Category: Player Valuation

Protecting the Blue Line and Driving Break-outs: Repeatability and Impact of Exits & Entries Against

Posted in Defensive Value, Hockey Strategy, Player ValuationTagged , , , , , 3 Comments

This article is being co-posted on NHLNumbers as well as on my own site, OriginalSixAnalytics.com. Find me @michael_zsolt on twitter. If you are able, please provide some support to public data providers Corey Sznajder (@ShutDownLine), Corsica and Puckalytics

Every team in the NHL is constantly striving to find market inefficiencies to capitalize on towards the goal of creating value and ultimately winning games. Whether done by finding undervalued assets or developing a set of sustained competitive advantages – every team should always have these concepts in mind.

The analytics community has widely acknowledged we are not as good at evaluating defensemen as we are at evaluating forwards – in part due to having fewer effective metrics available. As a result, a number of people have spent time trying to expand our knowledge in this area – as any new development would be sure to present a strong market opportunity to capitalize on.

A particular focus has been on applying Eric Tulsky’s historical zone entry and exit analysis to defensive evaluation. Given controlled entries into the offensive zone (carry-ins) have been proven to generate more shots than uncontrolled entries (dump-ins) – intuitively, if a defender can prevent controlled zone entries against his team, that should reduce shot attempts against.

There has been a lot of great work done on this subject, including articles by the likes of Sean Tierney, Dom Luszczyszyn, JenLC and more. Dim Filipovic at Sportnet has written a number of times on the value of tracking the percentage of entries against that are controlled, as well as the number of controlled zone exits that a defender creates. This type of work has broken ground recently in evaluating defensemen. However, in an article late last season Dimitri summarizes the current gaps in the analysis as well:

“It’s important to retain perspective on all of these figures. At this point they’re much more descriptive than predictive, in the sense they’re telling us how a certain player did in the games he’s already played, but not necessarily helping us forecast how he’ll do in the future. There’s also the fact that most players only have [only] ~10 games worth of data to their name, which leaves plenty of room for inexplicable swings in either direction.”

So far, the best evidence to support the repeatability of these metrics is on the zone entries against side – where Eric Tulsky used a full season of tracked data for the Philadelphia Flyers’ defensemen to test this. His results are here. While this analysis definitely hints at a relationship, I suspect Eric himself would say a sample of only six defensemen should be seen only as a ‘first step’ that can built upon in the future.

As such, my goal in this article is to test, replicate and expand Tulsky’s work, as well as to hopefully broaden it to some uncharted territory. I also hope to encourage others to recognize the amazing data being made available by Corey Sznajder’s tracking efforts – which you can access here and here. Hopefully others will decide to support Corey by purchasing his data, and do further work to expand our knowledge in these areas as well.

Definitions

Let’s start with some important definitions:

  • Zone Entry Attempt Against (ZEA) – Any time an opponent is attempting to bring the puck into your defensive zone; it is registered against the player (e.g. defenseman) who is most closely defending the play across the blue-line
  • Controlled ZEA – When the opponent gains access to your defensive zone by successfully carrying-in or passing-in the puck, retaining possession
  • ‘Break up’, or ‘Failed Entry Against’ – When the defender is able to prevent the entry from gaining access to the zone, turning over possession
  • Zone Exit Attempt – Any time a skater is attempting to move the puck across his own blue line, whether carried, passed or dumped/cleared out
  • Zone Exit with Control – Any time a skater successfully carries the puck out or passes it out of his own zone, retaining possession

A simple way to think about preventing controlled ZEA’s is that it is the act of ‘Protecting the Blue-line’. Likewise, individual controlled zone exits represent players who are strong puck-movers, or who excel at ‘Driving Break-outs’.

Key Questions

With respect to preventing controlled ZEA, being able to break-up plays, and driving controlled zone exits (whether as a % of total, or per 60 minutes of play), my key questions are as follows:

  • Predictive – Are these repeatable skills? Is past performance a reliable indicator of future performance?
  • Relationship with Goals – Do these metrics drive improvement in Goals For Differential (GF%), by either increasing goals for or decreasing goals against?
    • If not, do these metrics at least help to drive the other inputs that translate into GF%? (I.e. xGF%, Shots, Corsi-For%, etc.)

“Protecting the Blue Line” – Zone Entry Defense

Let’s start with protecting the blue line: preventing controlled entries against, or breaking up entry attempts. To be clear, a lower percentage is better – the lower the proportion of controlled entries against a defenseman, the fewer goals and shots against you would expect. (In the interest of time, I have focused more so on ZEA, rather than break up %.)

Repeatability

To test repeatability I have done a ‘split-half’ test to see how well the 1st half of a season of data predicts the second half. All data is from Corey’s 2013-2014 tracking – the only full season of publicly-available tracked entry data. I have only included defensemen with over 150 entries-against in each half, for a total sample of N=148. (Note – the mid-season mark wasn’t technically the 41st game as Corey only captured zone entry defense for the final 60-65 games).

1-protecting-blue-line-repeatabilityAs you can see above, mitigating controlled entries against % is a highly repeatable skill with a relationship (R^2) of 0.37 between first half and second half results. I think this is a very exciting finding, as it shows the recent work of Dimitri, Sean and others is spot on – and that past performance should be predictive of future performance.

Relationship with goals

The next question is ‘does this improve GF%’? Intuitively I think we all expect it would, but it is still important to check. To evaluate this I tested the relationship (R^2) between controlled entry against (% and per-60) and a wide range of metrics: goal differential, goal and shot against rates, and ‘rel’ stats – i.e. stats that adjust goal and shot rates to be more focused on individual, rather than team-level, play.

2-zea-v-goals-table-incld-rel

As you can see above, there are some interesting results. First, many on-ice stats are significantly impacted by these metrics. In particular, ZEA with control (% and per 60) show a meaningful relationship with xGF%, CF% and CA/60, which are all at an R^2 around or above 20%.

However, it is interesting to note that when you focus on individual impact (i.e. rel stats), the relationship is considerably weaker than with unadjusted on-ice stats, which are more influenced by teammates. As such, while preventing controlled ZEA is repeatable, and does meaningfully impact goals and shot rates – there may also be team/system impacts that are difficult to separate out from the individual contribution.

