Strikingly Similar: the Upcoming NHL lockout

While I am not a hockey fan and don’t follow NHL hockey, I live in Canada and news about hockey dominates our media. Because of this I have learnt the following information by osmosis: the current NHL Collective Bargaining Agreement (CBA), which was signed on July 13th, 2005 (and was preceded by a 10 month lockout of the players by the owners), is set to expire on September 15th. The two sides — the owners, let by NHL commissioner Gary Bettman, and the NHL Players Association (NHLPA), led by Executive Director Donald Fehr — are currently trying to negotiate another deal.

The demands coming from the owners seem rather extreme. To me, the interesting part is that the rhetoric we are hearing from Bettman is very similar to what we heard from NBA commissioner David Stern during the recent NBA lockout. Perhaps this should come as no surprise, as Bettman used to be third in line to the NBA throne before he started working for the NHL. Just for fun, let’s see how the NHL’s recent comments compare to what the NBA owners were saying prior to the signing of the NBA’s new CBA.

‘The players are being paid too much’

Former home of NHL Hall of Famer Wayne Gretzky

What NBA owners wanted:

reduce players’ share of Basketball Related Income (BRI) from 57% to 47%
reduce salary cap from $58 million to $45 million
move from a ‘soft’ cap to a ‘hard’ cap
increase luxury tax penalties

What NHL owners want:

reduce players’ share of Hockey Related Revenue (HRR) from 57% to 43%
reduce salary cap from $70.2 million to $55.3 million
“The fundamental proposal, our initial proposal, relates to the fact that we need to be paying out less in player costs,” — Gary Bettman

‘Teams aren’t making any money’

The Phoenix Coyotes’ arena is usually empty

What NBA owners said:

‘the league loses around $300 million a season’
22 of 30 teams posted losses; only a handful of big market teams are making money
small market teams are struggling; we might have to contract teams

What NHL owners say:

only a handful of teams are making money
small market teams are struggling; we might have to contract teams

‘Contracts are too long’

The man with the 15 year contract (photo: Jim McIsaac/Getty Images)

What NBA owners wanted:

shorten max contract length from 5 years to 4 years

What NHL owners want:

restrict length of player contracts from to 5 years, down from a max of 15 years

‘We hate free agency’

Ryan Suter left the Nashville Predators for the Minnesota Wild and their 13 year, $98 million contract offer

What NBA owners said:

star players leave small markets too easily

What NHL owners want:

players must accumulate 10 years of service before they can become unrestricted free agents, instead of the current 27 years old or 7 years of service (whichever comes first)
increase the length of entry level contracts from three years to five

‘Let’s go for the jugular’

Gary Bettman’s game face

What NBA owners wanted:

Increase entry age from 19 to 20

What NHL owners want:

eliminate salary arbitration
remove the salary floor (the minimum value of salaries a team must pay out in order to play) for at least a few teams

The facts

“Hey, you can blame me for the NBA lockout, but this next NHL lockout is all Gary’s fault!”

As with the NBA owners during the NBA CBA negotiations, the NHL is blatantly trying to run away with the players’ cash. Here are the facts:

since the last CBA was signed, league revenue has increased from $2.2 Billion to $3.3 Billion
the NHL has experienced seven consecutive record-setting revenue seasons
player salaries are tied to a percentage of league revenues, which means that players’ salaries can only increase when the league makes more money
the NHL will be making more money from new TV deals: the 2012-13 season TV deal with NBC is valued at $200 million annually, up from $75 million annually. The Canadian TV rights come up in 2014-15, and will undoubtedly lead to increased revenue as well
the NHL has the weakest revenue sharing of the major North American sports leagues, which means that the richer franchises make money at the expense of the poorer ones, something that has nothing to do with the players

Living in another world

“I’m not sure that there has yet been a recognition of the economics in our world — and I mean the greater world and the sports industry, taking into account what recently happened with the NFL and the NBA.” — Gary Bettman

We didn’t fall for these tactics when David Stern tried them, although the NBA Players’ Association did eventually end up agreeing to a new deal that cut player salaries. Does Bettman think that NHL players and fans will fall for these tactics now, after what happened in the NBA?

– Devin

9 Responses to "Strikingly Similar: the Upcoming NHL lockout"

Steven says:

August 28, 2012 at 2:08 pm

“We recovered last time because we have the world’s greatest fans.” — Gary Bettman
Al S says:

August 28, 2012 at 2:20 pm

I don’t know how you can say “the NHL is blatantly trying to run away with the players’ cash.” The players don’t have a right to the cash; the current CBA is expiring.

