• Marx Spector

    by Tyler Dellow • October 5, 2012 • Hockey • 14 Comments

    Hey, Mark Spector has a column that has lots of journalists on Twitter praising it. What do you think – is it going to be really good?

    When you are on the outside the way a proper reporter should be — with nothing invested in a particular team — there are topics that are impossible to settle with those on the inside.

    For example, you’ll never have come to an agreement with a member of the Vancouver Canucks organization about that team’s propensity for diving or referee baiting. You will also not get a Flames insider to admit the roster is too old, or a Leafs man to admit the Phil Kessel trade was a disaster.

    Coaches, players, management types — of all 30 NHL teams — are simply too vested.

    Funny thing: Mark Spector works for Sportsnet and appears on Oilers telecasts. He presumably draws a pay cheque for this. As Robin Brownlee’s pointed out on Oilersnation, the TV guys are basically advertising for the team. I assume then, when he talks about someone “on the outside the way a proper reporter should be” he’s talking about someone other than himself.

    What if Gary Bettman played out the season with no CBA, and the players threatened to strike during the playoffs — when they don’t get paid?

    Ask an Expos fan. That’s exactly what Donald Fehr did in 1994 as the head of the Major League Baseball Players’ Association.

    Spector isn’t the only one who thinks that this is a threat. Bob Stauffer, Doug MacLean and David Staples have all endorsed this as a possible threat if the NHL just opened the doors and played under the expired CBA. There’s a saying about generals always preparing to fight the last war; sportswriters seem to constantly be preparing to write about the last CBA negotiation.

    When the NHL went to a linkage/salary cap system, it altered future negotiations and the value of a strike right before the playoffs. MLB, of course, has no link between revenues and salaries. Say, for the sake of discussion, that the NHL opened the doors and played the regular season. April rolls around and the players have a strike vote. If they go on strike and wipe out the playoffs, the league makes $0 in that time.

    If you’re an old sportswriter (or, uh, guy who was entrusted with a $100+MM business for a decade by someone who’s now thrown up his hands twice and claimed that he can’t make money playing hockey) you reach into your bag of “Things That Were Once True” and declare that the players should vote for a strike, because they aren’t getting paid in the playoffs.

    Except, while they draw no cheques during the playoffs, when the grand accounting that this CBA calls for takes place, the NHL generating $0 in revenue at a time when it usually generated $200MM or $250MM in revenue is going to reduce the player’s share of the take by 57% of $200MM or $250MM. Call it $200MM for discussion purposes. On last year’s $3.3B in revenue, that’s about 6.1% of the league’s revenue. If you’re a member of the Edmonton Oilers, untroubled by an obligation to work in April or May or June, why do you want to go on strike? Maybe you perceive some leverage in holding up the playoffs that’s worth the risk of 6.1% of your salary but the key is this: the math is no longer the same as before.

    The flip side of that is that if you own a team that was run by Doug MacLean for a decade and never makes the playoffs, a strike that started when the playoffs started and wipes them out costs you $0 in revenue (subject to the implications that it has for revenue sharing) and reduces the share of league revenues that the players get.

    As Matt Fenwick pointed out on Twitter, the same logic holds true for the pre-season. You don’t have to write the players a cheque during training camp but the amount of money that they’ll ultimately receive is tied to the financial success of the pre-season. Pre-2004, a lockout that wiped out training camp just cost the owners money; now it costs the players money too. The incentives are different.

    It just doesn’t make sense (to us, at least) that one side makes 57 per cent and pays none of the bills, while the other side gets 43 per cent, has all the financial risk, and pays all of the costs of running the shop.

    Sorry. We’ve asked. No one can come up with an answer for how that works.

    As a preliminary point, the owners don’t take all of the financial risk. With the players receiving a share of revenue that is linked to the total, the players are taking a financial risk. If league revenues are $0, then the players all just spent a season playing for free, as their entire salaries are clawed back. Sure, it’s unlikely that league revenues are going to be $0 but then the guys who run the Maple Leafs are unlikely to lose any money.

    As to why the players should get 57%, I’ll start by saying that I prefer a market solution when it comes to determining how much money the players should receive. The NHL has said that, with the freer market that existed prior to 2004, they were spending 75% of revenues on salaries. I’m not sure I buy that – it depends on how you calculate things – but it’s not out of line with the English Premier League, which is much closer to the free market ideal, and spends 70% of its revenue on player wages.

    I’m not an economist, but it seems to me that when the market is dividing the revenue that a business generates between the employees and the employer, what it’s doing is putting a price on the relative contributions that each side is making to the generation of those revenues. It’s giving the players the price that the market thinks their efforts are worth and the owners the price that it thinks that their efforts and capital are worth.

    Why then, are the players entitled to 57% (I think it’s probably higher but that’s not the question)? Bluntly, because that’s how the market divides up the money in the absence of restraint. Part of this is due to the fact that there are lots of people out there willing to put capital into a hockey team without demanding a return on that investment, or at least not demanding a return on an annual basis from the team itself – they’ll take tax writeoffs and a return at the end of the line. In a truly free market, people are willing to own sports teams and give the players 70%+ of the revenues.

