Sports Law Blog
All things legal relating
to the sports world...
Wednesday, September 13, 2006
Islanders Sign Goalie Through the Year 2022!

Kevin Allen of USA Today reports that the New York Islanders just signed goaltender Rick DiPietro to a 15-year, $67.5 million deal ("Islanders sign DiPietro to record 15-year deal"). Allen notes that the deal is believed to be the longest term player contract in NHL history, although Wayne Gretzky had a 21-year deal that included some personal service stipulation. There's no service stipulation in DiPietro's deal.

DiPietro's contract runs through the year 2022, and DiPietro will be 40 years old at that time! Allen notes that a 4 or 5 year deal is considered a long term deal in the NHL, and the longest deal signed in the league so far this summer was Patrik Elias's 7-year, $42 million deal with the New Jersey Devils. The GM of the Atlanta Thrashers, Don Waddell, is quite surprised: "It's highly unlikely that you will see teams go beyond that. This is a once-in-a-lifetime contract. Ownership must feel very strongly that he's their guy for the next 15 years."

But when agents are in awe over this contract, I really begin questioning the logic:
"I would think it's an aberration. I've been a little bit surprised by the length of contracts in general, but this certainly raises the bar. It's mind boggling that anyone would sign a 15-year deal, but hallelujah. My sense of the marketplace was that there was going to be a lot more musical chairs. There would be core players, but everyone else would rotate. Do you really want one player to be your key guy for that length of time? Obviously the Islanders do."
I hate making generalizations, and I typically don't like to debate business decisions made by teams, but I question why any team in any sport (that has guaranteed contracts) would lock up any player to a long term contract. First, there are just too many risks involved, and the amount of the investment is just too great in proportion to the risks. Secondly, on long-term deals the team usually ends up paying the player close to the same amount that it would pay him under a short-term deal anyways, but takes on much greater risk. In any other industry, price is typically tied to the amount of risk. Finally, long term contracts in hockey are even riskier than in baseball because, if the team buys out the remainder of the contract prior to the end of the term, the team takes a hit against their salary cap in the amount of the buyout.

Interestingly, new Islanders GM Garth Snow was the backup goalie behind DiPietro last season, and they are close friends. DiPietro told Allen at the interview: "I was probably more excited than anyone when he became general manager." Yeah, I can see why....


Well, so they will suck for 15 years. Wang (the owner) is wrong on this one (or has the inside scoop on how to get out of Steve Young's USFL contract or Magic Johnson's 25 year deal). Or, maybe they will file bankruptcy like the Pens and the contract will be discharged?

Anonymous Anonymous -- 9/13/2006 7:04 PM  

Assuming some sort of standard increase in the amount of salaries, won't this guy be getting severely underpaid in six or seven years, by comparison to his peers?

Anonymous Collin -- 9/13/2006 7:32 PM  

Also, slightly off topic, but what is the obligation of an individual solvent team to a contracted player if the entire league goes under?

Anonymous Collin -- 9/13/2006 7:34 PM  


You raise a good point about increasing salaries. However, the median salary for the 2005-06 season is about the same as it was for the 2000-01 season. If I was running an NHL team, I guess the prospect of increasing salaries wouldn't sway me to enter long term contracts anyways. The last thing you want is to have a player on your team who thinks he's underpaid. And at that point, good luck trying to convince the player that he's benefitting because he has a long term contract.

I'm not sure what you mean by the league going under. Do you mean bankruptcy? In that case, the contract is between the player and the team, and if the team is solvent, maybe the team could discharge its obligations by arguing impossibility/frustration of purpose?

Blogger Rick Karcher -- 9/13/2006 7:57 PM  


Isn't a comparison between 2005-6 and 2000-1 a somewhat skewed comparison, considering what happened to the NHL in between those dates?

But let's take the issue out of the NHL, though, since there's so many variables. Lets consider baseball, and the glory that is Alex Rodriguez's contract. How many folks who are substantially worse than him will be earning more than him by the end of that contract? Or put that contract aside, since it's always used as a stalking horse. Look at Jeter's contract. Isn't he tied in for many more years? Won't there be a sizable number of folks worse than him who're earning more by that point? (Arguments that he's actually not any damn good outside of some good hitting this year aside)

I understand the point that the team wouldn't want to tie itself to a franchise player for that long. I just think that the long-term contract is equally bad from the star player's perspective. It is, however, excellent for the non-star whose buddy becomes a GM.

Anonymous Collin -- 9/13/2006 8:19 PM  

The insurance on this deal--or lack of insurance--only adds to the Islanders' risk. According to an article on TSN, "The Islanders only have insurance on the first six years of the deal. If DiPietro is healthy at the end of that six-year term, they can purchase another six years of insurance."

So what happens if DiPietro blows out a knee in year 4 of the deal, but instead of retiring, tries to recover and basically stays in constant rehab for the next 11 years? The Islanders would not have insurance on 9 of those 11 years, so they would be on the hook for $40.5 million. I know the NHL has a long-term injury exemption policy that would provide the Islanders with salary cap relief (the Boston Bruins recently used the long-term injury exemption on Alexei Zhamnov), but they would still have to pay DiPietro his $40.5 million. Yikes.

