The NHL appeared to move off its hard line stance with its second CBA proposal to the NHLPA, but it is still unlikely to sit well with the players.

The NHL’s recent proposal for a six-year CBA to the NHLPA saw the league seemingly move away slightly from the hard line position on the players share of hockey-related revenue (HRR) contained in its initial proposal, which reduced the players share from 57 percent down to 43 percent.

Instead, the league moved closer to the “50-50” split most observers anticipated was its true goal.

Under its latest proposal, the players get 51.6% of HRR in year one, 50.5% in year two, 49.6% in year three, followed by 50% for each of the final three years.

According to TSN’s Darren Dreger, that represented a reduction of the league’s initial request by $460 million over the life of the deal, including $120 million in the first year.

It also proposed lowering the salary cap to $58 million for year one, followed by incremental increases for each following years. The cap would increase to $60 million in year two, $62 million in year three, $64.2 million in year four, $67.6 million in year five, and $71 million in year six.

Uncoupling salaries from revenue to slow down increases of the salary cap was something I expected to see in the league’s initial proposal, so it was unsurprising to see this turn up in their follow-up, especially since it was also something the NHLPA suggested in its initial proposal.

What’s also notable is the league didn’t seek to implement a salary rollback on existing contracts. As per Dreger:

 “Necessary adjustments would be financed entirely from a combination of modified contracting practices, increases in league-wide revenue and from the players’ Escrow contributions.”

As George Malik of Kukla’s Korner put it:

“In plain English, there isn’t a rollback per se, but there’s a rollback via escrow, and there’s a rollback via reducing the cap without a rollback–which may or may not mean that there would be another round of buyouts, yielding a de-facto “dispersal draft,” just like last time around.”

No rollback of salaries could also make things interesting for the sixteen NHL teams currently sitting above the league’s suggested salary cap of $58 million for this season.

As Malik and Greg Wyshynski suggest, it could mean another series of amnesty buyouts, as well as perhaps demotions to the minors and loaning players overseas (assuming both measures are still allowed under a new CBA as a means of clearing cap space), trades, a dispersal draft or perhaps contract renegotiation.

No word if the league’s latest proposal also contained changes to contract lengths, free agency or arbitration.

NHL Commissioner Gary Bettman considered this proposal a “significant, meaningful step”, which, on the face of it, appears to be.

The main issue, as always, is the distribution of HRR, which of course includes revenue-sharing.

As Tim Panaccio of CSNPhilly.com observed, the two sides appear close regarding the numbers to improve revenue-sharing, but there remains disagreement over the math.

“The NHL wants the increases in revenue sharing to come from reductions in player salaries. The union says that’s not revenue sharing. That’s asking the players to cut salaries to fund revenue sharing. The union wants to see the additional money taken from the owners’ share of the HRR”.

Bettman claims revenue-sharing won’t be a “make-or-break” issue, but it certainly will be if the league’s insistence is the players carry the burden without significant contribution from the big market teams.

The players despised escrow under the current CBA. They’ll hate it even more if they see even more dollars clawed back to float struggling teams while big market clubs like the Toronto Maple Leafs, New York Rangers, Montreal Canadiens, Vancouver Canucks and Detroit Red Wings – which had combined operating income (before deductions) of $210.7 million last season, compared to the combined losses ($118 million) of the 18 money-losing franchises – contribute considerably less.

So, while the league appears to have moved off their initial proposal, they still want the players to not only accept less revenue, but carry the freight on revenue-sharing too.

For a new CBA to be hammered out, the players will have to accept a reduced share of HRR. That appears an inevitability, one the PA seemed to acknowledge with its initial proposal two weeks ago. How much of a haircut they’re willing to accept remains to be seen.

In return, however, the NHL must consider a revenue-sharing system that doesn’t put the burden entirely upon the players.

Everything else – contract lengths, UFA eligibility age, elimination or alteration of arbitration – won’t be significant stumbling blocks toward a new deal.

The question is, how will the NHL and NHLPA arrive at a compromise regarding division of HRR that won’t leave the players feeling screwed and addresses the league’s need for improved revenue sharing?

Until that question is resolved, the threat of a lockout remains.

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4 Responses to Analysis of the NHL’s Recent CBA Proposal.

  1. rattus rattus says:

    Lyle,

    One thing I never see when people talk about the revenues/profits of teams like Montreal, Toronto, Detroit, the Rangers, etc, is how much it costs to purchase one of those teams.

    If I invest $500 million to buy a team, not only do I have significantly more capital tied up, as well as at risk, but I would also expect to be making a lot more $ profit in absolute terms than someone who has invested $150 million.

    And, if i were the owner of one of those teams, who typically expend a lot more in advertising, running the team, etc etc, I hardly think I would be thrilled to see the money my own investment is generating be then given to someone who seems incapable of running a business well or developing an asset.

    Furthermore, I think I would say to myself – “well, do I really need a Phoenix or a Nashville? It’s a gate-revenue driven League, I don’t really care if we’re down a few teams, it will still be an 82 game schedule and I will still sell out.”

    The stuff about the TV footprint is a turning out to be less important. At least for the next 10 years or so, until the sport grows its profile in the USA = more American players/the Olympics/ etc.
    To me it seems that the party that actually has the most invested in maintaining 30 teams right now, ie in revenue sharing, is the Union. Lose 2 teams and there goes 6 to 7 % of your membership.

    rrrrrrrrrrrrrrrrattus

    • gameon63 says:

      you make a few good points rattus but i don’t think the union has to worry about losing teams as the league would clearly prefer relocation to contraction. .

      With a TV contract in place (however weak it may be) there’s no pressure to keep franchises in markets that clearly aren’t interested in supporting a team. given the relative success in Winnipeg it stands to reason that moving a problem team to an area with more passionate hockey fans would be a win win situation for everyone (except Bettman’s ego).

      like you said the successful teams are probably less than thrilled to be not only throwing good money after bad but losing quality players to them as well.

      • Uncle Slavko says:

        Some great points by both of you. Enjoyed the discussion! Putting two new teams in the Toronto/Southern Ontario area seems to be problematic, but worth solving to help get relocation started, along with Quebec City….Let’s see….Phoenix, Nashville, maybe Carolina for a start….Not many other big cities that would support a team at present….

  2. Frank Brophy Lives says:

    They should consider using the escrow amount as a portion of the revenue sharing. Teams in the top x% of spending pick up y% of the share of escrow.

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