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The NHLPA shouldn’t be portrayed as the ‘fall guy’ in the next round of CBA discussions

As noted earlier, the Carolina Hurricanes, among other smaller and mid-market teams, find themselves a little financially squeezed by the fact that the league’s revenues have exceeded the $3 billion mark, thus yielding a salary cap “floor” of $48.3 million and a cap ceiling of $64.3 million, which are obviously much higher numbers than the league was working with coming out of the lockout, but as the smaller-market franchises begin to lament a CBA which they wholeheartedly supported, negotiated between Bill Daly and a sycophant in Ted Saskin, because a) the “payroll range” is determined by league-wide revenues instead of team-by-team revenues and b) because one Gary Bettman’s dream CBA involved parity, thus a $15 million gap between floor and ceiling instead of a more reasonable $20-25 million one…

The Hockey News’s Ken Campbell insists that, when the NHL and NHLPA engage in CBA negotiations after whatever happens happens in terms of the NFL and NBA’s lockouts, it’s the PA that should take another salary rollback because they’re earning too much of the pie, especially after applying their 5% inflator, thus making the PA the “bad guys,” if not the “fall guys,” upon which the smaller-market teams should foist blame:

And like the economy in the United States, that kind of spending hurts a lot of teams. And with a new collective bargaining agreement on the horizon after next summer, teams are going to be wedded to contracts that will take them up to the floor this season, then will have to deal with the repercussions that will come with a new agreement. That means the same NHL Players’ Association that has insisted on bumping up the salary cap every year with its inflator will almost certainly have to accept a league-wide rollback in salaries as part of the next negotiations.

“It’s an unusual landscape right now,” said Phoenix Coyotes GM Don Maloney, “because I’m quite frankly not sure what’s going to happen, whether teams will just go berserk and the teams that have money blow their brains out…whether it’s guys who you think should be paid at $2 million are making $4 million or $5 million, time will tell.”

Well, isn’t that nice. A collective bargaining agreement that was supposed to solve so many problems doesn’t seem to have done a thing for anyone. The league was hoping to get away from crazy contracts, but now you have teams spending more money than they want just because they have to do so. You have players taking more every year, then complaining about paying escrow and you have as big, perhaps even bigger, chasm between the haves and have nots of the NHL.

It’s the NHL’s general managers and owners who sign checks, and they’re the ones who have jacked up the “marketplace” to silly levels by spending like there’s no tomorrow. That’s not the NHLPA’s fault—and the players understand that escrow is part of the deal because the league will always encourage its teams to spend more than what’s allotted to the PA if they can get a refund for any overages…

None of this will matter July 1 when teams trip over themselves to sign Brad Richards to an enormous long-term deal. We’re thinking eight years at about $50 million, heavily front-loaded with the Toronto Maple Leafs and New York Rangers beating each other’s brains out to get him.

Six years after all of this was supposed to be solved, the market again needs a correction. The NHL talks about tweaking the CBA, but it’s going to take a lot more than that for this league to get it right.

The clock is ticking. The league and its players’ association has one more year to make it work. From this vantage point, it sure looks as though they have an awful lot of work to do.

That’s very true, but to suggest that the NHLPA should pay for the “correction” when some of these smaller and mid-market owners might be asking whether that tight payroll range and a cap determined by league-wide revenues instead of perhaps an average or median number has come to bite them in the butt means that it’s worth locking out both players and fans all over again to bail themselves out and re-set the stupid mistake meter.

There is no CBA that’s going to “protect the owners and GM’s from themselves,” and there’s simply no purpose in following the NFL and NBA’s league in engaging in another lockout when the owners, the NHL and the NHLPA can sit down and work out amenable solutions to the issues they’re concerned about without playing the nuclear option that is a league-imposed “work stoppage.”

The village has been burned down in order to save it two times over the past fifteen years, and testing fans’ patience again, especially based on empty promises and out-and-out lies about “inflationary spirals” in ticket prices being reduced once again or “all franchises being stable in the markets they’re currently located in” simply won’t cut it.

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Comments

monkey's avatar

This is America, George.  Labor is always the fall guy because it is always the greedy workers who want too much.  All lockouts are strikes, and the poor impoverished owners are always the victims.  Didn’t you know?

Posted by monkey from Praha, Česká republika on 06/25/11 at 08:24 PM ET

Slumpy's avatar

Fehr and the players won’t cave into bettman and fellow lawyer buddy.
bettman wants 2 yr max contracts, lol. Players union has been a joke for so many years it’s time it took a stand and doesn’t flinch.
With any luck the next CBA outcome will be the one that gets bettman fired and most of the old boys club in the front office.
Regime change is long overdue.

