Kesler

As most people know by now Kesler has signed with the Philadelphia Flyers for $1.9 million dollars. Of course the Canucks have until September 19, 2006 to make the same offer to Kesler to keep him, which has just happened. Kesler is 22, which, by chance is the same age as me I might add. He’ll be a free agent when he turns 27 according to the new CBA (I think), which means that he will have played 5 seasons with the Philadelphia Flyers, provided no one does the same thing to the Flyers. Someone else signing Kesler is unlikely considering his value is going up not down and as such one would need to give him more than $2.0 million meaning he would also cost a first and third “rounder”.

Kesler is a first round draft pick (23 overall in 2003), that’s only 2 years ago. In my opinion he’s been a disappointment offensively, but this is likely due to the limited support he’s had. He certainly was one of the best players on the team in terms of defense. He was one of the teams better (if not best) penalty killer. And no question played a significant role no matter how you look at it.

It is extraordinarily rare for a 21 year old centre to see that kind of responsibility and still end up at evens in EV+/-. ~ Vic Ferrari.

The first question would be: What are the Flyers getting: they’re getting an NHL ready restricted free agent for 5 years ($1.9 million for the first year). I’m not sure how next years pay for Kesler works out for next year (it doesn’t happen too often a 23 year old takes a pay cut). Most people agree they’re paying for two things here: a free agent and the player. Remember also this signing is in terms of the free agent market one has to compare to group II free agents not group III’s because he is chosen amongst alternative in the group II’s (they could’ve signed any group II instead, at least a few months ago). The price includes the “value” of a second round draft pick. (Each team needs 20 players, each player has an NHL life span of about 10 years => Teams should be built up with about 10 1^st “rounders” and 10 2^nd “rounders” (this is extremely rough and wrong, but it’s a reasonable estimate: age: 25 – 35), of course many teams have 3^rd “rounders” and 4^th “rounders” for reasons such as trading away their 2^nd “rounders” for playoff hopes (try to calculate those numbers). And well teams aren’t very good at drafting. Some get injured some die, some sign in Europe etc. It suffices to say that a 1^st “rounder” such as Kesler should be a 1^st or 2^nd line player, as such their value ranges anywhere from about $1.5 - $3 million at this present time (Kesler isn’t at this point yet). (3^rd liners are $0.8-1.5M and 4^th liners less than $800,000). What I’m trying to say is that a 2^nd round draft pick = a group III free agent for let’s just say 4 years for a 4^th or 3^rd line player (not all that much if you ask me ~$200,000 per year for 4 years or $800,000), although in terms of “error” one could argue there’s a good chance that 2^nd “rounders” become as good as first “rounders”.

Let’s now assume Kesler still can’t score like a top line for the next two years this is how his salary might be projected (this is extremely important to the Flyers). Please don’t jump on the numbers as they are nominal numbers not real and as such include inflation. I believe Kesler will expect a pay cut next year and will sign for lower.

Year – Age	Canucks	Flyers
2006 – 22	$1,000,000	$1,900,000
2007 – 23	$1,200,000	$1,300,000
2008 – 24	$1,500,000	$1,800,000
2009 – 25	$1,800,000	$2,000,000
2010 – 26	$2,250,000	$2,250,000
Total:	$7,750,000	$9,250,000

Of course the Canucks “option” is no longer available due to the fact that the signing of Kesler at $1.9M puts him on the Flyers path either way. I realize this number is arbitrary, and it could be almost anything it’s hard to argue that the cost of Kesler hasn’t gone up at least a bit due to this years contract and subsequent years should also be higher (no one takes a 50% pay cut).

This scenario shows the importance of the group III offer sheet rules, without them Kesler would be unable to sign simply because the Canucks were ripping him off (it’s hard to debate that because of the price the Flyers will pay), in fact the offers by the Canucks were likely 20% below market value (if they weren’t below market value the Flyers would have no incentive to sign him). To be honest the only thing this shows me is how poorly Nonis has dealt with Kesler. Nonis told Kesler this was the last offer (whatever it was) and that he should sign it or else... Well Kesler decided to do the "or else" and left for a more reasonable GM (and won I might add).

The interesting thing of course is that I approximate the worth of a 2^nd round draft pick to $800,000 and the difference between this year and last at around $900,000 (although the Flyers might argue this number is lower), this suggests that the Flyers expect to save around $1,700,000 over the next 5 years in savings resulting from having Kesler, which suggests that a 1^st “rounder” like Kesler is worth around $400,000 per year, or twice that of a second “rounder”.

Of course all of this is guess work, something I don’t do all that much. I'm not sure what this all means, but teams will try to continue to recoup their losses by paying less (even more less I suspect) to their restricted free agents as such GM's with a a good eye for value can quickly snatch them up (of course no team wont match). Since every team matches it would appear all this will do is drive up the cost of having group II free agents and the value of draft picks will fall (and development with that) leaving teams with little incentive to develop talent (as a number of people have already predicted). We'll see if this happens again in the next few years or if thi is just another anomaly, but even if it doesn't happen it should effect negotiations as players know they can use this to their advantage.