New NHL CBA Won’t Help Small Market Teams.

Unlike the previous lockout, the NHL isn’t painting this lockout as a means of obtaining a system to help its small market teams. That’s because its current CBA proposals won’t help small market teams, like the Winnipeg Jets.

 Gary Lawless of the Winnipeg Free Press suggested in a recent column the new CBA would go a long way toward determining the future of the Jets, even at the potential risk of losing this season to a lockout.

“Sustainability is one thing. But why not push for a restructured system that allows this city to compete for the Stanley Cup. And if that means waiting, even losing a season, maybe that’s the best thing for Winnipeg.”

Lawless didn’t believe the Jets could win a Stanley Cup under the terms of the previous CBA, claiming there “just wasn’t enough money” to spend to the cap each year, while the current player contract rights “were going to see the Jets best young players” – like defenseman Zach Bogosian – leaving just as they reached their prime.

He believes big market owners, like Ed Snider of the Philadelphia Flyers, don’t really care about small market team like the Jets, while the players only care about themselves, though he doesn’t blame them for looking toward their self- interests.

Lawless also claimed the Jets made money last season, but not a lot.

” The Jets turned a profit in a year that, minus inflation, will most likely be at or near the top of the revenue cycle for this franchise. The key to their financial success, after taking in unexpectedly strong revenue, was living within a budget that was anchored by bottom-third-of-the-league salary spending.”

Lawless called Winnipeg a “real hockey market”, which pays its own way and doesn’t need subsidization, calling it “willing and able” to pay NHL prices for the NHL product. He considers this current lockout about teams which cannot afford to do so, believing it should be about teams like Winnipeg.

I hate to disappoint Lawless, fans of the Winnipeg Jets, or those of small market/struggling market teams, but there’s nothing in the NHL’s CBA proposals which will help those teams.

Like the previous two NHL lockouts, this one isn’t about struggling or small markets. If it were, we’d see more owners of those clubs participating in the CBA negotiations, rather than their current relegation to the sidelines while the league’s negotiators and several hawkish, big market owners make the decisions for them.

Rather, it’s all about the owners in big, successful hockey markets trying to control how much hockey-related revenue the players can have.  Everything I’ve seen in the NHL’s proposals in this lockout to date amounts to a “cash grab” by those owners.

The real reason the league wants to reduce the players share of revenue from 57 percent down to a 50-50 split is because NHL owners saw the NFL and NBA getting their players agreeing to a similar split and wanting the same for themselves.

Don’t believe for a minute reducing the players share to an even split provide long-term help for perennially money-losing NHL franchises. If slashing it from a supposed 75 percent to 57 percent seven years ago failed to address the problem, why would a 50-50 split stand a better chance of success?

As in the previous CBA, it will helps some of those teams in the short term, maybe for a year or two, but over the remainder of the deal, as revenues increase and raise the salary cap accordingly, the same problems will persist.

Increased revenue sharing could alleviate the problems, but it’s the NHLPA, not the NHL, pushing for it.

The league’s latest proposal saw them agree to increase revenue sharing to $200 million, but it’s still to be determined where the full amount will come from (in its earlier proposals, the league wanted the players to carry the cost), let alone if the formula will be less complex and more sensible than the one used under the previous CBA.

As for unrestricted free agency, increasing the eligibility age/years might keep stars with their teams a little longer, but won’t eliminate the problem of re-signing those players, especially for teams which consistently operate near the bottom of the league in payroll.

The new NHL CBA must find a balance between the needs of all teams while ensuring players receive fair compensation.

Over the past twenty years of the NHL’s contentious labor negotiations with the NHLPA, the league negotiators and the team owners have proven to be remarkably short-sighted and selfish, implementing CBAs which fail to fully address the needs of its weaker markets. Those agreements have also been filled with loopholes swiftly exploited by teams seeking an edge over their rivals.

I certainly don’t expect the next CBA to sufficiently address the issues facing struggling teams, let alone those facing a popular market like Winnipeg. If anything, I fully expect the league to once again kick the can down the road on those issues, which could make things difficult for the Jets.

When the franchise was moved from Atlanta to Winnipeg last year, I expressed concern over its long-term future in the NHL’s smallest market.

I don’t question the devotion of Winnipeggers and Manitobans toward the Jets, but the market size remains an inescapable problem.

The Jets made a profit last season (but not very much, according to Lawless) charging one of the highest fan cost indexes (third overall, including the second-highest average ticket prices) whilst maintaining one of the lowest payrolls (25th overall) in the league.

Their fan cost index is expected to remain high (likely among the league’s top five teams) for this coming season, or next if this one is cancelled by the lockout.

