Is Signing Jeff Skinner a Wise Financial Move for the Buffalo Sabres?

The talk of Buffalo, NY for the past month plus has been what is going to happen with Jeff Skinner. He was the most prolific goal scorer that the city has seen since Thomas Vanek in his prime. However, the overall team performance was poor once again and fans have been left wondering if the team should pay Skinner a significant amount of money. Our contract projection has Skinner signing a deal worth around $60M over seven years. However, if the Sabres want to prevent Skinner from listening to other teams, they likely will have to pay between $70M and $72M over eight years.

There are some Sabre fans who wonder if this would be a wise investment. Some of this fear is over ghosts of contracts past, while others worry about being committed to a player into his mid-thirties who has had moments of inconsistency throughout his career. It is also fair to wonder if the team could plug any player next to Jack Eichel and have them produce near the level of Skinner at a significantly cheaper cost. My goal in this post is to dive into the financial impact of a potential Skinner contract and see if the team can justify giving Skinner a $72M contract.

Assessing Monetary Worth to a Team

Hockey contracts are negotiated and signed almost exclusively based on a player’s past performance. This is the reason many teams end up with “poison contracts” on their payroll. When players earn their unrestricted free agency (UFA), they are often in their late twenties, which is often times around their peak performance. Once they sign their UFA contract, they are usually on the decline of their career. This does not mean they will automatically be poor players the instance they sign, but they will probably have a gradual decline in performance from season to season. Jeff Skinner is unique as he is set to become an UFA younger than many other players because he started playing in the NHL at age 18. Therefore, Skinner may not start his decline for another year or two.

Regardless of when Skinner starts to decline, the Sabres (or any other team) should be looking to pay him what he is worth to them in future years. My goal is to do my best to determine what that value is. To do so, I will borrow a concept that was first introduced in baseball by Vince Gennaro in his book Diamond Dollars. This concept is the use of a team’s win-curve to project the monetary value Skinner will provide in the years he is under contract. Before we get to Skinner, we need to understand the concept of the win curve and how I went about constructing one for the Sabres.

A win-curve is intended to measure how responsive fans are to additional wins and overall on-ice success. Once we establish that, we can then take the fans’ responsiveness and translate it to a monetary amount. We need to look no further than this year’s Carolina Hurricanes as evidence that winning can provide a monetary boost in the NHL. However, the Sabres are not the Hurricanes. No one would blame Sabre fans if they chose to spend their hard-earned dollars elsewhere. Through the ups and downs, the team has enjoyed pretty consistent support, which makes it more difficult to conclude that additional wins will dramatically impact the team’s attendance. However, there is a definitely a positive relationship between the Sabres’ wins and attendance. Let’s take a look.

I should make a few notes of how I constructed the above win curve. First, I collected wins and attendance numbers from the 2000-2001 season to the 2018-2019 season. I excluded the lockout shortened 2012 season as well as the 2013-2014 and 2014-2015 seasons where the Sabres were fielding a team that was not designed to win. However, fans were more engaged than ever because they were hoping the losing would result in Connor McDavid or Jack Eichel. Those two seasons do not represent the fans’ responsiveness to winning. Finally, the Sabres’ arena capacity changed during my sample. To account for this, I translated all attendance numbers into the current arena capacity. I then plotted the data and fit a linear regression where the x-variable is wins and the y-variable is attendance.

It is too early to know what the Sabres’ opening lineup will look like for the 2019 season. I am going to make an assumption and say the Sabres’ without Skinner will be around a 35-win team. Using our win-curve formula displayed on the graph above, I am going to assume a 35-win season would see the team draw around 734,719 fans. The multi-million-dollar questions is how much revenue would be expected from this number of fans.

