Don't overreact to NHL arbitration "valuations"

A quick note on what the public numbers actually mean when teams and players submit them.

Arbitration cases are a harbinger of social media outrage.

The player and team will be far apart in valuation, the gap will be considerable, and in many cases standard reaction on Twitter/X/socialhellfire/etc… will be “This guy thinks he’s worth that much????”

We had the most recent case of this exercise on Monday. Troy Terry submitted his valuation for arbitration at $8 million, the Anaheim Ducks countered at $4.5 million.

It’s important to remember that NHL arbitration cases are also mediation. It’s not like baseball where the arbitrator picks one of the valuations, player or team, in hockey the middle-person can pick any value they choose based on the cases presented.

So the player comes in asking for more, much more in fact. Terry and his agent know that he’s not an $8 million player, but they also know if they ask for $6.5 million, that’s where the negotiation will start.

The player will then argue, using comparable players, that they are worthy of that value. One source with understanding of the arbitration process speculated that if it goes to arbitration, Terry would use Patrik Laine’s contract ($8.7 million AAV) as reason his $8 million claim is justified.

The Ducks know that Terry is more than a $4.5 million player. But if they start at $6 million, the arbitrator will use that as a starting point and they’ve already ceded territory to Terry’s camp.

So we go through the song-and-dance, of both mildly insulting each other to get to a middle ground.

It’s a much less gruesome version of King Solomon calling for the sword and declaring he’d cut the baby in half to appease both women claiming it was their child. Although in this case, neither side is going to immediately surrender based off emotional whim.

Historically speaking, the arbitrator splits it down the middle. As my Expected by Whom? co-host Prashanth Iyer laid out on Twitter.

The general formula is to meet in the middle, so Terry, in theory will sign for $6.25 million if it goes all the way to arbitration and the “meet in the middle” philosophy.

That would line up with the projected value by AFP Analytics, which projected Terry around $6.41 million on a five-year deal.

For another example, earlier this summer Ilya Samsonov was was awarded a $3.55 million contract by the arbitrator. Samsonov’s camp submitted a value of $4.9 million, the Toronto Maple Leafs had submitted a value of $2.4 million.

With higher-dollar decisions, like Terry, it’s a financial posturing. For players lower in the hockey eco-system, a team can play a bit dirty to further tank their value. For example, a team can offer a two-way contract, and then waive the player in the off-season — players always clear in this situation — and the team can then use that as a data point in arbitration to prove that mediator should shade closer to the team valuation.

I covered a case like this when I was on the Dallas Stars beat. Gemel Smith filed for arbitration, the Stars submitted a two-way deal to the arbitrator and waived him Smith before the hearing to prove lack of value. Smith ended up getting a one-way deal, but the Stars ended up getting their contract value.

On Monday I spoke to people from both the team and player side to make sure I still had this right, and I do.

One of the bigger challenges for both sides in arbitration is trying to predict what the other will counter with. It’s a cat-and-mouse game both sides play to try and find closer to their true value, and not the one that has been publicly submitted.

In the short-term, and financially speaking, the players and teams end up partners at the end of the arbitration case. But it’s not often a foundation for a long-term marriage, and most players that make it all the way to the hearing are moved to another team within 18 to 24 months.

It’s why, even after a number has been submitted, players and teams will still work to find a happy medium and salvage a relationship, even after both have been forced to make poor-faith financial offers publicly.

In fact, people I spoke to from both the team and player perspective said they’d be surprised if the Terry case ever made it all the way to arbitration.

It’s another reason these numbers aren’t worth overreacting to. Just like you shouldn’t overreact to college free agent signings or articles about offer sheets that don’t include the Montreal Canadiens and Carolina Hurricanes.