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Solving the NHL lockout with common sense and some simple math

I solved it. Pretty easy. Why the drama?

We are at day number I Don’t Care in the lockout, and we still don’t have a deal to get this season underway. Both sides are being ridiculously stubborn with their demands, and it is pure hatred and disrespect on both sides that prevents cooler heads and common sense from prevailing. The deal that is going to be made is right in front of us, and it has been since August.

The players want 100% of their signed contracts honored. That is a fair request.

The owners want a 50/50 split of HRR. That is a fair request.

Both of these are sticking points for both sides. Both of these are easily obtainable. But here’s the kicker: Both sides agree with the other! So what in the world is holding up a deal?

Timing is holding up a deal. The owners want a 50/50 split immediately, which isn’t possible if they honor all contracts at 100 pennies on the dollar. It’s mathematically impossible actually.

The players say they will go to 50/50, but that won’t happen until Year Four of any offer they have presented to the league. So they both know what will eventually happen. But yet, they can’t (or refuse) to see the common sense deal in front of them.

Gary, Donald, let me show you the deal. It’s quite simple actually. Let’s break it down into steps, it’ll be easier for you to understand. And maybe it’ll get through your thick heads if you see it in steps.

Step One: Freeze NHL Salaries

The NHL pulled in $3.3 billion in revenue last season. Using the previous CBA numbers, the players are entitled to 57% of that, which is $1.89 billion. That $1.89 billion is the sticking point for the players. So give it to them. Let them keep their salaries, but freeze them at this $1.89 billion. As revenues grow, that share drops, and it drops faster than you think.

Step Two: Get to a 50/50 Split

So now that we have step one in place, let’s move on. Step two is getting to the 50/50 split. After you freeze the salaries, it happens relatively quickly. I ran the numbers for you. This happens by Year Three of the deal, assuming a very conservative 5% growth (see below).

Step Three: NHLPA Dips To 49% For Year Four

But Dave, wait a minute. The NHLPA won’t accept that.

Well, it’s called bargaining for a reason. The players will remain over 50% for the first two years of the deal, so in Year Three, when revenues have grown enough that the $1.89 billion becomes less than 50%, let it ride for a year. Not only do the owners get their 50/50 split, but they get one year of 51% of the revenues. That’s an extra $20 million for the owners, it’s a bit of a “give back” if you will.

Step Four: NHLPA Salary Connected to Revenues

We have reached the final step, which is move it back to a 50/50 split, and player salaries are tied to revenues. As revenue grows, player salaries grow. This step is simple, since it’s been in place for the past eight years.

Gary, Donald, I’ve run the numbers for you. Assuming an extremely conservative 5% annual growth in revenues, the players get to 50/50 by Year Three.

 Year Revenue NHLPA NHLPA %
2011-2012  $  3,300,000,000.00  $ 1,890,000,000.00 57%
2012-2013  $  3,465,000,000.00  $ 1,890,000,000.00 55%
2013-2014  $  3,638,250,000.00  $ 1,890,000,000.00 52%
2014-2015  $  3,820,162,500.00  $ 1,890,000,000.00 49%
2014-2015  $  4,011,170,625.00  $ 2,005,585,312.50 50%

Looking at that table above, we use the current numbers (2011-2012), and apply them to the 2012-2013 season. Assuming that the owners see 5% growth, which they will if they have a full season, then this $1.89 billion becomes 55% of HRR.

Salaries are still frozen for Year Two (2013-2014), and assuming that 5% growth, that’s still 52% of revenues. Year Three at those numbers makes the players’ split 49%, which as mentioned above, is a bit of a give back by the players.After that, it’s a 50/50 split.

