• Unfocused Rambling on Labour Issues

    by  • August 17, 2010 • Uncategorized • 32 Comments

    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.

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    32 Responses to Unfocused Rambling on Labour Issues

    1. August 17, 2010 at

      I don’t think a full-scale blow-up of the system is required in this situation. The NHL screwed themselves when they got too greedy with expansion fees, which was a cause of them not pulling in national revenue and losing money.

      I think a scale-back, be it by contraction or 1 or 2 relocations would be a step in the right direction.

      The NHL had the right idea in expanding and growing the sport, but it was too much too quick. In markets where the teams succeeded, the markets are fine. However, they took too many bad teams, with no financial security and put them in situations where they wouldn’t get better and thus would grow a fanbase at a snails pace.

      That’s ok in isolated cases, but this is too much. Blowing it all up I don’t think is a smart long-term plan (even though I know your plan is abort the NHL altogether) but I think one step back may be the appropriate plan.

    2. Patrick Johnston
      August 17, 2010 at

      Tyler, interesting thought bubble there about the reasons behind the formation of the Premiership. Murdoch also was responsible for the ‘Super League wars’ of the mid-90s in rugby league.

      If you aren’t already familiar with this, I suggest you look up the story of World Series Cricket and its founder (and Murdoch’s great rival) Kerry Packer. Basically Packer hired all the best players of the late 70s and created the one-day version of the game, started playing it into the evening under lights, put his teams in coloured kit and used white balls. It was so popular that the old school, stick in the mud International Cricket Council was forced to completely revamp its structure or else it would have disappeared from existence. (It should also be noted that Packer dressed the NZ team in what is widely regarded as one of the worst-ever uniforms – their colours were brown and beige.) Because they could carry so much more weight the ICC was able to re-assert its dominance, but not until they had been forced to recognize that money was everything and romanticism could have next to no role in future decision-making.

      More recently there has been the emergence of the Indian Premier League which has taken TV money and control to a whole new level.

    3. Kid Canada
      August 17, 2010 at

      Maybe they should bring Ian Pulver back to run the show. The players all seemed to really like and respect him.

    4. Tyler Dellow
      August 17, 2010 at

      Which of the three purges did he go in? The PA would probably be better off if, like the USSR by the end of the 1930′s, they hadn’t killed pretty much everyone who can read.

    5. Triumph
      August 17, 2010 at

      It seems your first comment already speaks to what I was going to say: the union needs a guy like Fehr who has a proven track record that can unite an apathetic and fractious union. Everyone ‘inside’ is compromised.

      The problem with hockey in general is that it’s a regionalized sport, and you would like for it to admit it’s a regionalized sport. That’s fine – I wouldn’t argue that the Southern expansion strategy has worked, although that’s in part due to the incompetent management and constant ownership turnover in some of the franchises. However, the league is marginalized in that case – local media are dying out, it’s all about national media exposure. Furthermore, since gate in the NHL is always high (and always close to 100% in the markets you indicate), there has to be a better expansion strategy than increased demand in markets the NHL already serves.

      Bottom line, your ‘Premier league’ scenario wouldn’t do any better than the league is doing now. Hockey gets decent regional ratings in the US. It barely beats infomercials when you subtract out the regional viewers. I don’t see where the TV money comes from.

      It’s always interesting to talk to Canadians about the perception of hockey – while I as an American have a hard time comprehending a place where hockey is the #1 sport, likewise I think Canadians have a hard time seeing a place where hockey is behind 6 or 7 televised sports.

    6. August 17, 2010 at

      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.

      This is the house of cards that Bettman has to keep from tumbling down. The trade off that Bettman gave big market teams in return for providing additional revenue sharing funds was the salary cap that would push down their costs for players greater than what they would give up in revenue sharing allowing them to generate greater profits. The big market teams who were once spending upwards of $70M on player salaries only had to spend $39M after the lockout so even if they were handing out $10-15M in revenue sharing their profits rose. This kept the Leafs, Rangers, Red Wings, and other big market teams on board during the year long lockout.

