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How to Build a Cup Contender in Atlanta, Part 6

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Intro: Recap of the "How to Build a Cup Contender in Atlanta" So Far.

In Part 1 of this series I pointed out that contrary to popular Canadian belief, not all non-southern markets are destined to be revenue poor. Atlanta is very similar to the Dallas market (ranked 10th in revenue). What is lacking in Atlanta is a compelling on  ice product. In Part 2, I argued that the mark of good NHL management should be building a Cup Contender and I demonstrated that 90% of recent Cup winners finished in the top 6 overall standings. In Part 3, I showed that in the short run the Thrashers have been one of the poorest teams and management faces a huge challenge of winning on budget--in order to grow revenues. The good news is that the gap between rich and poor teams is MUCH smaller under the current CBA. In Part 4, I noted that Atlanta must squeeze out value from every dollar spent--which means taking advantage of market inefficiencies. I suggested that bargains are more likely to be found on the defensive side because offense is easily measured. In Part 5, I looked at the NHL draft and argued that a revenue poor teams should always use its 1st round pick for a player with offensive skills (easily measured by NHL teams) and pursue good defensive player later (inaccurately measured by NHL teams). I also suggested that since the NHL undervalues small skill players, a revenue poor team would be wise to take chances on such players later in the draft (see: Buffalo Sabres recently). Today in Part 6 I look at free agency and talent acquisition. In the future I will discuss strategic timing within the contending cycle.

The Winner's Paradox or Why You Can't Build A Team Through Free Agency

Stanley Cup contenders are built through a variety of methods. Tampa Bay Lightning build their team around a 1st overall draft pick (Lecavlier), an amazing minor league signing (Martin St. Louis) and a highway robbery trade (Dan Boyle) a regular trade (Khabibulin). Detroit uses a combination of player development (Zetterberg and Datsyuk) that is supplemented by free agents and trades.

Teams that try to try to "buy a championship" almost always fail. For example, in baseball the New York Yankees were a powerhouse when they mixed free agents with home grown talent (Derek Jeter, Bernie Williams, etc) and when the farm system fell quiet they spent a lot of money with a declining return on their investment. In hockey, the New York Rangers keep spending to the cap max but their failures in talent development (Hugh Jessiman) have not given them a sufficient base of cheap young players to leverage their financial advantage into a power house the way Detroit has.

And now for the dirty little secret of why it is impossible to build a contender completely through free agency. It is called "The Winner's Paradox" by behavioral economists. NHL free agency operates something like an auction. There are 30 teams with money to spend and each team is looking at the assets available to bid upon. Each team makes an estimate of how much each player is worth--so far this appears entirely rational. In theory the market should accurately price what each free agent deserves to be paid.

But who actually determines the winning price in an auction? The 2nd highest bidder. When the 2nd highest bidder decides not to spend any more money, the highest bidder then wins (we have no idea just how much more the winner was prepared to spend). Now consider this basic fact--teams will vary in their ability to accurately price talent. If we have 10 teams chasing after Alexei Kovalev (and we assume for the moment that Kovalev only cares about money) then the the team that most over-estimates his value will win the auction. This is the winner's curse--those that overestimate will overpay and live to regret their success at the auction.

If you look around the NHL the most competently run franchises rarely make big headlines in free agency (Sharks, Wings, Devils, Wild, Hurricanes). And sometimes when a well run team does make headlines they regret it later (see Dallas Stars-Sean Avery). Teams that run around snapping up free agents like Imelda Marcos shopping for shoes (Tampa Bay last summer, New York Rangers every summer) seldom hoist the Cup or even finish high in the standings.

For one more example of the problem of free agency consider the Boston Bruins in the summer of 2005. The Bruins thought that players would be cheap after the lockout and so they made sure that almost all their player contracts expired. The Bruins figured they would have more money to spend and therefore would make out like bandits in the free agent market. However their plan completely backfired when the NHLPA agreed to a 25% salary roll back which gave every other team more money to spend. The Bruins avoided making foolish offers and were outbid by many other teams that summer. They ended up spending a lot of money and ended up with just an average team. This free agent miscalculation led to their GM being fired and their marquee player (Joe Thornton) being traded.