Last, let’s ‘zoom in’ one on of the cells above: % Controlled Entry Against vs xGF%. the chart below illustrates the direct relationship between reducing controlled entries against and improving expected goals.

3-zea-v-goals

 “Driving Break-outs” – Zone Exits with Control

Now, let’s look at the zone exit side, or ‘Driving Break-outs’. Comparing the Exit data to ZEA, there are a couple nuances to mention: first, the data is slightly more limited in this area. Corey provides raw tracked data in 2013-2014 for all offensive zone entries and for all ZEA – which allowed me to separate it into split-half components. Unfortunately, I checked with Corey, and for the 2013-2014 zone exits the tracking was done offline and aggregated at the end. As such, there is no full season of raw data that we can use to do a repeatability test.

On the positive side, Corey has been providing the raw data for his new 2016-2017 tracking work which is well underway (maybe 10-15+ games tracked per team thus far). As such, by the end of the season, we should have another full year of data – and I will at that point confirm whether or not Controlled Zone Exits are a repeatable skill. My guess is that this will ultimately be shown to be the case, as simply from watching, certain defensemen seem to be natural puck-movers (Karlsson, Josi), and others seem to be less so (Polak).

Last, the 2013-2014 zone exit data lacked some key elements (which Corey has done well to include in the 2016-2017 work). The old data did not have a broad ‘failed’ zone exit category, nor did it show what Corey now calls ‘Transitional Plays’ – i.e. getting the puck out of the zone while surrendering possession via a clearing attempt. As such, we can’t say the proportion of the time an individual’s exit attempts were successful. However, we are still left with some very valuable data – individual Zone Exits/60 and Controlled Exits /60 – as defined above.

Relationship with goals

So – if we assume for now that Controlled Exits are a repeatable skill (and not simply randomness) – do they have a strong relationship with goal events?

4-zexits-v-goals-incl-rel

The chart above shows some very interesting findings. First, zone exits with control have a fairly meek impact on GF% and xGF% directly. This isn’t entirely surprising, as exiting your own zone with control can only get you so far towards scoring. However, there is a more relevant relationship between Controlled Exits/60 and CF% – with an R^2 of 15.5%. This shows that having a defender who is strong puck mover can definitely begin to ‘move the needle’ on winning the shot-differential battle.

Lastly, what I found most intriguing here were the Rel Stats – where the metric is adjusted for how a player’s team does with him on the ice versus off the ice (i.e. isolating individual contribution). While teammates can play a bigger role in helping a defensemen prevent controlled ZEA, Zone Exits are actually the opposite – both CF/60rel and CF%rel have a ~19% relationship (R^2) with Controlled Exits/60, stronger than CF% alone. This demonstrates that strong individual play from puck-moving defensemen can have a major CF% impact strictly from their ability to exit the zone with control.

Before wrapping up, let’s ‘zoom in’ again on the relationship between Controlled Exits/60 and CF%rel.

5-exits-60-v-cfrel

The chart above shows how a Defensemen’s individual controlled exits/60 have a meaningful impact on his ability to be a net-contributor to his team’s Corsi-For %.

Tying it all together – what these two sets of analysis tell us is that a great puck-moving defender can have a substantial impact on his team’s shot-attempts, as well as overall shot attempt differential, through his ability to Drive Break Outs. Further, a defenseman who excels at Protecting the Blue-line will have the greatest impact when surrounded by teammates and playing within a system that does so as well.  Naturally, the greatest value will be found in acquiring players who show both these skills , even if they don’t necessarily contribute significantly in terms of goals and points.

Conclusion & Practical Applications for Teams

As should now be clear, these types of new metrics for defensive evaluation are very interesting and important. They appear to be repeatable skills (at least for ZEA), and they do have a material impact on a team’s xGF% or at the very least, its CF%. While they are visible to anyone watching a defenseman closely – just like batting average or save % – only over dozens of games of tracking can we truly quantify and understand how well a player performs on each.

So – practically speaking – what should NHL or teams at other levels do about this? Gather the data! At a minimum, every team in the league should be tracking their own player’s performance on these metrics in order to better game plan, develop, and observe improvements or deficiencies over time. Further if any team ever took a systematic effort to track these on a league-wide basis (like – say – the Florida Panthers…), it would almost certainly present a clear competitive informational advantage that can help them build value over the long term. 

Such a team could have a greater understanding of the value of their own players, and also directly identify defenders around the league that may have a big impact on their team’s results, despite low goal or point totals. At this point, teams should be compelled to begin acting on this knowledge to build an ‘edge’. If not, eventually they may be doing so just to prevent themselves from falling too far behind.

 

Does Every Team Need a Troy Terry? Quantifying the Value of a ‘Shootout Specialist’

Posted in Hockey Strategy, Player Valuation, Salary Cap Management, ShootoutTagged , , , , , 2 Comments

This article is being co-posted on NHLNumbers as well as on my own site, OriginalSixAnalytics.com. Find me @michael_zsolt on twitter.

 Troy Terry. Jonathan Toews. T.J. Oshie. These names are all recognizable in part because of a heroic shootout performance they each have put on for their country. Troy Terry was the most recent, scoring 3 goals in the USA World Junior semi-final win over Russia, and ultimately being the sole scorer in the championship game, winning Team USA a gold medal over Team Canada.

Due to shootouts being the subject of many conversations over the last couple weeks, I found myself wondering: for an NHL team, what exactly is it worth to have a shootout specialist in your line up? Should every team have one? Or is it a ‘nice to have’, merely a secondary consideration when evaluating players?

So – let’s see if we can figure it out.

Quantifying the Value of a ‘Shootout Specialist’

In order to answer this, I have looked at three areas:

  1. Simulated outcomes of two league average teams in the shootout
  2. Simulated outcomes of adding a ‘Shootout Specialist’ to a league average team
  3. Estimating the resulting win probability improvement, and quantifying it in terms of standings points/contract dollar value

In order to answer these questions, I have drawn data about the league average shootout (SO) Sh% and Sv% from the last three full seasons courtesy of Hockey-Reference (2013-14, 2014-15 and 2015-16), summarized below:

  • 31% SO Sh% (% of shot that are goals)
  • 69% SO Sv% (% of shots that are saved, or (1 – 31%))

In the next two sections, I will look at a hypothetical team and their Shootout Win Probability %. Let’s call the team in question ‘Team A’, and for now we will treat both Team A and their opponents as league average.

