Archived

This topic is now archived and is closed to further replies.

Edler's Mind Tricks

How Luongo's Contract Will Affect Trade Value... Not In The Way You Might Think.

Recommended Posts

People have said that Luongo's contract will make it impossible to find a trade partner... Or at least his contract will make it difficult to get good value. I have vehemently disagreed since it was signed, and still do. Offside sports is a pretty great blog and he thinks that Luongo's contract is quite attractive.

http://offsidesports...gain-at-53.html

The Luongo Contract: Is He A Bargain at $5.3 Million?

It looks like Vancouver Canucks goalie Roberto Luongo is on his way out of Vancouver. According to TSN, he will soon submit a list of teams that he would accept being traded to. Is Luongo tradeable? What of his contract that takes us to 2022 (when robots will feed us and Twitter will be President)?

When Luongo signed his massive deal in 2009, it seemed at that time he might be untradeable.

That, however, is not the case. Let’s take a look.

The Deal

In 2009, Luongo signed a 12 year/$64 million dollar deal. He was 31 years old when he signed the deal, which means by contract’s end he will be 43.

The distribution of pay across the 12 years is as follows:

luongo.jpg

2010-11: $10 million

2011-12: $6.716 million

2012-13: $6.714 million

2013- 14: $6.714 million

2014-15: $6.714 million

2015-16: $6.714 million

2016-17: $6.714 million

2017-18: $6.714 million

2018-19: $3.382 million

2019-20: $1.618 million

2020-21: $1.0 million

2021-22: $1.0 million

That means his cap hit is $5.333 million. Remember the cap hit is the average yearly salary over the life of the contract and not what a player makes in a specific year.

So it comes down to his cap hit. Back in 2009, the length of the deal (taking Luongo into his early 40s) together with the cap hit made it seem like he wasn’t tradeable. Of course, times – and the salary cap – have changed.

Here are some of the reasons he is now tradeable.

The Rise of the Salary Cap

Yes a cap hit of $5.333 is not chump change in a cap world. However, since the inception of the cap in 2005, the cap has gone up dramatically:

images.jpg

2011-12: $64.3 million.

2010-11: $59.4 million

2009-10: $56.8 million

2008-09: $56.7 million

2007-08: $50.3 million

2006-07: $44 million

2005-06: $39 million

When the adjustment to the players’ share of revenue is made from 57% to about 51.5% (in my estimation) the cap will stay relatively flat or go up or down by about $2 million or so. So this year, there won’t be a big change in the salary cap. However, in coming years, expect it to continue to rise. The NHL continues to grow revenue under the capable watch of NHL COO John Collins. Since he took over in 2006, the NHL’s revenue has grown over a billion dollars. The NHL is enjoying upward momentum and will continue to leverage its Comcast TV deal to grow the game. All signs point to up – for revenue and the cap.

When Luongo signed in 2009, the cap was $56.7 million. Now it’s $64.3 million. So that’s a gain of almost $8 million. There’s a lot more place under the cap to make room for Luongo.

Also ask yourself this: in 2015, what will the cap hit be? Assuming it;s higher, Luongo's deal will look a lot better from a cap standpoint.

Comparables

Luongo’s $5.3 million cap hit is starting to compare pretty favourably to other goaltenders in the league:

Lundqvist - $6,875,000

Ward - $6,300,000

Miller - $6,250,000

Backstrom - $6,000,000

Kiprusoff - $5,833,333

Bryzgalov - $5,666,667

Luongo - $5,333,333

Brodeur - $5,200,000

Thomas - $5,000,000

Fleury - $5,000,000

DiPietro - $4,500,000

Hiller - $4,500,000

Niemi - $3,800,000

Khabibulin - $3,750,000

Halak - $3,750,000

Lehtonen - $3,550,000

Roloson - $3,500,000

Rinne - $3,400,000 ($7M next season)

Luongo’s deal falls somewhere in the middle of the top tenders this season. Next season, Pekka Rinne’s cap hit on his new deal with be $7 million. He hasn’t yet been to a Cup final.

High Five to the Circumvention of Cap

org_Congrats.gif

When the Kovalchuk decision came out, the arbitrator Richard Bloch mentioned in a footnote to his decision that there were other contracts that constituted circumventions of the salary cap given that throwaway years were added to contracts to artificially lower the cap hit. One of those contracts was Luongo’s – and for good reason. When Luongo turns 40 years old, his salary goes from $3 plus million to $1.618, and in the last two years his salary is $1 million. These years lowered the cap it from about $6.7 million to $5.3. Big difference for a team looking to acquire him.

As well, the last 4 years of his deal amount to about $7 million. That means that a team would happily buy him out before he turns 40 years old in 2018. There would be a cap hit on the buyout, but it would be manageable.

Or rather than buy him out, before the 2018 season a team could trade him to a cap hungry team looking to make the floor. Why? By then his salary cap hit will be more than his actual salary. So the team that acquires him will enjoy a net gain on his cap hit. People love net gains.

Read my analysis of 58 NHL contracts in the context of circumvention here.

Wanted: Goalies

It is getting a lot tougher to find quality goaltending. Just look at the playoffs this season so far. A lot of goalies have struggled. When Luongo is at his best, he is one of the best goalies in the league. Yes he has had some issues in key games and in key situations (shaky glove syndrome). However, there aren’t a lot of good goalies to go around.

