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Next CBA negotiations might pit big-market owner versus small-market owner

So we understand that it’s the salary cap’s “floor,” not its ceiling, that’s pushing smaller-market teams into the red—and the $15 million gap between the “floor” and “upper limit” was Gary Bettman’s idea to foist parity upon the NHL, as a sort of bonus in the NHL’s dream CBA that was supposed to fix every team’s financial problems—and after a weekend’s worth of discussion as to whether the NHLPA will bear the burden of smaller-market teams’ desire to witness the a significant market “correction” in terms of the players’ share of wages and actual player salaries, the Globe and Mail’s David Shoalts offers the other side of the coin: if there is to be another lockout, Bettman will have a hard time selling it to the Board of Governors as owners are now splintered.

Via a salary cap determined by league-wide revenues, big-market teams are both making more money than they did prior to the lockout and are being demanded to toss large revenue-sharing checks and up to half of their playoff ticket sales to float the smaller-market teams—and the checks are blank ones—and the bigger-market teams feel that there’s no need to stage a lockout to screw themselves out of good business for their weaker sisters’ sakes:

Those familiar with the league’s finances say a lockout is possible since new NHLPA leader Donald Fehr is not likely to preside over a huge decrease in the players’ share of the revenue. But a more important negotiation may lie ahead. That would be a discussion between the big-market teams and the small-market teams about a more equitable way to cut up the revenue pie. That is not likely to be a pleasant discussion.

A big-market governor scoffed at the idea. He said a lot of the poorer teams don’t run their businesses well, and besides, it’s the big boys who pull in the money. NBC laid out only $2-billion over 10 years for a U.S. television contract because it wants lots of the Chicago Blackhawks, New York Rangers and Los Angeles Kings on the schedule, not the Predators and Blue Jackets. But, the governor said, the little guys still get an equal share of the $200-million a year NBC is paying.

He had some other examples, too, but the point was clear – if labour peace depends on large-market largesse, forget it.

Continued with “other examples” as to why the cap floor has pushed many small-market teams into operating loss territory…

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Comments

WestWing's avatar

the bigger-market teams feel that there’s no need to stage a lockout to screw themselves out of good business for their weaker sisters’ sakes

As others have speculated in recent days, reading the tea leaves on this, there just doesn’t appear to be a very strong likelihood of a lockout—for exactly this reason.

Posted by WestWing from Portland, Oregon on 06/29/11 at 05:24 AM ET

George Malik's avatar

Every time I’ve talked to the Wings’ management about cutting revenue-sharing checks, they cringe. They HATE IT. And I hope that’s a good sign.

Posted by George Malik from South Lyon, MI on 06/29/11 at 05:35 AM ET

Hippy Dave's avatar

For all management involved, this is a great case of be-careful-what-you-wish-for.  Thanks for the lockout, jerks.  Now don’t give us another one or who knows what you’ll get 7 years down the road.

Posted by Hippy Dave from Portland by way of Detroit on 06/29/11 at 05:41 AM ET

MsRedWinger's avatar

I’ve always disliked the revenue sharing thing.  It’s really unfair to punish successful teams by making them support teams that will never be successful.  As someone who grew up in Michigan and now lives in Florida, I believe that hockey is a sport you either grow up with and love, or you don’t grow up with and couldn’t care less about.  I have, in all the years I’ve been here, never been able to convince any of my friends to watch or attend a hockey game.  It was stunning to me to read yesterday that the Tampa Bay Bolts are losing money despite their exciting season and deep playoff run.  That’s gotta make it hard to commit to a huge, long-term contract to a guy like Stamkos, no matter now much you want to keep him.  It’s time for the league to acknowledge that there are too many teams and that hockey in the sun belt is just not ever going to be financially successful.

Posted by MsRedWinger from Flori-duh on 06/29/11 at 10:27 AM ET

Hank1974's avatar

I never thought I’d say this, but if the NHL was smart, they’d scrap the salary cap.
The small-market teams will always be small market and will always struggle to make a profit. They shouldn’t have to spend to a set floor unless everyone shared their revenues to the point where they didn’t have to worry about it.

TV deals are only as good as the ratings. And ratings show that people will watch if big markets are involved.
It’s why you don’t hear nearly as much grumbling from the Royals or Brewers in MLB. Their TV deal is incredible because clubs like the Yankees and Red Sox are always competitive and bring in huge ratings. That translates to a big slice of the TV pie for smaller market teams.