League Average versus League Average

Given shootouts, like wins, are zero-sum (i.e. same number of wins and losses), the average winning percentage on a league-wide basis will always be 50/50. As such, as a starting point, I have created the table below summarizing the round by round probabilities to reach that 50%.

lg-avg

As you would expect, the probability pretty cleanly comes out to 50% winning probability for Team A. If we define a ‘Round Win’ as when one team scores more goals in that round than their opponent, then we get the following distribution in each round:

  • 21% chance that Team A ‘wins’
  • 57% chance of a ‘draw’
  • 21% chance that the Opponent ‘wins’ the round

Now, naturally this is pretty straightforward, as the overall outcome will inevitably be 50/50. However, if we want to know what happens when we start changing players – and having these probabilities update dynamically – it gets a bit more complicated. To address part (b) – adding a Shootout Specialist to Team A, in the next section – I created a tool that simulates the outcome of a shootout, given a particular Sh% and Sv% for each team/goalie.

After running 1000+ simulations, the probabilities here represent the average outcomes, and I am happy to provide more detail on the actual calculations if anyone is interested.

Adding a ‘Shootout Specialist’ to Team A

Now, looking at ‘regular’ SO shooters – i.e. those who have 10 or more attempts in the sample – I will define a ‘Shootout Specialist’ as the players who are in the 90th percentile of these ‘regulars’. Here are all of the players who meet this level over the past three seasons:

list

I will come back to the specific individuals, but as you can see, this cohort of players will score on roughly 52% of their shootout attempts – an impressive number.

So let’s imagine that Team A decides to go out of its way to sign or trade for a Shootout Specialist – what happens if  we add him to our prior probability table?

specialist

With the simplifying assumption that a team will put their specialist in frequently (i.e. every shootout), you can see that a ‘Shootout Specialist’, or a top 10% shooter in the league will increase his team’s likelihood to win a shootout from 50% to 58%. This increase is a far cry from a guaranteed win, but also not an insignificant jump.

Now what exactly is that worth?

In order to convert this 8% improvement to standings points, and ultimately a contract dollar value, there are a couple more steps. Given 2016-2017 is one of the first seasons where the 3-on-3 is well-understood and teams have clearly formed strategies, let’s use the first half of the 2016-2017 NHL season as our proxy for a ‘typical’ year going forward. This half has shown roughly 4 games going to shootout per team so far – giving us ~8 or so for the year.

value

So assuming teams will typically be in ~8 shootouts over the year, and that a shootout specialist will increase their probability of winning by ~8% (50% to 58%), this illustrative scenario implies a shootout specialist would contribute an additional 0.68 shootout wins per season.

Given a shootout win is worth a single standings point, adding a SO specialist to a league average team is worth approximately 0.68 standings points; or about 1/3 of a win ‘win’ per year. Using @Behindthenet’s win value estimate of $2.80M per win (against the salary cap), this skill set is worth about $950K in contract value.

Going back to our first question, of ‘if every team needs a shootout specialist?’ – I think the answer here is likely ‘no’. On a big picture basis, NHL teams should have higher priorities than finding their own Troy Terry or T.J. Oshie – especially since teams shootouts are only relevant during the regular season. However, I would also say that SO capabilities are an important secondary consideration that teams and agents should still absolutely have in mind when negotiating player contracts.

For anyone who noticed the lesser known names on our list of specialists – like Brandon Pirri and Jacob Josefson – these guys might just be examples of ‘Moneyball’ contracts that New York (previously Florida) and New Jersey keep around in no small part for their shootout capabilities. Although both are RFAs, each team has them signed at low risk, 1-year contracts worth $1.1M for each player (Source: CapFriendly). Putting aside Josefson’s injury issues – assuming these guys contribute almost anything in the typical run of play – at #3 and #4 in the league in Shootout Sh% at 56%, they each are likely paying for their cap space in Shootout goals alone.

Other Considerations

Before closing, I should add a couple last qualifiers to my analysis, above:

  • For teams that are currently well below league average in shootouts, the ‘marginal’ value of a specialist is significantly greater than I have shown above, as their ‘baseline’ starting point is much lower
  • Further, any team who has focused on acquiring one or more Specialists should naturally be playing to their own strengths – potentially employing a more conservative strategy in 3-on-3 OT in order to drag extra games into shootouts (again – creating additional value beyond the average 8 games shown above)

Some areas for analysis that others may want to explore further include the value of other ways a team could go about increasing their shootout win %. What if a team had three specialists? Or what if they found a strong shootout goaltender? While each of these merit much further research, my short answers are that:

  • Adding a goalie will naturally have a dis-proportionately large effect, because he gets to face every shot against. However, given that teams have only one starting goalie (versus 12 forward roster slots), the shootout is less likely to be a goaltending priority
  • If a league average team were to have multiple Shootout Specialists, their win percentage in my analysis above would jump even further. My current estimate is that this would reach 66% with two specialists – meaning 1.3 shootout wins over a season, 1.3 standings point, or an aggregate $1.8M in salary cap value

Conclusion

In conclusion – while being a Shootout Specialist certainly increases the value a player adds to his team, I wouldn’t say it is a characteristic that every team ‘needs’ to have in their roster. That said, the New York Rangers and New Jersey Devils may have made some stealth, intelligent signings between Pirri and Josefson, who are some of the highest-value ‘depth’ Shootout Specialists a team could add. Further, when very high caliber players like T.J. Oshie (or Troy Terry down the road) head into their contract negotiations, I certainly would recommend both teams and agents do some work to understand exactly what they should be paying for this skill.

 

Myth-busters: Disproving the Idea that Stamkos “Left Millions on the Table” to Re-sign in Tampa

Posted in Negotiation Leverage, Player Valuation, Salary Cap ManagementTagged , , , , , Leave a comment

This article is being co-posted on Maple Leaf Hot Stove as well as on my own site, OriginalSixAnalytics.com. Find me @michael_zsolt on twitter. Author’s note: for those who noticed – my apologies for the 4+ month gap between articles in this ‘Myth-busters’ series. This piece has been about 80% complete since September, though between my day job and hockey consulting work I have had limited time to write. While Stamkos’ contract negotiation is now very old news, the analysis herein remained meaningful, so I figured I would finish this up and publish regardless.

