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The Complete Idiot’s Guide to the NHL CBA negotiations

By now you are probably aware that the chance of the season starting on time remains pretty low. You’ve heard the rhetoric and you may have come across some attempts at number crunching. However, the fact of the matter is the media and the respective parties involved haven’t done a great job at communicating what both sides need in order for the sport to continue to grow and prosper. All you are getting are calculated opinions, half truths and secondary issues that are only meant to distract you from the core issue. How do we grow and split the pie?

What a fair CBA should look like

In my humble opinion, the pie (also known has hockey related revenue) should be split 50/50. This past year the split was 57/43 in favor of the players. Obviously a split of this nature is not sustainable. The way the business world operates in 2012 is far different than it did in 2005. Whether it is wages, travel costs, healthcare costs, lack of access to credit, etc., the price of doing business in this country has increased dramatically over the last several years and I think most people understand that.

It sounds like I am over simplifying this, but at the end of the day the NHL is still the 4th most popular sport in this country.  It doesn’t make much sense to me that players collect 57% of their sport’s revenues, while players in more popular sports such as football and basketball all receive 48-50%.

Of course getting to a fair 50/50 split is easier said than done.

The NHL’s proposal

Forget the league’s earlier proposals with all of the contract restrictions, eviscerating arbitration and their attempts to redefine HRR (e.g., deducting expenses used for upgrading their buildings). Those are secondary issues that can be left to debate over another day and I’m not sure how important those issues truly are to the league anyway.

The meat of the NHL’s latest proposal is a six-year deal in which players would get 49 per cent of hockey-related revenues off the bat, then in year 2 it would be 48 per cent. The remaining four years would be 47 per cent.

The league is certainly moving closer to 50% from their original offer of 43%, but the way they go about getting there is unrealistic. You can’t rollback players salaries that much that quickly and continue to decrease their share. If anything the league should slowly decrease the player’s share to around 50% and keep it there.

The NHLPA’s proposal

The NHLPA’s original proposals have been less straight forward as they’ve been trying to re-write the entire way the league functions with ideas of selling cap space, soft caps and increased revenue sharing (yes, the league already has revenue sharing, which has curiously been under-reported for some reason).

Still, the NHLPA is right in their assertion to prevent salary rollback and receive the contracts this coming season they were guaranteed. Their latest offer was a five-year deal. They backed off their original request for 57% of revenues (in the final year) and are instead proposing they take 54 percent of new revenues in the fourth and fifth years of any agreement. Of course, 54% is still too high and their cut doesn’t move closer to 50/50 over time either.

While some of the numbers are still being debated, I have seen reports that the NHLPA stands to lose anywhere from $200 million to $300 million per season under any of the proposed deals. This obviously sounds like a lot, but if you divide those figures by the 690 players in this league it only averages out to a loss of around $300-500K per player. Considering the average NHLer makes somewhere between $2.4 and $2.5 million, I don’t really see the big deal.

The Final Word

Overall the purpose of this post isn’t to strictly blame or point fingers at one side or the other. Both parties are at fault for this impending lockout. The NHL may be the ones forcing a stoppage, but you can’t play on without an agreement, as the NHLPA certainly would have no incentive to get anything accomplished.

You can blame the NHL for giving ultimatums and –generally speaking– being terrible at communicating with the fans/media, and I wouldn’t argue with you.  But then again, having players take to Twitter to mouth off or to concoct some weird idea of persuading labor boards in Alberta & Quebec to forbid a lockout is a complete waste of time. The NHLPA should be focusing their efforts on coming to an agreement.

Hopefully both sides will come to their senses soon.

12 Responses to “The Complete Idiot’s Guide to the NHL CBA negotiations”

  1. SalMerc says:

    Unless the owners books are open, no one can ascertain what a fair contract is. Some may make lot of $$ others may lose $$. While 50/50 sounds fair, the devil is in the details and if the details are under wraps, the rest is just supposition.

    • The Suit says:

      NHL books were opened for the NHLPA. League paid 1.8 billion in players salaries alone. They want that figure to go down next season. NHLPA won’t allow it and that is a big reason why we are where we are.

      • Scully says:

        This is true, but what can we do essentially to save the owners from themselves… i.e. handing out contracts that are too large for depth players or star contracts for players that are a tier below that. The Rangers have been guilty of it in the past as much as anyone. I know this is the GM negotiating with the player agent, but ultimately whomever the owner is has to sign off on the deal. This was also a big sticking point in the NBA lockout last year. The owners seem to consistently want the NHLPA to bear the brunt of blame for escalating player salaries, but it’s the owners that pay them. Now, granted there needs to be a strong revenue sharing system put into place (I don’t know the details on the current revenue sharing situation) much like in baseball, but big market teams will always be operating at an advantage. That’s just the way it is.