Posted by Slumpy from Detroit on 06/25/11 at 08:30 PM ET

cs6687's avatar

The players will have to accept a rollback. It’s inevitable. When the NFL gets a new CBA that gives the players less than 50 percent of revenues, the NHL is almost certain to follow. And if the players don’t agree, then get ready for another lockout. The owners already sacrificed one season to get what they want. Don’t think they won’t do it again.

The reason for the rapid increase in the cap is because of the five-percent inflator clause, which has been used all but once in the last six years. And while that is the owner’s fault for allowing that provision, it’s not really reflecting the actual growth of the league. And yes, the floor should be dropped. Everyone agrees with that.

In the next CBA, the players will reluctantly accept another rollback and lose their five percent inflator clause, as well as get less of the revenue pie. If not, get ready for another lockout.

Posted by cs6687 on 06/25/11 at 08:32 PM ET

cs6687's avatar

Slumpy, I have yet to read anything suggesting Bettman wants a two-year maximum contracts. That’s poppycock. But a league that doesn’t cater to the Red Wings isn’t worth having, right?

Posted by cs6687 on 06/25/11 at 08:33 PM ET

monkey's avatar

Bettman hates long term contracts.  That is a fact.

Posted by monkey from Praha, Česká republika on 06/25/11 at 08:42 PM ET

cs6687's avatar

The long-term contracts like Kovalchuk’s, Bryzgalov, Franzen, and Zetterberg? I do too. They are cheater contracts. I’m pretty sure that’s what he means.

Posted by cs6687 on 06/25/11 at 08:52 PM ET

Avatar

You hit the nail on the head. What CBA is going to make it impossible for owners to lose money? None, as long as GMs and owners continue to make bad decisions in non-traditional hockey markets.

No one thought that the NHLPA won the last round of bargaining. If small-market owners are unhappy with the result, it’s hardly the players’ fault.

Posted by K on 06/25/11 at 09:24 PM ET

cs6687's avatar

It’s the owners fault with this CBA. No one can dispute that. The owners will get what they want. It’s just the way it works.

Posted by cs6687 on 06/25/11 at 09:28 PM ET

Avatar

All they need to do with regard to those contracts is make it so that the actual salary is the cap hit instead of averaging the total salary over the term.

Posted by Garth on 06/25/11 at 09:28 PM ET

Avatar

The reason for the rapid increase in the cap is because of the five-percent inflator clause, which has been used all but once in the last six years. And while that is the owner’s fault for allowing that provision, it’s not really reflecting the actual growth of the league. And yes, the floor should be dropped. Everyone agrees with that.

This is flat out wrong. The two reasons for the cap’s rapid increase are 1) the cap was set too low coming out of the lockout and 2) revenues have gone from $2.1 billion to 3 billion over the years since the lockout. The players are locked into a fixed percentage (57%) of the revenue.

The five per cent inflator clause is part of the CBA because the cap is first set based on last year’s actual revenues. It is then increased to account for the (probably correct) expectation that revenues will rise next year. (If they do not actually rise, player escrow will go up. Player salaries over the player’s share of the revenue is refunded to the teams in a way that benefits the poor teams.)

If the league wants to stop that 5% inflator they have the same right to block it as the players do. The league always leaves it up to the NHLPA because it really doesn’t matter to them.

The cap increases does reflect league growth - precisely. The problem is the same as it was before the last lockout. Most of the revenue increases are concentrated in the big revenue teams in a league where more than 90% of revenues are generated locally. There is a huge - and growing - gap between the top revenue generators and the sad sack franchises.

The average franchise generates about 90 MM locally. Phoenix generates about $40 MM locally and several other franchises aren’t much better off. From Bettman’s perspective there is only one possible solution - increase the subsidies to keep the zombie franchises afloat and make the players pay for it with a smaller percentage of the revenues.

Posted by Tom Benjamin on 06/25/11 at 10:11 PM ET

cs6687's avatar

The players are locked into a fixed percentage (57%) of the revenue.

Only when the annual revenues are $2.7 billion or more. Second section on first page…

http://www.nhl.com/ice/page.htm?id=26366

And it is only fair that if the players keep choosing to apply the inflator, that they accept a rollback of salaries. Again, it is imperative to eliminate that clause because it hurts the lower revenue teams for competitive and financial reasons, like Campbell writes.

