Quote:
Originally Posted by Flames Draft Watcher
Some bizarre takes by Moustache in this thread.
Team does not have all the leverage.
Some bad math (thinking the difference in one of the seasons won’t be made up by the whole contract) and some lowball numbers if Tkachuk keeps this up.
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I see your sentences and do not get what is ‘bizarre’. It makes perfect sense.
Don’t get hung up on the absolute numbers.
- You have the player’s ask, you have the team’s offer. I’m talking about as high and as low as they go when they get to an impasse, not the starting point of 5 and 10 or whatever is obviously not mutually acceptable
- you have the gap
- you have the term
Use 7 and 8 instead of 6 and 7 if that floats your boat. It actually takes longer to make up the gap.
Say, for arguments sake, we take a case with this scenario:
- player and team have their starting points and negotiate to as close as they can get
- Player asks for 8
- Team offers 7
- This is where they both stop and don’t budge.
- Player holds out
- Player is so hung up on his number (in this case, 8) that he is willing to hold out 1 year
Outcome A:
If the player is willing to hold out 1 year to get 8 and wins, then after 8 years (ie 1 yr at 0 and 7 yrs at 8), then he has made 56 million. (After 4 years he has made 24.)
Outcome B:
If the player accepts 8 years at 7, and doesn’t hold out, then after 8 years he has made the same 56 million. (After 4 years he has made 28)
So he is break even after 8 years, but up until that 8th year he always has more money.
Right?
Now, let’s consider the time value of money. What IRR do you want to assume, say 8%? Ok.
The NPV of Outcome A’s 56 million dollars is 43.44 MM in today’s dollars
The NPV of Outcome B’s 56 million dollars is 41.65 MM in today’s dollars
So after ‘breaking even’ he has actually even left a couple of million on the table
It’s not bad math. At some point there, measured in years, there is a breakeven. And it’s not year 1, it can stretch out almost to the end of the contract, if the gap is small. At which point the contract is up and they have won nothing.
The team has the majority of the leverage. The R in RFA is restricted.
What can the player do? Withhold services. And not get paid.
And sitting out a full year at 7 or 8 million takes years to recoup.
The player has stubborn pride, but sure as heck doesn’t have the majority of the leverage.