Since the latest NHL lockout began, many fans and journalists alike have sided with #theplayers, appalled by the notion that the owners – “greedy, stupid billionaires” all – would demand their employees take an immediate pay cut. After all, the NHL made $3.3 BILLION last season. Also, the players have contracts – written agreements, signed by the owners, promising to pay x amount over the life of the deal. Now the owners don’t want to pay the agreed-upon amount? How dare they! To the NHLPA and their supporters I say: get over yourselves. Set aside your histrionics and your talking points and take a cold, hard look at reality. Here’s why the owners are (mostly) right, and you are (mostly) wrong:
The Nature of the Beast
The NHL is a unique industry, in that 30 separate businesses simultaneously work in conjunction to produce a single product (an NHL season) and compete fiercely against one another (to win the Stanley Cup). The battle between teams isn’t confined to the ice, either: GMs compete with each other for scarce resources (NHL-caliber players). The level of competition is such that, were 30 Sidney Crosby clones available, each team would attempt to acquire as many Sidney Crosbys as possible.
To continue that analogy, as a fan, you would be upset if your team made no attempt to acquire at least one Crosby (or at least one more Crosby than your biggest rival). Fans pay good money for tickets, concessions, parking and souvenirs, and as such, they (rightfully) expect, even demand, management/ownership do whatever it takes to ice the best possible team. Fan expectations, which translate directly to revenue, are a significant driver of off-ice competition.
This “Battle of the GMs” is not just driven by fan expectations – it’s also required by law. If they didn’t compete – if the 30 GMs got together and said, “Okay, guys…from now on, nobody offers UFAs more than $2mil/year. Agreed? Agreed!” – that would be collusion, and the NHLPA would sue…and win. Thus, player salaries continue to grow (from an average of $1.4mil in 2005 to $2.4mil today), held in check only by the salary cap and the self-imposed spending limits of individual owners.
Why the Players are Locked Out
Over the life of the now-expired CBA, the players received 57% of Hockey-Related Revenues (HRR). Despite the fact that HRR has grown to record levels, at least half of all NHL franchises lost money last season. Why? Because 43% of HRR is not enough for many franchises to cover their operating expenses.
In truth, the NHL erred back in 2005, when they agreed to give the players 57%. It was intended as “a spoonful of sugar” to make the medicine – a salary cap – go down, but the financial struggles of at least half the league’s franchises have proven the short-sightedness of that deal. Now, for the stability and financial health of the NHL as a whole, a correction must be made.
Why We Wait
If you’re reading this, you know the NHL’s latest offer called for an immediate 50/50 revenue split, with a “make whole” provision for existing player contracts. In short, players would have some of the money due them this season and next deferred to Year 3 or to the end of their current contract, whichever comes first. The NHLPA objects to those “make whole” payments coming out of the players share of HRR, saying it would mean “players paying players”, which they find highly offensive.
At the same time, the NHLPA has called repeatedly for increased revenue sharing to help the struggling franchises. By this, of course, they mean moving money from profitable franchises to unprofitable ones…in other words, they’re all for “owners paying owners”. Though revenue sharing among franchises is a necessity, the NHLPA stance reeks of hypocrisy.
The players made three counter-proposals to the NHL last week, none of which would bring the HRR split down to 50/50 before Year 5. In other words, the NHLPA proposals call for roughly half of all franchises to continue to bleed cash for at least four more years. What will the players sacrifice in return? Well, they’ll get smaller raises each year…but make no mistake, they will get raises.
Truthfully, there’s no guarantee a 50/50 HRR split will put all 30 NHL franchises in the black; in fact, some franchises will still lose money, at least in the short-term. Lowering the players share of HRR will reduce the number of teams in need of revenue sharing $$$, which will increase the stability of the league as a whole…and thinking long-term, at the end of the next CBA, if only three or four clubs are still losing money, it will be exceedingly difficult for the NHL to make a case for a greater share of HRR.
It’s obvious, even to the NHLPA, that the HRR split must come down to 50/50. Now, the players must set aside their personal animosity toward Gary Bettman, their ridiculous indignation at the NHL’s original offer (43% of HRR) and their unrealistic expectation of uninterrupted (though reduced) raises year-over-year, and work with the league to tweak the NHL’s last offer and get a deal done. In the current economic climate, many people in the ”real” world are either unemployed or have taken significant pay cuts in order to keep their jobs. A 20% pay cut when you’re making $50k hurts much more than 20% of $525k, believe me. If the rest of us can do it, the NHLPA can, too.