Posted by cs6687 on 06/25/11 at 11:32 PM ET

Baroque's avatar

The problem is that even if the players are forced to roll back salaries, and accept a lesser percentage of revenues, as long at the most profitable teams are still making money hand over fist, the salary cap and floor will keep going up as well because a mean (as opposed to a median as a measure of central tendency) is much more sensitive to outliers.

As long as the cap floor keeps going up, the teams with very low local revenues that do not increase from one year to the next will NOT be able to profit. The math just doesn’t work to make it possible.

All a rollback would do is set the league back a little bit, and after a few years the low-revenue teams will be exactly where they are now, while teams like Toronto and Montreal make enormous profits because they keep increasing ticket prices, costs for sponsorship deals, etc. and are only permitted to use a small percentage of their earnings on player payroll. Meanwhile the low-revenue teams will still see their player payroll costs increase (as well as everything else that goes into running a business, such as travel costs, lodging, electricity for the arena, printing costs for tickets and promotional materials, postage, etc. etc. etc.) and will face this with stagnating revenues because the team will not be able to increase ticket prices for a team that doesn’t win that often, and sponsors will not be willing to pay even more money to be associated with a team that loses players because they can’t afford them.

NOTHING that tweaks the CBA will make any difference if the revenues league-wide keep drawing up the average to a point that small-revenue individual markets cannot keep up. Not one tweak will work.

If there isn’t enough league-wide, evenly-divided revenues to give enough to even the teams with lowest revenues enough to survive the season, then the smaller markets will always be at a severe disadvantage and can only be kept afloat by someone losing money.  The fans (in higher ticket prices for the same poor quality hockey), the team owner himself, or the league as a whole because the other teams all chip in from their own profits to keep the team afloat.

If they can’t find enough revenues in their local market to survive, at least most years (with occasional years of shortfall when they might have to tap into reserves) they will not win. Not ever. It just isn’t possible.

The players aren’t going to work for a maximum of $100,000.00 dollars a year just so teams with pitiful revenues can make some kind of profit.

Posted by Baroque from Michigan on 06/25/11 at 11:59 PM ET

J.J. from Kansas's avatar

The reason for the rapid increase in the cap is because of the five-percent inflator clause, which has been used all but once in the last six years. And while that is the owner’s fault for allowing that provision, it’s not really reflecting the actual growth of the league. And yes, the floor should be dropped. Everyone agrees with that.

This is flat out wrong. The two reasons for the cap’s rapid increase are 1) the cap was set too low coming out of the lockout and 2) revenues have gone from $2.1 billion to 3 billion over the years since the lockout. The players are locked into a fixed percentage (57%) of the revenue.

Posted by Tom Benjamin on 06/25/11 at 09:11 PM ET

This is correct.  To call the 5% inflator the biggest part of the problem is ridiculous.  The salary cap has gotten close to doubling itself in six years.  Adding 5% every year for six years is clearly not the reason for this.  For confirmation’s sake, please take 39 and multiply six times by 1.05. 

Arguing the semantics of whether it’s 57% or 54% is meaningless.

If the league wants to stop that 5% inflator they have the same right to block it as the players do. The league always leaves it up to the NHLPA because it really doesn’t matter to them.

I do not believe this is correct. My understanding is that the 5% inflator is at the whim of EITHER the league or the PA, but neither side can stop the other from utilizing it.

The cap increases does reflect league growth - precisely. The problem is the same as it was before the last lockout. Most of the revenue increases are concentrated in the big revenue teams in a league where more than 90% of revenues are generated locally. There is a huge - and growing - gap between the top revenue generators and the sad sack franchises.

Tattoo this on your arm and read it every day if you don’t understand it, because this is right.  The gap between team earnings used to be significantly smaller.  It has now grown to a chasm and is the reason there are teams at the bottom in so much trouble.

All a rollback would do is set the league back a little bit, and after a few years the low-revenue teams will be exactly where they are now, while teams like Toronto and Montreal make enormous profits because they keep increasing ticket prices, costs for sponsorship deals, etc. and are only permitted to use a small percentage of their earnings on player payroll.

Damn, there are a lot of smart people in here who get this.

I really feel that the small market teams won’t have the guts to vote in favor of a lockout and the big market teams won’t have the balls to honestly think that the fans won’t see through them making dollars hand-over-fist while crying that the players are making too much for their buddies to survive. 

I do not feel there will be a lockout because I don’t think the league has a united front.  They told everybody that 54-57% of revenues paid to players is all they’d ever need to survive and then tried breaking their own rules. The players manned up and got an excellent negotiator in Donald Fehr who realizes that the NHLPA is in a significantly bigger position of strength than they were going into the last lockout.

