Larry Brooks had quite the column the other day, although I don’t really get why he calls himself “Slap Shots”:
Slap Shots has been told by several sources that the NHL likely is to present a new version of the hard cap next time around where what has been the midpoint will actually become the ceiling and in which the band between high and low will be as narrow as the low-revenue, floor-hovering teams will permit.
In other words, instead of the cap this season being $59.4M based upon a $51.4M midpoint, the cap itself would be $51.4M.
But wait, it would be significantly lower than that, even, because the league is believed prepared to demand that the players’ percentage of the gross be reduced from 57 percent to 50-52 percent, with all one-way contracts within an organization counting against the cap.
This in addition to strict term limits on contracts, controls relating to front-loading; and changes in the manner cap charges are calculated on multi-year deals. Plus, who knows what other give-backs?
The league will attempt to divide the union by pointing out that a cap calculated this way would eliminate escrow even as it would dramatically drive down payroll on about half the league’s clubs that will spend to the cap this season.
If this is what the players have, if their repose in the face of a $102M defeat is an indication, if their inability to attract the best and the brightest to their cause is a reflection of how they are perceived by the outside world, they might as well bend over now and save everyone the aggravation in two years.
As Brooks alludes to in the last paragraph, he mentions elsewhere in his piece that it looks like former MLBPA chief Don Fehr isn’t going to take over the leadership of the NHLPA. Before I talk about the merits of the CBA stuff discussed in his piece, I thought I’d comment briefly on that.
I’m a little mystified with the fascination that the PA has with getting a name candidate to run the show. Fehr became the acting leader of the MLBPA in 1983, when he was 35 years old. He had years of experience working with the organization, having been involved in the Messersmith and McNally decisions in 1975 that granted members of the MLBPA with free agency rights. He’d served as general counsel to the MLBPA since 1977 when he was 29. He wasn’t a name guy when the MLBPA hired him – he was a smart guy who’d been intimately involved in the operations of the PA for at least six years, with an intimate understanding of the business of MLB.
If I was sitting on the committee that was looking for someone to replace Paul Kelly, I’d be looking for someone who has an understanding of how the NHL operates and the power structure on the other side of the bargaining table. The negotiation that the NHLPA is facing is a curious one, because it’s a negotiation where one body with, I suspect, 900+ members, all of whom have disaparate interests, are negotiating with another body that has 30+ members, all of whom have disparate interests. It is an awfully complex thing for someone to be stepping into without any understanding of how things work. When it comes to Don Fehr running the NHLPA, I’d be a bit concerned if I was a member of the PA, that he has no idea who is aligned with whom in the NHL and how it all works internally.
I also might not limit myself to looking for a lawyer but might expand my search to encompass business people. You can hire people to negotiate things – Bob Batterman isn’t employed by the NHL. It strikes me that what the NHLPA needs at the moment is a uniter, someone to unify what seems like an awfully fractious group of players, in order for them to present a common front. The first step in this would probably be spending all or most of next season on the road, going city to city, educating players on the current CBA, learning what they like about it and what they don’t like about it. I’m surprised that the education component is necessary but it seems to me like it is.
In effect, the new head of the PA needs to figure out what the common interests are or, if they don’t exist, what the interests of the majority of the membership are. Once the interests to be advanced are identified, you can start talking to the lawyers about how to best accomplish that.
Anyway, that will come in time, I’m sure. It was the specifics in Brooks’ piece that really caught my eye. I think that this would be a fascinating negotiation to be part of and what’s contained in Brooks’ piece doesn’t really surprise me. If Brooks is right, it looks to me like the NHL is going to try to (in part, at least) address the problems created by revenue disparity by driving down the amount paid to the players leaguewide. The NHL is, I think, so screwed up and has so many teams with so many disparate interests that this is about all they can do to try and create a system in which all of their member clubs can thrive.
The negotiation on the percentage is going to be an interesting one. It’s understandable that the NHL is going to try and drive it down. At present, they’re the only serious employer of elite hockey talent in the world and if they cut the pot of money by $135MM or so annually, it will still be paying more money than any other league in the world for hockey talent.
It will be an interesting experiment to see what happens if the NHL can push down the player’s share of revenue. Until there’s some reason not to keep doing it – reduced revenues or losing the prestige and money that comes with being the best league in the world, they’ll try to drive it down further. At some point though, there will be some response, whether because the players perceive a clearly better option or some owner or owners within the NHL do.
The funny thing about this is that the NHL is only able to do this because they’re able to conspire, with the player’s association’s blessing, to limit the amounts that they pay to hockey players. If the players didn’t band together and agree to a salary cap with the owners, the owners would be left to compete with one another for hockey talent on an open market. Tom Benjamin kind of obliquely referenced this in his most recent post.
