The Myth of Cost-Per-Point, Volume 2

You know what? Any idiot can go spend money. There are so many idiots out there that spend to the cap every year – take a look at where they are. It all comes down to cost per point. That’s the only stat I care about – cost per point.

- Eugene Melnyk, Ottawa Senators owner

January 14, 2012 on TSN 1200’s “The Drive”

Five years ago, I did a deep dive into these infamous words of Melnyk’s. The conclusion of the work was simple: spending does not guarantee you success, but NOT spending guarantees you won’t have success. From 1999 to 2013, this rule held true with two notable exceptions: the 2004 Tampa Bay Lightning, who had Brad Richards and Vincent Lecavalier as RFAs and Martin St. Louis as a 94-point Art Ross winner making just $1.5M; and the 2008 Anaheim Ducks, who benefited from the turmoil that came right after the lockout and teams suddenly having to adapt to the salary cap. Other than those two, 15 years of NHL history demonstrated that Stanley Cup-winning teams were above league average spending and near the salary cap once it came into effect.

I recently was asked how these results have changed over the last few years, and I decided to use this week’s Wednesday long form to take a look at the last four years of data. It’s only four years, but it’s still interesting because, kind of like how 2008 was an outlier after than 2004-05 lockout, 2015-16 should have seen the end of any lasting effects from the change in cap rules of the 2012-13 lockout. The data below continues the trend of the previous years: only teams that spend to the cap win the Cup.

The data shows the spread of the teams’ spending in each year, as well as five trends of interest for Senators fans through the years. Obviously, there’s no Cup winner or cheapest playoff team in 2019-20. Possibly my biggest finding in doing this exercise is how fortunate we are to have CapFriendly.com, which gave me all this data very, very easily. It was challenging to do this exercise for 1999-2014, and wasn’t hard at all this time around.

The first thing that sticks out to me is the mirroring of the Cup winner and the salary cap. The Cup winner has been right up against the salary cap each and every season. The biggest discrepancy was this past year, when the Blues were a whopping $586k (or 0.7%) below the salary cap. The previous year, the Capitals were just $25k below the salary cap, and the Cup-winning Penguins were exactly on the cap each season. It may seem curious that a team ends up exactly at the salary cap, but the answer is very simple: long-term injured reserve for players such as Pascal Dupuis, Eric Fehr, and Trevor Daley allowed them to reduce their salary hit to exactly where their teams needed it to be, and all those players had remaining days on the IR that they weren’t on LTIR, so the Pens could even have accommodated another player in a trade if they’d wanted to.

In theory, the Sens could put several players on LTIR this coming season for some cap relief, but because LTIR is never mandatory, the Sens are instead using the cap hits of Ryan Callahan, Clarke MacArthur, and Marian Gaborik to get to the cap floor this season. The main concern with using LTIR for cap relief is that a player can’t go on it until the season starts, which is why we see a few teams projected above the salary cap for 2019-20. The Toronto Maple Leafs, for example, will soon put Nathan Horton, David Clarkson, Zach Hyman, and Travis Dermott on LTIR and suddenly find themselves $13.6M of cap relief. In what is I’m sure unrelated news, Mitch Marner remains unsigned.

Coming back to Ottawa, it’s interesting to see what happened with spending over the last few years. The only year in which the Sens surpassed league average spending was in 2017-18, and it’s not hard to see why: the Sens were coming off a season where they reached Game 7 of the Eastern Conference Finals, and came into the year with heightened expectations. The Kyle Turris for Matt Duchene trade upped the cap hit a bit, and Clarke MacArthur actually spent half the season on IR instead of LTIR. Expectations were a little higher for the Sens, and Pierre Dorion went out and spent a bit more money — only for the team to crash and burn. And from there, the plan was clear: the Sens cut salary and went back to down to near the bottom of the league.

