from Amazon
Wednesday, September 13, 2006
15 Year Hockey Deal
Rick Dipietro of the NYI signed a long-term contract:
signed DiPietro to an unprecedented 15-year deal worth $67.5 million US
Can we justify this?
Rick DiPietro, 25, was a former first-overall pick, a player the Islanders were able to draft for, by trading up, and giving up their incumbent, Roberto Luongo, likely the better of the two goalies. Luongo recently signed for 27 million$ for 4 years, one year before free agent eligibility.
I believe DiPietro was still two years from being free agent eligible, though I’m not certain. Let’s say that his age-25 and age-26 seasons, the market rate was a total of 7 million$. How much could he make for the next 13 years afterwards?
In two years, the NHL-inflation rate will have probably gone up by 15%. So, if we expect him to have signed a 5-yr 30 million$ deal, that would jump to a 35 million-5 yr deal. That puts him to age 31.
At age 31, NHL goalies are still highly coveted. So, he signs another 5-yr deal, this time for 20 million$ in today’s dollars. NHL inflation rate will now go up say 75%, making that a 35 million$ deal in future dollars.
He finally signs a 3-yr deal at age 36 for 10 million$ in today’s dollars, or say 20 million$ in future dollars.
There is a risk that he won’t be in the league any more, or just not that good. Let’s discount his first 5-yr deal at 20%, his second 5-yr deal at 40%, and his last 3-yr deal at 60%. Just making numbers up.
So, we have: 7 + 35*.8 + 35*.6 + 10*.4 = 60 million$ over 15 years
This is all just off-the-cuff, and just going with my hockey guts. Signing him for 67.5 million$ for 15 years is probably a fair deal for both sides.
This is the 2nd longest contract in North American team sports.
The longest was the 25 year $25 million Magic Johnson contract, which was considered huge at the time.
After a few years, he was very underpaid.