The brave new world of RFA contracts and what it means for Mikko Rantanen

Friday night, Toronto Maple Leaf forward Mitch Marner signed a six-year contract extension worth $65.4 million. His cap hit of $10.9 million now ranks seventh in the league, and he’s now the second-highest paid winger in the NHL.

The #MapleLeafs Mitch Marner 6 year $10.893M Cap Hit:

-Yr 1: $700K Base, $15.3M SB
-Yr 2: $700K & $14.3M SB
-Yr 3: $750K & $9.608M SB
-Yr 4: $750K & $7.25M SB
-Yr 5: $750K & $7.25M SB
-Yr 6: $750K, $7.25M SB

Rep’d by Darren Ferris @quartexxmgmt https://t.co/bcUNcKgR24

— PuckPedia (@PuckPedia) September 14, 2019

Why does this matter to the Avs? Because Mitch Marner was drafted the same year as Mikko Rantanen. He’s coming off his ELC, just like Rantanen. He plays wing next to an elite centerman, just like Rantanen. He’s put up 224 points (67G/157A) in 241 games (0.93 pts/GP), which is very similar to Rantanen’s 209 points (80G/129A) in 239 games (0.87 pts/GP).

The biggest difference? Mitch Marner now has a contract for the 2019-20 season. Mikko Rantanen does not.

Resetting the RFA Market

There is no doubt that Marner sets the market for the remaining unsigned restricted free agents. As of this writing, Kyle Connor (67G/61A/128Pts in 178GP, 0.72pts/GP) and Patrik Laine (110G/74A/184Pts in 237GP, 0.78pts/GP) of Winnipeg, Matthew Tkachuk (71/G/103A/174Pts in 224GP, 0.78pts/GP) of Calgary, Brock Boeser (59G/57A/116pts in 140GP, 0.83pts/GP) of Vancouver, and Brayden Point (91G/107A/198Pts in 229GP, 0.86pts/GP) of Tampa Bay join Rantanen as high-end young forwards still waiting for a contract.

Now, it’s easy to say that Marner’s contract is an outlier, an overpay. Every year, Luke and Josh Younggren of Evolving Hockey use market trends to project free agent salaries that summer. For Marner, they expected him to receive an 8-year deal at $9.6 per year.

Not only was the actual deal two years shorter to allow Marner to hit unrestricted free agency closer to his prime at age 28 rather than age 30, but it also came in $1.2 mil more per year. They calculated what a six-year deal would look like as well, and pegged $8.9 mil as the expected cap hit. Marner’s actual numbers cleared that by a full $2 million.

Of course, there’s the Toronto factor to consider. According to Forbes’ annual valuation of NHL teams, Toronto ranks only behind the New York Rangers in total value, and third behind NYR and the Montreal Canadiens in revenue. They’re not shy about throwing that money around either.

The decision to sign John Tavares to a seven-year, $77 million deal ($11 mil cap hit) in the summer of 2018 set the internal comparable for Marner much higher than anywhere else in the league. Marner’s similarly-aged teammate, Auston Matthews (111G/94A/205Pts in 212GP, 0.97pts/GP) also inked a five-year deal worth $11.6 million per season in February.

There’s no doubt that this context is critical to understanding how Marner managed to land this contract. However, it’s justifiable in a broader sense as well, even if it does purposely upset the norms and correct a market inefficiency.

Young players begin their NHL careers on extremely cheap three-year, entry-level contracts (ELCs) that are set by the league. After that, their original team retains exclusive negotiating rights (the “restricted” part of Restricted Free Agent (RFA)) until they’re 27 or have 7 NHL seasons under their belt.

However, NHL players – especially elite ones – hit their prime between age 22-25. Under the current system, the best players during their best years have extremely limited negotiating power and are usually highly underpaid for the amount of value they bring to their teams.

Yet once those players have “paid their dues” and hit the magic age of 27, teams pay up. Artemi Panarin became the highest-paid wing in the league this summer when he signed a seven-year deal worth $11.6 million per. However, he’ll be 34 when his contract ends. The Rangers are hoping they get a few highly productive years out of him before they’ll likely sharply overpay for declining play into his 30s.

Compare this to Marner who will only be 28 and still in the tail end of his prime years when his deal is done. Which would you rather pay for over the course of those deals?

