this summer, as the Avalanche weigh their option of a long-term contract for O’Reilly against the possibility of trading him.

The backstory is simple. The Avalanche and O’Reilly haven’t been two peas in a pod when it has come to contract negotiations since the center was drafted in 2009. In 2013, O’Reilly elected to stay overseas after the lockout with his KHL team, Magnitogorsk Metallurg, rather than sign what he viewed as a low-ball offer from the Avs.

The Calgary Flames decided to do a little poaching and signed O’Reilly to an offer-sheet in the spring of 2013, risky because rhino’reilly was a protected species at the time, in other words a restricted free agent. Flames’ GM Jay Feaster offered O’Reilly a two-year deal with a salary of $3.5M in year-one and $6.5M in year two. The Avalanche didn’t let their man walk, and matched the offer.

Last summer, the Avalanche elected team-induced arbitration as a method to get some leverage back in the negotiations. At the eleventh hour, with a hearing sure to get personal and nasty on the horizon, they got O’Reilly to sign on the dotted line of a two-year deal worth $12M overall.

When that deal expires on July 1, 2016, O’Reilly will be an unrestricted free agent, free to sign with any team he chooses. The Avalanche risk losing him for nothing, and so here we are.

Colorado Avalanche and Ryan O’Reilly are discussing a 7YR / $50M contract. Term may come down, but expect ROR to be around $7-7.5M / season

— The Hockey Chat (@TheHockeyChat) June 3, 2015

The latest rumor (take it for what it’s worth) has O’Reilly signing a deal worth just over $7M AAV (annual average value) against the cap, which would keep ROR in Denver through the 2022-23 season.

The Structure

Most Colorado Avalanche fans will instantly know what you mean when you mention “the structure.” Joe Sakic and Patrick Roy have set an internal budget within the organization, centered around Matt Duchene. A golden-boy in Colorado, Duchene is in the midst of a five-year deal worth $30M, which averages out to a cap hit of $6M per season.

Sakic and Roy have made it known that in an ideal world, players fall into line behind Duchene, and he sets the bar. It has been interpreted that the motto at the negotiating table has been nobody makes more than Duchene.

The viability of this model was always questionable, and cracks are beginning to appear. If the Avalanche want to keep their core players intact, some of them are going to have to be paid more than Matt Duchene. More on the why in a bit.

Avalanche nation is still divided on this issue, with some calling out O’Reilly as greedy, and others clamoring to pay the man. The question at hand is — what is Ryan O’Reilly worth? It’s an issue that has gotten personal for many Avalanche fans, so my goal is to take emotion out of it, and present a case for the salary I think O’Reilly deserves.

Salary Cap Inflation

The first point I’d like to discuss is inflation, a natural occurrence in any economy. Compare dollar-to-dollar values from different time periods, and you will notice that the dollar doesn’t get you what it used to. High schoolers in the 70s could fill their car with a tank of gas and fill their pockets with candy for far cheaper than high schoolers can today.

The same is true in the NHL. As the salary-cap continues to escalate, and more money funnels into the league, a player signed today will be worth more dollars than he would have been worth five years ago. His value hasn’t changed, but the dollar amounts have.

Let’s look at Matt Duchene specifically. He signed his $6M cap-hit contract extension in the summer of 2013. The salary cap for the following season was $64M dollars. O’Reilly is due a contract extension this summer, and the cap is expected to be about $72M next season. If projections are correct and O’Reilly hypothetically signs an extension, the cap in the following season will be $8M higher than when Duchene signed his extension.

If we break down the percentages, Duchene’s cap-hit accounted for 9.4% of the Avalanche’s spending limit (salary cap for the following season) at the time his deal was signed. To achieve the same 9.4% against the projected cap of $72M, O’Reilly’s next deal would need a cap-hit of $6.75M.

In an NHL economy with an escalating salary cap inflating the amount of money players can earn, we should view an equivalent value to Duchene’s $6M dollar cap-hit to be a $6.75M dollar cap-hit today.

There may be fluctuations from year-to-year, but with the cap raising from $39M in 2005-06 to $69M last season, it’s safe to say we can expect the trend to continue to be higher player salaries moving forward.

Market Value & Comparable Player Breakdown

The other element to the Avalanche “structure” is the fact that they aren’t determining market value for players. When a player hits free agency, the market determines their value.

