James Mirtle has done some outstanding work on the NHL CBA, simply killing some of the other stuff that’s come out of media guys. (Full disclosure: I know James and consider him a friend of mine.) He’s put in the work necessary to actually crunch some of the numbers on the various offers that have been exchanged by the NHL and NHLPA and, as such, isn’t saying the sorts of foolish things that the guys whose careers depend entirely on having a lot of sources are saying. I’m going to borrow some of his work to comment on something that I noticed with this week’s flurry of NHL negotiating.
Prior to this week, the last exchange of offers that touched on dollars occurred shortly before the last CBA expired. After making an offer that called for the players to get 49% of HRR in year 1, 48% in year 2 and 47% in years 3-6 of a new CBA, Bettman made the following comment on September 12, 2012:
“I reiterated and I’ll reiterate here that what we did do today will be off the table if we don’t have a deal by the expiration of the collective bargaining agreement.”
As might be evident from the amount I’ve written about it over the years, I find negotiation to be a pretty fascinating thing. I’ve had a few years of getting some experience at it, albeit not on the billion dollar level, since the lockout. I found that comment from Bettman interesting because when I’m in a negotiation, I’m always trying to figure out what the other side’s bottom line is. There are two ways to do this. The first is by listening to what they say. The problem with that is that people aren’t always entirely honest in what they claim their bottom line is. You’re constantly engaged in a process of trying to identify how credible they are. The second is by doing my own thinking, trying to put myself in their shoes, and figure out what my bottom line would be. The problem with that is that I’m not always privy to the information that they have.
These negotiations differ from many negotiations in that the NHLPA basically has access to all of the NHL’s financial information. This permits them to measure the league’s claims against the financial information and kind of engage in an ongoing process with respect to whether what the league is claiming seems to be true. If it checks out, you’re more likely to take their position seriously on a given point. If it doesn’t, you’re probably more comfortable in assuming that they’re bluffing.
Building credibility during the course of a negotiation is important to you if you’re representing a side because there are times when you make statements that can’t really be checked for reasonableness. Like, for example, when you say: “What we did do today will be off the table if we don’t have a deal by the expiration of the collective bargaining agreement.” You can have an informed opinion, based on the data, as to whether the party making that claim is likely being truthful but it’s hard to be certain. You’re going to rely on the opinion you’ve formed over time.
Which brings us to the NHL’s offer earlier this week. I’m going to use some of James’ number crunching here to make a point. He’s done his calculations based on 7.1% NHL growth, which is the historical figure. Note the total player compensation for the next six years:
It got about $650MM better. We also know, from the NHL’s release, that they backed off on some of the demands that they were making in terms of player contracting rights. So the players seem to have gotten a much better offer from the league, simply by figuring Bettman was bluffing and waiting. It’s awfully hard to square that with Bettman’s comment about the September offer being off the table if there was no deal by September 15. It’s probably worth noting as well that the NHL essentially bargained against itself here – it’s generally not considered to be a desirable thing to do because you’re making concessions without getting anything in return.
When the NHL made its offer earlier this week, there was much excitement amongst hockey fans, followed by dismay when Bettman came out to the microphone after a brief meeting and dumped all over the PA’s response. His comments included this:
“The proposal that we made, so we can be clear about it, at 50/50 and all the other things, was the best that we could do. We gave it our best shot. It is our best offer. We gave the Players’ Association what we had to give. But the longer this goes, and particualrly if we’re not in a position to have an 82 game season, the damage may in fact make it even more difficult as time goes on to make a deal…This is the best offer that we have to make.”
Do you believe him? If I was in the PA office, the balance that I struck between believing Bettman and believing my own analysis would have shifted with the NHL making a better offer after September 15 despite saying that their offer was off the table as well as with the NHL evidently feeling some pressure to make another offer. The NHL also seems to feel some pressure to get an 82 game season in and the deadline for that is coming up.
