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On revenue-sharing as it stands now and ‘reasons for optimism’

Two things:

First, Yahoo Sports’s Greg “Puck Daddy” Wyshynski engaged in some serious-ass research to explain the NHL’s revenue-sharing program, and it serves as a fantastic companion piece complimenting the New York Times Jeff Z. Klein’s analysis of the NHLPA’s proposed “Industry Growth Fund.” How does the current revenue-sharing program work, and what “minor tweaks” are the NHL proposing to its present model? Here’s only a snippet of Wyshynski’s article:

The current model for the NHL’s revenue sharing has the teams in the bottom half of the League-wide revenues eligible for revenue sharing. Which means if you’re in the top 15 revenue-generating teams but are playing through a mountain of debt — hello, New Jersey Devils — you aren’t eligible under the current system.

According to NHL sources, the League has proposed that the system will be opened up to any team in the NHL that might require revenue sharing, and not just the bottom 15 revenue generators.

Essential to that broadening of the system: Dropping the current CBA rules that prohibit teams in big media markets — 2.5 million TV households or more — from being eligible for revenue sharing. In theory, teams like the New York Islanders, the Devils, the Anaheim Ducks and the Dallas Stars that should logically qualify for revenue sharing would be eligible under the new model.

As David Shoalts of the Globe & Mail detailed earlier this summer, the NHL’s revenue sharing system is tangled and baffling.

Part of that confusion comes from a “clawback” system that incentivizes teams to maximize their local revenue streams — if they hit certain growth targets, usually at a rate above the League’s average revenue growth, then they qualify for a larger share of the revenue. If they miss the targets … they don’t.

The NHL intends to loosen those restrictions and make it easier for teams to qualify for a larger share of revenue sharing.

Now, if the NHL expands revenue sharing, that means it needs a bigger pot to draw from, right?

I strongly suggest that you continue reading Wyshynski’s article, but the second “thing” involves Sportsnet’s Michael Grange offering a one-two punch in terms of framing tomorrow and Thursday’s CBA negotiations.

As we proceed toward an incredibly important week in terms of finding out whether the NHL will be holding games this fall or will be locking out its players and fans, Grange offers five reasons to be optimistic about the tenor of said negotiations, even though Grange deems the revenue-sharing debate to be a “red herring.” Amongst his reasons:

1. They’re talking: The players and owners might see the world differently, but they haven’t thrown up their hands or thrown down the gloves just yet. More importantly, they’re talking about the right stuff. With considerable progress being made on secondary issues, this week’s agenda has been devoted to the twin issues that will be at the centre of any agreement whenever it gets made. The first is core economics—what exactly will be defined as the league’s hockey related revenue (HRR) and how the two sides will divide it. The second are so-called systems issues—matters relating free agency and a wide range of contract rights. Fix those two issues and a deal gets made fast.

2. The hard cap stay: NHLPA executive director Donald Fehr hates salary caps. A major part of his legacy after running the MLB players association is that baseball remains salary-cap free, unlike the NBA, NFL and the NHL. If he had his way there wouldn’t be one in hockey. “The reason we have a salary cap is because the owners believe—and they are correct—that the salary cap we have now pays the players less than what the free market would pay them. That’s the starting point from the players’ analysis, but the players are willing to live with that if we can work out an agreement.”

What Fehr didn’t say was that over-turning the hard cap system the NHL shut down hockey to get seven years ago would mean a labour stoppage his members don’t want. Discretion being the better part of valour, the player’s proposal maintained a hard-cap, though it did provide means for teams to trade up to $4 million in cap space for draft picks. Allowing the owners to keep a hard cap in place may prove to be the single most significant concession the players make in the name of avoiding a lockout.

3. There is room to wriggle on HRR: That each side has put forward proposals with revenue sharing splits the other won’t accept hardly matters as much the fact that the relative positions don’t seem completely set in stone. The players’ proposal calls for a drop in their share of HRR from 57 per cent to 54 per cent over the next four years. It’s a long way off the 43 per cent the owners want to give them, but it is a concession.