This is pretty damn simple gentlemen. And guess what? If the revenue grows by 7%, then the players are at 50% by Year Two (numbers below):

 Year Revenue NHLPA NHLPA %
2011-2012  $  3,300,000,000.00  $  1,890,000,000.00 57%
2012-2013  $  3,531,000,000.00  $  1,890,000,000.00 54%
2013-2014  $  3,778,170,000.00  $  1,890,000,000.00 50%
2014-2015  $  4,042,641,900.00  $  2,021,320,950.00 50%
2014-2015  $  4,325,626,833.00  $  2,162,813,416.50 50%

Look at that. A 50/50 split in two years. It took me about 15 minutes to do the math, and another hour to write the post. You’ve been “negotiating” for months. What gives?

17 Responses to “Solving the NHL lockout with common sense and some simple math”

  1. SalMerc says:

    If it were only that simple. Have you ever had a disagreement with a spouse? The longer the issue festers, the more difficult it is to solve. While the steps you have contrived seem simple enough, you did not account for the pent up hostility between the two. That hostility cannot be solved in 5 easy steps. This is no longer a deal about money, it is about principle. Both sides feel taken-advantage of. Until some larger that both third party gets involved (mediator or even media money), both will stand firm. As mentioned before, the fans are left out of the negotiations as they do not want people with passion and commen-sense in the negotiating room.

  2. Hatrick Swayze says:

    As taken from the article, “Both sides are being ridiculously stubborn with their demands, and it is pure hatred and disrespect on both sides that prevents cooler heads and common sense from prevailing.” It continues, “The deal that is going to be made is right in front of us, and it has been since August.”

    I believe Dave did take into account the hostility between the two sides. He did not choose to discuss it further, because this article isn’t intended to be a behavorial analysis. It is a numbers article, which he structured quite well. And as far as the numbers go, it looks like he hit the nail on the head.

    I agree with your point, SalMerc, regardsing WHY a deal hasn’t gotten done. It’s more of a grudge match between Donald & Gary as opposed to a responsible negotation, unfortunately. But regarding the numbers game, this post sums it up nicely and really makes us wonder why this situation is still dragging on…

  3. Dave says:

    Emotions have no place in business. It’s the first thing you learn when you enter the workforce.

    “Leave your personal shit at the door, no one cares, and it will get you fired.”

  4. Walt says:

    This all amounts to BS! I can’t believe that 8 owners can dictate to 22 others, and give Buttman so much power.

    If all parties involved were serious, they would have had an agreement in place by now. Both sides are greedy, and to blame. If, and when this comes to closure, the first thing that the 22 other owners should do is get one more owner on their side, and dump that sawed off pimp Buttman. The NHL could do so much better than that piece of crap.

  5. hockeydwp says:

    Not so sure players union / Fehr would agree to a salary freeze! Moreover, how would a salary freeze effect players with no contracts presently – especially MDZ?

  6. Dave says:

    hockeydwp:

    A salary freeze is just freezing the total dollars that the union gets, which is at $1.89 billion. It doesn’t affect players without contracts, as there are still teams under the cap that need players.

  7. Sioux-per-man says:

    Pretty simple Math really.

    It would be win win for everyone involved, it is such a good idea, they should write this agreement for 10years.

    This is a fair deal, and pretty much what the players were asking for in their 3rd deal. It is a better idea then losing $3.3 Billion dollars and a whole season over a couple of guys EGO’s.

    I’m affraid Bettmans EGO is so big, that nothing will be done if its not his idea, or his terms.

    Now will I watch the Rangers when they come back. Sure I’ll watch on TV. Will I buy Center Ice, will I take the family to the games, or buy Jersey’s. Not for a long time. It’s getting to the point to where I don’t really care about the Multi Millions the players and owners make. In the long run, this will save me thousands of dollars, that could be better off spent on something else.

    I will cheer for my college team, and watch the players play for the love of the game.

