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The Malik Report

Lockout #3 is all about kicking the can

The more I think about the premise behind Gary Bettman and the Board of Governors’ desire to lock out their players for a third time in eighteen seasons and the second time in eight years, the more I think that the NHL gods must be crazy.

The NHL ceased operations for an entire season to bring labor costs down, ensuring that the players would make only a certain percentage of pennies on the hockey-related dollar, with that percentage linked by iron chains to league-wide revenues. The current CBA wasn’t so much collectively bargained as it was bullied, bulldozed and eventually written by Bill Daly and a group of turncoats who had so sold out their union that would-be NHL executive director Ted Saskin and his cronies did exactly the opposite of what super PAC’s insist “union bosses” desire to accomplish, instead nodding their heads to every suggestion that Daly and the NHL made while completely acquiescing to their opponents’ demands in secret.

Especially given that fans were lied to about an “inflationary spiral” surrounding salaries and ticket prices that doesn’t exist, and that the NHLPA expected to lose a season for some sort of meaningful reason, the current CBA was sprung upon fans and players chock full of lies, empty promises and unpleasant surprises.

Because the CBA’s revenue-sharing program seems to do little more than piss off big-market owners, and because the salary cap is based upon a percentage of league-wide as opposed to team-by-team revenues, under the current CBA, the rich have gotten richer, the teams in the middle have gone back to “have-nots” after spending a few seasons as “haves,” and teams in trouble (absent taxpayer-backed subsidy deals, anyway) have remained in trouble, all while ticket prices have continued to rise irrespective of player salaries or team performances as they are determined by supply and demand.

And yet the NHL came back to its players eight years after drafting this “dream CBA,” with salaries maxed out as high as they will go in terms of percentages of hockey-related revenues, demanding to not only receive a huge bailout in terms of a percentage of the HRR pie, but also to severely restrict player movement, player mobility and essentially workers’ rights to find employment elsewhere, with the league readily and publicly admitting that it had no intent to change the system by which it operated—and on top of that, to redefine hockey-related revenues to ensure that the players would give at the office twice.

In plain English, given that the NHL does not plan on contracting teams, a league whose business model isn’t working for each and every one of its 30 franchises decided that its only problem involved labor costs, labor costs determined by a fixed percentage of league-wide revenues, and that while current business model was unsustainable, it would continue operating under its current system, minus huge give-backs from its employees’ pockets.

Does that make sense from a business perspective? In a business with 30 franchises who can charge whatever admission supply and demand will allow them to charge to watch performers perform, where a third of the franchises are raking in dough, a third of the franchises are getting by and a third of the franchises are in economic distress, and where labor costs are fixed to a certain percentage of the revenues deemed to stem from their performers’ work, what would a second “bailout” from employees likely result in?

That’s an easy answer. More profits for the moneymakers, a few years of better times for the franchises in the middle, and maybe a year or two of less immediate distress for the troubled franchises, with guarantees that things would be much worse by the next time the labor deal was up for negotiation again.

Why?

Because in this kind of business, where labor costs are fixed to a certain percentage of league-wide revenues, and revenue-sharing isn’t particularly meaningful, five to eight years from now, the rich will be even richer and the poor will be even poorer because those moneymaking teams will continue to make more money, driving the salary cap higher and higher and higher. Decreasing the players’ share almost exacerbates the problem because, especially with HRR redefined, profits are all but guaranteed to increase and increase at steeper rates.

So what we’re really looking at, as the Montreal Gazette’s Jack Todd suggested, a third lockout for the sake of a fourth and then a fifth, a sixth, and so on.

Without addressing the inequities between the biggest and smallest-market teams, and without tweaking the system to ensure that teams like the New York Islanders or Anaheim Ducks qualify for whatever revenue-sharing program exists, the NHL is ensuring that the gap between rich and poor will get bigger at a faster rate, and that the same problems will manifest themselves the next time the league insists that it’s labor costs and only labor costs that are the problem for a business plan that clearly doesn’t work for everyone.

If anything, the biggest markets will be even more tired of continuing to bail out its weaker sisters under a system of revenue-sharing that’s partially constructed from teams’ biggest cash cows in playoff revenues, and there will be more teams like Phoenix and Long Island, not less.

It’s also worth noting that, according to the labor union’s representatives, even a cursory glance at independently-audited team books indicate that a significant amount of revenues that are supposed to be subject to divvying up between labor and owners are in fact not being divvied-up, to the point that the labor union believes that there’s a fuzzy math gap of 6% of league-wide revenues.

