The Pääjärvi Contract

As I'm sure everyone reading this article is aware, the Oilers have come to terms on a contract with Magnus Pääjärvi-Svensson.  Thanks to capgeek.com, we now also know the details of the contract.  Unsurprisingly, Pääjärvi received the maximum base salary of $900,000 per season (which includes a $90,000 signing bonus each year).  What's a little bit more surprising, at least to me, is that Pääjärvi didn't get the maximum amount of "Group A" bonuses.  The maximum he'd be allowed to receive in Group A bonuses is $850,000; he actually received $625,000.  After the jump, we'll explore whether how that number fits with Pääjärvi's draft number, speculate a bit on the negotiations and look for some patterns in some of the contracts given out to medium-high first round picks over the last three seasons.

In order to compare Pääjärvi's contract with other players, I've collected the contracts given out to all of the players selected anywhere from 5th to 15th overall between 2007 and 2009.  One thing that makes a salary comparison difficult is that the maximum salary over those years wasn't perfectly consistent.  In 2007 and 2008, the maximum base salary allowed was $875,000, while in 2009, the maximum base salary was $900,000.  In order to normalize for that, I've reduced the salary and cap number of each player drafted in 2009 by $25,000.  The chart is sorted by salary and then by cap number:

 

Paajarvi_contract_medium

The highlighted players are the players who rank the lowest on the chart for their draft number, i.e. the lowest-salaried 5th overall pick, the lowest-salaried 6th overall pick etc.  Six players are highlighted from the 2007 draft and five are highlighted from 2008.  You'll also notice that all of the nine players signed from 2009 received the maximum base salary available, whereas four players from 2007 and three players from 2008 received something less than that.  This suggests two things to me: agents are successfully negotiating better contracts for their players as time goes on and the 2009 draft was a superior draft class to either 2007 or 2008 by a fair margin.  Just going by the contracts, it's probably a good bet that the class of 2009 (or at least the first fifteen guys) will outperform those two previous seasons. 

In terms of positional distribution, 19 players (and 17 of the signed players) are forwards while 14 (13 signed) are defenders.  The forwards average a higher cap number ($1,591,323 compared to $1,472,756) but the forwards also had an average draft position of 9.2 compared to 10.8 for the defensemen which is a pretty significant gap.  Further, of the seven players who received less than the maximum base salary, six were forwards.  It doesn't seem to me that there is a significant difference in compensation based on position.  One guy I was surprised not to see on that list of non-max salaries was Alex Plante, though the list itself is really strange.  Jakub Voracek and Cody Hodgson?  But not Alex Plante?  Huh.  That said, even though Plante's getting the maximum base salary, his cap number is second to last in the group.  That's probably a bit of a tell that Plante, at the time he signed the deal, was somewhat behind the players drafted ahead of him.

Another significant factor in these contract negotiations is likely whether or not the player will be able to play in the NHL.  Sam Gagner, for example, has the lowest cap number of any sixth overall pick but he also got to play in the NHL immediately after being drafted (that's the last column).  This of course means that his UFA clock starts ticking one or two years earlier than his peers and that he's making NHL money right away.  As an agent, it would be tempting to advise a client to take the maximum salary - or even a bit less - but forego any bonuses if it meant an NHL spot at an earlier age.  Dean Lombardi, the GM of the L.A. Kings, recently commented on this issue... in a way that makes no sense at all.  Talking about Brayden Schenn he said, "To the kid’s credit though, one thing that bodes well for the kid, in fairness to him, he adjusted his contract. As the fifth pick, he could have demanded X, Y and Z on his cap number, but he recognized that he wanted to play here, so he kept his cap number down to ensure that he’s not left off the team because of his cap number."  Uh... Nope!  Schenn is easily the highest-paid 5th overall pick since the lockout so... that's weird.

Anyroad, Pääjärvi doesn't seem to have limited his short-term earning potential to make himself more attractive from a team-building perspective.  It looks to me like the Oilers probably started negotiating hoping for a contract in that 1.3M group while Pääjärvi's agent likely shot for the 1.725M group, i.e. the maximum Group A bonuses.  They then basically split the difference.  It's more complicated than that of course (what the bonuses are for and where the bonus thresholds get set is obviously pretty important and is likely where some concessions were made) but that looks to me to be the basic gist.  The contract looks fair to me with no one drafted after Pääjärvi earning more than him and only Jared Cowen (9th overall) earning less which might be a slight point in favour of the agent.  On the other hand, Paajarvi got fewer bonuses in his contract than did Cody Hodgson, the 10th overall pick from 2008.  Overall, without having knowledge of the specific bonuses, it's close enough to fair value that both the agent and the team can feel pretty good at what they've negotiated. 

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