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The Malik Report

Could it be, el Guapo, that the NHL plans on lying its way through CBA negotiation PR campaigns?

Given the comments made by CSN Northeast’s Joe Haggerty that NHL fans must mandatorily begin shaking in their sneakers because Donald Fehr’s clearly going to stare down the NHL’s perfectly reasonable suggestion to hack 7% of a $3-plus-billion business’s proceeds off players’ paychecks, I’m very happy to read the Hockey News’s Adam Proteau not only suggesting that fans might be better-advised to check out the validity of the claims made by the NHL, Gary Bettman and the owners both prior to the 2004-2005 lockout and thereafter when determining whether one should swallow everything Gary Bettman and Bill Daly say about the supposed un-sustainability of the NHL under a business model its owners locked players and fans out for an entire season to essentially craft themselves, with NHLPA sycophant Ted Saskin simply smiling and nodding all along the way:

Personally, I’m not buying anything coming out of the league offices and their faithful water-carriers in the press. That’s not to say I’m locked arm-in-arm with the NHLPA; if you’ve read my work before, you understand I’ve criticized them for putting profit over player safety and on many other issues – including their aversion to the salary cap and preference for untenable disparities in roster quality.

However, I also recall all the snake oil the NHL massaged into our collective dermis during the ‘04-05 lockout. Remember the Levitt Report? Neither Shakespeare nor Mel Brooks has penned such a grand work of comedy. For what I think is the definitive debunking of the Levitt Report, look here– but make sure you’ve got a good hour to spare.

That said, the truth of the Levitt Report can be summarized this way: The NHL paid a former U.S. Securities and Exchange Commission chairman to put out a disingenuous, sleight-of-hand version of the league’s finances and alleged it was losing nearly $300 million per season. It couldn’t go on, the owners cried, and most of the media and Average Joes agreed with them. The notion of player greed was sold extensively as the reason the NHL might have to relocate every Canadian team except bulletproof Toronto and why small-market teams couldn’t compete for talent with the Leafs, Rangers, Red Wings and Flyers. And most of the media and Average Joes agreed with them.

It couldn’t go on, either, because, according to the man who let Enron do what Goldman Sachs and Bank of America have done over the past four years, cranking back players’ salaries and ensuring an ironclad linkage between a fixed percentage of revenues and fixed business costs would not all but guarantee that franchise equity would increase in any sort of “nominal” economic situation, regardless of how much red ink they bled in day-to-day losses, but would instead put an end to the “inflationary spiral” directly liking ticket prices (which are determined by supply and demand) and player salaries.

It was, in other words, a very thoroughly-crafted load of shit.

The players, burdened by a myopic NHLPA leadership under Bob Goodenow, never stood a chance. They were millionaires trying to stare down billionaires – billionaires who regarded their teams as their toys – and in defeat, they gave the NHL the two actual victories they were seeking: the PA fired Goodenow (loathed by the owners with the intensity of 100,000 John Tortorellas) and allowed the league to more or less write a new CBA itself.

Yet somehow, the utter thrashing the players took in that labor pact is about to be held up by the owners as another instance of the players manipulating the system to their advantage. Blackhawks owner Rocky Wirtz has come out recently and tried to get people to believe his franchise still wasn’t making a profit despite more than 200 consecutive sellouts of Chicago’s home dates. If this is some type of Sacha Baron Cohen satire of sports owners, then bravo, Mr. Wirtz.

Proteau goes on, but here’s the thrust of his article:

Could it be that it’s actually the owners and their GMs who take each CBA and exploit whatever loopholes (such as the front-end loading of contracts) they can find? Why do the players have to keep financing bad business decisions like the money pit in the Arizona desert when it’s Bettman and the owners who are responsible for that strategy? If the owners can’t control themselves, handing out contracts such as the first one Ilya Kovalchuk tried to sign with New Jersey, why should the players have to pay? If we want to talk about how many cars and mansions Sidney Crosby has, why aren’t we including Ted Leonsis’ personal lifestyle in the discussion?