 As introduced in my article in September on the topic of the Leafs use of analytics, this piece will be the second of my ‘Mythbusters’ series. The point of this series was to write a short set of articles that use data and objective analysis to try to go against the grain on some of the narratives that came out over the summer of 2016.

In this article – my topic will be the (now ice-cold) Steven Stamkos free agency situation. Although I am posting this on Maple Leafs Hot Stove, this ‘myth’ is one that has been spread around the league at large. Rumors of Buffalo or Detroit offering Stamkos an AAV of $10-11M+ had people suggesting Steven left an annual $2M-3M+ ‘on the table’ to stay with Tampa. Stamkos was sometimes quoted as having “taken a big pay cut for the chance at a cup”.

Today, I will argue that – although those teams or Toronto may have given Stamkos ‘headline’ contract offers that are significantly above the $8.5M AAV he ultimately took in Tampa Bay – Steven actually maximized his own income by staying in Tampa. The most important factor here will be estimating the tax impact of Stamkos’ hypothetical contract offers – which we will get into shortly.

Most people give Steven credit for the facts that he is the franchise player in Tampa, he is loyal to his teammates, he is the team captain, and is on a team that has been in two consecutive conference finals – but not many give him credit for actually making just about as much money as possible as well.

So – putting aside Stamkos’ current injury and reflecting back to his time of signing – lets dig in.

Situation Recap

Last spring, I wrote two articles about Steven Stamkos: one estimated Stamkos’ market value, and the second was a long term analysis of the Leafs’ salary cap – to see if they had room for him in their ‘plan’. In these, I argued Stamkos’ was ‘worth’ anywhere from $9.5M to $10.5M of AAV for the maximum possible term, and that the Leafs should attempt to sign him for the $9.5M-$10M range.

As we all know, Stamkos ‘shocked’ everyone by re-signing with Tampa Bay days before reaching free agency (granted – he had had the chance to speak to other teams), at a contract value that had previously been released publicly – $8.5M over 8 years. But did he ‘leave money on the table’?

Adjusting Stamkos’ Contract for Tax Implications

It is easy to discount the impact of taxes – especially when it isn’t your money. Unfortunately, the fact of the matter is that no employed person in North American walks home with their ‘full’ salary in hand – the tax-man has to take his slice first. Depending on the region, someone who ‘makes’ $50K per year may take home $40K, and someone who makes $150K will keep maybe $115K – and the highest brackets are even more impactful when these numbers become millions.

Looking at fully-burdened income tax rates (including both federal and state/provincial), Ontario and Florida are at opposite ends of the spectrum – Ontario’s top tax bracket being ~53% and Florida’s being ~39% (source: http://gavingroup.ca/personal-income-tax-rates-in-nhl-cities/) . In order to illustrate this impact, the chart below shows what each team has to pay (on the y-axis) in order for Stamkos to receive a given amount of take-home pay (on the x-axis).

chart-1

This is bit of a simplified approach, so to clarify some of my assumptions:

  • Only applies the highest tax bracket (rather than each marginal bracket), which usually takes affect after a couple hundred thousand in income
  • Combines all levels of taxes (federal, state/provincial)
  • Excludes minor taxes/fees associated with playing away games in different cities/states
  • Ignores the impact of escrow – which would hit all teams equally as a percentage

What does this chart tell us? Quite simply – for Steven (or any player) to take home the exact same amount of money, Tampa Bay can pay him considerably less than other teams on an AAV basis, and still be ‘matching’ or exceeding the offers on a ‘actual take home pay’ basis. This amounts to a substantial financial competitive advantage for Tampa Bay (or the Florida Panthers), and a distinct disadvantage for high tax region teams like Toronto.

Now, given the public storyline was that Stamkos’ top two choices were Tampa or Toronto, let’s see how this would have made hypothetical offers to Stamkos from Toronto and Tampa Bay look on an ‘actual take home’ pay basis.

tml-v-tbl

As you can see – if TML had offered my proposed $9.5M to Stamkos, Steven would only get to keep ~$4.5M per year. At the $8.5M offer that he ultimately accepted from Tampa, the much superior tax rate allows Stamkos to take home pay of $5.2M, a gap of $700K per season!

For Toronto to have matched Tampa’s $8.5M AAV offer, it would have cost them $11.1M AAV per year on Stamkos, which was undoubtedly outside of the range that Lamoriello, Pridham & Co were willing to accept. Put differently – in order for Tampa to match a hypothetical $9.5M AAV offer from Toronto, they would have only needed to give Stamkos $7.3M.

The table below summarizes how this tallies up over the life of his contract, including the fact that Tampa can give him one more year than any other team:

to-v-tbl-table

And – just to be comprehensive here – thanks to TSN’s helpful after-tax take home pay calculator (http://www.tsn.ca/nhl/stamkos), anyone can see that even if Buffalo or Detroit offered Stamkos $11.0M AAV, they only come out at $40.2M and $41.7M in after tax total contract value, respectively – essentially matching the existing offer that Tampa Bay had already made.

 Conclusion

 Financially speaking, it should now be clear that Steven did not ‘leave money on the table’ to stay in Tampa – in fact, he made just about the maximum possible amount when compared to rumored offers from other teams. Further, I haven’t spent any time in this article looking at the wide range of other factors that could have caused Stamkos to want to re-sign in Tampa, including:

  1. Stanley Cup Competitiveness (near term & medium term)
  2. Steven’s Role & Contribution (as Captain)
  3. Total Financial Compensation
  4. ‘Legacy’ Potential
  5. Geography (proximity to friends and family)

Tampa certainly outperforms Toronto on (a), and (b), above, and we just showed he was actually maximizing his total after-tax compensation (c) by staying in Tampa as well. Sure – Toronto would be close to friends and family, and be an unbelievable ‘legacy’ (should he have helped the team become a contender) – but it is hard to knock a superstar athlete for prioritizing the team he captains, who is a regular Cup-contender, that has also given him the best financial offer. It should be no wonder to us as outsiders that Yzerman succeeded again in a long, drawn out negotiation where his offer was fair – and final.