Marner is good now. Toronto’s good now. While that’s a team that doesn’t have to worry about cash flow, it’s probably going to hit a peak while Marner’s in his prime and fans want to pay up to see exciting players on the ice.

For smaller markets (more on this in a minute), it makes sense to pay good players while they’ll still be good over the course of the full contract. It aligns expenditures with revenue and helps avoid trying to make star players whole when they’re old and bad and the team is slipping into a rebuild.

Ever since the salary cap made finding market inefficiencies more important, the NHL has been trending younger and younger. When RFA aged players bring more value at a similar price than veterans, it makes sense to play them instead. The fact junior development leagues have been producing more pro-ready talent at a younger age than ever before helps as well. Teenagers in the NHL are not the rarity they used to be.

Unfortunately, the league is still largely operating under old-school thinking of when it’s time to pay your players. Six of the top 10 scorers last year were in their RFA years, and more than half of the top 20 could say the same. Some have netted paydays, but most were comparatively underpaid versus their UFA counterparts.

Marner’s contract breaks this paradigm and forces Toronto to pay for his value while he’s generating it. And we know he will – he scored 94 points last season as a 21-year old. Dom Luszczyszyn at the Athletic projects that Marner will be a top 15 player in the league over the next six years and has a 74% chance of providing positive value on this contract.

While it’s easy to look at this from the team side and panic a bit because it puts a greater squeeze on the cap, it also forces clubs to pay their players more equitably and in a time frame more in line with their revenue. In the long run, this is not a bad thing for the health of the league.

It also may even drive down the amount of money teams have to spend on ill-advised UFA salaries, saving GMs from some truly awful contracts. Players deserve to get paid for their services, but doing so while they’re most likely to be good is far less risky than trying to do so after the fact.

Marner’s contract provides a much higher comparable contract for RFA negotiations both this summer and into the future. While the “Toronto factor” and team payroll context likely pushes his pay quite a bit higher than other RFAs will receive, it should considerably bump their salaries as well.

The demographics of the league has changed. It’s high time the pay scale does as well.

Impact on Rantanen & The Avs

So what does this mean for the Avs? With the Marner contract now on the books, Toronto has the most money slated to be paid this year. Colorado has the least. The Avs currently have approximately $15.6 million left in cap space, and while Rantanen will take up some of that, there’s plenty of room for everyone without the cap loophole tomfoolery we’re about to see from the Leafs.

However, the Avs are not the Leafs. They play in a much smaller market and have a much smaller cash flow, which in some cases could make supporting a large, long-term contract difficult. Forbes valued the Avs at $430 million last December, a lowly 24th on their list.

However, the Kroenke family owns not just the Avs, but the arena, ticketing, merchandise, broadcast, and other non-hockey professional teams that often pool resources. Where Forbes draws the lines between the Avs and the rest of the empire is hazy at best, so there’s little doubt the club is more profitable than they appear.

They’re also a team on the up and ups. The NHL is a gate-driven league, so more butts in the seats means more money in the bank. The Avs saw the largest increase in attendance (9.9%) between the ’17-18 and ’18-19 season, yet were still below capacity. With the projected trajectory of the team, increasing gate revenue is unlikely to be an issue.

Furthermore, NHL players aren’t paid for the playoffs. When they do receive checks, it’s for the amount they’re contracted for in the regular season. Anything above and beyond that (ie, the postseason) by and large goes into the team’s coffers. The same goes for special events, such as the outdoor game in Colorado Springs this year. It’s unlikely the Avs will operate at a loss in the years to come.

And unlike other small-market teams, the Avs have successfully fielded extremely expensive rosters. The $60.8 they paid in salary during the 2002-03 season equates to $86.9 million in today’s dollars, which is $5.4 over the current salary cap. Joe Sakic earned a (non-adjusted) $15 million signing bonus in 1997, and his salaries in the years leading up to the lockout were in the 9.8 million range. By 1999-00, Peter Forsberg was making $9 to $11 million per season. Patrick Roy was making $7.5-8.5.

No matter what Rantanen asks, this ownership and this market can easily support it. The Avs are stable with almost zero risk of relocation and play in a city that owns one of the NHL’s longest sellout streaks. They’re also primed to be very successful over the next few years with Rantanen as a big driver behind it.