      Bettman will have to find a way to make a similar pledge to these big market owners if he is to keep them on board during the next CBA negotiation should the players put up a fight. Bettman needs more revenue sharing to keep the small market teams afloat but needs to give something back to the big market teams for providing that revenue. If he is unable to beat down the players even more provide that offset, the house of cards comes tumbling down. The big market owners may not break away from the NHL but they may demand permanently abandoning the failing franchises.

    7. Tyler Dellow
      August 17, 2010 at

      Bottom line, your ‘Premier league’ scenario wouldn’t do any better than the league is doing now. Hockey gets decent regional ratings in the US. It barely beats infomercials when you subtract out the regional viewers. I don’t see where the TV money comes from.

      I don’t think I explained this very well. The first step along the road to the Premier League was basically a fight over things like TV money in the 1980′s, as I understand it. The clubs that generated revenue were tired of sharing it with the clubs that didn’t.

      Teams like Nashville, Atlanta, Tampa Bay, Florida, Carolina, Phoenix, Anaheim and Columbus basically add nothing to the attractiveness of the NHL’s TV rights. There’s about $280MM or so in centrally generated money to go around on the 2008-09 numbers and those 8 teams really add nothing in terms of making the contract more lucrative and selling more NHL branded products. Between them, they probably pull in a pile of revenue sharing too. At some point, does someone in the league office or at MLSE or on the Red Wings executive not ask a pointed question like “Why are we spending $100MM+ annually to keep these zombie franchises alive?”

      I suspect that part of the Bettman plan is to share more revenues. Achieve $150MM in annual savings in player costs, lower the threshold for profitability and throw more money at them. There has to be an end to that at some point, a point at which teams like the Leafs and Flyers say “This doesn’t make sense to us anymore.

    8. Triumph
      August 17, 2010 at

      Teams like Nashville, Atlanta, Tampa Bay, Florida, Carolina, Phoenix, Anaheim and Columbus basically add nothing to the attractiveness of the NHL’s TV rights.

      I disagree about this. You pull those teams and the hope of a lucrative national US television contract goes away forever. Then where does hockey grow? You say that it adds nothing to the attractiveness of the NHL’s TV rights – that’s just not true. Without those markets even nominally involved, network affiliates will balk at running programming that their markets have no interest in. While the broadcast network is not as powerful as it once was, that’s still where the money is in TV sports.

      There were a lot of reasons to think hockey could catch on in those markets (shifting U.S. demographics, hockey’s increased visibility). There’s still some reasons to believe that it can. No, those clubs won’t ever be top revenue teams. They won’t ever be top television markets. Maybe some of them don’t work out and need to be moved elsewhere or somehow dissolved. Regardless, the NHL is following the model of all the other major team sports: a large national TV contract is an excellent way to increase profit and visibility. Without it, mid-range teams are relying on the caprice of the gate.

      The big markets are still making tons of money under this system – NHL revenues are higher than ever and yet they are paying out less salary than they were in 2004. I am not sure they will go in for increased revenue sharing. The real answer here is to lower the salary floor.

    9. Kid Canada
      August 17, 2010 at

      I believe Pulver worked very briefly under the Saskin regime before resigning to open up shop as an agent. Basically under Goodenow’s leadership Pulver was the head of the labour side of the union while Saskin was the head of the licensing/marketing side. I think on the overall totem pole Saskin was #2 and Pulver was #3 or possibly #2A. I think Pulver outranked Ian Penny at that time but I can’t say for sure – Pulver had been at the NHLPA since he was called to the bar.

    10. dawgbone
      August 17, 2010 at

      I have a hard time taking Brooks seriously when he talks about a team or the league in general. He sounds like a crazy old uncle telling you that the FBI is wire tapping his phone, despite the fact he doesn’t own a phone!

