Yesterday, Auston Matthews signed a five-year contract extension for a little over $11.5 million per season with the Toronto Maple Leafs. He would have been a restricted free agent this summer so this deal wraps up one of the biggest tasks on Leafs’ GM Kyle Dubas’ to-do list. On the surface, this might seem like business as usual. But looking a little deeper, this contract introduces new dynamics to the NHL free agency market.
These changes could have immediate impacts on the upcoming contracts of several players including the Lightning’s Brayden Point as well as Mikko Rantanen in Colorado, Patrik Laine in Winnipeg, and Mitch Marner in Toronto. How these players and their agents choose to incorporate the Matthews deal into their negotiations will be key in determining the future of restricted free agency for the league’s best players.
The current environment
Prior to this contract, established NHL players coming off their entry level contract (ELC) typically signed one of two types of deals. Good players signed for between five and seven years for between five and seven million dollars. The top tier players (Connor McDavid, Jack Eichel, Leon Draisaitl) signed max term eight year deals for high average annual values (AAV).
These deals would typically carry through the players’ first few years of unrestricted free agency, which results in the league’s best players not being on the open market until their late twenties. While high-end players are still valuable at that stage of their careers, the timing ensures that the contracts they sign at that point will include their declining years.
This means that teams are competing to spend max money for players heading toward the back end of their careers. They’ll get good value on the first few years of those deals. But all bets are off even for great players as they get into their mid thirties.
What we can learn from baseball
In some ways, this is a fine system. But it isn’t optimal. Under these conditions, teams will get good value from restricted free agents and then pay a premium for unrestricted free agents. Conversely, players will make less than their worth in many cases as restricted free agents and then cash in when they get to the open market.
If we all agree this is how things will work, then ultimately, everyone likely gets their fair worth in the end. But the problem is that we won’t always agree this is how things will work. All we have to do is look at baseball to know this is true.
Major League Baseball has a somewhat similar system of restricted free agency that allows teams to exclusively negotiate with their young players through their mid-twenties before the players reach unrestricted free agency. And as baseball teams have gotten smarter, they’ve optimized the way they spend money. That means building around players with team control (restricted free agents) and spending sparingly in the open free agent market.
This trend has become particularly pronounced over the last two seasons and has grown into a topic that will likely cause a labor stoppage when the collective bargaining agreement (CBA) expires. This winter, three of the top four free agents remain unsigned just weeks before teams report for spring training. And good players are forced to take minor league contracts or are left without contracts at all because teams feel their money is better spent in other ways.
This type of thinking will inevitably come to hockey. And possibly with even more vigor than baseball. Hockey has exactly the sort of restricted free agency and incentives to take advantage of cost controlled young players. And exacerbating the issue is the hard salary cap that doesn’t exist in baseball and tighter aging curves. Put that all together, and we can be confident that at some point in the near future, the thrift that has frozen MLB free agency will come the NHL.
So what to do?
This brings us back to the Auston Matthews contract. Matthews set a couple of important precedents that are potential solutions to the looming specter of the misguided incentives of the current free agency structure. The first is that he was able to get both shorter term on his contract and a high AAV.
This accomplishes several things. First, it ensures that he’ll get paid to be a great player while he’s a great player. Instead of having his earnings suppressed through his early twenties, he’ll be getting paid like one of the best players in the league, which he is.
The second thing this accomplishes is that it gets him to unrestricted free agency sooner. Instead of being on the market at 28 or 29, he’ll be there just before he turns 27. That removes some of the risk for teams looking to sign him when that time comes. He’ll still have at least four years of prime hockey left and even an eight year deal end before he turns 35. While this isn’t a guaranteed defense against the sorts of issues we see in baseball right now, it makes it more likely that he’ll be able to get a second big contract even as teams get smarter.
Better for the players, better for the game
Undeniably, this is a good deal for Matthews. He gets to free agency faster. And when he does, the cap will be higher meaning that he’ll earn more money on his next contract. Cap inflation alone is a reason for players to want shorter contracts. A high AAV in year one of an eight year deal could end up looking like a lot less money by year eight.
For example, a new television contract could add a huge bump to the sport’s revenue, which then determines the salary cap. Any player who signed their deal before a change like that could find themselves underpaid compared to their peers until the deal expires and they can negotiate a new one under the newly increased cap.
But this type of deal is also better for the game. Players getting paid for their value while they’re at their peak is a much healthier system than one that delays that payment and then overcompensates veteran players. And as we see in baseball, teams will eventually optimize their spending based on the incentives of the system resulting in labor and fan unrest.
Independent of the economic incentives for teams, more player movement is fun. Auston Matthews as an unrestricted free agent at age 26 is going to be a huge story. Players having long careers with one team is great and teams should get some advantages to re-sign their players to help maintain competitive balance. But the current system is too unbalanced in that direction.
Imagine a certain team on a metropolitan-area island vengefully trying to recruit Matthews when he hits the market. We miss those kinds of stories when players returning to their team a foregone conclusion.
In the current environment, we almost never see star players get to free agency. More deals like Matthews’ would mean more chances too see a star move in their prime. And taking it one step further, shorter contracts would mean more expiring contracts and therefore, more possibilities for trades if teams realize they won’t be able to re-sign a player headed for free agency.
Wrap-up
If the NHL continues down the same path MLB followed, they will end up in the same place: with a broken system that disincentivizes free agent spending thereby distorting the market for players and upsetting fans. The only way to fix this problem permanently is through changes to the CBA. But more creative contracts like the one Matthews signed are a step in the right direction.
Matthews has maximized his earning potential by ensuring he’ll hit the open market as soon as possible and with a chance to increase his AAV by a large margin depending on how much the cap has increased by then. He’s also decreased the degree to which teams will be able to use aging curves against him when it comes time to negotiate that deal.
In concert with that, the league gets a great story. Will he re-sign? Will he not? Will the Leafs be able to fit him under the cap? If the Leafs somehow end up being bad during the 2023-24 season and aren’t sure they’ll be able to re-sign him, would they consider trading him? These stories are all years away but more shorter contracts for stars would mean we get them more frequently.
The only entity that doesn’t get exactly what it wants here is the Leafs. For them, a max term would be a better option because it removes the risk of losing Matthews after five years and it locks him in at a cost that will get less expensive as the contract progresses and the cap increases. But the amount the Leafs give here is less than the gains for the sport.
In a few years, we might look back on this as just a blip. Teams might return to the way they did business before this deal and march blindly into the same swamp currently filling baseball’s boots with mud. But we might also look back on this as the first step toward a new approach by the league’s best players. One that improves not only their own financial position, but the position of the league as a whole.