 

Does Stamkos Fit in the Shanaplan? A Long Term Analysis of the Leafs’ Salary Cap

Posted in Player ValuationTagged , , , , , 7 Comments

This article is being co-posted on Maple Leafs Hot Stove as well as on my own site, OriginalSixAnalytics.com. Find me @michael_zsolt on twitter.

“We have a five year plan that changes every day” – Lou Lamoriello

I recently wrote an article focused on estimating the value of Steven Stamkos’ production over the next seven years. In it, I concluded a ‘fair’ price for a player of his caliber would be $9M-$10M for the maximum term (7 years). Further, I suggested that – given Steven’s negotiation position resembles an auction – we should expect Stamkos to find a team willing to give him the high end of that range.

So, the next logical question posed by fellow Leafs fans:

“OK – Stamkos is worth a lot. But does it make sense for the Leafs to pay him that much?”

In this article I will walk through a detailed review of the Leafs’ cap over the next 7 years, and the strategic questions facing them. Looking at this analysis, my own conclusion is that Toronto should definitely attempt to sign Steven Stamkos – however, like in any negotiation, they should do so own their own terms, and only in a manner that fits within their broader salary cap strategy.

So – let’s get into it.

Approaching Long Term Salary Cap Analysis

Teams must consider a wide range of factors when planning their long term salary cap management. Besides ‘team-level’ factors, like on-ice strategy and their ‘competitive window’, there are a range of factors that must be evaluated for each individual player signed (on both a near term and long term basis):

Naturally, writing an article that goes in depth on all of these topics would take thousands of words – so I will have to narrow my focus somewhat. Today I will be focusing strictly on the financial side: how to analyze a team’s salary cap strategy and contract commitments over the long term, and what that tells us about the Leafs’ decision to pursue Steven Stamkos.

Before getting into the Leafs’ cap situation, I want to first talk about (i) the principles behind this type of analysis, and (ii) an example of a team who has managed their cap along these principles in the past.

‘Asset-Liability Matching’

A major principle used by financial services companies is the concept of ‘matching’ assets to liabilities. In the case of banks, insurance carriers, and pensions – this means forecasting the future payments to their clients, and then building portfolios of assets (investments) to match when those liabilities will become due over time.

This line of thinking is extremely applicable for the strategic management of a salary cap. In the NHL the ‘assets’ are players – represented by a bottom-up forecast of each player’s individual production – and the ‘liabilities’ would be the length and term of each player’s contract. Production could be considered as either basic goals/points or as advanced stats like Goals Versus Threshold (GVT)/Goals Above Replacement (GAR).

The objective of this exercise is to closely match the value of your players (assets) to the cost you incur to secure them (liabilities) over time – while maximizing total value. In the interest of time, I will not be building a Stamkos-like production forecast for the entire Leafs’ roster. Instead, I will focus strictly on the liability side of the equation, and try to build up the estimated contract dollars and term for all of TML’s future ‘core’ players.

Before getting into the Leafs, let’s look at an example of an organization that has applied this approach beautifully in the past.

Salary Cap Management: Best Practices

Despite their recent 1st round exit, Stan Bowman’s Chicago Blackhawks represent one of the model franchises in today’s NHL (as I have previously written about). Borrowing a chart from that article, you can see that Bowman has been able to closely match each player’s proportional contract dollars and total production, when compared to the team as a whole.

Hawks - roster construction

As you can see, most of Chicago’s top 8-10 players in AAV (average annual value) closely match their top 8-10 players in terms of Goals Above Replacement – with many ‘outperforming’ their cost to some degree (e.g. Saad).

Looking at Chicago and others around the league, the best practice appears to be assembling a ‘core’ of players that can be secured for the long term. These core contributors typically represent ~60-80% of the team’s cap, while the remaining 20-40% can be dedicated to short term contracts, strong prospects on ELC deals, and cheap, role-playing replacement-level players for depth and filling specific needs.

Now – enough pre-amble – let’s talk about the Leafs:

TMLs’ Long Term Cap Strategy

 To analyze the Leafs’ salary cap, I will to look at:

  1. Current contract commitments
  2. Estimating future cap constraints
  3. Estimating future commitments to ‘core’ players

Ideally this analysis will both help us understand Shanahan, Lou, (and namely, Brandon Pridham’s) plan for the organization, as well as whether or not Stamkos fits within it.

To be clear: the upcoming analysis uses almost entirely estimates and will require many placeholders to complete it. As a result, this analysis as a whole should be considered ‘illustrative’.

TML’s Total Contract Commitments

 Given the NHL has a 50 contract limit per team, let’s start by looking at how many players the Leafs have committed to over the next seven seasons (all data here is courtesy of GeneralFanager.com).

Leafs Contracts

(Note: Although the league limit is 50 contracts per team, General Fanager caveats that six of the Leafs’ contracts in 2015-2016 are exempt: Zaitsev, Marner, Dermott, Kaskisuo, Nielsen, and Timashov)

Beyond the 2015-2016 season, Toronto has a solid amount of flexibility in terms of total contracts. However, the number of contracts is likely the smallest piece of the puzzle, and salary cap dollars will be the more important factor.

Historical/Future Salary Cap Growth

In order to have a meaningful projection of the Leafs cap, we first need an estimate of their future cap constraints. To gauge that, let’s first look at the growth of the salary cap over the last 10 years:

Historical Salary Cap

This chart shows the NHL salary cap can change dramatically over time – it rose from $39.0M in 2005-2006 to $71.4M this year – a CAGR (compound annual growth rate) of 7%.

However, we shouldn’t assume this rapid growth will continue – especially given the recent weakening of the Canadian dollar. Instead, I have projected the future annual salary cap growth rate to be roughly ~3% on average, shown in the chart below.

Projected Salary Cap

Given the NHLPA’s tendency to use its ‘inflator’ clause, along with the general currency inflation rates in Canada and the US being in the 2-3% range, I consider this 3% estimate to be a conservative assumption. Although the chart above will likely be wildly incorrect on a year-to-year basis, over the long term it will serve our purposes of providing a conservative estimate to be used going forward.