      He’s usually bang on when he talks about a player or the players union.

      I have a hard time seeing why the league would have a problem with the higher cap and escrow. The higher cap keeps the big teams happy, and escrow in general helps the teams overall manage the costs.

    11. Nigel
      August 17, 2010 at

      The higher cap and escrow is a perfect example of illustrating the main point here. The current situation works well for the bigger market teams (in that the fiction of an ever increasing cap with increasing escrow has allowed the large market teams to keep spending) and may still currently be fine for the smaller teams – but at some point it will become an issue for the small market teams (unless there is greater revenue sharing). Getting to the spending floor will eventually become a problem. You are already seeing a significant portion of the teams not spending to the cap.

    12. Shawn McMann
      August 17, 2010 at

      Two things Tyler. One, why would the PA sign off on losing 200-250 jobs in a new super league? And Two, you need to do a little more research on the EPL model. Look at the recent history of teams like Southampton, Charlton, Leeds and Portsmouth who try to spend with the big boys and perish.

    13. August 17, 2010 at

      I think a scale-back, be it by contraction or 1 or 2 relocations would be a step in the right direction.

      They essentially need four to six relocations to fix the whole thing. They’re screwed in Phoenix, Florida, Nashville, Atlanta, Columbus and Long Island.

      So unless Long Island gets a new arena sooner rather than later and stops losing money, you need to engage Houston, Kansas City, Seattle, Cincinnati, Southern Ontario and either Quebec, Hartford, Winnipeg, or Wisconsin to move these teams to markets that can bring a max revenue team.

    14. Tom Benjamin
      August 17, 2010 at

      One, why would the PA sign off on losing 200-250 jobs in a new super league?

      A better question is why should the NHLPA even exist? What do they do for the players except keep their salaries depressed?

      At some point the other 700 or so players – all the good ones and all the bad ones who think they are good enough to make a smaller league – are going to decide they’ve had enough of propping up zombie franchises and zombie jobs. Its costing them many tens of thousands a year each.

      I think a Tyler scenario is possible, but not very likely. I wrote a post during the lockout wondering what would happen if the Canadian teams bailed on Bettman and invited 1x American teams to join a new league. It would have worked then and it will work now.

      I still think NHLPA decertification is more likely. None of the players can possibly think the Union is doing them any good at all. Why should they stay with an organization that helps their employers far more than it helps them? Habit?

    15. August 17, 2010 at

      The PA would probably be better off if, like the USSR by the end of the 1930’s, they hadn’t killed pretty much everyone who can read.

      Someone needs to write the hockey version of The Master and Margarita.

    16. Mr DeBakey
      August 17, 2010 at

      “you need to engage Houston, Kansas City, Seattle, Cincinnati, Southern Ontario and either Quebec, Hartford, Winnipeg, or Wisconsin”

      Portland.
      Portland must be ahead of all those except Hamilton.
      Portland has the arena, the money and a bit of hockey tradition.
      If they had arenas, which thy don’t, Hartford and Quebec City next.
      Despite its arena, forget Kansas City. Cincinatti & Winnipeg too, none of them has enough money.

    17. Triumph
      August 17, 2010 at

      I still think NHLPA decertification is more likely. None of the players can possibly think the Union is doing them any good at all. Why should they stay with an organization that helps their employers far more than it helps them? Habit?

      this is one of those occasions where someone who has done a lot of thinking on a particular subject has a hard time imagining anyone else not coming to the same conclusion they have on that subject. i don’t believe that we would ever see this, even if it were demonstrated to be the correct path. the NHLPA’s constituents aren’t exactly visionaries, and lots of institutions continue well past their usefulness because they’ve convinced people of their essential role.