These are the questions that should have been asked more often in 2004 and I take full responsibility for my role in the NHL’s disinformation campaign at that time. But you can learn your lesson and I believe I’ve learned mine, which is why I believe this next labor clash won’t be about making ticket prices affordable for working class families or giving a team like the New York Islanders a better chance at winning. It will be about the ultimate goal of the last lockout: increasing franchise values. A recent Forbes NHL franchise value report pegged the average NHL team’s worth at an all-time high of $240 million, or 47 percent more than it was before the lockout. Another mission? Tightening the noose on athletes with a very limited earning window.

Most of all, I believe the idea you’re going to hear quite a bit in the months to come – namely, that if there’s another work stoppage, the NHL’s owners and players are equally greedy and as much at fault – is nothing short of false equivalence bunk. Sometimes, one side is setting a new standard for avarice. And I think we’re approaching those times.

Ding ding ding.

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Comments

Chris in Hockey Hell's avatar

Could it be, el Guapo…

Jefe, would you say that the NHL and the NHLPA have a plethora of issues to work out in this new CBA?

Posted by Chris in Hockey Hell from Ann Arbor, MI but LIVING in Columbia, TN on 06/14/12 at 07:57 PM ET

George Malik's avatar

Could it be, that Gary Bettman’s simply turned sixty, and that he might be feeling a little touchy about his “legacy?”

Technically, yes, there are a plethora of pinatas’ worth of issues to deal with, but the really hard ones involve more accurate reporting of revenues, revenue sharing, escrow, arbitration and free agency.

The NHL chose to lock everyone out for a full year to get a cap with an ironclad link to revenues that’s never going away, however, so the concept of either side being willing to stop play for as much as half a season simply because the NBA and NFL got away with it is absolutely ludicrous, and even Donald Fehr knows that the players would commit seppuku by striking for the first time since 1992.

This is clearly a sustainable business, even though Bettman’s desire for a narrow range between a payroll “floor” and “ceiling” whose numbers are determined by an average of league-wide revenues as opposed to a median or team-by-team-determined formula is causing the smaller-market teams to sweat a bit.

Mostly, the same problems that the New York islanders were having in 2005, they’re having now, the same problems the Coyotes were having then, they’re having now, the Panthers, for example, haven’t gotten much better at attracting paying fans, and if the Canadian dollar were to drop down to the sixty-cent range again, that alone would imperil Canadian franchises again despite the super-owner-friendly conditions imposed by the current CBA.

The system could use some tweaks, but it is far from broken, and there is absolutely no need whatsoever to partially or completely burn down the village yet again in order to save it, especially given that every re-set seems to generate its own set of problems that the NHL wants to wipe away by any means necessary, and especially, especially given the fact that in an era of instant information and hundreds and hundreds of alternatives with which to invest their entertainment dollars, many fans embittered by the last lockout would finally bolt for good should the doors be locked for a third time in seventeen years.

Posted by George Malik from South Lyon, MI on 06/14/12 at 08:15 PM ET

Avatar

There will be lots of talk with garbage spewed by both sides. As we try to frame the arguments of each side, there are some points to be made from management’s side.

1) They are a business. There goal is not mere sustainability, but to make as much money as possible. They will extract the best deal possible from the players. Things do get messy with anti-trust issues and I can’t comment on those implications.

2) The business is constantly changing. Two of the biggest ones are the impact of technology which improves the TV experience, making both the rights very valuable and possibly keeping fans from the gate; and the specter of a more hostile environment for public arena financing. Both could require increased investment into the business to increase franchise values. Doesn’t this put owners in a better position to reduce players’ share of revenues?

So add points 1+2. The league have established such a dominant position by controlling arenas and investing in the business, that the players will have little recourse if the owners want to tighten the screws. Maybe others can comment about the legal outcome of such a battle, should the players decide to fight for the last dollar. Or, the league will decide that a protracted battle is not worth it.

Posted by Dave on 06/14/12 at 09:37 PM ET

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The league is fragile in many areas, but on the right track.  This is not the time for a work stoppage.