    The price that a free market demands for the risk that the owners take is considerably below 43% of revenues. In a society organized on free market principles, I think that’s a sufficient answer to the question. Honestly, though I can see why sportswriters might be leery of the free market principle.

    Email Tyler Dellow at mc79hockey@gmail.com

    About Tyler Dellow

    14 Responses to Marx Spector

    1. October 5, 2012 at

      I’m not an economist, but it seems to me that when the market is dividing the revenue that a business generates between the employees and the employer, what it’s doing is putting a price on the relative contributions that each side is making to the generation of those revenues.

      Furthermore, players aren’t merely employees in sports entertainment – they’re also the product. I wonder in most industries if you add product costs and employee costs what the typical split ends up being.

      • Subversive
        October 5, 2012 at

        A very good point, Kent, and one that is never mentioned by the people who rant about how much a typical employee earns in a business.

      • Saj
        October 5, 2012 at

        I don’t think it’s as simple as it boiling down to the relative contributions of each side. It also has to do with what alternatives each side has. If the owners don’t compete with each other, the players don’t have a lot of alternatives where they can make nearly as much money, so they can get pushed around (and did last time around). This time around, however, there’s a KHL which can finance the players to some extent. Also, this time around the owners (in the aggregate) are probably making a lot more money (thanks to the last deal), so their alternative (small losses during the lockout, negative return on cost of capital) doesn’t look as good as it did last time.

        • dawgbone
          October 6, 2012 at

          There was the RSL last time around too… the issue is they still can’t (won’t) spend what NHL teams do.

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        May 31, 2013 at

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    2. Cory Dakin
      October 5, 2012 at

      Slighty out of context, but:

      I think it is pretty safe to say that the owners aren’t going forward without a shift in revenue, and the players are absolutely not taking an immediate cut in salary. So, is it not plausible, for there to be a freeze at the current share that the players are taking now? If the league continues to grow revenue, then the players share remains frozen until the share reaches a more palatable level (52/48 for the players, let’s say). Once that level is achieved then the cap will raise according to any increased revenue. If revenues drop then the cap drops, as it would under the old agreement and again remains frozen until it reaches the agreed upon split. Players aren’t taking a cut in salary, and the owners are put into a position to grow the game if they want increased revenue, which is what their major responsibility should be, anyway. I’m sure there are a million reasons why this wouldn’t work, but I don’t pretend to be an expert. Just an incredibly annoyed fan who can’t even pretend that I’ll boycott hockey when it does eventually come back.

      I personally blame Shawn Horcoff.

    3. October 5, 2012 at

      Funny thing: Mark Spector works for Sportsnet and appears on Oilers telecasts. He presumably draws a pay cheque for this. As Robin Brownlee’s pointed out on Oilersnation, the TV guys are basically advertising for the team. I assume then, when he talks about someone “on the outside the way a proper reporter should be” he’s talking about someone other than himself.

      I also love the implicit assumption that being involved with a team means you’re completely incapable of seeing its faults.

      Then again, this is coming from an Oilers broadcaster who thinks Cam Barker’s a top-three defenceman, so maybe he’s just drawing on his personal background there.

      • Garnet
        October 8, 2012 at

        I’m getting in quite late on this one, but the Spector column is exactly the simulation of sober consideration that I expected going in. Never mind his refusal to even try to understand the math, it’s the fake bravery of declaring the flaws in three organizations he doesn’t cover. Do you think he could, just possibly, find a problem in the way the Oilers are being run?

    4. October 5, 2012 at

      “What if Gary Bettman played out the season with no CBA, and the players threatened to strike during the playoffs — when they don’t get paid?”

      This has always been a false argument for me and not just for the reason you specify. If Bettman was really concerned about this, the players would more than willingly agree to extend the old CBA for another season making a strike just before the playoffs illegal. The players are content with the old CBA and are willing to continue playing under it. They’d probably sign a 10 year extension. It’s the owners that are asking for more from the players so it is the owners that feel the need to lock out the players when the owners have the leverage.

    5. Komrade Horcov
      October 5, 2012 at

      Why hell everyone always pick on me?

    6. Komrade Horcov
      October 5, 2012 at

      Also am more of Trotsky man myself but Marx had some interesting thing to say. Is lucky for little midget Bettman and cronies that is not 1917, is what I am saying. Up the republic and all that.

    7. Mr DeBakey
      October 7, 2012 at

      “It just doesn’t make sense (to us, at least) that one side makes 57 per cent and pays none of the bills, while the other side gets 43 per cent, has all the financial risk, and pays all of the costs of running the shop.

      Sorry. We’ve asked. No one can come up with an answer for how that works.”

      Maybe he just ask someone who knows.Friedman wrote about it a couple of weeks ago.

      http://tinyurl.com/d2dc34m

      Its not “”makes 57 per cent”, its “makes 57 per cent as defined”?

      Maybe Friedman should bring Marx up to speed next time they chat.

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    9. Pingback: Devils in the Details- 10/9/12: Almost Like There’s No Lockout Edition | All New Jersey Devils News

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