Look at the Flyers – Bryzgalov’s cap hit over the next 9 years is $5.6 million. Early on, Bryzgalov has been shaky and has emerged as a renaissance man or eccentric – you take your pick.

Whatever you may think of Luongo in the clutch, he will immediately make a team better (like Tampa).

Playoff Revenue

Teams make their money in the playoffs. When revenue is added up – gate, media, merchandising – teams make about $4 million per playoff game on average. Some of that is shared with the league and other teams. Still, teams pocket decent money with home playoff games.

As well, many execs will say that the playoffs are a springboard for marketing and ticket sales for the next season. In fact, for many teams making the playoffs is critical to the long term viability of their franchises.

Luongo helps your team get into the playoffs – there is no doubt about that. Once you’re in, you start to generate that key revenue and position yourself favourably in the marketplace. This will matter to teams, as they will look at his contract as an investment with a possibly strong return.

So there are lots of reasons why Luongo’s contract is moveable. The comparables are good, the salary cap hit is manageable, he’s a really good goalie, and the potential return on his contract is promising.

Frankly, at this point, isn't his $5.3 million cap hit looking like a bit of a bargain?

Share this post


Link to post
Share on other sites

i had been telling people this since Luongo signed the contract... but most fans in vancouver seems to somehow think the contract was a disaster even after the NHL stepped in and stopped this type of contracts to show up in the future...

anyone with a decent sense of math would understand Luongo's contract and cap hit is a bargain.

Share this post


Link to post
Share on other sites

I fully agree. Thanks for posting the blog/article. I never saw his contract as a bad one. Once our owner coughed up the first 10 million it increased his value as an asset.

So many people are out to lunch saying it was a bad deal. He's one of the best at getting his team to the playoffs thus generating revenue for the team and nearing the end of his contract his value as an asset increases.

People need to read between the lines (maybe a terrible anology) of this contract. It was well thought out and meticulously constructed.

Share this post


Link to post
Share on other sites

wow great stuff, i still say we keep him and if we dont gillis will give schneider a similar or bigger contract

Share this post


Link to post
Share on other sites

So lets keep him instead!!! I hope....

But people saying Schnieder will be cheaper, not by any significant amount that would be the difference between getting a top player and not....only gonna be a matter of 1.5mil max, probably less, of a cheaper contract....Fans think Lu's contract is preventing us from getting a Shea Weber and Schnieder will be soo much cheaper

Share this post


Link to post
Share on other sites

If people still believe that Luongo is an elite goalie in this league, then a $5.33 mil cap hit is not only manageable, but attractive. The problem is, many people don't believe that Luongo is in that elite category anymore. His numbers this year were pretty bad, and that was with the best team in the league in front of him. He has collapsed in the playoffs every year for the past 3 years (excluding this year when Schneider stole the #1 job). He's not getting any younger either. Even if a team is still very interested after considering all that, they have to realize that if they make the trade, they're locked in in a big way. These facts are enough to make any GM pause.

Can the trade be done? Probably. Will we get a good return for Luongo? No.

Share this post


Link to post
Share on other sites

If people still believe that Luongo is an elite goalie in this league, then a $5.33 mil cap hit is not only manageable, but attractive. The problem is, many people don't believe that Luongo is in that elite category anymore. His numbers this year were pretty bad, and that was with the best team in the league in front of him. He has collapsed in the playoffs every year for the past 3 years (excluding this year when Schneider stole the #1 job). He's not getting any younger either. Even if a team is still very interested after considering all that, they have to realize that if they make the trade, they're locked in in a big way. These facts are enough to make any GM pause.

Can the trade be done? Probably. Will we get a good return for Luongo? No.

Share this post


Link to post
Share on other sites

I never understood people hating Luongo's contract, 5.33 mil cap hit is a steal.

Either way, I still want Lu to stay, and to trade Schneider instead.

Share this post


Link to post
Share on other sites

I think the media likes to troll canucks fans. I never had a thought about luongo's teade value going down because of the contrsct until the media mentioned it.

When really there are teams out there desperate for a goalie when we have 2!! A world talent at wayyy less cap hit then it should be. And a rookie looking to make a dent in our cap.

Share this post


Link to post
Share on other sites

If people still believe that Luongo is an elite goalie in this league, then a $5.33 mil cap hit is not only manageable, but attractive. The problem is, many people don't believe that Luongo is in that elite category anymore. His numbers this year were pretty bad, and that was with the best team in the league in front of him. He has collapsed in the playoffs every year for the past 3 years (excluding this year when Schneider stole the #1 job). He's not getting any younger either. Even if a team is still very interested after considering all that, they have to realize that if they make the trade, they're locked in in a big way. These facts are enough to make any GM pause.

Can the trade be done? Probably. Will we get a good return for Luongo? No.

Share this post


Link to post
Share on other sites

It wasn't the cap hit I was worried about. It was more the length. But after reading through the post, it looks like even the length wouldn't be too much of an issue because it's a front-loaded contract.

Share this post


Link to post
Share on other sites

Man, I can think up a lot of people who should read this article and get educated.

Share this post


Link to post
Share on other sites

Oh come on guys . Once again Luongo's thread . Why We r wasting our time for cheap topic every single day .

HE IS NOT GOING ANYWHERE . And we know that very well . Then why Guys ?

Please don't post Stupid Thread about luongo's trade .

Share this post


Link to post
Share on other sites

  • Recently Browsing   0 members

    No registered users viewing this page.