Posted by 13 user names on 06/14/12 at 10:10 PM ET

Ajax19's avatar

Jefe, would you say that the NHL and the NHLPA have a plethora of issues to work out in this new CBA?

Yes, I would say they have a plethora of issues to work out in this new CBA.

I fear that the two sides will rape the horses, ride away on the women and prune the hedges of many small villages before ever coming to an agreement on this.

Posted by Ajax19 on 06/14/12 at 10:12 PM ET

George Malik's avatar

The players’ recourse is their union and Fehr. They’re going to bargain hard for the concessions the league wants to ram down their throats.

Look, neither side is going to be the “good guy” here because in these kinds of negotiations, there are only varying degrees of culpability should something go wrong that affects paying fans like you and me.

But this is a fully functional business—and yes, it’s a business, there is no “good of the game” at stake here, but instead money, power and influence—and it makes no sense for either side to kill the golden goose lest another golden egg roll into the other guy’s hands.

Posted by George Malik from South Lyon, MI on 06/14/12 at 11:20 PM ET

DocF's avatar

I would never trust the Evil Garden Gnome as far as I can throw him.  He and his toady owners have screwed up the league what with money losing teams in such wonderful hockey centers as Arizona.  The commissioner probably will advise the owners that a lock out is necessary to save the NHL.  It will bring about doom for many of the teams.  Only the very faithful will return after another of those fiascoes.  The majority of people simply do not care enough to come back.

Doc

Posted by DocF from Now: Lynn Haven, FL; was Reidsville, NC on 06/14/12 at 11:47 PM ET

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I have to laugh and think again of the film “Good Cop, Bon Cop” . . . .

Bettman is still lying but this time he has the best against him, and perhaps the players are seeing that.

I think the owners who are against Bettman are being bought off with Winter Classic and similar programs. 

Hey, concussions and game regulation will be glossed over.  Just don’t look behind the curtain, guys.

Posted by bobbo from Romeo, Michigan on 06/15/12 at 03:00 AM ET

George Malik's avatar

When I talked to Jim Nill, who’s an incredibly nice man, about revenue-sharing checks, which are partially cut from teams’ playoff revenues, he almost hissed.

There are more than a couple of issues that annoy the owners, Board of Governors and GM’s, too, and the concept of subsidizing Bettman’s bad business decisions is one of ‘em…

But the thing that scares the crap out of me is the way that what was, in retrospect, a rather hair-brained and poorly thought-out suggestion to radically realign the league was so easily passed by the BoG simply because Bettman told them to do so. You don’t see 27-3 votes for something like that unless it was what it was—the first shot across the PA’s bow and an easy way to scapegoat them for asking legitimate questions about whose travel would dramatically increase for the sake of bringing others’ down, and how the hell the playoff format would really work despite the fact that the Eastern Conference was more or less “bought” by getting a 4-in-7 chance of making the playoffs instead of that 4-in-8 one in the “West,” the players were pissed about that (so were the Western Conference’s Governors, but they still voted for it)...

That’s what worries me about the concept of a lockout. Bettman may very well tell the Board that it’s his way or the highway, and after getting them a hard cap with an ironclad link to a certain percentage of league-wide revenues, they might say, “Okay, Gary, sure, the NFL and NBA got away with it, so I’m sure we can, too.”

Posted by George Malik from South Lyon, MI on 06/15/12 at 03:13 AM ET

MsRedWinger's avatar

Ugh.

Posted by MsRedWinger from Flori-duh on 06/15/12 at 09:43 AM ET

J.J. from Kansas's avatar

The more I think about it, the more I’m convinced that a simple drastic lowering of the salary floor would solve a lot of the issues at hand.

Big clubs would pay less in revenue sharing because it would take significantly less to “make them whole” on the concept of only spending 57% of their HRRs on player salaries and those clubs could use some of the savings to find more creative ways to keep fans interested.