That’s staggering and stunning in itself, or it should be. 6% of $3.3 billion is a crapton of cookies behind hidden under pillows and chocolate bars stuffed in underwear drawers.

Yet we find ourselves at a point where it’s the labor being told its wages are the only problem plaguing a runky pickup truck whose driver’s solution to a leaky fuel line that’s gotten worse over the past eight years is to consistently tell his mechanic that he needs a bigger gas tank to continue getting from point A to point B. It’s the labor union that’s trying to meaningfully address the league’s revenue-sharing issues, trying to make it more palatable for big markets to keep their weaker sisters afloat. And it’s the labor union’s plan—which included massive give-backs in pay in addition to a revised revenue-sharing system to essentially float its employer’s most troubled franchises a loan that will never have to be repaid whose proposal was dismissed out of hand.

If we take the words NHL and NHLPA and put them in the place of “employer” and “labor union,” does any of this sound any less insane? Does it sound like anything less of a game of “kick the can?” Or does it sound anything less like a business that will continue to ask for salary give-backs to the point that the labor union will eventually say, “Screw it, cancel the season that would be played during Lockout 4, we’re going to play in leagues that treat us more like the talent that puts butts in the seats you sell people, and less like bloodsucking leeches?”

The NHL is currently operating under a CBA it sacrificed a year to achieve, a CBA that Gary Bettman promised fans and promised the 30 members of the Board of Governors would solve the systemic issues plaguing the business and destabilizing small and mid-market teams, and because it was based upon a salary cap that would be an average of league-wide revenues, and because it was based upon limited and ineffectual revenue-sharing, it didn’t achieve its goals.

So wouldn’t you think that any sane sports league would suggest that it has some systemic problems to tweak under a new CBA?

Instead, we’ve got a sports league threatening to lock out its players and fans because it wants to place the burden of stabilizing the business upon its labor force, and because it’s unafraid of the fact that continuing to operate under its business model will make the gap between moneymaking and money-losing franchises that much more stark over time.

All the NHL’s proposed CBA does is buy off the big markets by promising even more profit, and buys off the mid and small-market franchises by suggesting that they can cross their fingers and hope that whatever business problems plague their franchises will magically disappear over the short and long term simply by reducing labor costs.

For the smallest and most troubled franchises, the league essentially addressed their inability to keep up in the revenue-increasing rat race by not setting broken bones or fixing broken ligaments, but instead slapping their legs in casts, and as they continue to limp along, the NHL is now promising them new, lighter casts and better braces. They aren’t promising any real “fix,” and five or eight years down the line, when they’re being lapped for the eighteenth or nineteenth time, Gary Bettman’s plan appears to be, “Lather, rinse, repeat.”

That’s nuts. And stupid. And yet the league is unrepentant, not even trying to mount any sort of PR campaign or write another “Levitt Report.” This time, its’ just, “Well, we lied to you last time, and now we’re going to lock you out again, assume that you’re all going to come back—even with many more ways for you to spend your discretionary income more immediately available in this digital world—and then we’re still going to keep asking you to spend more and more money to watch hockey games. If you don’t like a lockout, tough shit. And if you don’t want to deal with a fourth or fifth one, tough shit.”

Arrogant, nonsensical, illogical, and plain old idiotic. In any sane business, Gary Bettman and the Board of Governors would be laughed at for having already achieved every goal in terms of restricting labor costs, and yet suggesting that the systemic problems with their business plans have nothing to do with the system and everything to do with having to spend exactly what they wanted to spend on labor costs. It’s ludicrous. It’s stupid. It’s childishly immature.

And at this point, it appears that, “We’ll just keep digging into our employees’ wallets to solve all our problems, even after we locked them out for a year to achieve all our collective bargaining goals, just to kick the, ‘What do we do to fundamentally address the problems that are plaguing our 30-team business model?’ can down the line until the next time we lock ‘em out to dig into their pockets” is both a sound strategy in the Board of Governors’ eyes and is a strategy that’s going to cost games, fans and, in the case of game-night employees, real jobs to real human beings who can’t afford to not pay their bills while the billionaires try to get away with holding the millionaires over a barrel all over again.