Without access to the team’s private financial numbers (if anyone wants to slide into my dms, they’re open 😉), I will do my best to estimate revenue. I have used the Sabres’ fan cost index to attempt to calculate the team’s revenue directly related to attendance. In simple terms, the fan cost index looks at the cost of a family of four to attend a game. This includes tickets as well as food, drinks, merchandise, and parking. Unfortunately, the most recent season I could find was the 2014 season, which had a cost of $291 for a family of four. I divided this number by four to get the average cost for one person. I then employed an inflation rate of 10% for each season. This means I estimated the revenue from one person attending a Sabres’ game to be $107. Based on the team’s attendance, I estimated the Sabres would have made $78,206,094 from attendance in 2018. In the table below, I estimate approximately how much additional revenue the Sabres may generate with an additional win in the next eight seasons. This does not take into account “corporate money,” which could include sponsorships and television advertising since Pegula Sports and Entertainment runs their own broadcast network.

The big money really comes from the sponsorships and advertising, which are excluded from the table above. As I’ve previously stated, the Sabres have benefited from tremendous fan loyalty so there is only so much they can add in attendance and subsequent revenue. We now need to turn our attention to the impact of Jeff Skinner on the team’s wins as well as the impact of winning on sponsorships and advertising.

The Impact of Jeff Skinner

There have been many attempts at creating models that capture how many wins a player is responsible for in hockey. One such model is from @EvolvingWild. Their calculations have Jeff Skinner as a player who provided three additional wins in the 2018-2019 season. All of their work is housed on their website, https://evolving-hockey.com/. Although I respect the work they have done in this regard, I think using just three wins as Skinner’s impact is a little low. Let’s look at it this way. Skinner himself provides three wins. Additionally, his presence in the lineup allows other players to play different roles as well.

Let’s assume Skinner plays on the top line with Eichel. If Skinner were not there, the Sabres would have to play Conor Sheary there instead. Now Conor Sheary is not available to play on the second-line so Evan Rodrigues would need to play that role, instead of centering the third-line. Now the Sabres have to use Johan Larsson or Vladimir Sobotka as their third-line and fourth line centers instead of only having one of them in the lineup and the other off the roster. How many wins is this impact worth? I do not have a good answer so I estimated the impact to be another three wins. Therefore, I think Skinner’s presence in the Sabres’ lineup helped the Sabres earn approximately six additional wins. I want to be clear, this estimate is not based in any sort of math or statistics. Below I have provided a table showing what my estimates are for the Sabres’ win totals for the next eight seasons, with and without Skinner. Again, these estimates are not based on any sort of model.

I then took these numbers and translated them into a monetary amount, using the revenue from additional win table. The results of this exercise can be found in the table below.

At this point, it looks like signing Skinner would not be a wise financial move for the team. However, we still haven’t accounted for the additional sponsorship and advertising revenue the additional wins could generate for the team. Below are what I think could be the revenue generated from sponsorship and advertising for an additional win for the next eight seasons.

Let’s now take a look at the updated difference when taking the sponsorship and advertising revenue into account.

My revenue projections do not seem to justify paying Skinner what he is likely to sign for. Since my revenue and win projections, are based in some fact but are ultimately estimates, they should be taken with a grain of salt. I assumed there would be no impact on sponsorship and advertising revenue by having Skinner be a player that has a negative impact in his final season.

One factor that could come into play that my calculations do not capture is if the Sabres’ fans finally say enough losing and dysfunction is enough and stop showing the same level of loyalty. If Jeff Skinner walks and the team fails to make any other major additions, things certainly could hit that level. Now we are not just discussing the additional revenue Skinner’s performance and presence will likely provide, but also a loss of revenue without Skinner. Taking this into account, could make the revenue difference close to what Skinner could be paid. Below I have assumed the Sabres lose half of what they would make if they were to retain Skinner in the next three seasons. That would also have a compounding effect as they likely wouldn’t be able to start inflating their revenues until 2023. Below I show two tables. The first is how revenues could be impacted in this situation, the second shows the difference with and without Skinner.

Now the numbers start to tip towards the side of signing Skinner being a financially wise move. To wrap this section up, I will look at the revenue and expense of Skinner’s contract in net present value (5% discount rate), to assess whether this contract would be a worthy investment. Although it would be extremely unlikely, I assumed Skinner receives his $72M in equal payments of $9M a season. I am also working off the assumption that this happens in a vacuum. The Sabres would likely spend some or all of that money on other pieces. They would obviously provide some value but it is impossible to predict what level of impact they could have.