        What really bugs me as a hockey fan (and not just a Rangers fan, I mean a fan of the game in general) is that hockey is an amazing sport… every time that inroads into American culture seem to be made the entire sport (owners + NHLPA) seem to force their own sport to take a step backwards shortly thereafter. Until they learn how to actually capitalize on their success, come to mutually beneficial agreements, and stop locking out every time a damn CBA is up they’ll never be considered anything but a second-rate sport by the general American public. That is what bothers me more than anything. Not to be political or anything like that (which is not my intention) but this situation is a microcosm of a lot of business situations going on right now. Frankly it’s plain selfish and stupid and we as fans lose.

    • Dave says:

      That’s the beauty of collective bargaining, they both have major sticking points, and need to “bargain” to get down to a deal they can both live with.

      Problem is: neither side is bargaining.

      • The Suit says:

        I totally get where you are coming from Scully and I myself am frustrated with the situation just like everyone else, but I also understand why owners sign off on these contracts.

        It seems hypocritical, but at the end of the day everyone has to do what they can to make their teams better within the given rules, and most owners aren’t throwing that kind of money around anyway. Situations like these is when you have step outside of your role and look at what’s better for the greater good. In my opinion a 50/50 split sets the sport up for success for a longtime. Hopefully they can get there quickly.

  2. Chuck A says:

    Art – in this case, sports – reflects society.

  3. Dave says:

    This is a fantastic post Suit.

  4. VinceR says:

    Great post, Suit. Been lurking and numbly following the situation, trying to stay distant to anything NHL…too heart broken.

  5. Justin says:

    Nice analysis Suit, however I disagree to an extent. I think a major component of collective bargaining in the sports context is an equal partnership to ensure a healthy balance between the players and the owners.

    You made this point yourself in the post, but didn’t take into account that the players bent over to a laughable extent the last time around. Now, I’d obviously have to do a deep-dive analysis into the economic differences between situations with non-guaranteed contracts (NFL) and a soft-cap (NBA) to determine if your proposed 50/50 revenue split would have a similar effect. I feel like the NFL is a completely different animal because players are a much more fungible commodity, given their short career shelf-life and seemingly hundreds of D1 college programs as a feeder.

    I’ve listened to the assertions by ownership that the league does not have a sustainable future where the players are entitled to more than 50% of the HHR. What no one has given a proper analysis to is, why? Why can’t the league survive if the players are over 50%? I’m no economist, and you could probably answer the question better than me, but I’ve never seen it addressed anywhere.

    Obviously the owner’s take on a ton of operating expense/risk in running an NHL franchise. However, the players are the lifeblood of the league and are subject to tons of earning restrictions on what amounts to, what, a 5-year avg career? What the owners have 70+ years to cash in on, most players must make 95% of their lifetime income in less than a decade.

    Given the fact that the players left the salary cap in place with their initial proposal, I feel like they are just trying to make up some of the ground they lost in the last CBA. The owner’s agreed to give up 57% last time in order to facilitate the implementation of the salary cap, and while the magic number might be closer to 50% long-term, it should really take 2+ CBA’s to get them there. The only reason this has become such a big issue is the players had the nerve to engage fans and their wallets to the tune of 3.3 billion in revenue.

    The players wouldn’t have hired Donald Fehr if they were willing to bend over again. In my opinion, its the owners that need to give this time around, as the players already did their share in 2005.

    • The Suit says:

      “What no one has given a proper analysis to is, why? Why can’t the league survive if the players are over 50%?”

      Because spending $1.8 billion on players is too much. Not enough teams are making money and even the teams that do make money only turn a profit when they make the playoffs. If teams miss the playoffs they often end up in the red. The league can’t control healthcare costs, taxes, or other outside costs, so the only way to reduce costs is to bring the players salaries in line with the rest of the sports world. The players will still make their millions and their pie will still grow with revenue, as will the salary cap, they’ll just receive a more even slice this time around.

  6. Walt says:

    There is a simple solution, let the owners deduct all operating expenses, developement teams, etc., then share the balance at 55-45 players getting the 55%. This would be based on TV monies, and gate fees only. Then remove the cap, and all is setteled!!!