Brief Analysis of the Latest NHL-NHLPA CBA proposals.

The latest CBA proposals from the NHL and NHLPA suggested both sides were inching closer together, but not close enough to create a workable agreement.

I had intended on posting this much earlier today, but life plus today’s depressing press conferences (first, the NHLPA, followed by the NHL) delayed it. Better late than never.

James Mirtle of The Globe and Mail did an excellent job of breaking down the differences between the NHL and NHLPA in their latest CBA proposals.

Briefly, the NHL’s proposal was a six-year deal, in which the players get 49 percent of hockey-related revenue in Year One, 48 percent in Year Two, and 47 percent over the final four years.

The PA’s five-year proposal, as Mirtle noted, is more complex, and I refer you to his description, but as per the diagram he provides, the players propose a reduction of their share of revenue down to 54.3 percent in year one, followed by 52.7 in year two, 52.2 in year three, 52.3 in year four, and 52.4 in the final year, representing an overall percentage of 52.7.

Both proposals are based on the assumption of 7.1 percent revenue growth each season, which was the average under the current CBA.

The league reportedly weren’t seeking a salary rollback but stuck with increased escrow claw-backs as per its previous proposal. There was no intention to redefine HRR, (ensuring players a smaller share of the revenue pie before reductions were even implemented),which was a contentious part of their previous two proposals.

As Mirtle pointed out, the league didn’t like the PA’s proposal because there’s some uncertainty involved, plus the players share was still too high for the owners liking. The PA, meanwhile, didn’t like the league’s proposal because, well, what they’re seeking is more than the players want to give up.

I daresay the players also don’t like the fact the league still wants them to carry the freight for revenue sharing.

My sympathies lie with the players, and I understand their unwillingness to part with more of their share of revenue, especially after giving up so much during the previous lockout.

That being said, however, they won’t win a war of attrition with the owners. The previous lockout proved that. The owners know the fans, for all their justifiable outrage over another lockout, will return when the league opens its doors again. The fans are the owners ace in the hole.

I’m not saying the players should just capitulate, but they should accept the 50-50 split – be it a straight split each year, or a gradual reduction over the life of the deal – the league appears to be aiming for, in hopes of gaining concessions (revenue sharing, contract lengths, free agency, arbitration) which, over the long run, will work to their advantage.

While I realized the PA argues they’re already earning that much when you get into the deep number-crunching of the current revenue numbers, the fact remains the league won’t agree to the players retaining 52 percent annually over the life of the next CBA.

As for the league’s proposal, they did make a significant move from their original demand of a 24 percent reduction in players salaries to 9 percent (though the PA contends it’s actually around 17 percent), appear to have dropped the redefinition of HRR, and moved up from demanding the players accept 43 percent of HRR toward their ultimate goal of 50 percent.

But the problem with the league’s proposals is that it essentially does little to help the perennially struggling teams.

Bettman appears dismissive of the revenue-sharing issue, claiming the league and the PA are actually close dollar-wise in addressing it, and rejecting any further talk as an unnecessary distraction. He claims the issue is how much they’re paying the players.

The league’s proposals would have the increased monies from revenue-sharing come from the increased amounts clawed back from the players salaries via escrow.

Under the current CBA, escrow averaged between 8-12 percent, and in most seasons the players got their money back. This time, the league reportedly wants to increase those escrow payments between 15-20 percent, which suggests if the players are funding revenue sharing, they probably won’t get much, if any, back.

The PA believes the successful, big market clubs should carry the revenue sharing burden, which the owners of those markets are dead set against.

Having the players, rather than big-market clubs, carry the burden of revenue-sharing isn’t going to resolve the problem of the six-to-eight teams perennially losing money, most of which are located in the US Sun Belt.

In looking at what the league has been offering, it appears the owners are kicking that problem down the road for another six years, hoping it’ll be gone, or at least, not as serious, as it currently is.

Reducing the players share of revenue and rolling back their salaries under the current CBA provided some short-term relief (if you count the perennial money-losers losing less money in the early years of the current CBA “relief”), but did nothing over the long haul to improve their respective situations.

Cutting their share of revenue again without an improved system of revenue-sharing doesn’t seem like a recipe for success.

The league’s offer seems little more than a cash grab, which will benefit the big markets, perhaps a few of the mid-markets, and leave the struggling markets to fend for themselves.