You are also wrong when you say “players’ salaries can only increase when the league makes more money”. This confuses revenues with profits. Players’ salaries increase when revenues increase, but profits are equal to revenues less costs. Whether the “league makes more money” depends on more then just revenues.
Steve Dickinson says:

August 28, 2012 at 5:40 pm

For all the flaws in the NBA owner’s argument, they certainly came away with a better deal than they had. The same should be true of the NHL too.
Zachary Young says:

August 28, 2012 at 8:33 pm

Al S, I think you’re nitpicking a bit. It’s absolutely right to say that the players only make more money if the league takes in more revenue, which is clearly Devin’s point and clearly what he meant by “makes more money.” If the NHL owners are in a bad position financially, it’s because they mismanaged their own slice of the pie, not because the players stole some of it. Sure, the NHL owners have the right to try and get themselves a better deal, but that doesn’t mean the current deal is a bad one and it doesn’t mean that one should sit idly by while the players get shafted by disingenuous rhetoric.
Al S says:

August 29, 2012 at 7:46 am

Zachary, I don’t think it is nitpicking to point out that in normal parlance “making money” refers to profits, not revenue. After all, the entire issue in the labor negotiation is that owners want profits and players are only interested in a share of revenue.
Devin Dignam says:

August 29, 2012 at 9:22 am

Al S,

As player salaries are tied to HRR (as mentioned in the post), that means that salaries only go up when league REVENUE increases (happy?). This means that, if the owners aren’t making any money, they are spending a rapidly increasing amount of money on non-player costs, something that has nothing to do with player salaries.

As for your other point — “the players don’t have a right to the cash; the current CBA is expiring” — I’m going to (surprise!) disagree. The players are the commodity; without the players, there would be NHL. But you could have an NHL with 100% new ownership, or player ownership; without the owners, you could still have the NHL. Do the players have a “right” to the cash? I never said that, nor do I believe that. But I believe they deserve their fair share, and certainly deserve more than management and ownership, who don’t even pay for the venues anymore. Why should the owners be guaranteed a profit, and what do they do that makes them deserve it?
Al S says:

August 29, 2012 at 1:32 pm

Devin, I don’t think it is correct to say that non-player costs have “nothing to do with player salaries”. Non-player costs include amounts spent to raise revenues (i.e., advertising, facility rent, etc). Increased non-player costs lead to increased revenues, which due to the salary cap/floor and HRR split, leads to increased player salaries. In fact, therefore, there is a positive direct relationship between non-player costs and player salaries. I don’t know whether one is rising faster than the other.

I don’t understand your other comment regarding players being the “commodity”. Sports leagues can exist without the unionized players (ie the 1987 scab NFL) and players can leave a league for a new league (ie the WHA in hockey). But neither of those situations works well. I also believe that players deserve their fair share, but I don’t presume to know what is a “fair share” more than whatever is the result the parties arrive at thru collective bargaining.
Zachary Young says:

August 29, 2012 at 2:47 pm

If player salaries increase, it means league revenue has increased. The ratio between what the owners control and what the players receive remains constant. The players shouldn’t be penalized if the owners’ non-player costs cause them to suffer a financial loss. Unless the NHL is arguing that league revenue will increase so much under a new agreement that the players won’t lose money despite having a (significantly) smaller slice of the pie (a dubious claim on the surface), I don’t really see how it could be characterized as anything other than the owners taking what is currently player money in order to subsidize their own mismanagement.

I’ll also agree with Devin in that, fundamentally and with very few exceptions, the owners are interchangeable. Substitute the KHL owners for the NHL owners and nothing changes. The player quality is what distinguishes leagues from one another, so when in doubt I’m going to side with the players since that is more likely to result in better play.
The NFL Referee Lockout: Fighting Over Inches | The Wages of Wins Journal says:

September 21, 2012 at 11:55 am

[…] Like professional athletes, sports officials have collective bargaining agreements (CBAs) with their respective sports leagues. The CBA between the NFL and its referees expired in June, and when the two sides couldn’t agree on a new agreement, the NFL locked out its referees, just like the NHL has locked out its players. […]

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‘The players are being paid too much’

‘Teams aren’t making any money’

‘Contracts are too long’

‘We hate free agency’

‘Let’s go for the jugular’

The facts

Living in another world

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