Ryan O’Reilly isn’t necessarily being greedy when he exercises his right to earn market value in unrestricted free agency. The Avalanche, just like any other NHL team, will need to pay their players what market value deems them to be worth when they hit unrestricted free agency — not what the Avalanche want to pay them to fit into their own internal structure.

I didn’t hear anyone griping about Jonathan Toews having his asking price start at $12M per season. He wasn’t called greedy for ultimately taking a deal worth $10.5M per season, along with Patrick Kane at the same price.

The Avalanche should consider themselves fortunate to have the opportunity to sign a 24-year old player, in his prime, to a contract that will see him play out the better part of his career in Denver.

O’Reilly’s stats over the past two seasons are solid. Not spectacular — but solid. He put up 45 goals and 119 points over 162 games, good for a 0.73 point-per-game pace. Given his adeptness in the defensive zone, and ability to be one of the better two-way centers in the NHL, it’s a respectable level of production in today’s NHL.

Looking at a comparable players, let’s start with the first contract signed under the current CBA, Travis Zajac. Lauded as a core-player in New Jersey with notable leadership and two-way skills, Zajac inked an eight-year deal worth $46M dollars in January of 2013.

Zajac was never an offensive star, instead feeding off playing with talented wingers such as Zach Parise and Ilya Kovalchuk to put up numbers, including a career high 67 points in 2009-10 . Some may say he sounds an awful lot like O’Reilly, who is at is best when aided by more prolific scorers, but justifies ice-time even when he isn’t scoring due to strong two-way play.

Since Parise and Kovalchuk have left New Jersey, Zajac hasn’t had the same formidable wingers to play with, and his production has suffered. Over his past two seasons, Zajac is averaging 0.29 ppg. New Jersey still carries his $5.75M AAV ($6.41M in today’s dollars) for the next six years, and Zajac is already on the wrong side of 30. Objectively, I think O’Reilly is a better player and has youth on his side, but it’s worth noting the Zajac parallel.

The Avalanche have a lot more offensive weapons for O’Reilly to play with than Zajac currently has in New Jersey, so I doubt we see O’Reilly’s production deteriorate like Zajac’s has. Despite this, the Avalanche would be wise to highlight this deal when negotiating to keep O’Reilly’s contract reasonable, and as a cautionary tale if the money gets too big. Let’s take a look at some other similar players who have recently signed hefty extensions.

Jason Spezza, who at 31 is on the downslope of his career, signed a four-year contract with the Dallas Stars worth $7.5M annually. Spezza is the clear second-choice center in Dallas behind Tyler Seguin. In his past two seasons, Spezza has played in 157 games, recording 40 goals and 128 points — good for a 0.82 ppg pace.

David Krejci is another centerman, playing in Boston. His AAV is slightly less than Spezza’s at $7.25M, but his production is also a bit lower with 36 goals and 133 points over 174 games in his last three seasons with the Bruins. This comes out to a 0.76 ppg pace for Krejci.

I view both of these players as guys who aren’t necessarily franchise centers, but are number-one centers on a lot of teams, and a respectable Robin to teams who do have a Batman running the show. I would also classify O’Reilly as this type of player.

O’Reilly has shown the ability to succeed as a number-one center playing with Nathan MacKinnon and Gabriel Landeskog on his wings, forming the Avalanche’s most successful line last season.

Looking at a comparable closer to home, let’s focus back on Matt Duchene. Duchene’s salary was discussed above, but it’s worth noting his $6M cap hit is much lower than Spezza’s and Krejci’s, despite many Avalanche fans probably viewing Duchene as a more valuable player than either — I know I would.

Duchene’s production over his last two seasons is similar to O’Reilly’s. Duchene posted 44 goals and 125 points over 153 games, giving him a slight 0.82 ppg edge over O’Reilly’s 0.73 ppg. Many lament that Duchene needs good line-mates, and his production will surge, but a similar case can be made for ROR, who scored 24 points in 21 games last season while playing on the top line and scored 28 goals in 2013-14 on a wing with Duchene.

In my opinion, the Avalanche should view Duchene and O’Reilly like the Blackhawks view Kane and Toews. They are difficult to compare, but both bring near-equal value to the team. Much like Toews, O’Reilly does things on the ice that don’t show up on the scoresheet. Much like Kane, Duchene has game-breaking ability and talent. It’s apples and oranges.

Given salary inflation discussed earlier, and a look at recent contracts handed out to similar players, I think at this point it’s fair to say that O’Reilly’s value is hovering around the $7M mark. It’s a scary sounding number, I know, but should we consider this elite compensation for O’Reilly? Many might be inclined to say yes, although I’m going to say it’s not.

