This summer’s initial blizzard of signings in this summer’s free agent market not only has met with criticism from various pundits and bloggers over the irresponsible spending of general managers, but  given rise to concerns over the impact of these and previous expensive signings upon the next round of NHL CBA talks, slated for some time next year. 

No one should be surprised by this kind of talk. An increase in the salary cap by $5 million was bound to result in another frenzy of irresponsible spending, despite the lack of depth of quality star talent in this summer’s UFA market. 

It’s also seen as another indicator the NHL is heading for another lockout next year. 

Given the continuing struggles of several American-based franchise, most in the deep South, and the ever-escalating salary cap resulting in ever-increasing player salaries, it appears this CBA will need more than just a few tweaks, but perhaps an overhaul. 

Of course it remains to be seen what happens between now and September 2012, when the current agreement expires, but it appears the opponents in the next potential labour clash might not simply be owners against players. 

In previous CBA negotiations, the two sides were clearly established.

 The owners, represented by the league commissioner, insisted on “cost certainty”, bringing players salaries under control for fear it would have a detrimental impact upon revenue. 

The players, represented by their union, or “players’ association”, tried to prevent the owners from denying them what they considered their fair share of revenue. 

The opponents in the next round of negotiations however aren’t likely to be so clear cut. 

Sure, the NHLPA will once again try to prevent the league from cutting back their share of revenue via salary rollback and escrow, while many owners will likely attempt to claw back as much of the players revenue pie as possible. 

But the league is currently enjoying a resurgence of popularity in the United States in recent years, forged by exciting new stars like Sidney Crosby and Alexander Ovechkin, new rules which improved the quality of play, exciting Stanley Cup Finals since 2008 featuring at least one Original Six team, and the introduction of the annual Winter Classic outdoor game every New Year’s Day. 

That in turn has resulted in a big surge in league revenue over the last six years, especially for clubs in markets where hockey has a large following. 

Any kind of work stoppage, be it lockout or strike, for even a few weeks could have an adverse effect upon that resurgence, and thus threatening those revenue streams. 

One has to wonder how keen the owners of teams in Toronto, Montreal, New York, Philadelphia, Chicago and Vancouver would be to have their revenues jeopardized by even the hint of another possible work stoppage, especially one which, this time, really would be to save struggling franchises, unlike the last two times, when it was merely a smokescreen for the real intent of crushing the militant leadership of the NHLPA. 

Count the Calgary Flames and Edmonton Oilers, once considered “small market”, into that group too. Those franchises were saved, not by the salary cap, but the steady increase in the value of the Canadian dollar, which not only significantly increased their revenue, but also made it possible for them to spend big money almost annually on their own talent or free agents. 

It would certainly be ironic if the Flames and Oilers were amongst the teams unwilling to stage a lockout to save struggling American based franchises. 

The next round of labor talks will center around the fact several teams – specifically, Phoenix Coyotes, Columbus Blue Jackets, Carolina Hurricanes, Nashville Predators, Florida Panthers, and the New York Islanders – are struggling to survive under the current CBA, which was supposedly designed to save them. 

Already the league has been forced to accept the loss of their Atlanta market, as the Thrashers were sold and moved to Winnipeg, while the Coyotes remain without ownership two years after former owner Jerry Moyes declared the club bankrupt and attempted to sell it to Canadian billionaire Jim Balsillie. 

It’s been a tendency amongst pundits to call those clubs “small market”. They’re not. Almost all those teams are located in the biggest markets in North America. For the most part, their problem isn’t location, but rather, how they’ve been run over the years. 

It’s anticipated the Coyotes, currently owned by the league, could be relocated – perhaps to Quebec City – if a new owner willing to keep the club in Arizona isn’t found by next spring. 

The Predators have been improving at the gate, and seem the more stable of the aforementioned teams, but it’s a safe bet their ownership group will seek to lower the current salary cap levels and stump for players to receive lower percentage of revenue. 

Ditto the Hurricanes, the 2006 Stanley Cup champions, who have a devoted fan base, but continue to scrimp by on lower payrolls, unable or unwilling to invest more money in improving their roster. 

The fan bases of the Blue Jackets, Panthers and Islanders have steadily declined for years to a combination of on-ice mediocrity and an unwillingness or inability of their respective ownership to keep pace with a rising salary cap. 

Those clubs will likely not only be at the vanguard of reducing salaries, but perhaps also at increasing revenue sharing, which isn’t likely to go down well with their wealthier brethren, whose resistance to such a scheme during the previous lockout resulted in such a convoluted process under the current system that it is usually of little help to the clubs which need it most. 

Even if the owners are all on the same page once again and determined to slash the players revenue share, unless they push this time for a hard salary cap which isn’t tied to revenue, they’re only going to see the same problem again down the road. 

And a hard cap might not be acceptable to clubs who have no problem spending big bucks on their rosters, who believe they should be allowed to spend whatever they want since they can afford to do so. 