Small market teams will only be successful if they draft extremely well and do everything perfect - from coaching, to ownership, to buffet tables.
All players want to play for glamor teams. Ask a star today if he’d prefer playing in Nashville or Philly and a great majority will say Philly.
Until those small market clubs can cement a legacy through unbelievable drafting (and lots of luck), there’s no chance those teams become marquee locations for RFA’s and UFA’s. And so the cycle continues.

In a perfect world, the NHL would be a 20 team league. 10 teams in Canada, and 10 teams in hockey hotbeds in the US.
Everyone would be making money and TV ratings would be at their best from both sides of the border.

Posted by Hank1974 on 06/29/11 at 11:34 AM ET

bezukov's avatar

If these small market owners didn’t want to spend the money to be competitive they shouldn’t have joined the game, plain and simple.  If owners don’t want to take a greater stake in their teams, let them fold.  I can think of some teams in Florida, Arizona, and New York that ought to be allowed to rot off the vine.  It would be better for the rest of the league.  The players, the remaining owners, and the remaining fans would benefit.

Posted by bezukov from the kids are alright. on 06/29/11 at 12:05 PM ET

Hank1974's avatar

If these small market owners didn’t want to spend the money to be competitive they shouldn’t have joined the game, plain and simple.  If owners don’t want to take a greater stake in their teams, let them fold.  I can think of some teams in Florida, Arizona, and New York that ought to be allowed to rot off the vine.  It would be better for the rest of the league.  The players, the remaining owners, and the remaining fans would benefit.

Absolutely agree.

Posted by Hank1974 on 06/29/11 at 12:14 PM ET

Avatar

The solution is obvious: 40-45% of revenue.  The floor and ceiling go down (only a bit, keep reading), small market teams survive, big market teams get richer and richer, there’s less revenue sharing (other than the TV deal), players don’t suffer another 25% rollback b/c of NBC-Vs. revenue starting in 2012. 

That TV deal was a huge coup.  I don’t know why Bettman isn’t getting praised for that.  A huge win for players and owners (and even fans).

Posted by jkm2011 on 06/29/11 at 12:25 PM ET

J.J. from Kansas's avatar

40-45% is a pretty huge salary rollback.

That’s $500,000,000 fewer for the players at 40% of $3B.

I don’t believe for a second that a penny of that will go to lowering ticket prices or making the fan experience any better.

also FIVE HUNDRED MILLION DOLLARS.

Posted by J.J. from Kansas on 06/29/11 at 12:37 PM ET

J.J. from Kansas's avatar

More math:

$500,000,000 less to the players broken out among 30 teams is a $16.67M decrease in the salary cap.

That’s a 26% rollback in team spending.  It would be lower than the 2007-08 cap was

Also, that $3B projection already has the NBC deal built into it.

Posted by J.J. from Kansas on 06/29/11 at 12:56 PM ET

Hank1974's avatar

I don’t believe for a second that a penny of that will go to lowering ticket prices or making the fan experience any better.

Very, very true.
Ticket prices weren’t rolled back during the last lockout.

I was on the side of the owners in ‘05, but no more.
The owners had the opportunity to keep salaries under control.

More power to the players.

Unless the NHL gets a TV deal similar to NBA, MLB or the NFL, the small market teams will always lose money.

And jkm2011, I agree. Bettman got an absolute steal for their last TV deal. I still can’t believe he got that kind of money.

Posted by Hank1974 on 06/29/11 at 01:11 PM ET

Avatar

So we understand that it’s the salary cap’s “floor,” not its ceiling, that’s pushing smaller-market teams into the red…

Please. We have to stop repeating this red herring. It is defining the problem the way the owners want to define it. It is wrong. The smaller market teams are being pushed into the red because they are not generating enough revenues. Relatively speaking they fall further behind every year.

I think the owners will be united. The big market owners want higher profits and the small market teams want more revenue sharing. Gary’s answer to keep his employers happy is to cut player wages and funnel the savings into higher profits for the big markets and higher subsidies for the half dozen or so zombie franchises.

Posted by Tom Benjamin on 06/29/11 at 03:07 PM ET

mrfluffy's avatar

Posted by Tom Benjamin on 06/29/11 at 01:07 PM ET

You’re a funny guy.

Posted by mrfluffy from A wide spot on I-90 in Montana on 06/29/11 at 03:37 PM ET

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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.