Blogger Michael McCann -- 9/13/2006 9:11 PM  

Steve Young's USFL deal was for 45 years, not that it mattered, the USFL folded in one year.

Anonymous Chris -- 9/13/2006 9:20 PM  

Right after this was announced, I heard the rumor that the NHL was trying to find a way to void it, and that their lawyers were already working on it.

Which brings up the question - as ridiculous as the contract is, should the NHL do anything about it, or should they just let Wang toss his money away?

Blogger Satchmo -- 9/13/2006 9:21 PM  

Not for nothing, but this is one of the most ridiculous contract announcements I've ever heard. Average contract increases over the life of the deal make absolutely no difference whatsoever. None. There is no doubt that this contract will hamstring the Islanders, it may not be in the next two or three seasons, but no player in the NHL not named Gretzky could possibly be worth a 15-year commitment, regardless of the money involved. Not to mention the fact that DiPietro could hardly be considered the best goalie in his division, (that would be Martin Brodeuer), let alone the league.


Anonymous John J Perricone -- 9/13/2006 9:40 PM  

Michael, Satchmo, John,

I think the moral of the story is that an owner hiring a GM to negotiate multi-million dollar deals should probably first look for somebody with experience, as opposed to his backup goalie last year.

Blogger Rick Karcher -- 9/13/2006 10:48 PM  

I'm not sure it's a 15 year deal so much as a way of circumventing the salary cap by essentially deferring a good chunk of the contract to a time when it will take up less of the salary cap. As I understand it, the contract does not have escalators, and the team guarantees it unless DiPietro chooses to retire. It's for a little over $4 million a year - which is about two-thirds of what an elite goalie makes right now, with prices escalating again. If they think he's their goalie for the next 8 years and will be significantly above average for that time the deal makes sense for the Islanders. The question is, does this sort of quasi-deferred payment violate the spirit (or even the letter) of a hard salary cap? If it's allowed to stand, will it encourage teams to get into a mess of deferred contracts that will drive down their ability to sign players to new contracts?

Blogger Swordsmith -- 9/14/2006 1:02 AM  

This is why hockey is what it is. This is why hockey had a whole season cancelled. People who run hockey and the teams are not doing a good job.

Anonymous tommie -- 9/14/2006 9:38 AM  


He gets exactly 4.5M per year, which pays him a little more than 2/3 of what the "elite" goalies make -- and my guess is that he's not considered as one of the elite. 4.5 is definitely a better than avg. salary for a goalie, put it that way. Regarding the cap, there is a deferral mechanism with respect to salary applied to the cap in the event of a buyout -- but if it comes to that, then the Islanders obviously made a bad deal. And as far as the possibility of a rising market of escalating salaries in the future that, in theory, puts the team at an advantage, I understand what you're saying if we were talking about mortgages or stocks. The problem is that you're dealing with emotions and relationships here. How often do we see players complain that they are tied to a contract in which they are undervalued? Lots -- and when that happens, the player demands a renegotiation, trade, etc. and the team usually does something because it doesn't want an unhappy player. But on the flip-side, when players are clearly overpaid under long term contracts due to injuries, decline in performance, etc., the team gets stuck with the bill.

Blogger Rick Karcher -- 9/14/2006 10:02 AM  

Rick -

I agree that it's a stupid deal, and if DiPietro does turn into an elite goalie he'll insist on renegotiating; I'm just saying there was a rationale for it beyond the many media "why do they think he can play for 15 years?" comments. As a salary deferral scheme I think it's falwed and likely to blow up in their faces (which is nothing new for an Islanders contract) but it's flawed in a more creative way than has been the Islanders norm.

Blogger Swordsmith -- 9/14/2006 11:39 AM  

I know you guys are attorneys, but let me give you a little Finance 101 lesson:

The longer you spread out expenditures the better. It makes all the sense in the world to just stretch this out as long as possible. Also, over 15 years, inflation (or a discount rate) will take effect and in today's dollars this will look like a steal.

However, as with the USFL, can we be sure that the NHL will last 15 years?

Anonymous Bill -- 9/14/2006 3:13 PM  


This isn't an issue of whether the team should pay the player now or defer it. So it's not about how long the team can spread out payment of the $67.5. Maybe you could explain yourself better? -- that's just something us attorneys like to do :)

Blogger Rick Karcher -- 9/14/2006 8:39 PM  

I just want DiPietro to win some games for USA Hockey. He's pretty much the only hope for USA goaltending.

As for legal matters, I agree that this contract is way too risky for the Islanders. Does anyone know if the language in the contract includes anything involving trades? This would obviously be an issue if he did not turn out to be the franchise player Garth expects him to be.

Also, do they really expect Dipietro to be the next Hasek and play until he is 40 years old? I would not count on it.

Blogger WMUpsci_student -- 9/14/2006 9:19 PM  

Post a Comment