They may not be the Leafs, but revenue should not be an issue in Colorado over the duration of Rantanen’s next contract.

Another limiting factor is the other players on the team. The highest internal comp contract-wise is Nathan MacKinnon‘s $6.3 mil for the next four years. While you don’t want to anger your star player by paying his linemate significantly more than him, Rantanen’s back-to-back 80+ point seasons finishing out his ELC are a bit more impressive than MacKinnon’s 38 and 52. When MacKinnon’s seven-year deal is up in 2023, there’s very little doubt that he’ll be made whole, but in the meantime, paying Rantanen market rate shouldn’t cause a problem.

The only problem with Rantanen earning Marner-type money starts to arise when said new MacKinnon contract hits in four years. Or the new Kadri contract hits in three years. Or the new Landeskog and Makar contracts hit in three.

The Avs have built a promising young team that will earn a lot of money, but figuring out how to proportionally divide that among so many good players, fill out the rest of the roster, and maintain cap compliance is going to be a challenge.

Fortunately, Seattle will be joining the league in two seasons and bringing $650 million in expansion fees with it. The US broadcast rights also expire in 2022 and are expected to bring another huge influx of cash. The salary cap is expected to steadily rise over the next few years at least.

The Avs also have maintained an impressive amount of roster flexibility. Sam Girard is the only player signed past the MacKinnon summer of 2023, and the majority of the Avs projected players – especially depth players – are scheduled to expire this summer. GM Joe Sakic has been careful about minimizing contract terms.

Even though Donskoi and Compher each received unusual four-year deals this summer, the team seems cognizant of the raises that are coming for their main players. While they can’t go too crazy with Rantanen’s deal, they have flexibility elsewhere. If Sakic remains diligent, building around a $9 or $10 million dollar a year contract shouldn’t be a problem.

Paradigm Shift

In the end, the NHL is a balance between the owners and the players. Without the owners, there’d be nowhere to play, no one to sell tickets or broadcast rights, no one to figure out travel arrangements and pay for hotel rooms. But without players, there would be no revenue. Fans pay to see the players skate on the ice, not the mechanisms that keep everything running smoothly beyond it.

Marner’s contract may seem like a wrench in this balance, but it’s not. It’s merely correcting a market inefficiency and paying players for what they’ll help the team bring in, not underpaying them during their best years and compensating on the tail end.

Marner did what he had to to get this deal. He negotiated publicly through his agent and agent-friendly media personalities. He faced backlash and outrage and fans taking it extremely personally that a boy from Toronto wasn’t taking what the club was offering no questions asked. Since the Leafs had backed themselves into a very problematic cap situation, the fact he was asking for above the going market price instead of taking a team-friendly deal (requiring an earnings sacrifice that Tavares and Matthews were not asked to make) was scorned.

But in the end, Marner’s victory is good not just for him, but for the league. Young players deserve to earn a wage proportionate to the money they bring in. They deserve to exert the limited leverage they possess in the RFA negotiation proceedings. They deserve to set themselves up financially while they can instead of banking on a long career in an injury-prone sport. And they deserve to be paid when the team can afford it instead of when declining play on the ice means they can’t.

Team concerns shouldn’t be the only ones weighted when discussing RFA contracts. Marner’s contract is a win for the players and should help more fairly distribute revenue to those that are actually responsible for earning it across the league. It’s a healthier way to pay players, both for them and their club’s financials.

And yes, this applies to Rantanen. And in a few years, Cale Makar. And Bowen Byram. And all the other young stars the Avs will ice in the future.”Paying your dues” based strictly on age needs to be – and now finally may be – a thing of the past. If you have the numbers, if you’re an established core member of a team, choosing between long-term security and making bank on your first non-ELC contract shouldn’t be an either/or.

In short, Marner’s new contract is good for Rantanen, good for a league that struggles to proportionately compensate young stars while severely overpaying for aging ones, and isn’t going to critically hamper the Avs cap, profit, or internal team dynamics moving forward.

It’s a paradigm shift and one that may feel like it’s hurting the Avs in the short term. But Mitch Marner will be the first of many young stars campaigning for more equitable pay. The NHL is younger than ever before. With any luck, this brave new world of RFA deals will make it healthier as well.