Rationalizing a Cody Hodgson Buyout

Source: The Vancouver Province

In this week's 30 Thoughts (Point 4), Elliott Friedman was the first I've seen raise possibility of a Cody Hodgson buyout this summer though the idea had previously been suggested on the SabresNoise blog. At first, the idea seemed a surprising given Hodgson being one of the few Sabres on long term deals with offensive upside (e.g., leading the Sabres in points for the 2013-14 season, albeit with just 20 goals and 24 assists in 72 GP). But given his abysmal stat line (2G and 6A in 51GP, tied with Torrey Mitchell for 13th on the team as of February 8th) and mediocre possession numbers (0% Corsi Rel on a league worse 37.1% 5v5 Corsi team, despite having a relatively higher number of offensive zone starts and weaker quality of competition) more than halfway into the 2014-15 season, it is an idea that has become fun to explore as evidenced by recent blogs in favor of and against jettisoning Hodgson. Being a healthy scratch against the Islanders tonight (his third time this season) should only fuel the talk of a Hodgson buyout between now and the start of free agency. 

Source: War-On-Ice; Minimum 200 Minutes Played as of February 8th

First off, with CapGeek & its handy buyout calculator out of business, we will have to do some manual math to calculate why a Hodgson buyout could be an enticing proposition for Buffalo this summer. A 2010 post from Blueshirt Banter has a straight forward bulleted list of how a buyout is calculated, and the first bullet point was the main reason Friedman had highlighted a Hodgson buyout as a real possibility: a player under 26 can be bought out for 1/3 of his remaining salary vs 2/3 of the remaining salary for a player over 26. With Hodgson turning 25 in February, the direct cost of buying out Hodgson significantly raises from this upcoming offseason to the next. 

Prior to the start of the 2013-14 season, Hodgson signed a 6 year, $25.5M extension, working out to a $4.25M AAV. Unlike the kind of front loaded deals that we are used to seeing older players sign, Hodgson's deal was back loaded such that his actual salary was $3M in Year 1 (2013-14), increasing $0.5M every season until he is scheduled to make $5.5M in Year 6 (2018-19). As a result, the Sabres would be on the hook for buying out 1/3 of the remaining $19M in salary he's owed ($6.3M total) as opposed to the remaining total AAV. Should the Sabres hypothetically wait until the summer of 2016, the Sabres would be on the hook for 2/3 of the remaining $15M ($10M total):

Source: CapGeek data via the Wayback Machine 

Sabres Owner Terry Pegula may very well not want GM Tim Murray to spend another $6M this summer for someone to not play in Buffalo following last summer's compliance buyouts of Ville Leino and Christian Ehrhoff, who are respectively being paid $7.33M and $12M over the next dozen or so years to not play professional hockey in Buffalo. However, let's assume that Mr. Pegula would indeed drill another oil well to buyout Hodgson's remaining albatross of a contract if that is what it takes to win a Cup in Buffalo. So how much would a buyout affect Buffalo's salary cap? As shown in the below table, the $6.3M Hodgson is owed will be spread over twice the remaining 4 years of the contract (working out to $0.79M per season through 2022-23). For the years within the contract, the cap hit is equal to the difference in the $4.25M AAV and the "cap savings", which is the annual difference in Hodgson's salary and the $0.79M owed to him (e.g., in 2015-16, the cap saving are $3.21M, which is $4M in salary minus the $0.79M cost). For a summer 2015 buyout, the years that extend beyond the contract are just equal to the $0.79M owed Hodgson:

Source: CapGeek data; black data represents cap penalties, red data represents cap credits

Now contrast the cap hits vs. 2016. From 2016-17 to 2021-22, the buyout would cost an additional $0.88M, a small but not insignificant salary cap penalty for the Sabres to incur. The team's current rebuild means it will be awhile before they would/should realistically want to spend to the cap ceiling; additionally, Buffalo's willingness to spend to cap ceiling since Mr. Pegula's purchase of the team versus the internal cap the team had set under Tom Golisano gives the Sabres more flexibility to incur a buyout cost if that's what the franchise sees fit. An escalating salary cap - which has been predicted by James Mirtle to hit $100 million by the time the current CBA expires in 2022 - would further decrease the relative cost of having Hodgson's bought out salary on the books. 

However, the Sabres almost certainly expect to be contenders by the time Hodgson is due a new contract, let alone any years the bought out contract would sit on the cap. How high the cap will rise over the time frame also remains more in flux now than at the end of 2013 due to a couple different reasons. First off, the NHLPA will remain hesitant to inflate the salary cap at the expense of increasing escrow, the amount of salary the NHL holds out of player paychecks, as explained in the same Friedman piece from this week. Secondly, a strong American dollar multiple years into the future directly affects the value of revenues collected in Canada and would place downward pressure on the salary cap rising in future years. To a lesser extent, a strong American dollar also weakens the profitability of future global events the NHL is pushing forward as revenue drivers in coming years, including the return of the World Cup of Hockey (to take place in Toronto and Montreal in 2016) and a proposed "Ryder Cup" in European markets. 