      At some point the other 700 or so players – all the good ones and all the bad ones who think they are good enough to make a smaller league – are going to decide they’ve had enough of propping up zombie franchises and zombie jobs. Its costing them many tens of thousands a year each.

      this strikes me as fallacious. why would eliminating half the jobs increase pay for the remaining half? you’ve just eliminated a large chunk of demand for your product as well as created a huge set of out-of-work replacement level talent. what reason would a ‘new’ NHL have for increasing salaries? maybe to the top 15% of players – and even there i’m skeptical, because i don’t think even the top teams want to run a league without some form of cost certainty whether it be luxury tax or salary cap – but at the margins you’d have an even more fierce competition to make the league.

    18. August 17, 2010 at

      Cincinnati has 18 Fortune 1000 headquarters in the Metro – 12th in the U.S.

    19. Tyler Dellow
      August 17, 2010 at

      Triumph –

      I think you’re mixing two ideas here. If the union decertified, the theory is that the league could no longer impose a salary cap on the players – it would be illegal for it to do so. Under Tom’s scenario, the PA decertifies. The salary cap is gone. We enter into a legal netherworld. If the league tried to impose any restrictions on a free market, a player or players would sue, arguing that those restrictions were a violation of law.

      The lousy franchises maybe don’t disappear instantly, but they’re left to compete in a marketplace where there is no draft and they have to compete for the best available talent at market rates. They’re going to be made up almost exclusively of the lesser players in the league. How long until they whither away and die?

      What would happen to salaries for the whole is the great unknown. They have historically done pretty well with a freeer market.

    20. Triumph
      August 17, 2010 at

      ah yes, shows what i know. that makes sense – i was wondering how collective bargaining would work. of course, there wouldn’t be any.

      under that scenario, it increases the ridiculous lottery effect that is professional sports. i don’t think it’s in the interests of the players as a whole to increase variance in that way. not to mention that revenues would hardly increase, given that TV markets in canada are tapped out; the additional revenues would be the increase of ‘high-revenue’ teams making the playoffs over low-revenue ones.

      i can see a scenario where players make more money on the whole – where high-revenue teams have $15 million stashed in the minor leagues. i still think it’s very, very unlikely that either side would ever want that – the big-market teams certainly wouldn’t profit more.

    21. Tom Benjamin
      August 17, 2010 at

      The lousy franchises maybe don’t disappear instantly, but they’re left to compete in a marketplace where there is no draft and they have to compete for the best available talent at market rates.

      I think some of them can survive by pursuing prospects, developing them, and using them for a few years and then selling them for cash before they become free agents.

      What would happen to salaries for the whole is the great unknown. They have historically done pretty well with a freeer market.

      The whole point of this CBA is to reduce salaries. Are we supposed to believe that salaries will go down if controls designed to reduce salaries are eliminated?

    22. speeds
      August 17, 2010 at

      Triumph:

      It’s hard to say about the big markets. Admittedly MLB still has a labour agreement, but they don’t have a cap. Can’t be that many NA sports teams that make more than the Yankees?

      Now, I’m not saying that the Leafs would suddenly be as big a franchise as NYY, and maybe it sounds preposterous, but how certain can we be that TOR doesn’t make more money than they do now if they have a $100 mil payroll, finishing as a top team every season?

    23. speeds
      August 17, 2010 at

      Also, a question for anyone who might know. What happens to the following if the NHLPA decided to decertify:

      (1) Existing pension obligations, and a pension going forward for players?

      (2) Existing player contracts?

    24. The Other John
      August 17, 2010 at

      The old saw is” if it ain’t broke, don’t fix it”.

      Well the NHL is broke and somehow, someway it is going to get fixed. When Phx sells a pair of season tixs behind their own net, lower bowl for $2400.00 its broke. In January 2010 they hosted San Jose for the Divison lead and had 7500 people in the building…..the league model in some cities is broke.

      That means serious, serious changes to the model, although labour decertifications are very VERY hard to do.

      The “Southern NHL footrpint is necessary for a US TV deal”. That argument is now 30 years old and that parrot isn’t resting….its dead!!!!