The players should have no problem with this. They’re not actually making less money if the Florida Panthers are spending less. Regardless of every team’s spending in relation to the cap, the players’ share is GUARANTEED. If the smaller clubs are spending so little that the league doesn’t end up hitting the players’ share, then everybody in the NHLPA gets what essentially amounts to a bonus check at the end of the year.  Pay that amount first from league overages and second from the playoff skim (which could be lowered to between 30-50% instead of the current 50-70%).

The big concern with a lower floor is that it really hurts the concept of some teams climbing into competitiveness from the basement. The answer to that is “yeah, and?” If those owners can’t draw enough fans to root for them through those times, then they can fold. That seems to be the answer no matter what the build of the league is.  I like that there are 30 teams, but I don’t care so much about that fact that I would lose even half a season of hockey to make sure that it stays at that number.

Posted by J.J. from Kansas on 06/15/12 at 10:09 AM ET

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J.J. How is that not de facto revenue sharing? If the Florida Panthers spend 30 million instead of 50 million, that 20 million dollar hole is going to filled by the teams actually making money.

It’s also a competitive death knell for the basement teams because with players hitting UFA so early it is very difficult to control costs. Non-competitive teams in non-traditional markets do not grow, and that’s bad for a business in which increasing franchise values is so crucial.  And we all know about Bettman’s quixotic search for a wider footprint which yields a magical U.S. TV deal (the merits of which are debated endlessly).

Lower revenue growth is also bad for players who theoretically are in a “partnership” in which increasing revenues boosts their paycheck. While you may not care whether there are 30 NHL teams, the players sure as hell do care whether there are 50+ NHL contracts available.

To that point there is a natural internal conflict in league between the cash cows and the bottom feeders. Bettman will be tasked with keeping them together.

Posted by Dave on 06/15/12 at 12:19 PM ET

SYF's avatar

When I talked to Jim Nill, who’s an incredibly nice man, about revenue-sharing checks, which are partially cut from teams’ playoff revenues, he almost hissed.

Posted by George Malik from South Lyon, MI on 06/15/12 at 02:13 AM ET

Yeah, I remember you writing about that at the Wings’ TC in TC a few years ago.  There are nine members of the governing body of the Preds and four of them are multibillionaires.  The Wings have one and he’s a better businessman than all of them combined.

Posted by SYF from The Revenge of Johnny E on 06/15/12 at 03:56 PM ET

J.J. from Kansas's avatar

J.J. How is that not de facto revenue sharing? If the Florida Panthers spend 30 million instead of 50 million, that 20 million dollar hole is going to filled by the teams actually making money.

It’s de facto revenue sharing the same way the players’ escrow is de facto revenue sharing.  You can’t have a system where the players get a guaranteed cut that doesn’t have some sort of revenue sharing agreement.

That’s why I cut the first-bit revenue out of the central league cut and the playoff cut before I took it out of the top-10 team cut (which is how it currently works).

It’s also a competitive death knell for the basement teams because with players hitting UFA so early it is very difficult to control costs.

That’s why you keep the salary cap in place and fix holes that allow teams to hide mistakes. The costs will control themselves as room at the top fills or doesn’t fill. 

The thing about the bottom teams struggling to compete is that we’re already there.  Did the Stars or Avalanche have a snowball’s chance in hell? The Islanders?  I’m not saying get rid of the floor completely, but what we currently have is a system that forces teams to pay up to 65% or more of their revenues to salaries and doesn’t share enough to make them whole.

Ultimately, I’d still be in favor of a system where the cap is set the same way, but every single team is required to pay the players’ share of their own revenues into a pot that pays the players.  Unfortunately, there’s no way the $200M leafs are going to give up $114M when they’re only allowed to spend $70M on their own team.

Posted by J.J. from Kansas on 06/15/12 at 04:09 PM ET

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About The Malik Report

The Malik Report is a destination for all things Red Wings-related. I offer biased, perhaps unprofessional-at-times and verbose coverage of my favorite team, their prospects and developmental affiliates. I've joined the Kukla's Korner family with five years of blogging under my belt, and I hope you'll find almost everything you need to follow your Red Wings at a place where all opinions are created equal and we're all friends, talking about hockey and the team we love to follow.