That appears to be very short-sighted thinking on the owners part, but the last two lockouts proved the owners – past and present – have that tendency.

If there is any good news to glean from these proposals, it’s that they do appear to be slowly inching toward each other, and there does appear to be some room to maneuver toward a deal.

The question is, are both sides willing to work toward that deal before the current one expires by midnight Saturday?

If the respective press conferences on September 13 from the two sides are anything to go by, the answer is, no.

9 Comments

  1. I was thinking about this this afternoon. You know, when my buddies and I go to a bar or dinner somewhere, we don’t fuss over who ate what. We see the amount we owe, add a tip and divide by the number of people there. Everyone wins and the servers get a decent tip. Logic.

    Now, a lady-friend of mine was telling me about her office lunch a few days ago. It was a bunch of women sitting around a table fussing over how much their entree was and making the bill payment difficult and complicated. Well, they forgot the tip so my lady-friend put down another $20 to cover it. Servers almost got screwed, and she ended up paying twice. No logic whatsoever.

    At any rate, someone should share this story with the NHL and PA. They all need to put their big boy pants on and figure this thing out instead of screwing the fans.

  2. “Cutting their share of revenue again without an improved system of revenue-sharing doesn’t seem like a recipe for success.”

    Herein is the real issue.

    From an owners perspective: I’ve spent millions on my own NHL franchise. I’ve worked hard to build my business(es), so why should I be forced to throw money in a bottomless pit?

    From a players perspective: We sacrificed big time in the last CBA negotiations for “the sake of the league”. Thankfully, it turned out all right for us. But now they want us to sacrifice all over again. We’ve done nothing to cause these failed franchises to fail, we’re just hockey players. Thanks but no thanks.

    Both perspectives are justified, regardless of how much money they make.

    Failing franchises are failing franchises for a reason, which is a poorly conceived and/or executed business plan. Business plans have to take in consideration market and economy. These franchises and the NHL thought they could overcome un-ideal markets, and a poor economy is just opening a wound.

    Most of these franchises are a failed experiment. The only thing (logically) keeping them there are inflated egos. It’s time to cut the losses and move them to viable locations, not ride the backs of others for the sake of pride.

  3. I hate to be the one to beat this out, but even after all of your losing money analysis Lyle … take Columbus and Phoenix and drop them in strong markets and that takes away what nearly $40 million in league losses? I think the reason that the owner’s aren’t caring is they maybe accepting that the league is going to consider folding or relocating franchises in the coming years.

    I am sorry, but if I am the NHLPA you have to take this deal. If the league shuts them out they are going to get less, why? Because the damages to the league won’t be as great to the players and yes some engaged hockey fans who really pay attention may know whats going on. But the vast majority of hockey fans just see snippets on TSN or other sports networks and guess what…

    its the LEAGUE saying the right thing, not the players. In the PR battle the league is going to win again because they are saying the best things. The fans are going to come back, players will continue to be hated for making so much money that fans feel is undeserved, and the league will just go through this again in 6 years.

  4. looking at this i see that league revenue went up 50% over the course of the last cba.

    players salaries went up 70% over the course of the last cba.

    owners costs to run franchises have most certainly gone up since the last cba and if what i pay for gas/groceries/heat/electric and other daily life things is anything to go by those costs went up a lot.

    so if own a business that pulled in 50% more but now pay out so much more in salaries and business costs then i am not making what i made when the cba was signed.

    i would be looking at changing the percentage to at least get to where i was profit wise before and must admit yes a litte more as well.

    if nothing changes i am making less now and even if the projected growth continues at the 7% rate i am not going to be making more overall.

    on top of that what if that rate of growth is less or even god forbid ends up being a decline instead.

    the players have guaranteed contracts so they get it all no matter what so they have no worries or cares about a downturn or rising franchise costs.

    always betting on growth and continued large profits based on speculation is what caused todays depression and financial problems.

    both sides are not really being realistic and i have a feeling even when it finally gets worked out it is all going to happen again when the next cba expires.