Leafs’ Existing Contract Commitments

 Now, let’s look at the contract dollars the Leafs have already committed against their salary cap:

Leafs Contracts - Projected

Much like the last chart, you can see the Leafs have some flexibility for the upcoming season, with roughly ~$16M of cap space available (assuming the 3% growth materializes). After 2016-2017, the Leafs have a huge amount of cap space available – in large part thanks to their trades of Phil Kessel and Dion Phaneuf over the last two seasons.

Although the upcoming sections will be focused on the 3+ year future for the Leafs, for anyone interested in a detailed review of the 2016-2017 and 2017-2018 Leafs rosters on a player-by-player basis – check out this great post by @yakovmironov from Bloggers’ Tribune.

TML’s Future ‘Core’ Players

When looking to the Leafs’ future, I will focus my efforts on the Leafs’ ‘core’ players and rough estimates of these players’ future contracts. As the Blackhawks’ strategy shows, the other ~40 contracts will likely change on a year-to-year basis, so it makes sense to focus strictly on the major assets. Although some other players may warrant inclusion, I think most fans would agree on the following guys:

  • Nazem Kadri
  • William Nylander
  • Mitch Marner
  • Auston Matthews (assuming they take him)
  • Jake Gardiner
  • Morgan Rielly
  • Nikita Zaitsev (assuming Zaitsev plays out as hyped; otherwise, consider him a top-3 D placeholder)

Of these seven guys, the Leafs recently locked up Rielly and Kadri until 2021-22 – six years each – and have three years left on Jake Gardiner’s contract. Of the players omitted, the strongest argument for inclusion would be JVR. Given Van Riemsdyk’s UFA deal will likely be significantly more expensive than his current one (at $4.25M AAV until 2017-2018), I have not included him in the ‘core’ group; however, I will re-visit JVR later on.

Let’s look as this group as a whole in terms of dollars that have been committed to them to date:

Core - Commitments

Notably, the Leafs’ don’t currently have an answer for their long term option in net. Maybe Reimer returns or maybe Kasimir Kaskisuo becomes the long term option – it is too soon to say. Regardless, having a #1 goalie is essential to any teams’ success, so I have included a placeholder for the Leaf’s future goalie in my analysis.

Forecasting the Leafs’ Next Seven Years of Salary Cap

Although the Leafs’ core players don’t have huge contracts yet – those deals will eventually come. The issue Stamkos presents is 3-5 years down the road, when many of these young stars need new, big-dollar deals. In order to understand how much space the Leafs could offer to Stamkos while not sacrificing their top young talent, I have estimated the AAV of each core player’s next contract. To do so, I simply picked a relatively comparable player for each and used the comp’s AAV as a proxy (see footnotes for specifics).

The next two charts summarize a high-level view of the Leafs’ future cap situation, both in absolute dollars and as a percentage. I have included Steven Stamkos for the sake of illustration.

Leafs core projected - aav

Leafs core projected - cap percentage

Looking at the charts above, I think there are reasonable grounds to argue the Leafs should pursue Steven Stamkos, given:

  • The Leafs project to have ~$25M in cap space remaining in their tightest future year (2019-2020), representing 30.4% for non-core players, almost exactly the amount of the 2014-2015 Blackhawks
  • Assuming long term salary cap inflation, this number continues to slowly decline thereafter

Based on the above, I think it is safe to conclude that there is space for Stamkos within the Leafs’ future salary cap space. Naturally, we could debate the appropriate number to project for each player, but treating the ‘core’ as a whole, I think the outcome will be largely the same. Some fans may argue they would rather have 3 or 4 more of the current Marlies for 4-7 years than have Stamkos; however, I personally subscribe to the view that NHL teams require ‘elite’ talent (15-20+ GAR) to win a Stanley Cup – and not just a lot of ‘good’ talent.

One last note: including JVR at $6M per year starting in 2018-2019 would put the Leafs at 77% of the cap allocated to a core of 10 players (in 2019-2020). I think this is the absolute high-end of the range to give to a core group. That said, it would be hard to argue with the strength of that set of top 6 forwards and top 3 defensemen, all ideally supplemented by a goalie that deserves the $6M per year being allocated to his position.

Before wrapping up, I want to touch on two final areas: mitigating ‘over-payment’ risk, and TML’s negotiation strategy.

Minimizing Over-payment Risk

Many fans are concerned that signing Stamkos’ could create a cap drag in the last 3-4 years of his deal. Generally, I agree that this is a reasonable concern – but as I mentioned earlier, I believe the Leafs should attempt to sign Stamkos, but only do so on terms that fit their own strategy and needs.

The Leafs can limit their over-payment risk by refusing to give Stamkos a full No Move Clause (NMC) or No Trade Clause (NTC) – instead, they should only offer deals with a modified NTC (allowing Steven to list ‘X’ teams he will accept a trade to). A modified NTC is a strong hedge against the potential downside of the Leafs overpaying Stamkos, as even if he declines, they likely will be able to offload him for some combination of picks, prospects and retained salary. There happens to be a clear precedent for this clause in Stamkos’ UFA comparables – with 50% of them (Ovechkin, Nash and Kessel) having agreed to modified NTCs. Last, the Leafs would also be wise to front-load Steven’s cash compensation (salary), to increase his outer-year appeal to ‘budget’ teams that are cash-poor but have ample cap space.

Side note – @yakovmironov also included a great table in his article that summarizes the production of many 33-year old NHL players (Stamkos’ age in the final year of his contract) –it isn’t as bad as you might think.

Approaching the Stamkos Negotiation

Based on all of the information above, I think the Leafs should give Stamkos an ‘opening offer’ of $9.5M for 7 years, including a modified NTC for the duration of the contract. Depending how the negotiations proceed, I would recommend Toronto be willing to increase this offer up to $10M per year, and to reduce their NTC to only the final 3-4 years of his term. I personally suspect that if Stamkos has interest in coming to Toronto in general, that he would be willing to accept somewhere in this range. However – as in any negotiation – it is essential Toronto knows their maximum offer, and that they are willing to walk away from the deal if Stamkos pushes for anything beyond it.

