As the NHL and NHLPA move closer toward a new collective bargaining agreement, we’re starting to get a good idea of what the finished product could contain.
Regardless of how long it takes to reach an agreement, it’s apparent the NHL owners will get a deal that, at first glance, is in their favor.
Here’s what it could contain: A CBA likely between seven-ten years in length. A 50-50 division of hockey-related revenue. A “make whole” provision of deferred escrow payments likely around $300 million. A five-year term limit on player contracts, with up to seven years for re-signing potential unrestricted free agents. No amnesty buyouts or limitations on escrow early in the CBA.
It remains to be seen, of course, how such a CBA will play out over the course of its lifetime, but some potential problem areas are already apparent.
The most glaring is there’s little to suggest this new CBA will sufficiently address the lot of struggling clubs in non-traditional hockey markets.
NHL Commissioner Gary Bettman, toward the end of his press conference last Thursday, suggested his main concern was to get the right deal to ensure more franchises wouldn’t be in jeopardy, a stark deviation from the rosy picture he’d been painting over the course of the previous CBA.
Sportsnet’s John Shannon claimed he’d been told 18 NHL teams lost money last season, a number not far off from what the league claimed during the season-killing lockout of 2004-05.
Regardless, it appears the league’s solution for this problem is to once again reduce the players share of revenue. Under the previous CBA, the players share was reduced from what the league claimed was 76 percent down to 57 percent, as well as introducing a three-tier salary cap.
At the time of the implementation of the previous CBA, the league claimed it would “level the playing surface” and help those supposedly struggling clubs.
A system of revenue sharing was also introduced, but it proved quite complex and largely ineffective, with only a tiny percentage of overall revenue going into it ($150 million, or 4.5 percent of the league’s $3.3 billion in revenue).
Meanwhile, the gap between big market, money-making teams and those money-losing franchises widened.
Now, the NHL once again believes another reduction of the players share of hockey-related revenue, from 57% to a 50-50 split, will address the problem.
Furthermore, the league has expressed little interest in improving its revenue-sharing system. Indeed, it’s been the NHLPA pushing for a more robust revenue-sharing system.
The league offered $200 million and ending restrictions on clubs in big markets, like Anaheim, Dallas and New York (Islanders). It also suggested half of that $200 million would come from a revenue-sharing pool funded by the top ten revenue grossing clubs, and the rest funded by “league and playoff-generated revenue”.
The PA, meanwhile, has countered the money being cut from the players share of hockey-related revenue should go toward revenue-sharing.
If the goal for the NHL is to ensure a deal to aid struggling clubs while ensuring others don’t fall into that category, a better solution might be for the top revenue-makers to share more with those clubs at the bottom end of the scale.
Critics argue it’s simply wasting money, that successful teams shouldn’t prop up weaker ones, that revenue sharing won’t turn poorly run teams into better ones, and the league would be better off relocating or contracting its struggling franchises.
That’s as may be, but this is a situation of the league’s making, and if Bettman truly wants to aid those franchises, a more robust system of revenue sharing is required.
Given the limited number of destinations, relocation won’t fully address the problem.
Provided the Canadian dollar remains close to part with the American greenback in the coming years, Quebec City and Southern Ontario are prime destinations for relocated franchises.
Seattle appears a possibility once a new arena is constructed, though the prospective owner of said arena has his sights firmly set on attracting an NBA franchise, giving secondary consideration to the NHL.
Kansas City has an arena, but so far that’s only been used by owners in existing markets – hello there, Pittsburgh Penguins and NY Islanders (before their eventual move to Brooklyn) – in efforts to extract concessions on new arenas in their respective cities.
Portland has also been suggested, but the NHL’s contentious labor history could scare off potential buyers.
Given the league’s determination to keep struggling franchises in their respective markets, relocation doesn’t appear an option of choice until all others have been exhausted.
As for contraction, that’s out of the question. Indeed, there’s already speculation of expansion in 2015-16 by two clubs, bringing the total to 32, or eight teams per conference under their anticipated realignment.
If relocation won’t fully address the issue of struggling franchises, and contraction isn’t in the cards, a significantly improved revenue-sharing system seem the most viable solution.
But if the league’s proposed system of revenue-sharing is what ultimately ends up in the new CBA, it won’t sufficiently address the problem of money-losing franchises, potentially laying the foundation for yet another future NHL labor standoff.
Term limits on contracts combined with a five-percent variance on salaries could pose another problem.
Though understandable as a means of preventing clubs from signing star players to “cheat contracts” (lengthy, heavily front-loaded deals) for a lower cap hit, term limits could have the unintended consequence of producing teams lacking depth throughout their roster.
As per Ken Campbell of The Hockey News:
“ The league had better watch what it wishes for here. There’s a good chance what you’ll begin to see instead of 10-year contracts worth $70 million are five-year contracts worth $70 million, or seven-year deals worth $70 million. The same amount of money the owners are putting out now would just be crammed into fewer years, which will create a system where superstars are highly paid and the rest make minimum wage. It would effectively wipe out the middle class in the NHL.
And despite the notion that players will not honor the final years of front-loaded deals, we have no real evidence that’s actually going to be the case. Daniel Alfredsson, for example, was prepared to play this season for $1 million, an amount that will be even less during a truncated season.”
In other words, the result could be clubs with most of their payroll invested in a handful of stars, leaving little room for depth throughout their roster.
That situation exists under the current system, but those heavily front-loaded, longer-term contracts create more cap space for teams to bolster or maintain their depth throughout their roster. Term limits and a five percent variance on salaries, however, will simply eat up more cap space, leaving less money for depth elsewhere in the roster.
The result could be teams carrying fewer stars but more depth throughout their rosters employing a defensive system to neutralize teams which are top heavy with star players but lacking roster depth. That would exacerbate a problem which crept back into the NHL product during the final years of the recent CBA.
Another possible problem is young talent forsaking the NHL for more money in the Kontinental Hockey League.
When the NHL implemented its cap on entry level contracts in the previous CBA (term limits based upon age, plus a cap on base salary and bonuses), there was no rival league which could offer promising young talent better terms.
Today, the KHL has become a viable alternative for fading stars and those unable to cut it at the NHL level. Granted, that league isn’t without its problems, as it remains primarily funded by Russian oil oligarchs, but it shows no signs of collapse.
While it may be unable to poach away prime NHL stars, it could increasingly become a serious alternative for rising talent to earn bigger bucks than they would under NHL entry level rules.
It’s not inconceivable a future eighteen-year-old Alexander Ovechkin or Evgeni Malkin could bypass the NHL for the first three, four, or five years of his professional career because he could make far more money in the KHL.
Xenophobes would argue, “So what, let ‘em stay overseas, the NHL doesn’t need them”, but if the NHL is supposed to be the stage for the world’s best talent, its product would suffer if some rising European stars decided to put off their NHL debuts to make more money in Russia.
Finally, the length of the new CBA (a ten-year deal, with an “opt-out” clause for the NHLPA by year eight) could also create difficulties.
A longer CBA will certainly mollify fans and sponsors weary of the league’s labor strife, but potential problems arising under such a lengthy deal could fester into issues which set the stage for labor standoff upon its expiration.
Unless the two sides can agree to review the CBA at various times in order to address potentially contentious issues before they mushroom, a longer CBA could create as many problems as the league believes it could resolve.