Based off of my assessment, I do not see the financial value of signing Skinner being there. My assessment should not be taken as the end all, be all but there should definitely be some internal discussions in Buffalo. From a hockey standpoint, the team needs to retain Skinner so the question is how do they make it work?

How do the Sabres’ Justify Signing Skinner

I see two ways the team can justify signing Skinner even if his contract results a financial deficit. First, the team can supplement the roster with underpaid talent. The easiest way to accomplish this is with players on their Entry-Level Contracts (ELCs). However, value can also be found with restricted free agents and even UFAs if done properly. Going into next season, the Sabres will have Dahlin, Reinhart, Mittelstadt, and Montour who should fall into this category along with any other prospects that play significant minutes. Over the life of Skinner’s contract, it will be critical for the Sabres to wisely manage their young assets as well as draft and develop well as many of the afore mentioned players will be in line for significant raises soon.

The second way the Sabres’ justify this financial commitment is by going through the exact exercise I have with their internal data. Predicting future win totals is difficult, regardless of the level of data you have access to. Predicting attendance and revenue is much less difficult to do internally. The Sabres or any team looking to make a big free agent signing should be going through the exact process I have. Having a salary cap and revenue sharing structure makes the NHL different from MLB but not drastically different where teams should not be employing many of the same valuation methods. The amount of data available to teams has grown exponentially and will hopefully take a massive step forward next season with the addition of tracking data. The time is now for teams to transition from paying players based on past performance to paying based on the future value they will provide and using data to support those contracts.  

Image via BuffaloNews.

KYLE STICH is the Director of AFP Analytics.  In addition, Mr. Stich is a tax specialist and Director of Operations at AFP Consulting LLC, whose clientele include professional athletes performing services on three separate continents. Mr. Stich earned his Master of Science in Sport Management with a Concentration in Sport Analytics from Columbia University in 2017. He earned his undergraduate degrees in Accounting and Sport Management from St. John Fisher College in 2015, where he has served as an adjunct professor teaching Sport Finance and Baseball Analytics.

NHL Free Agency Predictions and Projections

As NHL free agency inches ever closer we wanted to have a little fun and make some predictions about what we think could transpire over the next few days. We’ve identified five forwards and five defensemen to make some predictions on. Four in each category are unrestricted free agents while the other two are top trade candidates. For the free agents, we have given contract projections that we arrived at using our internal methods (sorry, we won’t be disclosing them at this time). All the team picks are solely our opinions and little to no statistical analysis has been done to come to those predictions. Justin and Kyle came up with their picks completely independently without comparing notes.

John Tavares

Kyle’s Pick: New York Islanders

Contract Prediction: $92.5M over 8 years; $11.56M AAV

Had I been writing this a few weeks ago I might not pick the team I will but the more things develop, the more I think John Tavares stays with the Islanders. The team has stabilized their front office and hired a Stanley Cup winning coach. They just had a tremendous draft and have plenty of cap space to sign Tavares to the contract he commands. Tavares is just too valuable to the Islanders for them to lose him. The team will certainly still have some holes to fill his offseason on their blueline and in net but it will be much easier for the team to draw some talent if Tavares stays. I think the Sharks could be a dark horse here but ultimately Tavares will stay with what he knows.

Justin’s Pick: New York Islanders

John Tavares is arguably the best player to reach free agency in recent memory. If I were Tavares I would look to get out of Long Island. He will be able to handpick his next team and judging on some of the media reports he would be willing to consider teams in California. After the recent moves made the team I think he would fit best on is the San Jose Sharks. The Sharks have the cap space and the young talent that should be enough to attract the best free agent in the class. His speed and skill would blend nicely with a player like Evander Kane. However, I think the fun is not going to happen and Tavares is going to resign and stay a member of the New York Islanders. From what has been made public, Tavares is a very loyal player and the new arena is enticing to him. I hate to take the easy way out, but the Islanders have the cap space and enough young talent to make it worthwhile for Tavares to hang around. A team does not fire its coach and general manager if it does not feel that it has a great chance of holding onto its star player. As teams are making the pitch to Tavares this week, the Islanders will probably be the team to beat.

