Leverage . . . .

With emotions running high on all sides of the Ryan Johansen controversy, most omit the single biggest part of the compensation negotiation equation. (UPDATED to include Overhardt interview)

Ryan Johansen is in Vancouver, while his teammates prepare for their opening pre-season games in Carolina and at home vs. St. Louis. Is this part of his personal strategy? Is he merely a pawn in a strategy conceived by his agent, Kurt Overhardt? A little of both? We don't know, and likely will never know, unless Johansen a) signs and goes public or b) fires Overhardt.

Since Jarmo Kekalainen and John Davidson fired some verbal shots across the bow of the Johansen camp, and went public with the offers the club tendered, focus has largely been on the numbers, with fans quickly lining up on the side of the club or the player. "Comparables" are being thrown about with alacrity, ranging from young studs to cagey veterans. Each side is alternately vilified for greed and/or attempting to take advantage of the other side. "Split the difference"is the battle cry of the day. Unfortunately, "split the difference" doesn't work here. Why not? Leverage.

If you want to buy my car, a run-of the mill vehicle, it's pretty much an arms-length transaction. I'll ask what I want, you'll make an offer, and if either one is ridiculous, you can just walk away. I'll eventually find a buyer at my price, or time will become a pressure, and I'll lower the price. You can always buy another car, if there is nothing horribly unique about mine. However, if mine is a 1974 Firebird Formula 400 with twin hood scoops, and you REALLY want it, leverage suddenly appears. You can't go just anywhere and get what I have. But if I have to sell quickly to get the money to pay my mortgage, leverage quickly slips in the other direction.

NHL player negotiations are NOT arms-length transactions, nor are they designed to be. The CBA is structured such that the clubs have the leverage early in a player's career, so that they have the opportunity to derive some of the benefit of the development work they devote to the player, without having the player poached by another club or being compelled to pay outlandish compensation to what is likely an unproven commodity. The player has zero leverage during the entry level contract term. At ELC expiration, they can hope for an offer sheet, which can put the host club in a bind. However, the compensation for offer sheets is intentionally punitive, so that offer sheets are a fairly rare occurrence. After year 4, that leverage begins to shift further toward the player with the acquisition of arbitration rights. After year 7, the leverage is squarely in the player's camp, due to the acquisition of UFA rights. Indeed, these lines of demarcation form some of the most contentious battle fronts for CBA negotiations, as players want leverage earlier, while owners want to keep that leverage longer.

So, the NHL system works (I know, I know . . . separate article) not because it is an arm's length situation, but because both sides get the advantage at different points in time. It's not dissimilar to the jury system, which works not because twelve impartial jurors are found, but because the system allows each side to find six that they believe is favorable to their side. Accordingly, to simply "split the difference" is not so easy in this setting, as that represents a surrender of leverage, which can have devastating consequences.

In the player negotiation world, as elsewhere, leverage = value. Clubs are able to keep salaries in closer check during the early years of a player's contract, enabling them to receive value for their development efforts, and (hopefully) identify which players are true talents that merit long term deals. For their part, players have the incentive to maximize effort with the understanding that the big paydays are to come. In the interim, they are not exactly paid starvation wages. The P.K. Subban situation is perhaps the most textbook case of each side using the leverage provided to them when it arose, with the end result being a Norris Trophy player getting his big payday.

So, a fourth year player with 30 goals simply does not have the same value as an 8th year player with 30 goals. That third year player could be Nikolai Kulemin, who impressed in his third season in Toronto with 30 goals and 27 assists . . .and has not topped 30 points since. To disregard that fact is to surrender leverage. If it's an isolated transaction between private parties, no big deal . . .it's your funeral. But when you are swimming in a pool of piranha with a bunch of your friends, you absolutely cannot be the first one to bleed. If the Blue Jackets surrender their leverage here, it not only jeopardizes their own salary structure, but those of every other team in the NHL, as every player agent will be waving the Johansen deal as a battle flag. In that case, I hope that Davidson and Jarmo have food tasters at the next league meetings.

From the tenor of John Davidson's remarks, I strongly suspect that it is Overhardt's fundamental disregard for this inherent leverage that has him most disturbed, particularly at this point in the process. If you want to pull this sort of thing in early June, fine. Make your point, look like a hero to your fellow agents. No big deal. But now things are serious. Camp time is being missed, game situations are going by the boards, and Johansen is a player that needs all of the work he can get. As many have noted, he is just over a season removed from being scratched in AHL games.

