The NHL lockout has thus far seen the first 7 weeks of the season — equivalent to 327 games, including the New Year’s Day Winter Classic — wiped off the schedule. Yet if the two sides could reach an agreement by next week, the league could still salvage a 72-game season with a week-long training camp and no All-Star break. To this end, the NHL and the NHLPA resumed negotiations last week.
The issues separating the two sides centre on contract restructuring, revenue sharing, free agency, and health & safety concerns. Contract restructuring and revenue sharing, which have shown to be interconnected in many ways, have been the two most salient points in the lockout thus far.
The NHL has been aiming to split revenues down the middle with the players at 50% aside. This would be a reduction for the players, who were paid 57% of the league’s total revenues under the previous CBA. For a 50/50 revenue sharing framework to pass, the NHLPA wants the owners to accept a ‘make whole’ provision; this means the fulfillment of the terms of current player contracts. This reciprocation of concession demands exemplifies the intricacy between revenue sharing and contract rights.
In an interview available on the NHL’s website, NHL deputy commissioner Bill Daly explains that the owners made a “very very substantial proposal this past week: $211 million of their own money over two years to try to address the potential reduction in players’ salary during the first few years of the CBA due to the reduction of 57% to 50%.”
The $211 million would be paid out over a pair of year-long installments: $149 million over the first year, and the remaining $62 million in the subsequent year. We shouldn’t be too quick to discredit the NHLPA, however, as a drop from 57% to 50% means players are receiving $231 million less than they were last season, and that doesn’t include anticipated growth. Over the first two years of the NHL’s proposed deal, the players would receive $462 million less than under the previous CBA; $211 million is, of course, less than half of that total.
The NHL has also sought to restructure player contracts so as to limit them to 5 years, and not allow the amount of money a player is going to make from one year to the next fluctuate by more than 5% in either direction under that same contract. Daly explains that this is to avoid circumvention of the salary cap by ‘front loading’ big contracts, whereby teams pay players most of their money early on so as to bring the contract’s annual cap hit to a minimum.
The NHL wants to delay unrestricted free agency to age 28 or until after a player has spent 8 seasons in the league; players currently receive unrestricted free agency at 27 or after 7 years of service. Daly explains that this is to avoid having general managers forced into situations where they have to make talent assessments too early in a player’s career. An adjustment that the owners and the NHL view as one — of the many they have requested — that will result in a better on-ice product, resulting in more income, and ultimately higher revenues, meaning higher player salaries in the long run.
Sidney Crosby, in a recent interview with the Pittsburgh Post-Gazette, expressed his sense that this contract restructuring will take some of the art of being a GM away, and remove the competitive advantage of having a good front office. Said Crosby, “If that’s the case, you might as well just get someone who’s good at crunching numbers to sign contracts.”
It has surfaced recently that the two sides have begun to move closer on the issue of revenue sharing. Steve Fehr — the union’s special counsel and union head Donald Fehr’s brother — has explained that the players are ready to move to a 50/50 split, but that a satisfactory ‘make whole’ concession is necessary for a deal to be done. “The only question is over what period of time, and what’s the transition method,” says Fehr. “In some ways, we thought we were getting close in that area.” Fehr also mentioned that the NHLPA is prepared to begin discussions with a mediator; the NHL, in response, has said that the NHLPA has yet to formally propose mediation.
The problem is that this isn’t necessarily anything new. The NHLPA was close to accepting a 50/50 revenue sharing deal back in October. No deal was struck though because the owners refused to pay players according to their current contracts. Although the ‘make whole’ provision is often mentioned in conjunction with revenue sharing, it ultimately falls under the category of contract restructuring. Since NHL and NHLPA officials are offering so few details regarding the specifics of the negotiations, it’s difficult to tell whether this situation has changed in any meaningful way. It likely has not; Steve Fehr continued by saying that player contract rights are the still the most contentious area of discussion. Further, the NHLPA’s position is that the concession to be made in this area rests with the owners, as the players have already given in to their revenue sharing requests.
Last week’s negotiations ended with little progress made, both sides more entrenched on their positions, with players voicing their discontent, and it’s difficult to tell what progress, if any, has been made in the past week. Much of this can interpreted as each side’s final push to have its absolute demands met before the time comes to make serious concessions.
That time may come sooner than the state of the negotiations would indicate. One of the league’s major sponsors and a major U.S. broadcaster have both begun voicing their discontent over the continuation of the lockout. There have been complaints from NBC about the blank spots it has had to fill due to the lack of hockey; Molson-Coors has expressed an interest in pursuing the NHL for financial compensation for losses incurred as a result of the lockout.
Molson-Coors may not even have to pursue the NHL if the lockout goes on for much longer. Their contract (and many other sponsors have similar deals) with the league stipulates that they will receive financial compensation automatically should the league miss more than 25% of the season (or play fewer than 66 games). Similar clauses exist between the NBA and its major sponsors, and this is cited as one of the major reasons why the NBA made sure to play at least 66 games following their lockout last year.
This is certainly a reason to remain optimistic, even if on the surface it seems as though the two sides are as polarized as ever. What’s more, the league has already sacrificed net revenues of approximately $720,000,000 since the beginning of the lockout. Finally, there is the very real possibility of erosion of the fan base which the NHL has worked so hard to cultivate since the 2004-05 lockout. If the NHL isn’t careful it will lose newer fans, and, along with them, the very same projected revenue growth which the owners are now trying to make structural changes to accommodate. Sooner or later, the costs of continuing this conflict will outweigh even its long-term gains. Cooler heads should soon prevail and make the necessary accommodations to get the players back on the ice.