      What will be very interesting to see is when hockey broadcasts cease to be tied to TV feeds and become personal….. PDA, internet, tablets, whatever….. then the total number of eyes watching a feed will be king. Not the total number of potential eyes in a broadcast area.

      Lastly, I hope the issue of the resting/er dead southern hockey franchises does not get sorted out before Daryl Katz is done trying to shake down the City of Edmonton for a new arena. Hisnonthreat of build it or I will move, is not very effective when there are 6 of his partners with less than $50 million in revenue.

    25. Triumph
      August 17, 2010 at

      It’s hard to say about the big markets. Admittedly MLB still has a labour agreement, but they don’t have a cap. Can’t be that many NA sports teams that make more than the Yankees?

      Now, I’m not saying that the Leafs would suddenly be as big a franchise as NYY, and maybe it sounds preposterous, but how certain can we be that TOR doesn’t make more money than they do now if they have a $100 mil payroll, finishing as a top team every season?

      i’ll posit a few reasons why that’s unlikely. first, baseball has 81 home dates in 50,000 seat stadiums. hockey has 41 home dates in 20,000 seat arenas.

      reason #2: people think the yankees are an enterprise built solely on money. the yankees basically had 5 hall-of-fame level players come out of their system in a 5 year stretch (posada, jeter, b.williams, rivera, pettitte). neither of these players is dominant in the way that say, sidney crosby, is, but together, it’s hard to put together a ballclub that doesn’t win with those 5 guys around. consequently, the yankees’ empire is built on a substantial amount of luck that people tend to overlook when they are kvetching about the sabathias and teixieras. there’s no doubt they have a built-in advantage, but even with that they got seriously lucky.

      reason #3: even the yankees with their incredibly high priced tickets finally hit a wall; it’s unclear whether they sell out every game since they built their new stadium, and the culprits are the seats closest to home plate, where people and corporations balked at paying thousands of dollars a game. i’m too lazy to look up prices at the ACC, but i know it’s rather pricey already – there may not be that much more demand.

      it’s almost impossible to know how things like broadcast rights, territorial rights, or the like would operate in such a wild west scenario, so projecting revenues is likely an exercise in futility.

    26. August 17, 2010 at

      Is there a material difference between what the Premier League did and what some people were talking about last lockout, of simply killing the bottom tennish teams and calling it a day? Okay, one scenario either creates an extra tier or adds extra teams to the AHL, while the other simply cuts off elite-level hockey in ten cities and knocks off for lunch, but the effect on the highest level is the same: fewer teams, in a tighter revenue-generation band, essentially reversing everything that’s been done since 1990, with the exception of a few relocations. I’m not convinced that isn’t better for existing fans of the game in mostly-traditional markets (welcome back, Smythe Division, we missed you), but it sure isn’t good for the nascent hockey markets that are just now starting to show some degree of grassroots interest, and just can’t see that happening while Gary’s in charge and harbouring some form of the NFL dream. And really, much as I roll my eyes at yet another shitty season for the Columbus Blue Jackets, the only team I’ve ever literally forgotten existed, if the NHL’s ever going to be more than a nominal major league, they need at least some of those so-called zombies, and they need them to succeed, somehow. (Don’t ask me how they’d make it happen: I’m a programmer and scientist, not an economist.)

      I think I said during the last lockout (or shortly after) that the NHL should’ve waited until the early-90s expansion teams (SJ/OTT/TBL/ANA/FLA) were stable before adding the last four, and I think it’s still true. I mean, hell, look at the CFL. They’ve been trying to expand to the Atlantic or Quebec City and Ottawa (again) for years now, but then we find out that the Ticats are at odds with the city over a new stadium and are threatening relocation. You gotta get your shit together in the markets you have before you try to add more, and the NHL failed to do that in the ’90s. Hell, even before that, the old WHA markets were one bad economic situation (like, say, the shitty Canadian dollar) from having it all go tits-up, and they’d been in the League 12 years when expansion restarted.