Thanks to raises paid to Ondrej Pavelec and Evander Kane, as well as signing free agent center Olli Jokinen, the Jets sit 20th overall in payroll for 2012-13 .

Starting next season, they’ll be paying Tobias Enstrom an additional $2 million per season when his new contract kicks in.

By next summer, Zach Bogosian, Blake Wheeler, Bryan Little and Alex Burmistrov will be restricted free agents and eligible for significant raises.

Forwards Nik Antropov, Alexei Ponikarovsky and Kyle Wellwood, defensemen Ron Hainsey and Grant Clitsome and goaltender Al Montoya will be unrestricted free agents and either re-signed or replaced.

Even if the Jets get some money back via escrow, it likely won’t be enough to off-set those upcoming increases in payroll.

Regardless of where the salary cap sits after this season, payroll is bound to increase for the Jets. If, as Lawless suggests, they remain at or near the top of their revenue cycle, they’ll eventually face a loss. To off-set that problem, they could charge higher prices, but sooner or later those prices will become unsustainable for such a small market.

By that point, it wouldn’t surprise me if we start hearing True North Sports and Entertainment talking about the need for a new, larger arena, as the MTS Centre apparently cannot be expanded for additional seating.

If True North is willing to pick up most or all of the tab for its construction, it shouldn’t be a problem for Winnipeg and Manitoba taxpayers. Let’s hope so, as the spat between the billionaire owner of the Edmonton Oilers and the city of Edmonton over construction of a new arena demonstrates the ugly side of such a venture.

The Jets can afford to “carry the freight” now. But can they do so in five years time when the novelty of having an NHL team wears off? If league revenue continues to drive up the salary cap, can the Jets afford to keep pace? What happens if their best players depart via free agency because ownership cannot, or will not, spend what is required to maintain a competitive franchise. What happens when (not if) the value of the American dollar improves, and the Canadian dollar declines?

These questions cannot be ignored, especially if the NHL fails to address in the next CBA the ongoing or potential long-term problems facing its small markets and struggling franchises elsewhere.

As long as the league’s attempted solution is to continue squeezing the players for another short-term cash grab, those teams won’t be helped by the next CBA.

6 Comments

  1. To paraphrase Ghandi, (and I feel a little wrong using this for sports instead of real life), “there’s enough for the need, not enough for the greed.”

  2. Gezz lyle why are you scaring me, this whole thing about this is about the small market team in 04 lockout made me feel the oilers will be here for years to come BUT now you are scaring me.

  3. I don’t believe that the American dollar and Canadian dollar will deviate very far from each other in the future.

    • Unless commodity prices collapse I agree. The US has to address its huge budget deficit as well. Comparatively speaking the Canadian economy is in much better shape and there is no underlying reason why the currency will suffer a significant drop.

  4. I have a hard time looking at this as only a cash grab.
    With ticket prices maxed out,the TV deal in place for 10 years and advertising revenue probably going backwards due to tough economic times i see it more as a correction to try and slow down the rising costs and make the league more solid.
    When you start seeing the Yankees and Red Sox cutting back you know things are expected to start going backwards.
    But even if it is a small cash grab once you add in the large revenue sharing upgrade that means less losses and some more spending for the smaller markets and that means salaries for the players will still be good.
    if the smaller markets choose to pocket the cash there is nothing you can do about it and that also means they would do that no matter what new system would have been put in place.
    like in baseball getting big chunks of welfare does not mean teams will spend it over just keeping it to make a profit over making a better team.

  5. you know there are so many ways to hide money in a billion dollar corporation. when you really try to look at it in an objective way the owners haven’t done anything to earn the player’s trust in fact you could make a pretty strong argument the other way. it’s good that they’ve come to a supposed agreement on a 50/50 split but the two sides haven’t even been able to define what should be considered “Hockey Related Revenue” yet so i really don’t hold out much hope for a season this year. what i have a hard time understanding is why the league is so intent on not changing anything but how much they pay the players? it seems to me that te best way to stop losing money is to contract or relocate the biggest money losers and there’s already been a step in that direction by moving the Islanders to a new arena in Brooklyn. the NHL has to come up with some kind of a system of identifying and dealing with problem franchises before they reach critical mass like they have in Phoenix, the only way i see someone buying that franchise is if there’s an agreement in place to move to a more lucrative area if a significant improvement isn’t shown within a specified time period. which begs the question why was the NHL so intent on not selling to Jim Balsillie (a Canadian muti-millionaire who has been rebuffed in 3 attempts to buy troubled franchises)?