A better way to address the issue might be increased revenue sharing and a luxury tax, but again, the richer teams will probably be reluctant to share more of their money bailing out their poorly run, less successful peers. 

Even then, increased revenue sharing or a luxury tax won’t make general managers smarter, anymore than putting the burden upon the players once again for the excesses and mismanagement of management will resolve the problem. 

The players have given back enough, as the salary cap dropped their percentage of revenue from the lofty 74% claimed by the league in 2004 (other sources put it more at 65%) to the maximum of 57% today, thanks to the overall salary cap, the cap on maximum salaries, bonuses and rookie contracts, plus the 24 percent salary rollback in 2005 on existing contracts, and the seemingly annual clawback in recent years by escrow. 

Forcing them into slashing their share of the pie even further will only increase the wealth of the larger teams, although most of them would likely prefer the right to spend whatever they want, but won’t make poorly managed teams improve, nor prevent top stars from getting top dollar, or general managers from overpaying for second tier talent via free agency, or gambling on the development of young talent, or investing too much in ageing talent. 

It will require real imagination and creativity, from all the owners, and from the NHLPA, to craft an agreement which would work to the benefit of everyone. Sadly, both are traits that have been sadly lacking in previous negotiations, and are unlikely to be utilized in the next round of talks. 

What could ultimately determine a work stoppage could be the willingness of the players to accept still more cuts to their share of the revenue. 

Despite hiring noted MLBPA honcho Donald Fehr as the executive director of the PA, it’s quite possible the players simply lack the stomach for another contentious battle with the league.

 That could be something the team owners are gambling on, that the players – most of whom were in the league during the season-killing lockout of 2004-05, forced to find work overseas or training at home – aren’t willing to go through that uncertainty and disappointment again. 

The overall feeling could be to accept the rollbacks and cuts, and just hope Fehr can still work out an agreement which keeps the cap tied to revenues, while protecting the rights they still have (arbitration, unrestricted free agency eligibility in their mid-twenties, movement clauses and most importantly, guaranteed contracts) and perhaps getting a cap on escrow payments. 

If the players lack the will for another contentious round of negotiations which could put another season at risk, the owners will get what they want, but it won’t improve the lot of struggling, badly managed American-based franchises. 

And that could bring about the real possibility of the one word nobody wants to hear in NHL headquarters: contraction.


 

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4 Responses to More thoughts on a possible NHL lockout.

  1. Jim says:

    I cannot handle another lockout from the NHL. they need to get their s— together and prevent it. the canceled season was one of the worst things ever. I love this sport too much to tolerate that. please, NHL, please don’t do this to me again.

  2. bleedsbluewhite says:

    Why not get rid of the salary cap “floor” and let these “small market” teams go on their own self mandated salary cap. Or why don’t they allow a 57% cap based on individual team profits. I think that would allow fair market value, if the Toronto’s and the NY’s can afford a $500 million salary budget and the Florida’s can only afford a $25 million budget based on their own revenues, who really cares? I agree there should be some sort of profit sharing to help the smaller market teams, maybe incorporate a hard cap max but also have a luxury tax starting at 50% of teams revenue and increasing in value till you hit the 57%.

  3. BCLeafFan says:

    It’s a pleasure to read such a thoughtful summary of the NHL situation. Here we have a league on the rise among North American professional sports and the word “lockout” is being bantered about – what a shame. Perhaps the next CBA should be written by hockey fans. I can tell you what I’d have as the first principle – the owners and the NHLPA would put up the cash to buy out four franchises and dissolve them. The players on those teams would have their current contracts honoured and they would enter a dispersal draft. A twenty-six team league would exist for the duration of the CBA, at which time the same exercise could take place if needed.
    I know this is unlikely to take place but, as a fan, I would love it and I think everyone would love the level of play in the new NHL.

  4. Tyler says:

    While the NHL has several stuggling markets, nobody can deny the fact that the NHL has one of the best CBAs in pro sports. One just has to look at baseball where the Yankees A-Rod makes almost as much as the entire KC Royals Team and basketball where one team can sign 3 of the best players in the NBA without a problem. Atleast in the NHL, the competitive balance is there where only 5 teams have failed to make the playoffs in the last 3 years compared to the NBA, MLB and NFL where there are 7, 14 and 11 teams with droughts of 3 or more years. I think that if the league can come up with a better revenue sharing system between small and big market teams that allows for teams losing money to cover their losses, then the league will be much better off. This will also make the league more open to relocation of teams to help increase profit. Also, the salary cap floor should be adjusted so that its a percentage of the cap, not a set dollar amount as the floor has gone from being 59% (23 million) of the cap to 75% (48 million). if this was the case, the floor would be at 38 million for this season, a much more reasonable number for teams such as Florida and NY Isles.

    Another thing that needs to be addressed is the long contracts. The Kovalchuk clause help it but didn’t completely fix the issues as teams are not simply offering most of the money in the first year as a signing bonus so it doesnt count towards the minumum allowable amount in the final year of the contract (see Brad Richards contract)

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