Entry-Level Contracts Help Teams Stay Competitive

Ever since the NHL’s salary cap was invoked, the league and its 31 teams have been working on strategies to become more salary cap efficient via hunting for marginal value. As the manner in which teams are using their resources continues to evolve in today’s parity era, so too are the functions of scouting departments, as they’re becoming increasingly pertinent to the ability of a team to stay competitive over time.

Teams can gain a big competitive advantage if they can find and sign immediate-impact players to an entry-level contract (ELC). Thanks to the cost restrictions placed on these contracts and the ever-so-slowly rising salary cap, a new trend is emerging – one that’s seeing more undrafted players signing ELCs and going on to give their teams extreme value for very little cost. In fact, ever since the current Collective Bargaining Agreement (CBA) came into effect in January 2013, there’s been a significant rise in the number of undrafted players entering the NHL.

This graph does not include any undrafted player who did sign an ELC but never ended up playing in any NHL games.

This is especially true of teams who’ve recently won Stanley Cups since the number of Cups under a player’s belt skyrockets their dollar value. In order for championship teams to afford multiple high-end players, they’re forced to pay the rest of their roster less.

This proves problematic when maintaining Stanley Cup contention over time, as we saw with the Los Angeles Kings. One of the ways teams are combating this is by using ELCs, since their maximum annual aggregate amount per league-year is $925,000. Including performance bonuses, these players entering the NHL can make a maximum of $3.77 million a year.

The Top 2 Undrafted Players

Interestingly, the Pittsburgh Penguins have – and the Chicago Blackhawks had – one of the top two point-producing undrafted players coming off their ELCs. Is that a coincidence? I don’t think so.

Artemi Panarin

The first is Artemi Panarin, a Russian left-winger who turns 26 on Oct. 30 and had spent two seasons in the NHL playing for the Blackhawks. Now he’s been traded to the Columbus Blue Jackets and is their highest-paid player, making $6 million a year for the next two years. When Panarin joined the Blackhawks’ roster in 2015-16, he had already spent five full seasons playing in the KHL and was an instant impact for the team.

Artemi Panarin, the NHL’s biggest undrafted point producer coming off an entry-level contract. (Amy Irvin / The Hockey Writers)

In 80 games, he scored 30 goals and 47 assists, leading all rookies in points that year. He then managed to get another seven points in seven playoff games. Last year, he scored 31 goals and 43 assists in 82 games too.

However, because of the ELC compensation restrictions, Panarin was only making $812,500 in each of those seasons — although with performance bonuses he ended up with an average annual value (AAV) of $3.5 million. The only person to get more goals and more assists than him was Patrick Kane, yet 13 other guys on the roster had bigger dollar-amount contracts.

Conor Sheary

Then there’s Conor Sheary, an American winger, who turned 25 this past June, and had spent both of his first NHL seasons playing for the Penguins. Last year, he only played in 61 games but scored 23 goals and got 30 assists. The year prior he had only played in 44 games and got 10 points, though.

Conor Sheary (Charles LeClaire-USA TODAY Sports)

Including performance bonuses, Sheary was still making less than a million a year yet ranked fourth on his roster for most points that season — 17 other Penguins’ players had contracts worth more than his. Now Sheary has signed a three-year standard contract worth $3 million a year. Interestingly, he scored almost as many points per game played as Panarin did last year but he’s only getting paid half as much.

Why Weren’t Panarin & Sheary Drafted?

What’s more interesting about these two players is that they were both eligible for the 2010 NHL Entry Draft. They were likely passed on because of their smallish size, as Panarin is only 5-foot-11 and weighs 170 pounds while Sheary is only 5-foot-8 and weighs 174 pounds.

As the NHL continues to evolve, so too are the types of players who’re finding success in this league. It would seem that in the case of Panarin and Sheary, their small frames and quick hands have done them well. So for the Kings, building through the draft got them a couple Cups but perhaps they should have extended their scouting services to older guys in the NCAA or KHL and found a smaller goal-scorer.

Other salary-capped teams would also do well to look at wingers who might have been overlooked in previous drafts – not because they lacked skill but because they lacked size. Theoretically, it will be players like these who allow teams like the Toronto Maple Leafs and the Edmonton Oilers to stay competitive in two or three years from now, after signing Connor McDavid, Leon Draisitl, Auston Matthews, William Nylander, Mitch Marner and Kasperi Kapanen to standard contracts. After all, the salary cap only limits the amount of money teams can spend on their players. It does not, however, limit the amount they can spend on their scouting departments.