Paul Stastny

Kyle’s Pick: Colorado Avalanche

Contract Prediction: $24.7M over 4 years; $6.17M AAV

I think Paul Stastny goes full circle and returns to the place where he started his career. The Avalanche have plenty of cap space and could certainly use a boost at center behind Nathan MacKinnon. The team made the playoffs this season and if they want to keep the momentum going next season, they are going to have to add talent to keep pace with the central division arms race. I don’t think a return to the Blues or Jets is out of the question. Going back to the Jets would likely have to be for less money or less term but it might give Stastny the best chance at lifting the cup. I think dollars and term from a contending team win out with Stastny back in Denver.

Justin’s Pick: Colorado Avalanche

If I am Paul Stastny I would do everything in my power to stay in Winnipeg. Stastny is aging and the 32-year-old forward only has a handful of seasons left and the Jets figure to be one of the strongest teams in the league again next season. With that being said, there will be other teams interested in his services. Teams like the Philadelphia Flyers and St. Louis Blues would make sense to sign Stastny. The Flyers could use two-way center to help some of their young forwards and figure to have the space to sign Stastny. Stastny has been asked about a return to the Blues and he did not shoot down the idea. The Blues still feel that they should be a contending team and Stastny is a player that would help the team immediately. The former Blue provides exactly what the Blues are looking for and I would not be surprised to see the Blues in the Stastny sweepstakes. The Canadiens and Avalanche are rumored to be interested in Stastny and my pick is the Avalanche. Stastny started his career in Colorado and now seems like the perfect time to return. The team is stacked with young talent and Stastny could step in and help lead the team into the playoffs for the second straight season.

James Van Riemsdyk

Kyle’s Pick: Dallas Stars

Contract Prediction: $38M over 6 years; $6.3M AAV

James van Riemsdyk has to be the toughest to predict. On one hand, he is probably the second best forward available on the free agent market behind Tavares. On the other hand, there are probably some trade dominoes that could fall between now and July 1^st that could completely change the landscape for JVR. Tavares’s decision could take a potential suitor out of the mix for JVR. Once Tavares makes his decision, you would have to look at what happens with Ryan O’Reilly and Erik Karlsson. Though both players are players at different positions, adding their salaries will likely shift the amount of cap space available. If Buffalo flips O’Reilly for little salary in return, they suddenly have a plethora of cap space with a need on the wing. If a team trades for O’Reilly or Karlsson, they will likely be committing too much cap space to that player to also add JVR. I think the Stars are a team who are rumored to be looking to make a splash this offseason but will lose out on both Karlsson and Tavares will turn their attention to JVR. I would also watch out for Vegas if they miss out on any of those players as well.

Justin’s Pick: Dallas Stars

Depending on which reporters you are willing to trust it seems like more than half the league has expressed interest in James van Riemsdyk. At this point the most reliable reporters have confirmed most of the rumors so JVR will be a player to watch in free agency. Making a prediction here is going to be tough since so many teams are rumored to be showing interest. I think van Riemsdyk would fit nicely in Dallas. The Stars are in the Tavares sweepstakes so their willingness to pay for a forward is there. JVR would fit nicely in their lineup and the team will be looking to bounce back after missing the playoffs.

Ryan O’Reilly

Kyle’s Pick: Vegas Golden Knights

This pick will likely come as a surprise but I think this makes plenty of sense. Vegas will have to add some salary this offseason and can easily absorb O’Reilly’s cap hit for years to come. O’Reilly might not have the speed of other Vegas players but everything else he brings would be a great fit in Vegas. Vegas doesn’t have a great second-line shutdown center that O’Reilly brings. By acquiring a player who is thought of as one of the best two-way players in the game, Vegas could put their dominant scoring line in an even more favorable position. We can debate how important faceoffs are but Vegas was exposed at the dot in the Stanley Cup Finals. It seemed like they lost nearly every important draw. Ryan O’Reilly solves that. Vegas also has the assets to make a deal happen. I could see a deal revolving around Cody Eakin and Alex Tuch making a lot of sense. Rumors have swirled forever connecting O’Reilly to Montreal and St. Louis that I think if a deal was going to be made that it would have been made already.