But back to the main issue at hand: what is Tim Murray to do with Cody Hodgson? The cap savings from moving from Hodgson this year vs. waiting are tempting. But should the Sabres jettison one of the few players with pure scoring talent on their roster, particularly one who under the right system could finally reach the potential to play the two-way game so desired in today's NHL? 

To Hodgson's credit, this season has been a confluence of bad factors that many players of his tier would also falter under. For starters, Hodgson's 2 goals can largely be explained by his 3.0% overall shooting percentage (3.6% 5v5) thus far in the 2014-15 season, significantly below his career average of 10.8%. Part of it is also Hodgson is shooting the puck at a lower clip this season. With just 67 shots through 51 GP, Hodgson's 1.3 shots per game would be the lowest of his career as a full time NHLer (he had 9 shots over 8 games as an AHL call-up for Vancouver during the 2010-11 regular season). Another issue has also been the subtraction of Thomas Vanek and Jason Pominville from the roster, who Hodgson played the majority of his relatively successful 15G 19A lockout-shortened 2013 season. Adjusting for zone starts during that 2013 season, Hodgson was better at driving possession when he was on the ice with Vanek and Pominville than without. Conversely, Vanek and Pominville also played with Hodgson than without, a credit to Hodgson's ability to be more than just a passenger with Top 6 talent. 

Replacing Vanek and Pominville on Hodgson's line has primarily been Chris Stewart (a soon to be ex-Sabre largely more renowned for his size than for his ability to score or drive possession) and a revolving door of wingers and centers, as Hodgson himself has spent time this season alternating between the wing and center. Following the expected exodus of forwards such as Stewart, Torrey Mitchell and Drew Stafford at the trade deadline, Hodgson could get a chance to close the season out on a higher note by getting more playing time back in the Top 6 of the lineup. As it is, Hodgson is one of the "unluckier" players on Buffalo, with a PDO of 97.6 due to the Sabres scoring just 5% with him on the ice at 5v5 (vs. 8.1% 5v5 overall).  

In my own opinion, there's enough evidence to believe that if Hodgson were to be placed with better line mates and was having better luck shooting the puck, we'd more so be talking about what Buffalo could possibly trade Hodgson for than whether he should be bought out or not, which I ultimately don't believe the Sabres should do. However, the question is whether Buffalo should keep him long-term, and I am inclined to lead towards no on this. Though Hodgson can again be a 20 goal scorer when playing with quality line mates, Coach Ted Nolan seems insistent on burying Hodgson on the bottom 6. Perhaps part of that is bad defense, but if the Sabres are to trade Hodgson they will need to showcase him with Top 6 forwards to convince teams with a need for scoring wingers that he is worth the majority of his $4.25M AAV in a trade with the Sabres.

Speaking of trading Hodgson, as it's inconceivable seeing a team taking on 100% of Hodgson's contract for a few reasons. First off, another team would almost certainly require sending back a similarly bad or even worse contract to Buffalo if they were to acquire Hodgson at full cost, making the proposition of buying out Hodgson more appealing. As they did with the Vanek and Pominville trade, the Sabres would almost certainly offer to hold salary to maximize the return they get for trading Hodgson. Secondly, Hodgson's back-loaded contract structure makes him slightly more desirable to big market teams than small market teams, who are more likely to prefer back loaded deals with lower AAVs than salary that help them cost effectively reach the cap floor. But since many big market teams are so close the cap ceiling as is, prospective Hodgson acquires will want to acquire him at the lowest AAV possible. 

At this moment in time, Hodgson is probably what you would consider to be a "negative value guy" as defined by Sean "Down Goes Brown" McIndoe - a guy who, if Buffalo were to place on waivers tomorrow would go unclaimed at a $4.25M AAV given this season's play. Yet part of that is due to teams' ability to acquire guys at lower AAVs than the deals they were originally signed to thanks to the new CBA. Trading Hodgson within the next year or two at a pro-rated salary after his luck will have taken a turn for the better provides Buffalo the best chance at turning him into another asset. Even if an eventual Hodgson trade turns out to be a salary dump, any salary Buffalo holds back in a trade would come off the books at the end of Hodgson's current contract in 2019 versus 2022 or 2023 - a significantly more advantageous year to be free of dead money given where Buffalo hopes to be in their current rebuild.

So in conclusion, Murray's decision on Hodgson's future should be when/if to trade Hodgson as opposed to when/if to buy him out, and part of that will involve getting Ted Nolan to bring Hodgson back into the Top 6 of the lineup where he will be most productive (and hence most valuable). Sure, Hodgson is most likely not the Top 6 center the Sabres hoped they acquired in exchange for Zack Kassian at the 2012 trade dealine. Yet despite his current scoring struggles, below average faceoff numbers and reputation as a soft, "injury prone" player, at a lower AAV there's definitely still a place for Hodgson in the NHL as a depth scoring forward, like he was his rookie season in Vancouver. That place is just not in the bottom 6 of a rebuilding Sabres team.