    27. Alex
      August 17, 2010 at

      From what I understand, another factor in the creation of the Premier League was that the best English clubs were lagging behind the best clubs in Europe financially, and losing many of their best players to them (including some English players). The NHL isn’t in that predicament, and while it may someday (vis a vis the KHL), it likely won’t be by 2012.

      That being said, I think the idea that the NHL needs teams in the sun belt to get a national TV contract is bunk. The best thing it could do to get better ratings, and subsequently a better TV deal, would be to raise its quality of play and make it a more entertaining game to watch. If creating a breakaway league, or contracting 6-10 teams is the best way to do it, then I say by all means go for it.

    28. YKOil
      August 17, 2010 at

      Could also just be looking at the split before the second. The whole thing isn’t rocket science:

      1. make the cap floor flexible to rise (sop to small budget teams) instead of a straight 16%

      2. allow teams to go over the cap and charge a dollar for dollar luxury tax on those amounts; the amounts are exempt from escrow and fully revenue shared

      – players like it as they get paid more
      – big teams get to get who they want and will be forced to self-regulate (you know, just like they did before)
      – small teams get more revenue sharing so they are happy

      3. Drop the top percentage to 56 and expand revenue bars (sop to all teams but also relieves escrow)

      4. Eliminate some of the loopholes that have opened up (or… always been there… if you could read that is)

      Get past that sort of fix and, eventually, even mice will fight. Flawed second analogy aside, I have always been fond of pendulums.

      Don’t know what I would ever do with one. Just like watching them. Let it swing I guess.

    29. August 18, 2010 at

      “They essentially need four to six relocations to fix the whole thing. They’re screwed in Phoenix, Florida, Nashville, Atlanta, Columbus and Long Island.”

      I honestly believe there’s almost nowhere decent to go – aside from putting a second team in the GTA. Every other “new” market would have similar issues to the teams relocating barring outstanding performance on the ice and/or a sweetheart deal that bends the resident city over.

      There are not 25 excellent NHL markets in North America that can generate revenues to pay $50-million in salaries. Never were and probably never will be.

    30. August 18, 2010 at

      Now onto the topic at hand, the new CBA deal:

      Without throwing out the baby with the bath water as some suggest, the NHL and NHLPA will only tweak and needs to only tweak the current CBA mechanisms to be successful given 28 clubs within the existing 30 team circuit.

      The players will not drop their overall percentage of the pie (56% down to as low as 50%) with several clubs not pulling their reasonable fair share of the revenues in. So the natural conclusion is that by agreeing to relocate some teams in the next 1 to 2 seasons beyond the newest CBA to pre-destined cities (that allows the NHL to save face with the media, by concealing that the Union forced their hands), then the players will give back on their the percentage hoping that in effect a lesser percentage of a bigger pie is still worth more money to the players as a whole than current. The large markets will agree to this demand even if Gary Bettman hates it.

      In conjunction with this trade-off the cap gap between ceiling and floor, currently at $16 million, may allow to widen some and still seemingly come out even with the above. Widen not at the top but backing the floor down around $10 million for the bottom 5 teams by revenue. That way, the bottom feeders net effect is to “increase revenue sharing” without actually getting any more from the other teams. So that means that a $59.4 million cap has a $43.4 million floor, which would be now down to $33.4 million for those 5 “zombie” clubs.

      This takes into account that whereever the other 25 clubs are located that 5 will remain in their host cities with very little hope of breaking even without this condition.

      This allows the NHL to limit the players’ escrow to a certain percentage (eg. 5%) yet allows this $50 million saving to the 5 “zombie” clubs. Remember that the escrow is a function of the accelerator clause the players can boost the cap artificially by 5% each season over the last seeason actuals. escrow can’t be eliminated entirely if the accelerator/inflator clause remains.