Justin’s Pick: Buffalo Sabres

Ryan O’Reilly is not a free agent, but his name has been circulating in trade rumors since the season ended. The Sabres are looking to get faster and moving the $7.5M cap hit would help their cause. The Canadiens and Blues were rumored to be trying to deal for O’Reilly at the draft, but the deals fell through. The Sabres could have been looking to acquire picks in the deal so now that the draft has past I think the he will start the season in Buffalo. Some media members are reporting that the Canadiens have stayed in contact with the Sabres about making a deal. The Sabres have no reason to move him for anything less than maximum value, they are not a cap team and O’Reilly is tremendously valuable to the team.

James Neal

Kyle’s Pick: Nashville Predators

Contract Prediction: $36.6M over 6 years; $6.1M AAV

If my prediction comes true, Neal could sign quickly but will likely end up with a smaller AAV than we have predicted. Since I’m likely wrong with my team prediction, Neal will likely wait until the JVR domino falls. As I was typing this, Pittsburgh just cleared $5M in cap space so they could find themselves in the mix but it looks like the Neal ship in Pittsburgh has already sailed. It seems like Nashville is looking to add again and was certainly disappointed to lose Neal last year so this gives them the opportunity bring Neal back. Basically, what I typed for JVR applies to Neal as well if he doesn’t go to Nashville.

Justin’s Pick: Winnipeg Jets

James Neal is an interesting case, when he was drafted by Vegas it was assumed that he would be traded at the deadline to a contending team. As we all know, Vegas was a contending team, so it would have been a horrible look to trade Neal. Now Vegas is in a tough spot as Neal is an unrestricted free agent. It seems like Vegas will not be bringing him back, so I think a team that misses out on Tavares is a potential fit for Neal. However, Neal is rumored to be looking for a very large contract and the market could dry up rather quickly. It is for this reason that I think Neal will sign a short-term deal in Winnipeg. I suggested Stastny opt for a short-term deal but if he goes to the Avalanche the Jets will have room to add a forward in the short term and Neal fits the bill perfectly. If Neal is unable to get the long term deal he desires, Winnipeg looks to be a good fit in the short term.

Erik Karlsson

Kyle’s Pick: Vegas Golden Knights

If both this prediction and my Ryan O’Reilly prediction come true, Vegas will likely have severely depleted their organization depth but would have an awesome team for next season. Vegas could also take on Bobby Ryan’s contract to lessen the price they would have to pay for Karlsson. Ryan would be a great replacement for James Neal, who seems destined to leave the team. Acquiring Ryan, O’Reilly, and Karlsson would put Vegas close to the cap and it remains to be seen if they would be comfortable operating there. I would imagine Tomas Tatar would have to go back to Ottawa in this type of trade so if this is going to happen it would have to be before July 1^st, when Tatar’s No-Trade kicks in. I’ll probably be wrong on this or the O’Reilly prediction but I’ll hedge my bet. Vegas will make a splash this offseason.

Justin’s Pick: Ottawa Senators

John Carlsson signing was the first defensive domino to fall. Many people expect Erik Karlsson to be the next domino to fall, but I am not one of those people. I think he starts the season in Ottawa. The Senators are facing tons of pressure to put a good product on the ice this year, especially after they kept their first-round pick. The organization is not in good standing right now, a player like Karlsson is the only stabilizing force, moving him would only make matters worse. Holding onto Karlsson could put the team in a tough spot at the trade deadline but I think it is something the organization will do. The way things are going for the Senators I am expecting the worst and holding onto Karlsson and selling him for 50 cents on the dollar the deadline seems like the worst-case scenario.

Calvin de Haan

Kyle’s Pick: New York Islanders

Contract Prediction: $21M over 4 years; $5.2 AAV

I frankly have no clue what will happen with de Haan so I’m going to predict he returns to the Islanders. With new management and coaching in place, de Haan doesn’t have to move to get a fresh start. De Haan wasn’t the problem on the blueline last season and the Islanders are going to have to fill some spots up and down the roster. Retaining de Haan would be one less player they would have to find in free agency. Calvin de Haan would be a great option for teams who wanted to pursue Carlson and miss out on Mike Green. He should have plenty of suitors so a team striking quickly will likely be the one to land him.