  8. Kris says:

    My first step would be have the players stop crying over the amount of money they are losing in the new proposals. Grabner’s blog yesterday was awesome, theres a comment section but until he decides to allow your post to go up it wont. He asks how would you like it if your boss told you he was cutting your pay. Well mine kept my pay the same but added 12 hours to my work week, now I work 60 hour weeks instead of 48. He is scheduled to make 12 million dollars on the remainder of his contract. Without his HRR split, it would take me 400 years, actual number, to make that much money at my 35k salary. These players talk like the money they are losing is going to put them on food stamps. They complain about lost HRR, I dont get a piece of profit, if im lucky I may get a holiday bonus, but nothing special, they spend more money on dinner then ill get as a bonus. I agree owners should pay the contracts they signed, but right now the players are handling this like Crosby on a missed call.

    Both sides need stop trying to win negotiations. I know its hard with all the egos but no deal will be reached if both sides continue to try to win. Players also need to stop letting their agents whisper in their ears that this is a bad deal. The agents are the ones that contract limits hurt the most. They are involved in the game the longest, they lose the most on the deal.

  9. Dave says:

    Sioux, it’s not that one person’s ego is big, it’s that there is a general lack of respect for both sides.

    Neither side respects the other, thus they have this issue. The sooner they realize that they need each other, the sooner these lockouts end.

  10. SalMerc says:

    I still think the deal needs to happen in time to allow for the Winter Classic to be played. Backing up 30 days from there puts us at the last few days on November. This would allow for 2 weeks of training camp then at least 3-4 games per team before the “event”. Still lots of posturing going on at this point until somebody blinks. Fehr does not have a history of blinking first. Bettman will only blink under pressure from owners or the TV contract. I suspect real negotiations start on or about Halloween, which is appropriate for the ghouls ruining our hockey season.

  11. Mikeyyy says:

    Well you can’t get rid of the players soooo
    Looks like Bettman needs to take one for the love of the game.

  12. wwpd says:

    Salary freeze means you are not actually honoring 100% of players’ signed contracts. Seems like this would be an issue, it is like a post-dated rollback for anyone with an increasing contract.

  13. Dave says:

    By salary freeze, I meant that they keep it at the $1.89 billion, without any raises or roll backs. Terminology difference, but the idea remains the same.

  14. Hatrick Swayze says:

    If the salary remained frozen @ 1.89 billion, how would unsigned players get under contract? For example, MDZ or any other player currently unsigned (rookies included) would add onto that 1.89 billion. So real salaries, then would be > 1.89 billion by the amount of contract $ signed after this point in time…. am I looking at this correctly?

    If so, a salary freeze, wouldn’t actually freeze contracts paid out @ 1.89 billion. On the flip side, that 1.89 billion would decrease as current contracts expire…

    So, the owners would have to look at $$ paid out by this formula:

    $1.89 (currently committed) + new deals – expired contracts = salary paid to players

    ^True or False…. does it affect numbers in your tables? What would you anticiapte to outweigh the other; new deals or expiring contracts?

  15. SalMerc says:

    I think I need Hatrick as my accountant!

  16. Dave says:

    Hatrick, the players share of $1.89 billion is what they are allotted via the CBA. Not all teams spend to the max to get to the $1.89 billion. There’s lots of room to get unsigned players under contract.

    Think of it this way: The $1.89 billion sets the cap ceiling. Teams under the cap can still sign unsigned players.

  17. Hatrick Swayze says:

    3.3 Billion HRR @ 57% players share = 1.881 Billion – lets call it 1.89.

    Ok, I think I’m beginning to see where I lost track before. I had thought the 1.89 billion is what was COMMITTED to players via salaries (Total NHLPA salary committed to players for the 2011-12 season as per outstanding contracts).

    Now how about the cap ceiling?
    1.89 Billion divided by 30 teams = 63 million which makes the cap ceiling per team for the 2011-12 yr?

    IF this is true, and I forget the actual cap # last year (62m or 65m sounds right IIRC), then in order for the players to COLLECT their 1.89 billion, every team would have to spend to the cap.

    We know that this isnt the case though. So are the players actually earning 1.89 billion collectively?

    Additionally, how is the cap floor calculated? Last year it was set around 40 million/ team (IIRC). What would players earn collectively if every owner just spent to the floor?