Meanwhile, the owners deserve some credit for not being completely antagonistic. The NBA’s first offer to their players was to cut their share of revenues from 57 per cent to 37 per cent, eliminate fully guaranteed contracts and limit contract lengths to four years. Now that’s a low-ball offer.

Moreover, lost amid the hubbub of last week’s meetings was that Bettman did cite the NBA and NFL as models for the NHL’s position on splitting HRR. Since each of those league’s settled on splits in the range of 50 per cent, just mentioning them should signal to the NHLPA that the owners are willing to improve their first offer considerably.

Continued with a suggestion that “rollbacks” are not central to the owners’ proposals…

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Comments

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With GB’s own move, the NHLPA is in the strongest bargaining position they’ve been in for 20 years.  For 20 years GB has shown he is a shrewd, intelligent and tough negotiator.  But this time, by announcing a lockout on Sept 15 he’s backed himself into his own corner.  Because a day later, the Fehr led players made a reasonable presentation that allowed the cap to stand and provided a possible share framework for success.

Althought the players are way overpaid, and the fans are way underappreciated, it’s not the players responsibility to solve 100% of the owners issues.  The primary economic issues that were addressed during the last lockout are no more reason for player, fan, sponsor, tv, employee sacrifice.  If GB proceeds with a lockout, I think it’s sociopathic, and one could say that the financial success of the owners has been in spite of GB afterall.

If there’s a lockout on Sept 15 I would say it’s likely all bets are off.  Fehr will have been correct it’s a playbook strategy (code for hardball) and not negotiation.  It was a playbook lockout last time.  A lockout proves the players are dealing with that kind of mentality and as difficult as it will be, it will be time for the players to face the “general” issue head on.  My guess is Fehr has diplomatically advised the commissioner of something like that in the past day or two.

Another lockout presents interesting options.  Unfortunately the game would be hardball.  The salary cap the players agreed to and proposed again this summer comes off the table.  And they don’t come back until the cap is gone. It’s a free market system again and that could be Dec 2013 or Jan 2014, or even two full seasons.  After Sept 15 I think it’s possible the players will see the writing on the wall and decided the upside is worth it.  At that point GB has lost a fight he wanted, the cap is gone and he has to force another year long lockout to get it back in about 2018.  And the probability of that is low.  Reason being fans, sponsors and NBC will finally say, really…enough.

So, GB, as fearful as you can be about not having all the i’s dotted and t’s crossed before the puck is dropped, this time you’re simply going to have to trust Mr. Fehr as a professional and I know that’s been a stretch for you.  Maybe the recent conversation helped.  Revenue share is a mutually opportunity.  The little general in me is telling the little general in you, know thyself. And as cool as you can, make these next ten days count. Good luck.

Posted by Bill from Canada on 08/21/12 at 07:41 PM ET

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Bettman announced that if there isn’t a deal on Sept. 15 there would be a lockout because that is the move that gives him leverage, not take it away. The season doesn’t start then the players don’t get paychecks and risk missing out on a large portion of their pay if they don’t settle. Given the owners are the ones who signed the check they would have the leverage.

If the owners don’t lock them out and play without a deal under the old rules then that wouls swing the negotiating advantage to the players. The players would do what the baseball players under Fher did in 1994 wait play out most of the season and get most of their pay and then go on strike toward the end of the season threatening the playoffs (where the owners make their coin). At that point the demand to drop the cap would come off the table.

Posted by Jkrdevil on 08/21/12 at 10:17 PM ET

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Considering Bettman’s proposal to the union, the lockout does not leverage his proposal.  He’s backed himself in a corner.  Likely underestimated Fehrs willingness to do a deal.  If he locks them out Sept 15 his leverage begins when players miss a full two week cheque, end of October. Ho Hum. Only four more cheques to the outdoor game.  Bettman and Goodenow had formal authority, not moral authority.  Fehr has shifted the equation.  Bettman solves the owners problems with the owners money or loses his job.

Posted by Bill from Canada on 08/21/12 at 11:47 PM ET

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Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.

From breaking news to in-depth stories around the league, KK Hockey is updated with fresh stories all day long and will bring you the latest news as quickly as possible.

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