All of which is to say that I’m feeling sort of optimistic about this. The gap between the parties has shrunk – Mirtle made the following point in his breakdown after the NHLPA’s three offers:
Getting to 50-50 at the tail end of the PA’s agreement is great – it’s a sign that finally there’s some real commonality (!) between the two sides here. And the total “difference” we’re talking about is now in the realm of $100-million a season or less in several scenarios.
That’s roughly 3 per cent of hockey-related revenues. And losing a season over that would be absurd.
I tend to think that James is right about the absurdity of losing a season for 3%. And I also tend to think that Bettman is a smart guy and that he would be able to tell that the PA’s proposal represented movement towards some sort of a middle ground. I also tend to think that Bettman wasn’t really expecting that the PA would show up and accept his offer. Which leads me to think that, if he wasn’t really all that surprised by the offers that the players came back with – and I doubt he was – that what was done was a piece of theatre, for the benefit of Fehr’s constituents. The way that he has conducted himself in this negotiation – saying that the September offer would disappear and negotiating against himself kind of cuts at his credibility when he makes these pronouncements.
Which leads me to think that the NHL may be willing to go further and that the PA has kind of signalled its line in the sand: protection of existing contracts and it’s now on the NHL to find a way that protects those contracts that were signed while simultaneously satisfying itself otherwise financially.
I was intrigued by the PA’s third offer, which was dismissed by the NHL out of hand. I’m going to do a little more serious number crunching on it but what struck me about it was that the PA is openly suggesting that some of its players be treated differently than others. While I have trouble with this in a regular workplace context – it’s a favoured union trick, screwing the next generation of workers, it’s kind of intriguing in this context because the net effect would be that the guys who take it in the neck would would be the grunts who don’t have long term contracts and the young players.
If I’m a guy who’s only going to have a short NHL career anyway, I don’t know that I particularly care about the difference between a players’ share of 50% and a players share of 48%. Say I expect to have a three year NHL career averaging $800K under the old CBA which, statistically, a lot of NHLPA members should expect. Going from 57% to 50% of revenues drops that from $800K per to $702K per. Going from, say, 50% to 47% would drop that to about $660K.
A three season career is worth about $1.98MM in salary at 47% or $2.11MM in salary at 50%. The difference between those numbers is about $130K; about 20% of a single season salary under a 47% solution. If I miss 20% of one of the seasons of my three season career to keep 50%, I should be neutral about the choice between 47% and 50%. All of which is to say that for players like this, getting the deal now is perhaps more important than the precise share of revenue that they’re guaranteed. For stars, it’s a little bit different – they have some more skin in the game. Of course, most stars also have long term deals these days and guaranteeing their deals takes the bite away from them and passes it to the lesser players.
All of which is to say that it strikes me that there’s possibly a deal available that protects existing contracts while giving the NHL more than the players have given by simply reducing the player share of revenues for new deals below 50%. It sucks for the guys who wouldn’t be protected that they’d be stuck with what is effectively a different CBA than the players who do have longer deals, one that reallocates wealth from them and to the stars of the league but, as I’ve pointed out before, the lesser players in the league did well under the old CBA while the better players didn’t enjoy the same level of financial gain. Maybe the lesser players should bear a greater portion of the pain this time and maybe it’s in their interests to do it.
So, unlike the vast majority of the real hockey media, I’m optimistic that something will get done in the near future. Bettman’s statements this time aren’t as consistent with his actions as they have been in the past. The players’ have indicated a willingness to treat existing contracts different from new contracts. Bettman and the NHL seem to feel some pressure to get an 82 game schedule in. The two sides have moved closer together over the past few months. There are, I would argue, a lot of reasons for optimism based on what’s happened and, in negotiations like these, I tend to pay more attention to actions than words. The ways in which the parties are acting are suggestive of the possibility of a deal which preserves the possibility of a 45 or 50 loss Oiler season.Email Tyler Dellow at email@example.com