Misjudging Player Markets Cost The Oilers Dearly

Both Tyler at mc79hockey and I spent significant column space on the goaltending market in 2009.   There was an obvious glut of goalies and a shortage of teams looking for help in net.  It was obvious to those that had a bit of common sense that goaltender salaries were headed south prior to the opening of free agency.  The Oilers chose to chase down the Russian goalie and the rest is history.

That the Oilers completely and terribly misunderstood the goaltending market during the summer of 2009 is not a question.  That they signed Nikolai Khabibulin to one of the worst contracts of the post-lockout era is not a question.  What is in question, however, is how badly that decision will cost the Oilers, both in terms of goaltending performance and in terms of real dollars over the life of Khabibulin's contract?

While the Oilers giddily signed Khabibulin to a four-year, $15 million over-35 contract, the market for goaltenders in the NHL was imploding.  The following goaltenders signed UFA contracts during the summer of 2009.

Goalie Cap Hit Term 35+
Craig Anderson $1,812,500 2
Martin Biron $1,400,000 1
Ty Conklin $1,300,000 2
Nikolai Khabibulin $3,750,000 4 Y
Jason LaBarbera $1,000,000 2
Antero Niittymaki $600,000 1
Dwayne Roloson $2,500,000 2 Y

 

The off-season of 2010 saw more of the same.  The following goaltenders have signed UFA contracts since July 1st.

Goalie Cap Hit Term 35+
Martin Biron $875,000 2
Dan Ellis $1,500,000 2
Chris Mason $1,850,000 2
Antti Niemi $2,000,000 1
Antero Niittymaki $2,000,000 2
Marty Turco $1,300,000 1

 

Over the last two years, these very serviceable goaltenders (except for Khabibulin) have been signed to an average deal of $1,511,458 per year for an average term of 1.66 years.  The median contract was $1,450,000 over two years.  Essentially, the Oilers overpaid in salary by greater than a factor of two and overpaid in term by greater than a factor of two.  No other team gave out a contract of longer than two years.  The Oilers gave Khabibulin a four-year contract.  No other team gave a contract with a cap hit larger than $2,500,000.  The Oilers gave Khabibulin a contract with a $3,750,000 cap hit.

It didn't take a market timing expert to see this coming - there are a finite number of jobs available in the NHL (60) and an easily calculable number of goaltenders under contract.  The difference is the number of roster spots available.  Compare that number to the number of competent free agent goalies and anyone can immediately tell if it's a buyer's market or a seller's market.  So when, prior to 2009 free agency, I said:

In short, Tambellini should be able to spend less in goal than the Oilers have spent at any point since the lockout, and the Oilers should start the season with their strongest situation in net in this decade.

I wasn't guessing.  I looked at the variables in the market and made the obvious connection. The Oilers did not.

The reason I bring this up is a conversation I had recently with Tyler about the value of goaltenders in the coming off-season.  While the Oilers are still locked into the Khabibulin deal, for the third season in a row, there's a buyer's market of goaltenders in Unrestricted Free Agency.

A brief look at the goaltenders available in the coming off-season shows an even more oversaturated market.  Definite number one goaltenders J.S. Giguere, Antti Niemi, Craig Anderson, Ilya Bryzgalov, Mike Smith, Tomas Vokoun, Jimmy Howard, and Josh Harding are all unrestricted free agents.  Platoon goaltenders Erik Ersberg, Peter Budaj, Marty Turco, Dwayne Roloson, and Ty Conklin are also all unrestricted free agents.

Exactly four teams will be in the market for a definite number one goaltender: Colorado, Detroit, Philadelphia, and Phoenix.  Three more teams will be in the market for a platoon goaltender or a veteran backup to a young goaltender:  Florida, Long Island, and Tampa.  Eight number one goaltenders are available for four teams to bid on.  Five platoon goaltenders are available for three teams to sign.  No matter how you slice it, there will be at least one, and likely two or three, definite number one goaltender available in free agency for a price somewhere in the range of $1,500,000 for a year, and at most, two.

Why does any of this matter?  Winning teams are manufactured through winning incremental deals against the cap versus their competitors.  Holding onto a goalie at two-and-a-half times the average salary of his peers and two-and-a-half times the average term of  his peers is not winning any incremental battle.  In fact, by locking themselves into the Khabibulin contract they've guaranteed that the Oilers will not be competing in the goaltending bidding markets any time soon, forcing pricing pressures even lower.  They've also robbed themselves of between $2,250,000 and $1,750,000 in cap space, space that will be in short supply in two years.

Tyler made a comment to me that Khabibulin is perhaps overpaid by $10 million for the duration of his contract.  Given that he's over 35 years old and injury prone, and compared to his peers, Tyler might still be overvaluing Khabibulin.

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