Eugene Melnyk is no stranger to negotiation. As founder of the specialty pharmaceutical giant Biovail Corporation, he’s accustomed to not only getting what he wants but getting it at a good price too.
Along with a horse-racing stable in Florida, Melnyk is also the owner of two small-market hockey teams: the Mississisauga St. Michael’s Majors of the OHL and the NHL’s Ottawa Senators. He’s obviously a fan, but he’s also a businessman. This is a guy who Canadian Business magazine listed as the 69th richest Canadian in 2011, with a net worth of more than $900 million; he didn’t amass that pile by being reckless.
So it was very un-businesslike when Melnyk recently proclaimed his prodigy Erik Karlsson — who has been nominated for the Norris Trophy for the second time in two seasons — would “go down in history as one of the great defensemen of all time.” Now, less than two months after that lofty pronouncement, Melnyk is saying that his young star must temper his own expectations at the contract table. After all, Ottawa has to stay within its means: the NHL has mandated the payroll of each team not be above $64.3 million.
Here’s the thing: Ottawa is staying within its means. Their 2011-12 salary of $49.716 million is below the “adjusted midpoint” of $56.3 million and well under the established ceiling set by the league. Consider this: it’s not Bryan Murray, the club’s general manager, who said this … it’s the owner, the guy who ultimately pays the bills.
Everybody loves a discount, unless you’re on the wrong side of it. Karlsson is a restricted free agent and was paid a mere $875,000 in his entry-level contract with a cap hit of $1.3 million. Compare that to his blueline teammates Sergei Gonchar ($5.5 million salary and cap hit), Filip Kuba ($3.7 M/$3.7 M) and Chris Phillips ($2.75 M/$3.083 M) and things don’t look so good for a player who scored nearly a point a game, dominated everyone else in the league at his position and played a huge role in getting his team into the playoffs. Hell, even Jared Cowen ($900,000/$1.265 M) and Matt Gilroy ($1M/$1 M) are getting paid more.
There is a danger in lowballing an emerging star like Karlsson. Melnyk would do well to take a lesson from the Nashville Predators, who ended up going to arbitration with their star defenseman Shea Weber and ended up paying a bargain-basement $3.5 million for his services. The downside? Weber will be a restricted free agent next season, and Nashville will probably have to match a very expensive offer sheet from another club to keep him. Not only that: when (and if) Weber becomes a free agent, he’s likely to remember what the team he played for did to him during their negotiations.
Karlsson is only 21, and he’s listed at an even 6 feet and 180 pounds. He might be an inch or two shorter than that, but the talent is undoubted. Karlsson is a player who can keep the blueline of the Senators productive for years to come; the owner should let the business side of him take over and allow Murray to do his job as GM. Melnyk appears to love the limelight a little too much, and it could cost him a prime asset.