You Can Beat the Market: Estimating the Return on Investment for National Hockey League (NHL) Team Scouting using a Draft Value Pick Chart for the NHL

TL;DR

This paper demonstrates that NHL teams' internal scouting provides significantly better draft rankings than the Central Scouting Service, leading to substantial financial gains, and introduces a Draft Value Pick Chart for assessing draft pick worth.

Contribution

The study introduces a novel statistical method to quantify the value of internal scouting and develops a Draft Value Pick Chart for NHL draft picks.

Findings

Teams' internal scouting improves draft value by $1.8M to $5.2M annually.

No team outperformed others in draft performance.

Draft value is consistent across multiple productivity metrics.

Abstract

Scouting is a major part of talent acquisition for any professional sports team. In the National Hockey League (NHL), the market for scouting is set by the NHLs Central Scouting Service which develops a ranking of draft eligible players. In addition to the Central Scouting rankings, NHL teams use their own internal scouting to augment their knowledge of eligible players and develop their own rankings. Using a novel statistical approach we show in this paper that the additional information possessed by teams provides better rankings than those of Central Scouting. Using data from the 1998 to 2002 NHL drafts, we estimate that the average yearly gain per team from their internal scouting is between \$1.8MM and \$5.2MM. These values are consistent across the three measures of player productivity that we consider: cumulative Games Played, cumulative Time On Ice and cumulative Goals Versus Threshold where we have aggregated these metrics across the first seven years post draft. We used this time frame since teams generally retain rights to their draft picks for seven years. Further, we find that no individual team outperformed the others in terms of draft performance. One byproduct of our analysis is the development of a Draft Value Pick Chart to assess the worth of an individual selection.