Conclusion

Overall, I think the Leafs would do very well to try to sign Steven Stamkos this July. Stamkos is an elite shooter, a former first-overall pick, and a potential captain who could lead Toronto through a key stage of their rebuild. Projecting forward the Leafs’ core talent shows there should be a reasonable amount of room in the Leafs’ cap space for him, while keeping roughly ~30% of their salary cap to be allocated outside the top ~10 players on the team. Finally, by only offering Stamkos a contract that includes some version of a modified NTC – and otherwise walking away – the Leafs can carefully mitigate their biggest risk in this contract while also signing a hugely valuable asset at the same time.

In the end – I suspect the Leafs’ front office has a very clear view of their current long term roster construction plans, approach to salary cap management and their strategy for negotiating with Stamkos and his agent. As a result, all that is left for us fans to do is to sit back and count down the days until July 1st.

 

Valuing Stamkos: Estimating What Steven’s Next 7 Seasons are Worth

Posted in Player ValuationTagged , , , , , , 3 Comments

 This article is being co-posted on Maple Leafs Hotstove as well as on my own site, http://www.originalsixanalytics.com. Find me @michael_zsolt on twitter.

 All season long, Toronto fans have been talking about Steven Stamkos. It is well known that Stamkos will be an unrestricted free agent (UFA) this July. This means that – you guessed it – Steven Stamkos could become a Leaf. Naturally, if it happens, many fans have presumed Stammer would be named captain, immediately become the face of the franchise, and lead the Leafs through its centennial season and beyond.

As a result, many have also asked – what is Steven Stamkos worth? Assuming he reaches UFA status, what will it cost the Leafs to sign him? Does he deserve the same type of money as Kopitar, Kane, and Toews? Back in January, Ryan Kennedy over at thehockeynews.com made some reasonable comparisons and suggested that he sees Stamkos as being worth roughly ~$9M in AAV. Full credit to Ryan – as that was earlier in the season and somewhat different situation – however, in this article I will argue that it is extremely unlikely that any team, Toronto included, will be able to sign Stamkos for an AAV of less than $10M, or for much less than the maximum term of 7/8 years.

Before getting into the approaches to valuation, let’s look at some of Stamkos’ key statistics to understand exactly how he adds value.

Stamkos’ Goals Above Replacement (GAR)

Stamkos GAR BARs

 (If this data doesn’t mean much to you – I recommend you check out my summary of the practical applications of Goals Above Replacement).

For individual player analysis, GAR (Goals Above Replacement) can be a useful starting point to illustrate the big picture. Looking at Stamkos’ GAR shows us:

  • He performs at an elite level, hitting 15-20+ GAR all but his rookie season, something done in fewer than ~6% of all player-seasons
  • Stamkos contributes value to his team almost entirely through his offensive play:
    • 95% of Stamkos’ career GAR comes from his offensive ability, approximately 2/3rd of which coming from his shooting percentage (15.2% at 5v5) and 1/3rd from his impact on shot-rates (Corsi For)
    • At times over his career he has been a slight defensive drag to his team – but ultimately he is a relatively neutral contributor in non-offensive areas
  • As noted in the chart, Stamkos’ 2012-2014 results may not be indicative of his capability as the seasons were impacted by the lockout and his broken leg, respectively

We likely didn’t need GAR to tell us any of the above, as many would know most of this from simply watching Steven. However, GAR will be important to keep in mind for when we estimate Stamkos’ value later on.

WARRIOR Chart

Next, I have copied Domenic Galamini’s WARRIOR chart of Stamkos, showing Steven’s relative performance within the league on a number of metrics. For those not familiar with WARRIOR charts, Dominic provides a great summary here.Stammer solo

Looking at this chart confirms the following:

  • Stammer is an elite scorer and a solid playmaker, scoring very high on Goals/60, Primary Points/60, RelCF60 and RelxGF60
  • Stamkos should not be considered a two-way forward: his defensive contribution is sub-par, as shown by his shot/goal suppression (CA60Rel/xGA60 Rel)
  • As a result, when valuing Stamkos, we should be comparing him to similar elite shooters (e.g. Ovechkin, Kane, Perry), as opposed to the leagues’ finest two-way forwards (e.g. Toews, Kopitar, Bergeron)

Given that elite shooters don’t always excel at driving 5v5 CF%, it will be important to keep in mind shooting percentage and power play results when comparing Stamkos to other players.

Before we get into valuing Stamkos, let’s quickly look at the qualitative side of the equation.

A Note on Intangible Factors

Although the hockey analytics community tends to discount ‘intangible’ factors, I personally consider them very meaningful. Consider: if you have two players with similar stats – would you pay more for the driven, hard-working, high-character guy, or the player who demonstrates none of these traits?

We all know Steven Stamkos is a strong leader. Last season he captained his team to game six of the Stanley Cup final. He also has an incredible work ethic; he is well known for his rigorous offseason training with Gary Roberts. While these strong intangibles are difficult to quantify, they still should play a meaningful role in justifying a premium valuation for Stamkos. But first – what aspects can we quantify?

Approaches to Financial Valuation

In the world of corporate finance – buying and selling companies – great effort is spent attempting to value the businesses being acquired. Generally speaking, there are two approaches:

  1. Relative (market based) valuation methods
  2. Intrinsic valuation methods

Let’s start with relative valuation methods.

Market Based Valuation: Comparable Company Player Analysis

For investors, ‘comparable company’ analysis is a key aspect any deal. The valuation multiples of companies across an industry (e.g. ‘Enterprise Value / Earnings’) set the baseline for determining what the price should be for a similar one. As many readers will know, the exact same approach is often applied to players: we can look at a set of comparable elite shooters to help derive a benchmark for Stamkos’ market value. Keep in mind – relative valuation methods like comparables tell us what others are willing to pay for an asset (the market), not necessarily the inherent or ‘true’ value of it.

Using Corsica’s Similarity score feature, focused specifically on Stamkos’ most important stats (e.g. G/60, P/60, Sh%), I have arrived at the following set of comparables. All players listed below had a similarity score of at least 85% with Steven. I have also tried to present this similarly to how it is done in finance:

Comp Table

(Note – All data shown is all situations, except where specifically noted).