Building Without Free Agency

Well managed teams use free agency not as a primary means of roster construction, but as a supplemental process to fix specific roster holes. Almost every free agent is "overpaid" by some foolish bidder--a revenue poor franchise like the Thrashers cannot hope to beat out the foolishness of Glen Sather. How do you construct a Cup conteding roster on a budget then? Let's review the four sources of talent:

  1. THE DRAFT: The primary means of acquiring inexpensive talent. Teams on a budget need to be excellent here.
  2. FREE AGENTS: A supplemental means, talent is expensive for a team on a budget.
  3. TRADES: an unpredictable means of finding talent (Craig Button will not always have a job).
  4. "NEARLY FREE" TALENT: a consistent means rarely utilized: waivers, minor league free agents.

I've already discussed ways to maximize the return on investment on Draft Day in part 5 and I just discussed whey free agency is not a sustainable path to contention. Every  team would love to make a killer trade but they are rare enough that no team can count on that. That brings us to the last element "nearly free" talent.

What do I mean by "nearly free" talent? Every NHL player makes roughly $0.5 million--that is the minimum NHL salary under the CBA. If you are a NHL GM that is the bottom line--you cannot find talent that makes less money than that--half a million per player is a sunk cost. If the market perfectly priced every player--then in theory all players making the NHL minimum should be nearly worthless players--that is to say that they straddle the line between the NHL and AHL. This assumption is wrong. There are players making the NHL minimum that make significant and meaningful contributions every year. For a team on a budget finding those "nearly free" players is absolutely critical to building a contender.

Finding the Next Paul Ysebaert

In 1984 the New Jersey Devils drafted a winger named Paul Ysebaert in the 4th round. Ysebaert played three years of college hockey at Bowling Green and basically tore up the CCHA averaging over a point per game each season. He turned pro and tore of the AHL where he also averaged over a point per game. But the Devils only gave him 21 NHL games during his first three pro seasons. In 1989 the essentially gave up on him and dealt him to the Detroit Red Wings for a 4th round pick and a journey defenseman (Lee Norwood).

Upon arriving in Detroit, Wings GM and Coach Bryan Murray promptly inserted him on the scoring lines where he produced 84 Goals and 170 Points over the next 210 NHL Games Played. According to HockeyZonePlus, Ysebaert was paid a measly $155,000 + $300,000 + $325,000 for those three years. The Detroit Red Wings received nearly a point-per-game production from Ysebaert and paid just $680,000 for those points. The following season Ysebaert's salary would jump to nearly a million dollars ($750,000) and Detroit flipped him to the Winnipeg Jets (for a 4th rounder and Aaron Ward). Wings GM Bryan Murray got excellent production for a cheap price because he was willing to live with Ysebaert's iffy defensive play and because he had two strong centers to pair him with (Yzerman and Fedorov).

In my opinion, there is a Paul Ysebaert available all the time in the AHL--it simply takes good pro scouting and a GM who is willing to steal such a player and a coach willing to work around that player's short comings. For a budget minded team like the Thrashers finding the next Paul Ysebaert is very important. As I mentioned previoulsy "offense always get paid" on the UFA market, so the way to supplement a team's offense is to plan on using a cheap AHL player on the 2nd line who will chip in 40-60 for close to the NHL minimum. Getting scoring on the cheap is crucial because itfrees up some salary to address other team needs elsewhere on the roster.

Conclusion: Looking the next Paul Ysebart

Right now Rich Peverley is that guy. Claimed off waivers for essently the NHL minimum he ripped off a bunch of points when given an opportunity to play on a scoring and power play in the NHL. The Thrashers retain his rights and he will be very cheap for one more season. Assuming he plays on the 2nd line, he should be good for 40-60 points at the cost of half a milllon per season. After next season Rich Peverley may no longer be a bargain anymore. Another guy currently in the Thrashers system who could be another "Paul Ysebaert" is Brett Sterling. He is very small, lacks NHL quickness and will probably hurt you defensively. However, he has scored at every level NCAA and AHL. Another candidate for "Paul Ysebaert" status is the recently acquired Tim Stapleton who tore up NCAA for four years and averaged a point per game at the NHL level. The Thrashers have lined up a couple of good candidates and they should plan on having Sterling and Stapleton battle it out for a top six scoring line spot after Kozlov departs and Peverley becomes expensive.

If you are the Thrashers you can cound on one more cheap productive season from Peverly and then you need to line up the next cheap AHL veteran--and Brett Sterling might just be that guy.