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Summer Signing Series – Lucic

As the summer free agency period comes to a close MPS is taking this opportunity to review the biggest signings of the summer from a purely financial perspective. To be fair to all the teams and players we’ll be looking at we’ll be using the same set of base assumptions throughout the series. Principally these assumptions are:

– The performance metrics we want to pay for are:

o Goals (40%) and Assists (60%) when the players are out at Even Strength or on the Power Play.
o Team Goals Against (100%) when the player is on the ice killing penalties.

– The salary cap starts this season at $73 million and increases 5%/year for future years (obviously this is up for debate but it basically reflects flat revenue growth and the assumption the NHLPA uses its escalator clause).

Signing #2 – Milan Lucic

For our second contract of the series we have Milan Lucic reuniting with his former GM, Peter Chiarelli, in the NHL’s northern most city, Edmonton.

The Details

On July 1st Lucic signed, an identical deal to Kyle Okposo, a 7 year, $42 million contract with the Edmonton Oilers which works out to an AAV of $6 million/season. In the season before with Los Angeles Lucic had 20 goals and 35 assists.

Breaking it Down

As explained in our earlier blog, point totals are fine but valuation needs to be done using rates (if this doesn’t make sense to you please check out that other post because the rest of this article/series takes it for granted) so let’s take a look at Lucic’s rates:

EVEN STRENGTH Last 3 Years Last Season
Goals/60 Min 0.81 0.77
Assists/60 Min 1.07 1.26
POWER PLAY Last 3 Years Last Season
Goals/60 Min 0.79 0.67
Assists/60 Min 2.60 2.67
PENALTY KILL Last 3 Years Last Season
Team Goals Against/60 Min NA NA

In our first article of this series we took a look at Kyle Okposo and relative to Okposo these rates are a little lower. Lucic scores goals at a slightly better rate but generates quite a few less assists and is also not as effective on the power play. In total Okposo was producing around ~2.1 Pts/60 at even strength and around 4.5 Pts/60 on the power play. Lucic however produces around 1.9 Pts/60 at even strength and around 3.4 Pts/60 on the power play. These aren’t terrible numbers by any means but given the identical term and dollar value of this contract and Okposo’s our model will almost certainly prefer Okposo’s contract.

Ice Time

The other key factor to determining a player’s worth is how much ice time they get (again if you haven’t read this article yet you may want to do that so you can appreciate why this is the case). In Lucic’s case he has played the following:

ICE TIME Last 3 Years Last Season
Even Strength 14.27 14.45
Power Play 2.13 2.17
Penalty Kill 0.03 0.03

As you would expect with someone who has been in the league as long as Lucic, his ice time is pretty consistent over the last few years. Generally he plays 16 to 17 minutes a night at even strength and 2 minutes on the power play. While the even strength ice time is consistent with a first or second line player, the power play definitely doesn’t look like someone playing on his team’s first power play unit. That said, his production on the power play also isn’t incredible so it probably makes sense that he plays on the second unit.

The Forecast

Now that we have the ice time and rates we can do some forecasting. In our base case we’re just going to assume that Milan plays exactly like he has over the last 3 years for the duration of his contract.

Lucic11

So, assuming Lucic plays a similar role in Edmonton as he did in Boston and Los Angeles and that his play does not dip over the course of the contract he starts out being overpaid and then as the cap increases near the end of his contract he is more or less fairly compensated. On the whole though this scenario would have Lucic overpaid ($6 million compared to $5 million in value).

Given that Lucic is 28 years old though I’m not convinced his performance will stay flat for the whole contract. I’m also not convinced his role with the Oilers will be exactly the same as with his prior teams. So, if we assume that Lucic gets to play on the first power play unit with the Oilers and that his performance stays flat for 3 years before declining over the last four, what does this look like?

THis one will work

In our more likely scenario this contract performs a little better in the early years and a little worse near the end. Obviously the extra minutes helped but not enough to offset the declines in the final years and we still find that Lucic’s average value over the life of the contract is ~$5.1 million/year.
Now before we pass final judgement on this contract I do want to remind everyone that we are using the standard valuation assumptions described at the beginning. I’m sure there will be Oilers fans that rightly point out that we are not considering the impact of Lucic’s physical play or any leadership ‘intangibles’ he may also bring to the team. This is fair criticism and we could build it into the analysis but for the sake of this series we are sticking with our base assumptions and those base assumptions show Lucic’s value to be about $5.1 million/year.

Verdict

Lucic Verdict

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Summer Signing Series – Lucic

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