Another reason that the Blue Jackets cannot simply "meet in the middle" involves basic negotiation principles. No negotiator worth his/her salt is going to "meet in the middle" when the other side is not on the same planet in terms of value. That's called "bidding against yourself", and if that's how you like to negotiate, come see me -- I have a few things you might be interested in buying. Put another way, if a guys is asking $50,000 for is 1998 Taurus, are you going to "meet him in the middle"? I thought not. Same principle here -- at $6.5 million plus for a bridge deal, the Johansen camp is not in the same universe as NHL reality for bridge deals. (See Duchene, Subban, et al). Faced with that kind of demand, Columbus is not going to move and bid against itself.

The Blue Jackets have offered a variety of contracts, but it would be foolish to think that a long term contract is seriously in the cards, given the position of the parties. Johansen wants to follow the Subban example and prove his worth, then cash in . . . big time. Kekalainen and Davidson have both said that they have no problem with that, and would LOVE to be in the position to have to pay him big dollars . . . once he has the performance under his belt. The problem is that Overhardt wants his client to have all of the goodies now, while he waits for more goodies. That's not how it works.

It came to light today that several KHL teams have allegedly put offers in front of Johansen. That is always an option, regardless of leverage, but the Blue Jackets would continue to hold his NHL rights. So that perhaps becomes the test of whether this impasse is more Overhardt or Johansen. If Johansen were to bolt for Russia, it would be a pretty clear indictment of his true intentions. Nobody can stop that, but other NHL clubs would certainly take notice, and such a move would likely tarnish his value for a long time.

I've been looking at this thing from the perspective of the level of offer sheet at which the Blue Jackets would walk away. I think they would match a $10 million/ 2 year offer, but above that, I doubt it. Davidson knows far better than I where that line in the sand lies. Of course, an offer sheet itself represents somewhat a shift in leverage, as the offering team has obviously made the risk determination that the player is worth the draft pick compensation hit, and the receiving team is boxed in to a specific decision. It's really the only potential leverage a pre-arbitration player has, and it does tend to infllate value. However, until Johansen's camp indicates a willingness to accept that kind of number, it's a moot point. The Blue Jackets are not going to move a penny until they see movement into the "habitable zone" of compensation. That's the luxury that leverage provides. The Blue Jackets will be surrendering that leverage in 4 years, which is soon enough, from their vantage point. In the meantime, we wait.

LATE UPDATE: Kurt Overhardt provided an interview to NHL Radio on Sirius/XM earlier today. He acknowledged "a number of offers" from the KHL and other European teams, but insisted that the focus was to "place him with the Blue Jackets." Intriguingly, he acknowledged much of what we cover above, including the fact that where the player fits "systemically" in the RFA/UFA cycle is a factor. He then proceeds to totally ignore that fact in the rest of his discussion, implying that the mere fact that the Blue Jackets have cap space impacts the amount of money they are looking for. At the same time, he characterized as a "lie" the asserting that he is trying to wring "the last nickel" from the organization.

Overhardt stated that "this is a player that 29 other teams covet." Well, that may be true to a point, but apparently they don't covet him enough to put in an offer sheet at the levels Overhardt is asking for -- or anything close to it. He was quick to deny that the Kyle Turris situation was relevant here, as he indicated the Turris situation was always about giving the player and the team a fresh start, and "was never about money."

I'll leave it to you to listen to the entire interview, but for me it was slightly disturbing that on the one hand he claims that "What drives me is helping these young men realize their dreams.", while on the other hand, he consistently referred to Johansen as "the player" or "my client." If he cares so much about the person, why not refer to him as "Ryan"? To me, Overhardt came across as self-contradictory on the leverage angle, and made some frankly bizarre comparisons to the Blackhawks and Kings that were not entirely clear, particularly in the context of a player emerging from his ELC. The NHL Radio folks sounded almost as frustrated as Davidson . . . ;-)

LATER UPDATE: With Aaron Portzline indicating that the last offer from Johansen's camp was at $4.7 per year for 2 years, the landscape changes a little bit. First, while still not in range of a deal, the Johansen camp has landed on Planet Earth. In so doing, however, they have revealed the fundamental flaw in reaching for the moon against experienced negotiators. With just about $2 million in moves, they have come down 30% rather quickly. That's death in the negotiating world, as it signals a) a tacit admission that the initial offers were unreasonable and b) a signal that perhaps the concrete is cracking a bit. The $4.7 now likely signals the true beginning of actual negotiations. [See discussion of "bidding against yourself" above]. I suspect that $4.0 million is the DMZ mark, with the #CBJ desiring to stay below that (consistent with other bridge deals), and Overhardt wanting above that line as a "moral victory." Either way, I bet the pace picks up considerably at this point, and it might be enough for Jarmo to be directly involved. Stay tuned.

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