Justin’s Pick: New Jersey Devils

Despite a shoulder injury there are several teams who are interested in de Haan. A team I can see signing him are the New Jersey Devils. The Devils have a few free agent defensemen of their own and f they are unable to resign them de Haan could be a fit there. The Devils will have the cap space and a high upside player like de Haan fits exactly what they are looking for. He could be a nice complement to Will Butcher and his puck moving ability would help the forward group as well.

Jack Johnson

Kyle’s Pick: Edmonton Oilers

Contract Prediction: $17M over 4 years; $4.2 AAV

I think Montreal will also be in the mix here. Are we seeing a trend? Ultimately, I think it is Edmonton that makes the move. They seem desperate to add another defenseman and they have yet to do so. Jack Johnson fits everything Edmonton wants. A player with experience who can move the puck and is probably not as good as many hockey people think he is. Edmonton must improve their roster around McDavid and they will think this will do it (though it likely won’t).

Justin’s Pick: Montreal Canadiens

I am not a big Jack Johnson fan, but he will have a handful of teams looking to sign him come July 1^st. The defenseman is aging but there still appears to be quite the demand and willingness to pay. The Penguins are rumored to have interest, but I think trading Sheary and Hunwick was done to go after a bigger fish. The Montreal Canadiens are also rumored to have shown interest and I can see the team being willing to pay. The Habs are in a win now mode despite not having the strongest roster, that is a recipe for a big free agency splash. Johnson fits the bill and would fill a need on the back end. This would seem like a panic move to me, but I would not be surprised to see it go down.

Michal Kempny

Kyle’s Pick: Washington Capitals

Contract Prediction: $7.4M over 2 years; $3.7M AAV

Kempny is probably an underappreciated player who we will probably over shoot with our contract prediction. Teams should be interested in Kempny but if Kempny ultimately wants to stay in Washington, that’s what will happen.

Justin’s Pick: Washington Capitals

This seems like an easy one. Kempny is going to stay in Washington, why would he want to leave and why would the Capitals let him go? After being acquired from the Blackhawks Kempny found his game in Washington and played a key role during the playoff run. He shouldn’t cost the team a crazy amount and his style of play fits the style of play. When the player comes out and says the goal is to resign, it is obvious what the plan is. Kempny will not have to take a large “hometown discount” because his price will not be all that high to begin with.

Mike Green

Kyle’s Pick: Philadelphia Flyers

Contract Prediction: $24M over 4 years; $6M AAV

This is another pick I don’t feel overly confident in but Philadelphia will be poised to make a splash in free agency and this is the biggest fish I think they have any sort of chance at landing. Green is probably an upgrade over Brandon Manning and with cap space and few holes on their roster, the Flyers are in a position to pay for any sort of upgrade they can get. They are probably in a win now window so a short-term deal with Green would make loads of sense.

Justin’s Pick: Detroit Red Wings

Mike Green is an interesting case, he has a very specific skillset that some of the better teams in the league should be looking to acquire. The Capitals and Green are connected for obvious reasons, but I do not see the Caps having enough cap space to make it happen. I can see Green joining the Lightning, but they may need to clear some cap space to make it happen. For those reasons I am predicting that he stays in Detroit. I hate to make the boring prediction, but it looks like Green isn’t chasing the most money and the better teams in the league may not have the cap space required to sign a player like Green.

We hope you enjoyed reading! Please check back often for more free agency related content!

UPDATE (6/28): We have published our free agent contract predictions here

 

KYLE STICH is the Director of AFP Analytics.  In addition, Mr. Stich is a tax specialist and Director of Operations at AFP Consulting LLC, whose clientele include professional athletes performing services on three separate continents. Mr. Stich earned his Master of Science in Sport Management with a Concentration in Sport Analytics from Columbia University in 2017. He earned his undergraduate degrees in Accounting and Sport Management from St. John Fisher College in 2015, where he has served as an adjunct professor teaching Sport Finance and Baseball Analytics.

JUSTIN WHITE is an intern AFP Analytics. Justin is a graduate of St. John Fisher College where he earned his degree in Sport Management and Statistics. He has worked with the Rochester Americans and members of their coaching staff on various analytics and statistics-based projects.