The list of stuff that doesn’t make the slightest bit of economic sense in the NHL/NHLPA relationship and in the structure of the league as a whole is a pretty lengthy one. I’ve talked here at length about how screwed up the NHLPA’s incentives are under the current CBA, with the PA spending money to defend contracts for players that hurt the membership as a whole. The reason that those contracts exist, of course, is that the current structure doesn’t permit teams to pay the true price that the market has established for players like Kovalchuk. Is Kovalchuk cheating the system? Sure, but only because the system is established to cheat him.
The CBA has established perverse incentives for teams not to invest in growing HRR but, rather, to invest in growing non-HRR, which isn’t taxed. The Maple Leafs build condominiums, the Oilers make non-threats for an arena and Calgary spends money building bars. They’ve played three playoff rounds between them in the past four years but then, the incentive to actually make it into the playoffs is blunted when playoff revenues are heavily taxed. There are all sorts of stories about teams doing funny things in order to maximize revenue sharing. Money is shovelled over to teams in places like Phoenix, Atlanta and Nashville that have gotten nowhere in ten years and who generate nothing in terms of ancillary revenues.
I’ve gotten into following the Premier League (I think that’s what it’s called) in the wake of the World Cup. Reading some of the history of how that league came to be is fascinating. In effect, it came to be because the old structure, in which the high profile teams were effectively subsidizing a lot of teams that didn’t bring in any money, no longer made any sense. After a series of incremental changes that benefitted the big teams, they ultimately broke away en masse when money was waved in front of them by Rupert Murdoch. Ultimately, economic incentives trumped what had always been.
I have no idea what’s going to happen in the NHL over the next 25 years but I’d bet on the league looking a lot different in that time period. The current rage in North American sports is trying to contain costs by beating down the players in contract negotiations, with lengthy lockouts. The TV cow has been milked dry and getting money out of governments isn’t as easy as it once was, particularly with a lot of teams locked into long term leases. When that comes to an end though, whether because the players force the owners into an uneasy truce at some equilibrium point or because the players abandon their union and blow up the system, a new way to increase revenues will have to be found.
I wonder what happens if, in say November of the 2012-13 lockout, CTV were to approach the owners of the six Canadian teams, Detroit, the Rangers, the Pennsylvania teams, Los Angeles, San Jose, Chicago, Boston, Minnesota, Colorado and maybe one or two others (just assume I’m including your favourite team instead of dumping on me in the comments) and offer them a $120MM TV contract if they started providing high level NHL type games. If the Coyotes filings are to be believed, the league distributed something like $280MM in centrally generated revenues in 2008-09. If you were parcelling those out on the basis of the value that each team generated, the distribution to the lower end teams would likely be minimal.
The other teams in the league are, in all likelihood, so marginal in terms of generating central revenue off sales of their branded goods and marginal national TV revenue that they could be lost while the remaining teams would end up netting more money (the increase in centrally generated revenue as a percentage of each team’s revenue would also decrease the incentive for teams to spend crazy amounts of money on players). If the teams mentioned above could walk away from the NHL en masse, it might well make sense for them to do it. You’d end up with a league with most teams in a relatively narrow revenue band and a couple of real out performers.
At some point, one would expect the balance of the league to get tired of supporting the zombie teams financially and in the form of lockouts (and foregone revenues), particularly if they have options available. TV essentially created the Premier League. There’s no reason that it can’t do it here, although one wonders whether the owners of those teams would be eager to give up the salary cap and other things that they’ve gained. That is, I suppose, what the owners of the zombie teams have to consider when pushing the league to fight for concessions that benefit them.
To tie this back into collective bargaining, part of the reason that it’s so difficult for the NHL and NHLPA to come up with a workable system is because of the extraordinary number of disparate and conflicting interests that sit on each side of the equation. If Brooks’ dystopian vision of 2012 is accurate, it seems to me that it will only bring these problems into sharper relief. Some of the issues he’s listed there that the league will want, the majority of players will agree. The space within which a deal is possible that meets the interests of the various sides within each side strikes me as one that gets smaller every year – leaving aside revenue sharing, have teams like Carolina, Nashville and the rest of the southern disasters grown their business at anywhere near the league average since the lockout? As it gets harder to make deals that make sense for all involved, it seems to me that the probability of exended labour fights grows.
Ultimately, I sort of expect that the league will turn inward upon itself as the sheer economic insanity of supporting the ridiculous panopoly of teams that exist in places where absolutely nobody cares becomes too much for the owners of teams that have value to ignore. It’s an event that will likely be pretty beneficial for fans of hockey, as you’ll have a narrower group of ownership interests, which might make getting collective bargaining agreements easier.