Henrik Lundqvist and the tradeoffs of a long-term contract

Jerome Miron-USA TODAY Sports

A look at what Henrik Lundqvist's deal means for the Rangers now and in the future.

The Rangers announced Wednesday that they signed Henrik Lundqvist to a seven-year deal that pays $8.5 million per year.

This kind of big-money, long-term deal is pretty standard fare for a premium player who reaches eligibility for unrestricted free agency. Let's use this deal as a chance to talk about the value and trade-offs of a premium free agent.

The aging curve

The cost is rarely the primary issue for a deal like this. The real issue is the term.

Players like Shea Weber, Zach Parise, Ryan Suter and Lundqvist are easily worth their $7.5 million to $8.5 million cap hits right now, and probably quite a bit more. But NHL players' peaks fall on average at around 25-26 years old, and these deals continue to count $7.5-$8.5 million against the cap until the players are 39-40.

Nobody knows the future, of course, but their average expected value at that age has to be a lot less than $7 million.

Yes, the cap will go up between now and then. And yes, a handful of goalies have hung on that long -- but just a handful. There are a lot more who didn't -- including Hall of Famers like Patrick Roy, Grant Fuhr, Billy Smith, Ed Giacomin and Bernie Parent -- and as Chris Boyle notes, Lundqvist's reliance on reflexes might not bode well for him.

We expect the cap to go up, but if he struggles in his late 30s, the cap can't possibly go up enough to make $8.5 million reasonable pay for a backup.

Lundqvist is a great player, and I don't want to minimize that. But it's a lot easier to see how he could be worth $6 million less than his cap hit in the last year of the deal than $6 million more, and on average, I think we have to assume he'll be significantly overpaid.

Are they stuck with him?

At this point, people often come up with reasons why the tail of the deal won't hurt the team. Maybe he'll retire. Maybe he'll get traded. Maybe he'll go on LTIR.

The problem is that under the new CBA, it's a lot harder to plan on the deal coming off the books. The limits on contract structure mean that these big-money deals (Lundqvist, Perry, Getzlaf, Giroux) all have salaries of at least $5 million in their final year.

So whereas it might be fair to guess that Marian Hossa won't stick around for all four years when he's paid $1 million per year at the end of his contract, under the new CBA, players have more incentive to show up for camp and collect their paychecks. And the team no longer has the option of hiding those expenses by sending him to the AHL.

Trading the player seems even more far-fetched. We're talking about what happens in the event that Lundqvist doesn't age unusually well. If he's in decline and clearly not worth his cap hit, who's going to want to trade for him?

As for LTIR, well, that's assuming there's going to be a career-ending injury. LTIR does mitigate that worst-case-scenario risk. But most careers end with aging or minor injuries leaving a player a step slower but medically cleared to play. In that case, LTIR doesn't help.

The most likely answer by far is that if things go south, it's the Rangers' problem.

So you hate this deal?

I didn't say that. It's probably going to be bad for the Rangers in the last couple of years of the deal, but it's good for them right now.

This is a pretty standard situation for these big-money, long-term deals to UFA-eligible players. Some are better than others, but in every case, two things are true:

  • The contract covers the downslope of the player's career, so we expect them to be better at the start than at the end.
  • The cap hit is the same in every year of the deal.

As a result, it's almost necessarily true that signings that run through a player's late 30s help the current team more than future years. If the cap shoots up faster than the player declines, that doesn't have to be true, but the aging curve through a player's 30s is usually quite a bit steeper than the league's revenue growth.

Some deals might be better than others, but it's generally going to be true that the team has borrowed from its future resources to improve in the present. The key question, then, is whether that makes sense. For the Rangers, I think it does.

They are legitimately in contention right now. They have a reasonable mix of young and old players, but they don't have the kind of young core or prospect pipeline that suggests they're more likely than most teams to be a contender in five years -- there's nobody who's a clear bet to improve as fast as Rick Nash and Brad Richards are likely to decline.

When they traded for Rick Nash, they steered the franchise (yet again) in the direction of a near-term run, and at this point I think their best bet is to continue down that path and hope it pays off.

Misaligned incentives

The other reason to sign this deal is that the GM responsible, in this case Glen Sather, won't necessarily be there to bear the brunt of the burden it causes in the last few years.

It's always troubled me how this kind of misaligned incentive between coach, GM and franchise can lead to bad decisions -- it's part of how certain big-market teams end up in an unending and unsustainable win-now mode of operation.

When a team is struggling, often the best thing to do is to trade current pieces for future assets, picks or young players who can help them build a contender in a few years. But if that means getting even worse in the near term and likely costs the GM his job, how easy is it for him to make that move?

Many coaches are known for giving young players a short leash. Who can blame them when their job depends on the team performing over a timeline that's much shorter than the player's development curve?

Most owners are successful businessmen who likely understand the role of incentives in driving behavior. I've always wondered what they do to combat these issues, and how successful it is. I'd love to hear about owners demanding regularly updated five-year projections or setting up an adversarial system where there's always someone responsible for arguing to defer benefits, or even just trying to convince the GM that his job depends more on having a process that works in the long run than on his results in the near term.

In the meantime, I wish the Rangers good luck in their quest for the endless present.

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