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    Home / Opinion / Is Alex Ovechkin’s Contract A Good Deal?

    Is Alex Ovechkin’s Contract A Good Deal?

    By RMNB

     0 Comment

    February 10, 2011 11:04 pm

    Alex Ovechkin sits against the boards during warm-ups.

    Photo credit: Greg Fiume

    Signing Alexander Semin to a one-year extension was a good move. It limits the Capitals exposure to the potential downside if he doesn’t preform to expectations and lets them remain flexible enough to trade Semin if they choose. And while we are on the subject of Alex contracts, do you think there will come a time where Washington will feel constrained by Ovechkin’s monster deal?

    I think we can all agree that paying $9-10 million for a player who will score less than 30 goals puts a cramp in the salary cap. In fact, it is somewhat easy to estimate how much of a hindrance it might become. Using Tom Awad’s Goals Versus Threshold (GVT) metric, we can see when the Great 8’s contract will become the Great Burden. GVT measures a skaters contribution on both the offensive and defensive side of the puck, as well as the shootout. The higher the number, the better that skater is over what a replacement level player would produce.

    In an effort to reduce the amount of “Ovechkin will never not be good” comments, I am going to have him follow the same career path as Wayne Gretzky. When calculating Ovechkin’s value, he will depreciate at the rate Gretzky did at the same age for the life of his contract. Note that we don’t know for sure what Ovechkin’s 2011 GVT will be, so I am going to use Gretzky’s regression for that as well. I think the regression model used will be more generous than what will actually happen, adding some error in Ovechkin’s favor. Wins are determined by GVT, with six goals above threshold equal to one victory. We will also assume wins get more expensive every season and that the cost of them will increase 4% each year. When we say “cost,” we are asking “what would it cost in the open market to replace this type of production.” Salary info from CapGeek.

    Season Age Salary GVT Wins $perWin Running Cost Running Salary Delta
    2010 24 $9.00 30.1 5.0 $2.00 $10.03 $9.00 $1.03
    2011 25 $9.00 27.2 4.5 $2.08 $19.46 $18.00 $1.46
    2012 26 $9.00 29.2 4.9 $2.16 $29.98 $27.00 $2.98
    2013 27 $9.00 21.9 3.6 $2.25 $38.19 $36.00 $2.19
    2014 28 $9.00 22.3 3.7 $2.34 $46.87 $45.00 $1.87
    2015 29 $10.00 17.6 2.9 $2.43 $53.99 $55.00 $(1.01)
    2016 30 $10.00 22.8 3.8 $2.53 $63.60 $65.00 $(1.40)
    2017 31 $10.00 13.3 2.2 $2.63 $69.43 $75.00 $(5.57)
    2018 32 $10.00 6.3 1.1 $2.74 $72.32 $85.00 $(12.68)
    2019 33 $10.00 15.2 2.5 $2.85 $79.53 $95.00 $(15.47)
    2020 34 $10.00 6.2 1.0 $2.96 $82.62 $105.00 $(22.38)
    2021 35 $10.00 14.0 2.3 $3.08 $89.82 $115.00 $(25.18)

    First, let me say that from a business perspective, it is a great deal. If I am completely right with this projection (obviously I am not) then the merchandise revenue, ticket sales and nachos sold will more than make up for a $25 million deficit. However, after year 2014 or 2015 from a hockey production perspective, we should start to see the Caps paying more than what the on-ice value they’re getting is worth. When you are trying to win a Cup in the salary cap era, that is not good.

    Alex Ovechkin, Alex Semin, Contracts, Salary Cap
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