It seems like just yesterday the news broke that the 2004 season was not to be, and now like deja vu a lockout is staring us in the face yet again. The general consensus among NHL fans and media alike is that if the season starts late, or even worse is canceled, it is more a result of the greedy owners and their egotistical figurehead, Gary Bettman, looking to milk every last penny out of the NHLPA. While on the surface it certainly seems like a case of the rich trying to get richer, after all league revenues are at an all time high, the owners do have more ground to stand on than many believe.
In a recent column by David Pollak of the Mercury News, the San Jose Sharks reported a loss of $15 million last season, despite selling out all 41 home games, and both playoff games. According to Forbes the San Jose Sharks generated $96 million in revenue in the 2011-2012 season and carried a debt to value ratio of 21%. In the short term this isn’t a problem for California’s northernmost franchise, because the ownership group, headed by Kevin Compton and Stratton Sclavos has deep enough pockets to foot the bill. The bigger concern is how a team packing it’s arena, and carrying little debt (6th lowest debt/value % in the NHL), coupled with record revenues is still reporting a loss.
NHLPA Head Donald Fehr
Image courtesy of Getty Images
The fact of the matter is the NHL is not the NFL and it never will be. Gary Bettman hasn’t figured that out yet, but it’s about time the league, the owners, and the NHLPA accept the fact that hockey will always be a secondary sport in the United States and just concentrate on maximizing its success as such. The NHL is a gate driven league, they just don’t generate the advertising revenue or licensing income that the other leagues do. Additionally, while NBC’s increased coverage of hockey has been a boon for the league, the NHL doesn’t come close to the mega television contracts of the NFL or MLB.
With reduced revenue streams elsewhere, teams must put fans in the seats and their luxury boxes to stay afloat. But what happens when, as with the Sharks, the fans come but the team still loses money? If ticket sales are maxed out, the team must rely on licensing and merchandise, advertising, and television money to tip the scales. In many markets that revenue is nonexistent. That points to the distribution of revenue as much as it does the ability to generate it, and that’s where the owners are digging their heels in.
A rollback in player salaries would certainly go a long way to help mitigate loss, and make up for the diminished returns from other team revenue streams. The initial proposal by Bettman and company calling for a 24% rollback is a bit extreme, but ultimately look for the owners to try and work out a 50/50 split of the earnings, as well as a stronger revenue sharing system among franchises. A split down the middle isn’t such a bad deal for the players either, it only looks that way because they’ve been living fat off the land for years now. They accepted a reduction to 57% in the last CBA, but comparatively speaking that’s still a sweet deal. Look at the NFL, arguably at least an equally punishing league in terms of physicality and injuries, and the NFLPA is taking in 47% (will be closer to 50% over duration of CBA) of league generated revenue and their contracts aren’t even guaranteed! The NHL which generates significantly less income from other revenue streams compared to the NFL is currently giving their players 10% more of their revenue, and guaranteeing their contracts. The owners aren’t the only ones who come off greedy in this whole ordeal.
So what’s the solution? Well we could contract all the organizations that can’t operate solely on team generated revenue, give the players their 57% share to get them back on the ice, and watch a 16 team league with more than half of its members based in Canada. That doesn’t seem feasible, so here’s my take.
The NHL and NHLPA agree to split revenue straight down the middle, but it will be stepped down over the course of the CBA, a seven year deal with years 1 and 2 having a 2% reduction each, followed by a 1% reduction in the next 3 years and an even 50/50 split in the final 2 seasons. The tiered reduction will enable teams to keep their salary cap structure somewhat in place, without a massive rollback taking place in any one season.
Rick DiPietro’s contract may be ill fated, but that’s part of sports.
Image courtesy of Getty Images
As far as the long term contracts that have been a point of contention, this one goes to the NHLPA. Teams should be allowed to dig their own graves, it’s what separates good GM’s from bad ones, and the league should not be idiot proof. The only tweak necessary should be that a players salary cannot deviate more than 20% from his cap hit in any one season. Therefore a player who signs a 10 year $100 million dollar contract, can make no more than $12 million in salary and no less than $8 million in any one individual year. This will still allow mega contracts to be signed, but will discourage them slightly as it prohibits teams from paying players huge money up front and then a fraction of that in the final years of the contract when the player figures to be retired anyway. Putting a term limit on contracts is too restrictive, teams and players should be allowed to sign bad contracts, it’s part of sports.
Another big issue is the length of entry level contracts, currently the initial ELC is limited to 3 years, but the owners are pushing towards 5 years to keep from having to pay big money for potential in the second contract, as opposed to actual production. This seems logical, but the only way both sides should agree to this is if the minimums and maximums of the ELC’s are raised. Currently the maximum a player can be paid off his ELC is $925,000, if a player will be locked up 66% longer under his ELC, the maximum should be at least 66% greater, or $1.535 million, and the minimum should follow suit.
There are other bones to pick between both sides, such as rule changes, participation in the 2014 Winter Olympics, league wide revenue sharing, and potential realignment. However if they can come to terms on the issues outlined above, the other issues should resolve themselves peacefully. They say the best compromise is when neither party is happy, and I believe that for the NHL, the NHLPA, and most importantly the NHL fans, that is what we should be hoping for.
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