Jonathan Toews, whose point-per-game production over the last two seasons is 0.85, fairly modest for a superstar by the way, just signed a deal giving him a $10.5M cap hit starting next season. The percentage against the cap of the contract comes out to 15.2%, meaning Toews and Kane are occupying ~30% of the Blackhawks salary. This is elite compensation.

Sidney Crosby signed his $8.7M AAV contract in 2012, when the CBA allowed for extensions longer than eight-years. Crosby’s 12-year deal worked to massage a lower cap hit than he would have had under the current CBA with low salaries in the final years of the deal, but he still counted for 13.6% of the Penguins salary-limit at the time he signed. This translates to a $9.8M AAV in today’s dollars. Take off the last four low-salary years to make his deal compliant with the current CBA (eight-year max term), and Crosby is in the ballpark of having an AAV of $12M in today’s dollars.

Elite centers seem to be worth at least $10M a year right now on the market, meaning O’Reilly isn’t looking to get paid like one. Steven Stamkos is a center who will be looking to be paid like an elite, and I wouldn’t be shocked if his next contract makes him the highest cap-hit player in the league. Crossing the $11M AAV threshold is a very realistic possibility for Stamkos.

So, What’s Ryan O’Reilly Worth?

Based on my research, O’Reilly’s production statistics, his age, and my opinion of him as a player, I think that the $7 to $7.5M dollar window suggested for his AAV is extremely fair. Given that O’Reilly will be 25 when the deal kicks in, a 7-year term makes a lot of sense, and the Avs can expect to get O’Reilly’s best hockey over the stretch of that contract.

During UFA years, I’ve come to the conclusion that perennial all-star centers are worth 12% and above in regards to their hit against the cap based on salaries given in the last five years. Number-one centers are worth 10-12% of their teams annual spending limit, and top-six centers are worth 8-10%.

If the Avalanche can get O’Reilly for $7M per-year, he will be right on the borderline of that number-one center vs top-six center threshold of 10%, which is just about right in my opinion.

I also view Matt Duchene and Ryan O’Reilly as equals at this point in their careers, or at least very close to it. Duchene still maybe has more offensive upside and flash to his game, but I also think he’s currently on a very team-friendly deal with the Avalanche.

Looking at production over the past two seasons, you give Duchene the edge, but the gap isn’t as wide as I’d expect many think it would be. In fact, O’Reilly actually has contributed more goals to the Avalanche cause than Duchene since Roy has stepped behind the bench in the Mile High City, granted Duchene has played in nine fewer games over that period of time.

On the open market today, I think Duchene would command an $8M annual salary, a slightly higher threshold given his offensive upside. When Duchene is up for a new contract, his market value could be even steeper if he plays to his full potential over these next few years, although knowing Duchene he’ll likely throw his childhood team another bone.

O’Reilly is well within his right to make the type of money he is set to earn. The CBA is designed to allow players to cash in when they hit UFA, and Ryan O’Reilly won’t be the first or the last player to do so. Not everyone is going to have Matt Duchene type loyalty to a franchise — he’s the exception to the norm. Holding a grudge against O’Reilly for not being the exception to the rule is a bad way to do business.

Trade Considerations

So, what about those who want to trade O’Reilly? Honestly, I almost forgot all about that option. Given the lack of impact forwards in the system and age of Jarome Iginla and Alex Tanguay, I will say trading O’Reilly for a defenseman blows a pretty massive hole in the Avalanche’s top-six moving forward.

It’s not something that couldn’t be overcome, but help is on the way on the defensive side of the puck. Chris Bigras, Mason Geertsen, and Duncan Siemens are all on the verge of reaching the NHL, and Kyle Wood and Will Butcher solidify defensive depth in the system.

The Avalanche forward crop is much more sparse, meaning the Avs would have to make waves in the draft or free-agency to replace ROR and improve depth on the wing. I think that trading O’Reilly could have merit if the Avalanche have a different vision for the team going forward, but I don’t view trading ROR for a defenseman in itself as a solution to the problems the Avalanche are currently facing. It would be a re-arrangement of their problems.

Obviously if O’Reilly doesn’t get signed, they have to trade him — they can’t afford losing him for nothing. I’m hoping Ryan O’Reilly stays in Avalanche colors for many more years. His game on the ice and work ethic off it are just too good to let go. Time to pay the man.