  5. My question, especially after reading what “JJB” wrote is …why are we as fans acting like sheep and continuously coming back after whatever stoppage the NHL or its players enact?
    With the average being around $300 dollars or so for a family of four to go to a live game and with the economy being what it is, why when there are other options available to watch a game, cable or satelitte TV being the best ones, do we continue to send the message that no matter what they do the fans will always come back and drop their hard earned money?
    I have already let my season tickets go. I made this decision a while ago and will be sticking to my guns. Yes, the live game experience was good but to tell you the truth sitting in front of my big screen in my own home and sipping my beverage of choice without a worry of driving under he influence or having to take a cab there and back seems a whole lot better, as does my back account.
    My little drop in the bucket of resistance means little to nothing to the owner or the league but if a few thousand, say even more than a few thousand fans did the same in every Canadian NHL’s arena then the owners, league and even the players would soon be sitting up and taking notice. I say Canadian teams because we as Canadian’s are the most avid, rabid and loyal fans anywhere and if we are pissed and not attending in the expected droves then we may get the respect we deserve for without us there would be no NHL, AHL or any junior leagues anywhere.
    If you haven’t figured it out by now and to quote a famous line, “I’m mad as hell and I’m not going to take it anymore!

    Thanks Lyle for providing a forum that allowed me to get that off my chest.

  6. AHAB,

    i have not attended any pro sports event in over 15 years and except for the occasional free ticket neither have any of my friends.
    we all do as you and watch the games on TV and lost interest in pro sports once a game for the family got over a full days pay for the cost.
    working a whole day,maybe more than that, for 3 hrs entertainment stopped adding up.
    i have never set foot in the ACC and have turned down freebies a couple of times.

    as a matter of fact the only pro sports clothing i own are 2 caps,both bought on half price sales and a leaf jersey i bought 25 years ago when tiger williams was number 22.
    except for caps none of my friends have made any other purchases for a long time.

    i do not believe there are as many sheep as you think.
    take out corporate seats and the rinks would be all half empty even in Canada.
    even back in the past when i attended 2 or 3 games a year they were tickets free from work and almost every case the same with my friends.

    the salary ranges of my friends is 40-70k and none think the pros are worth the price.

    while i am surprised how many still do have season tickets i also think most take in only a handful of games and sell off the rest to others that do not mind taking in a game here and there.

    if corporations ever decide to cancel season tickets and put the money elsewhere i am sure you would see some very serious financial problems in pro sports.
    but until that day happens attendance will always look falsely strong while the majority of real fans are at home in their easy chairs watching their plasmas.

  7. Hello TopRightCorner:
    You bring up a great point about corporate advertisers and their tickets. Once again we hold the power and if we as fans ever wanted to send a very strong message to teams and team owners all we have to do is write letters against them advertising in pro hockey arenas, especially where ticket prices are actually beyond the budget off the average worker.
    Something that has irked me for a long time is Air Canada and spending our tax dollars (how often has the government propped them up?) on advertising in pro hockey arenas. But that’s a rant for another time. What I do want to stress is the power we as fans carry and refuse to wield as owners and players get rich, most beyond our wildest dreams, and on our dollar.
    It is time that the fans spoke out.

  8. My firm belief remains that the lock-out that’s coming will not go the entire season. Both sides have too much to lose so it’s now just a question to what compromise(s) each side is willing to accept.
    It seems to me that the real issue is a divide that has developed between the team owners causing the players to be caught in the middle. How else can you explain so many teams continuing to sign players to such long term and large contracts? We have a situation (documented very capably by Lyle in the ‘Soapbox’ area) of some teams that consistently make a lot of money, others that usually make money vs. those that rarely or never make money. This is the real battle being fought. The ‘have not’ teams need capital to remain competitive while the ‘have’ teams aren’t really big on the idea of sharing. Rather than address this disparity where it should be, at the ownership level, they’ve instead directed Mr Bettman to do their dirty work by going after the easiest target, the players.
    In the meantime really the only thing we fan’s can really do is to sit back, listen, and shake our heads. And yes once it’s finally settled I admit I’ll be back watching and let’s be honest, so will you.

  9. While I agree that the owners are clawing for more money, I think that’s their right, seeing as they are.. the owners.

    I know that the culture of professional sports is different then our 9 to 5 jobs, but really, no employee should be making over half of the owners profits.

    It’s clear to me the owners think this way to, and I fear they aren’t going to move on it. I honestly expect a long lockout and am 50/50 on losing the season.