As you can see, few players in the league score goals and contribute primary points at the same rate as Stamkos. Compared to this set as a whole, Stamkos outperforms the group average for all metrics listed, except for the Corsi stats and FirstA/60.

However, for this analysis to truly be relevant, we can only really compare Steven to players in the same free agency situation when signing, i.e. UFAs. As such, I have highlighted the four UFA players that I consider as having the most comparable performance statistics to Stamkos: Patrick Kane, Alexander Ovechkin, Evgeni Malkin, and Corey Perry. I have also shown their four-player average at the bottom of the table. As you can see, Stamkos is neck and neck with these players on every metric.

In terms of dollars, these four players averaged an AAV of $9.7M, and had an average term of the maximum 8 years. Considering that these players are also not historically known for their exceptional leadership qualities – which Stamkos has in spades – you can begin to see the case for Steven to be earning $10.0M-$10.5M+ per season.

Intrinsic Valuation Methods

In financial markets, the other approach to valuation is using ‘intrinsic’ methodologies – e.g., trying to derive what is a company is worth in an absolute sense. When valuing a company, this is based on the discounted ‘present value’ of a company’s future cash flows – how much money a company will generate cash for its new owner in the future.

My view is that the best ‘intrinsic’ player valuation method available based on public stats is using GAR, which I introduced at the beginning. The first approach I will use is valuing a player based on his historical GAR score, which I have shown previously. The second is a new approach, where I will show a high level attempt to forecast a player’s future GAR – and use that to derive what he should be paid. When we have confidence in a forecast for a player – (which I won’t necessarily say about my own Stamkos GAR forecast today) – forward-looking analysis will be the most ‘pure’ measure we can use in valuation.

Historical GAR

First I will plot Stamkos on the Fair Market Value curve, in order to see what he is worth based on what he has done historically. Typically I would encourage using a 3-year average GAR – however, due to the issues of the lock-out season and Stamkos’ injury, I will instead use his career average (ex-rookie season) GAR of 22.

Historical GARLooking at this chart shows:

  • Stamkos’ career Avg GAR/season of 22 values him at $10.8M in AAV
  • However, historical GAR will tend to over-estimate a player’s value, as it is backward-looking, and does not adjust for how players decline with age
  • As such, though this is a useful data point, we should take it with a grain of salt

Forward-Looking GAR: A High Level Estimate

To truly estimate a company’s, or players’, intrinsic value we need a forecast of how it/he is going to do in the future. Of course, like any prediction, this type of estimate is inherently flawed and almost never is how reality actually plays out. However, creating a forecast can help us to see some reasonable scenarios of how Steven might perform in the future. To do this, I will combine his past performance with the aging curve of a typical NHL forward.

Fortunately for us, part 2 of Moneypuck’s Building a Contender Series has an excellent chart that summarizes the league-average GAR aging curve for forwards (is anyone tired of me referring to this series, yet?):

Moneypuck GAR Aging curve

(Source: Moneypuck)

In order to connect this to Stamkos’ expected performance, I will use a rather blunt methodology of simply applying the same absolute value of decline in GAR score showed here to ‘extend’ forward Stevens’ historical performance. The most accurate way to do this would likely be to base Stamkos’ long term decline on how his comparables declined at the same age. However, for the purpose of brevity, I will use this simplified approach to help illustrate the methodology.

Stamkos GAR Forecast

In the chart above I did the following:

  • Extended the ‘historical’ performance by one year in 2015-2016, assuming his current season is comparable to 2014-2015
  • Starting at Stamkos’ current age of 26, I applied the absolute decline from Moneypuck’s chart to Stamkos in five and three year chunks
    • (As you can see, the projection begins to decline more quickly after 2020-2021F)
  • Last, I adjusted this ‘base’ case by +20% and -20% to create illustrative upside and downside cases

Although this is a very high level estimate, I think this gives an interesting, basic idea of what we could expect from Stamkos over the next eight seasons. What does this equate to in terms of dollars? The base case results in an average GAR per season of 18.3, equating to $9.1M per year in AAV. The downside and upside cases each average GARs of 14.7 and 22.0, respectively, coming out at AAV values of $7.4M and $10.8M.

Sizing it all Up

So – lets stack these all up next to each other:

Aggregate

Naturally, looking at a wide range of methods gives a wide range of potential values. However, all three of these approaches can be used to justify a valuation for Stamkos at $10.0M+ of AAV. There is also every precedent for him to get the full 8-year maximum term, or 7 years with the Leafs (in the case of a UFA signing with a new team). We can all be sure Stamkos’ agent is well aware of all of these approaches and will be pushing for the high end, trying to secure as much as possible for his client.

Practicalities of TML’s Negotiation Position

Much like in valuing and buying/selling companies – you can do as many fancy calculations as you want – but something is ultimately worth what someone is willing to pay for it. Given that Stamkos is a UFA, he is essentially able to auction his contract to the highest bidder – putting all of the power in his hands. This power dynamic, combined with the prior valuation approaches, gives me strong reason to believe Stamkos deserves $10M+ – and teams should be willing to pay it, if they have the cap space available.

I’m sure some readers will point out that Stamkos’ basic counting stats (goals/assists/points per game) have declined in the past two seasons, which may be a red flag for the future. Travis Yost and Stephen Burtch both addressed this somewhat, arguing that his quality of teammate and usage are both factors that may be impacting his performance. However, in terms of the value he commands, the strength of his negotiation position will ultimately rule the day. If teams want him, it will take big dollars to get him – either they will be willing to pay for an elite player, or they will not – and I suspect there will be at least one team left standing at a double-digit AAV.

Conclusion

In the end, I know Leafs fans will continue to argue that Stamkos wants to come home, and that maybe he will take a hometown discount to join the Leafs. Although this is possible, in reality the Leafs should not be expecting to walk into a bargain contract with Stamkos. He is an elite scorer, a strong leader, he deserves a top dollar contract, and I strongly believe there will be a team willing to step up and give him the $10M+ per season he commands. Stamkos is entirely worth that amount, and he is an excellent candidate to lead this young Leafs’ team through their centennial season, and six more after that. All us fans can do now is sit and wait.

Your move, Lou.

 

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