      Now because 2 or more teams WILL have to move soon anyways the NHL is not out anything to agree to that movement plan.

      Because the remaining bottom 7 teams (2 are to be relocated to an “easier” market) now need to reach a lower salary floor by $10 million, they also stand to make a real go of it, since losses for these clubs are around the $10 million mark or less per season. These clubs include Atlanta, Columbus, Nashville and Tampa Bay. NYI will get a new rink somewhere around NYC and will come back to profitability when that occurs. Phoenix and Miami are the two to port with losses in the tens of millions for many seasons before and after the current CBA.

      And as I review these thoughts, I wonder could the NHLPA bargain hard enough to force 3 or 4 clubs to move, in keeping with the above rationale? This would forego the lowering of the salary floor completely leaving the remaining troubled teams in a canoe with no paddle. All other clubs (even those being forced to move) would be happy with that result.

      I have no doubt that keeping the US national TV contract dream alive is important so moving the “insolvent” clubs around the USA remains an option. Houston, based off of Dallas’ success is a real option. Ditto Portland; lesser Seattle without a decent rink. Canadian options include Winnipeg and Quebec City with major media players (Thomson-Reuters and Quebecor respectively) backing both teams and Southern Ontario outside of the 2 existing territorial zones.

      So whether it is two or four teams being moved to reach a new CBA, it is a possible way forward for the league and players each to gain without losing.

      Arbitration with very open free agency is effectively dead as more and more teams walk away from the rulings. Thus the owners rid themselves of arbitration while giving up very few players to free agency each season. So don’t expect to see anything tangible given away by the clubs on that front.

      And really, other than for local club marketing with player name recognition, does total free agency while keeping the draft really hurt any NHL club? Given the issues teams like the Hawks find with the cap, opening up free agency just might make being a GM easier, as the dream of dynasties went down the drain when a salary cap as needed as it was, came into being. Therefore, I suggest the owners will offer total free agency after just 3 years of service or age 21 whatever comes first, if they need a trump card during the upcoming negotiations. As I suggest, keeping the draft is more to help poor clubs back on their feet, to offer their fans and ticket sellers hope that good times return. This is larger measure has become a form of revenue sharing without the glossy title.

      Chris
      President, http://www.myNHLincludesWinnipeg.com

    31. Tyler Dellow
      August 18, 2010 at

      Chris -

      I don’t mind linking and your comment had merit. Leave out the marketing material though.

    32. General_Sosabowski
      August 19, 2010 at

      The overexpansion into the Southern U.S. was driven by several assumptions. The most significant was an incorrect analysis of demographic trends. That is, the “Rust Belt” was losing population, while Arizona, Florida, etc. were increasing in population.

      However, these population increases were misleading in that they were largely caused by illegal immigration and retirees. The NHL failed in these markets for several reasons, but two seem particularly important. First, Mexicans earning below minimum wage are not potential hockey consumers. Second, most retired folks seem to keep their original team loyalties. For example, Florida and Tampa Bay have no problem selling tickets to games with marquee road teams from the Atlantic and Central divisions. They DO have problems selling tickets to games with other SE division so-called “rivals.”

      I lived in St. Petersburg, Florida when the Lightning first came into existence. After the initial “honeymoon” period, the Tampa Bay franchise became an outlet for snowbirds who had difficulty in getting Rangers and Devils tickets “back home.” From what I can tell, Phoenix and Miami don’t even do as well in this area as TB does. (Phoenix is sort of a different story altogether, as their stadium deal doomed them from square one.)

      Long term, it would make more sense for the top 12-15 teams to simply blow up the league and start over. In addition to all of the problems discussed above, the NHL is killing its popularity with casual fans with the constant player turnover. As it stands today, there is virtually no such thing as an “average veteran” player anymore. The majority of the teams’ salaries are tied up by a handful of stars, leaving most roster spots to be filled out with entry-level contracts. Cutting back on the cap ceiling will make this problem even worse.

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