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Comments

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Is the CBA about Greed? Yes i think it is. It is rampant in our society. When will TRUTH be seen by ALL? I hope THEY ( Owners and Players) realize who pays both of their incomes US FANS!!! Hockey is a sport and also a game. Entertainment has costs. Lets hope THEY comprehend ; that, the FANS foot the bill. Please Owners and Players save Hockey for us FANS this season. A prayer from rayzredwing!

Posted by rayzredwing on 08/20/12 at 07:27 AM ET

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Would this not be a better league if every team had the option to spend to the cap? I think that would lead to much better quality of games. Of course, the only way to do that would be to use a “socialist” type of revenue sharing system, which is obviously unpalatable for a group of pure capitalists. These guys didn’t become successful looking out for the other guy, they became successful looking out for number one. I honestly do not believe the NHL will ever be able to fix it’s problems due to the nature of the owners. That is rather a shame.

Posted by Iggy_Rules on 08/20/12 at 09:14 AM ET

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This is a great article.  Just rolling back players salaries is a band aid fix to the bigger problem.  The problem is between small market and big market teams.  I’m with Fehr on this one.

Posted by tbassett on 08/20/12 at 09:15 AM ET

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By the way, George, thanks for all the reporting. I may not often comment but I read most of what you post.  Keep up the great work!

Posted by Iggy_Rules on 08/20/12 at 09:16 AM ET

TheFreak's avatar

If the NHL succeeds in cutting player salaries, what happens to attracting overseas talent by paying them a fraction of what KHL is paying these days?

Posted by TheFreak on 08/20/12 at 10:05 AM ET

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George Malik, that was a great piece that should be printed on every hockey website, magazine, and newspaper sports page. Excellent writing that hits on every point. If the owners and players read this and cared about hockey and its fans the new CBA would be written and agreed to by the weekend.

Posted by G7 from TC on 08/20/12 at 11:03 AM ET

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As a friend of mine commented in the context of a baseball dispute some 20 years ago, when it comes down to it, “labor’s labor, and management is management”. As this piece states, it’s the management model that’s broken, and attempting to fix that by extorting from labor is a doomed enterprise.

Posted by aqf on 08/20/12 at 11:32 AM ET

Red Winger's avatar

If the NHL succeeds in cutting player salaries, what happens to attracting overseas talent by paying them a fraction of what KHL is paying these days?

Posted by TheFreak on 08/20/12 at 09:05 AM ET

It is still deeply ingrained in the players’ subconscious that if you have a medical emergency at a Russian rink, you will probably die.

Posted by Red Winger from Sault Ste Marie on 08/20/12 at 12:51 PM ET

calquake's avatar

As others have said… until the season ticket holders cancel their seats, until the average fan stops buying merch or cancels Center Ice, until most of us do not go online to follow hockey, only then will the league and players begin to pay attention.  I’m doing my small part by canceling my automatic renewal of Center Ice.  Insignificant? Yes, but at least I can give them my middle finger for now while I decide what new avenues to pursue if there is no hockey.  Will I come back?  Possibly so but not to the extent I have been involved for the past 40 years.

Posted by calquake on 08/20/12 at 03:16 PM ET

hockeychic's avatar

Will I come back?  Possibly so but not to the extent I have been involved for the past 40 years.
Posted by calquake on 08/20/12 at 02:16 PM ET

I run a small hockey pool every year for the playoffs.  During the season we email about various hockey stories.  Already, three people in my pool have said that if there is a lockout, they are done with the NHL. 

I have often said that I’m a fan of hockey despite the NHL. 

This is a great article and sobering.  It’s never been about the fans except how much they can get from us. 

The idea of no season makes for a long, cold winter.

Posted by hockeychic from Denver, CO on 08/20/12 at 04:08 PM ET

calquake's avatar

I have often said that I’m a fan of hockey despite the NHL.

This is a great article and sobering.  It’s never been about the fans except how much they can get from us.

The idea of no season makes for a long, cold winter.

Posted by hockeychic from Denver, CO on 08/20/12 at 03:08 PM ET

Wholeheartedly agree with you. I’m just a blessed and lucky bastard to live in SoCal, so the whole “long, cold winter” thing isn’t a problem. cheese

Posted by calquake on 08/20/12 at 05:12 PM ET

RWBill's avatar

Don’t you mean it’s all about kicking the Fan?

Posted by RWBill from Brush Street cruising with Super Creepy Rob Lowe. on 08/20/12 at 11:52 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.