I also feel that the lockout won’t be necessary because they’re 85% of the way to an excellent collective bargaining agreement.  Not many tweaks need to happen for them to have a good agreement in place, the biggest teams in the league are just going to have to accept swallowing the pill that is actually paying 57% of their revenues to player salaries instead of letting the league average do it for them and using the players as a de-facto middle-man to pay the smaller clubs what they should be.

Ken Campbell doesn’t know what he’s talking about here.

Posted by J.J. from Kansas on 06/26/11 at 01:00 AM ET

George Malik's avatar

All the comments in this thread make me feel warm and fuzzy.

And hopeful.

Posted by George Malik from South Lyon, MI on 06/26/11 at 01:15 AM ET

Avatar

Posted by Baroque from Michigan on 06/25/11 at 10:59 PM ET

Spot on.

Campbell’s talking about payroll as a function of individual player salaries, but individual player salaries aren’t relevant to the discussion because they grow and shrink at a set rate. Whether the PA gets 90% of revenues or 10%, whether the cap range varies by 5% or 3000%, on a long enough time-line, the cap-floor will get to a point that certain teams can’t get there without bleeding red.

The problem, as others have noted, is that the cap is a league-wide mean for a league whose member franchises experience asymmetrical growth.

The owners might try to scapegoat the players, but every owner is a successful enough businessman to have bought a team and is, thereby, smart enough to know that the percentage # in the CBA is not causing the problem.

In other words, while Bettman may give lipservice to player-salaries impacting franchise health as a negative just to see how much money he can get them to leave on the table, he, and every one of the guys he works for, knows gd well that Carolina’s cashflow problem is caused by MLSE’s growth, not Eric Staal’s exorbitant contract.


I do not feel there will be a lockout because I don’t think the league has a united front.  They told everybody that 54-57% of revenues paid to players is all they’d ever need to survive and then tried breaking their own rules. The players manned up and got an excellent negotiator in Donald Fehr who realizes that the NHLPA is in a significantly bigger position of strength than they were going into the last lockout.

Posted by J.J. from Kansas on 06/26/11 at 12:00 AM ET

Bingo. There’s no unified front. Something like 5 teams were operating in the black before the lockout, which created unity among the other 25. That’s about the number that can’t hit the cap floor currently. Salaries were experiencing runaway inflation, which was a threat to everybody but Toronto and the Rangers. Inflation is static now. For every Islanders team that’s still in the red, there are two more like Chicago, who have gone from red to black.

The big fight is going to be revenue sharing, not player salaries and it’s going to splinter the NHL cartel into 3 pieces. Don Fehr will step right into that space and see which side he can help himself by joining. There will be no second lockout.

Posted by steviesteve on 06/26/11 at 02:09 AM ET

George Malik's avatar

Third lockout. The first was in 1995. Sorry for being a stickler. :/

Posted by George Malik from South Lyon, MI on 06/26/11 at 02:35 AM ET

Avatar

I agree that the big fight is going to be over an actual revenue sharing system. A rollback without any other measures will just be a bandaid solution. Last time the CBA expired I thought the NHL could do with maximum contract lengths, maximum individual salaries, maximum team salaries and true revenue sharing. Well, the NHL got 2 of those 4 things but 6 years later it doesn’t seem to have helped because they are pretty much right back where they started. There is no way in hell fault for this can be laid at the door of the NHLPA or the players.  It is the owners and managers who have brought us back here.

Posted by Iggy Rules on 06/26/11 at 11:06 AM ET

Avatar

The only thing that is going to help the small market teams is a soft cap with a luxury tax. If the franchises that make piles of money were able to spend over the cap but had to put equal money into a fund to help fund the small market teams, the health of the small market franchsies would improve.
Look at the interview with the draft pick who grew up in dallas. He agreed the number of rinks is huge compared to what it used to be. In a large city in a nontraditional market, growth will occur, but it is going to take a team that is at least occasionally successful on the ice. If a generation can grow up with hockey, it will catch on, but it’s going to take 20 years of support of a money losing team.

Posted by Teldar from teldar24@gmail.com on 06/26/11 at 01:38 PM ET

J.J. from Kansas's avatar

A soft cap with a luxury tax is exactly the reason that the NBA is headed towards a labor stoppage.

It’s a broken model.

Posted by J.J. from Kansas on 06/26/11 at 01:42 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.