One thing I found interesting from the previous article was the fact that there was often a team near the bottom of the pack in spending that made the playoffs. In fact, three playoffs in a row (2010, 2011, 2012), the Nashville Predators made the playoffs as the lowest-spending team in the league. From 2015-19, we see this trend again, with low-spending teams still making the playoffs. The 2017-18 Avalanche were fourth-last in the league in spending and made the playoffs, and the 2018-19 Hurricanes were dead last and made it all the way to the Eastern Conference Finals. Low-spending teams still make the playoffs, and sometimes even make noise.

If the Sens continue to be below average spenders (i.e. don’t spend to the cap for “five years of unparallelled success”), this is probably about the best we can hope for. Making the playoffs is definitely possible by playing moneyball hockey. A smartly-managed budget team can compete, make the playoffs, hopefully earn a tidy profit for their owner. The highest cap hit on the 2018-19 Hurricanes was Jordan Staal’s $6M, and the Hurricanes found success with a bunch of stats geek favourites, the experience of Justin Williams, goaltending on a shoestring budget from Petr Mrazek and Curtis McElhinney, and big performances from ELC players like Sebastian Aho and Andrei Svechnikov. The problem with this model is that either it gets expensive (evidenced by Aho’s $7.529M raise this offseason), or it forces you to sell off your talent, kind of like the Sens did this past trade deadline. Unproven players can greatly outplay their contracts, but then at some point they want to get paid. Either budget teams get expensive (like the Preds, who jumped from $62M to $80M in cap hit over the past five years) or they have to trade their talent and hope to find diamonds in the rough again, which we’ll refer to as the Melnyk model.

Of course, extrapolation is a dangerous game. You can’t say something won’t happen just because it hasn’t happened. There is a motto that anything can happen in the playoffs, and to some extent that’s true: the 2016-17 Senators weren’t projected to do anything special, and they came within a double-OT goal of the Cup finals. After all, hockey is a game heavily influenced by luck — especially in the small sample size theatre of the play-offs. All that any star player, zone strategy, line combination tries to do is tip the luck in one team’s favour. You take your advantages wherever you can get them. But one of the biggest advantages a team can have is spending money on talent. Generally, better players will get better results, and better players tend to cost more money. A cheap team can sometimes outperform expectations, but almost always an expensive team will come out on top. Considering that the Cup winner has been within 1% of the cap each one of the 14 years since the implementation of the salary cap except for one, I would bet on that trend continuing. Otherwise, this turns into Mike Pence arguing that smoking doesn’t kill people because one-third of habitual smokers don’t die of smoking-related illnesses. Sure, not every team that spends to the cap wins the Cup, but only 3-4% (depending on the number of teams in the league) of teams win the Cup each year, and we’ve seen 93% of them spend to the cap. It would be foolhardy to have serious intentions of competing and ignore that discrepancy.

The important thing to remember here is the necessity of smart spending. Spending lots does not guarantee a Cup, as the 2015-16 Canucks ($0 in cap space) or the 2018-19 Red Wings ($0 in cap space after claiming all of Henrik Zetterberg and Johan Franzen’s salaries as LTIR) will tell you. The Penguins were right up against the cap again this past season, but having Jack Johnson eat up $3.25M of that was probably not smart. You could find a few examples from every NHL season of a team that spent right up to the cap and failed to even come close to a playoff spot.

What’s important to remember is the way that logic works: spending DOES NOT guarantee you’ll win the Stanley Cup, but that does not mean that not spending gives you a shot at the Cup. And at the end of the day, nobody cares about cost-per-point. Nobody remembers a team that won the President’s Trophy unless they also won the Cup, or are laughing at them for not winning in the playoffs. Let’s remember the mockery the Predators got for last season’s Regular Season Western Conference Champions banner. Championships are what matter, so at best, cost-per-Cup is the stat we care about. And here’s where that stat stands: spending to >99% of the cap has won 93% of the post-lockout Cups. Spending to even just league average pretty much guarantees you won’t win it all. I feel completely confident in saying that cost-per-point is a myth, and no team should consider it a goal worth pursuing.