Is Alex Ovechkin’s Contract A Good Deal?

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.

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  • Tattooed Enigma

    I find it very funny that Ovi has one bad year and everyone is questioning him. Now if he was dogging it like Alex Kovalev or Alexi Yashin do every year then yea I’d be questioning it as well, but thats not the fact. Ovi will score his goals and get his points, and he does not like to lose. Also keep in my mind that Backstrom has a similar contract and that Chris Pronger, Mike Richards, Jeff Carter, Roberto Loungo, Marian Hossa, and Ilya Kovalchuk all have long multi year deals and Jack Johnson just signed a 7 year contract with the Kings. These multi year deals are becoming the norm and its something we should get used to. I personally hate these huge money contracts, but thats just me. Just think of it like this, we have Ovi and Backstrom for 9 more seasons, and Green, Brooks, and soon Schultz, MoJo, Carlson, and Alzner will all be getting almost similar contracts.

  • greg

    Next article: Is Ovie an alien?

    Look, his physicality and presence makes him worth every cent. He will have years where he scores 65, years when he scores 30. The average balances out. Imagine having to play against him on a semi-regular basis, like the South East teams do. What a nightmare. Giving them bad dreams for the next 10 years is more than worth it.

  • Avtopilot

    There is one thing missing. The competition.
    Huge longterm contracts are there not for fun, but to book the star players now for the next 3-4 years.

    Is it possible to compare Ovi’s contract to some other huge contracts (like Kovy and others)?

  • Neil – RMNB

    @Tattooed Enigma

    “I find it very funny that Ovi has one bad year and everyone is questioning him.”

    Who is questioning him? I made an argument that at some point, perhaps 2014-15 (4 – 5years from NOW) his contract may start to get cumbersome. In fact I am one of the FEW that have chalked up this season to BAD LUCK and not “talent gone wrong.”

    “Also keep in my mind that Backstrom has a similar contract and that Chris Pronger, Mike Richards, Jeff Carter, Roberto Loungo, Marian Hossa, and Ilya Kovalchuk all have long multi year deals and Jack Johnson just signed a 7 year contract with the Kings.”

    OK. I also only eat chocolate pudding on Friday’s. What does this have to do with the price of wheat in Kansas? Let’s stick to OVECHKIN’S contract and what it will cost the Caps down the road.

    “These multi year deals are becoming the norm and its something we should get used to.”

    Why? A bad deal is a bad deal. In the salary cap era, bad deals WILL kill a team.

    “Green, Brooks, and soon Schultz, MoJo, Carlson, and Alzner will all be getting almost similar contracts.”

    Did the cap go to $100 trillion?

    @greg

    “He will have years where he scores 65, years when he scores 30.”

    Years – plural – he will score 65? Skaters who have had multiple years of 65 goals: Gretzky (4), Lemieux (4), Esposito (3), Brett Hull (3), Bossy (2) & Kurri (2) and none since 1996. Odds are against.

    “The average balances out.”

    How so?

    @Avtopilot

    ‘Huge longterm contracts are there not for fun, but to book the star players now for the next 3-4 years.”

    Agree, but what happens after that? You pay for mediocrity,and that’s a cap buster.

    “Is it possible to compare Ovi’s contract to some other huge contracts (like Kovy and others)?”

    Of course. Here are some resources to get you started:
    Salary data is here: Capgeek
    GVT data is here: GVT at Behind the Net
    Hockey database is here: Hockey-Reference

    Let us know what you find.

  • Avtopilot

    @Neil

    what happens after that you know – It’s Kovy’s story.

    But they can count the money and this good pension was a part of the deal.
    With a salary cap you can’t get 20M per year for 5 years, but instead you bargain for a 10-year contract 10M per year.

    So, this burden is the contract with a hidden part, that is over the salary cap (9-10M). The only reason to sign it – competition.

  • http://redlinestation.blogspot.com RAL

    Look guys, think of it this way: Ovechkin has the highest cap hit in the league. He’s not the best player in the league anymore, and, exiting his offensive prime–offensive prime occurs typically around ages 23-25–it’s doubtful he’ll be better than he is now, at least offensively.

    It’s perfectly conceivable that his contract can become a downer in the future.

  • Bushwood

    “Running Cost” should be labeled “Running Value”. I know you say that’s how much it would “cost” to replace those wins in the open market – but that’s not really true, it’s a totally theoretical construct, and also not what we’re after. The entire point of the article to find his value. Anyway, totally minor nitpicking point, but it’s the most important (or second most) of the table, and it’s a little misleading if you just glance at it. Good article.

  • AlexE

    I might agree with the findings, but completely disagree with the thought of the contract being a bad deal.
    Regardless of the ‘bad deal’ he is in terms of the scoring and production in the long term, it makes absolutely good deal for the caps.
    Might I remind you that OV is the Caps.

    All of you fans take it for granted that the arena is full and that the team is doing well-that would not have been the same without OV.

    We complain that we’re not on the top of the conference, and complain about being in the middle whereas that in itself is a good thing. Remember that time we were at the bottom of the barrel?

    OV completely changed the face of the Caps, and is IMHO the most tied to an organization player you can find in the modern era.

    OV is a great leader, and great representative of the franchise. I would not go to a caps game if not for OV.

    OV preoccupies all the defenseman and all the attention when he is on the ice and even if he had 20 goals a season, he would be very useful especially with the amount of time he plays.

    He is an irreplaceable brand and that means alot, even when it comes to overspending a few mil(if it gets to that in the worst case scenario).