“The fact is we did what we had to do at the time. Our research showed that [the fans] were supportive of what we were doing because they wanted the problems fixed. They didn’t want a Band-Aid. They wanted better competitive balance and better economics in terms of franchise health and stability.” –Gary Bettman via The Instigator by Jonathan Gatehouse
If the NHL returns to play without a more comprehensive revenue sharing plan, this lockout will have been a complete waste.
Bettman is adamant in quotes and interviews about needing to draw a line in the sand for the 2004-05 lockout. He’s convinced that the NHL caved too quickly in 1994-95 without fixing the league’s structural problems, problems that he fixed, apparently, back in 2005.
The funny thing is that either the owners are lying in this labour dispute, or Bettman was completely wrong about the growth potential for the league. Some of that comes with the strengthening of the Canadian dollar, but the league is still a rich man’s game. In the United States, it’s the Philadelphias, Bostons and New Yorks that are financially healthy. As the rich get richer, the poor teams have to spend more money, and with the limited revenue sharing the NHL offers to its weaker teams, they have a harder time competing.
I refrain from using “small market” because in reality, Phoenix isn’t a small market. St. Louis isn’t a small market either, and neither is Denver or Dallas, but the four teams have exhibited an aversion to spending money on hockey players like small markets in Nashville or Long Island. That hurts the NHLPA more than the NHL—since players collected 54-57% of league revenues, there’s an opportunity cost involved by not having big market teams collect revenue, and spend money like big market teams ought to like they do in baseball or football.
Part of the problem is that big-league hockey simply isn’t viable in many of the Western and Southern markets the NHL exists in, and it needs to do more than pay lip service to those teams to allow them to compete financially. Every second the NHL spends in Phoenix is another paycheque the average NHL player loses due to escrow.
Let’s structure a new CBA around that principle, eh? If the NHL is serious about fixing its financial issues, it needs to share more revenues.
A luxury tax in conjunction with a hard cap
A luxury tax, rather than a division of revenues, is probably the fairest way to accomplish this. This way a rebuilding team in a big market like the Toronto Maple Leafs won’t have to subsidize their opponents in a race for better players in the upcoming summer, but rather, teams that spend over the HRR midpoint have to pay a certain percentage back to teams below the midpoint.
One of the issues players face is that more teams spend between the midpoint and the salary cap than between the floor and the midpoint. In the last three years, 61 of 90 teams have spent more than they’re supposed to, and this effect is compounded by teams paying more to players than their salary cap hits suggest thanks to front-loaded deals.
Now, if teams can afford to spend over the midpoint, why are they crying poor? Well, the answer is that sports owners are competitive people by nature, and that more fewer teams are spending above the midpoint in recent years. In 2009-10, according to Capgeek, it was 8 teams. This past season, it was 11. If the NHL were to enter its 2012-13 season with the same rosters, it would be a 15-15 split.
The salary cap keeps going up because revenues are increasing, but that growth isn’t equal. If the NHL is serious about having 30 teams (and there shouldn’t be 30 teams, but they’re past that point now) they need to offer more to low revenue teams and give them a chance to bid on the league’s stars and increase their own revenue.
Oh, and keep the midpoint of 57%. Just because a few teams can’t meet that doesn’t mean that star players even less money, it just means that the league needs to do more to fix the divide between the rich and poor teams. If Bettman is serious about fixing the league’s economics, he needs to get the big clubs on board with sharing their revenues. The money exists to pay players what they’re worth, it’s just tied up in the hands of a few teams rather than many.
Freeze the hard cap
The midpoint can still increase along with league revenues, but for the first three years of the new CBA, teams shouldn’t be allowed to spend more than $70.2M on hockey players. It’s fair, since it allows the bottom-spending teams to catch up with the top-spending teams, as well as allowing players to keep their current contracts.
After the third year, the hard cap can continue to increase, but it will be closer to the floor. Rather than a $16M difference, I think a $12M or $10M difference is more reasonable. I think this is something that the NHLPA ought to push for. While I think some would argue that a salary floor shouldn’t matter to the NHLPA, only the percentage of HRR, consider that big increases in free agency spending don’t come due to the quality of players available on the market, but because of supply and demand. Having more teams trying to meet a higher benchmark of spending increases the demand for second- and third-line players league-wide.
Also, it sets a reasonable price of expectation. If a team collecting luxury tax continually has difficulty or an unwillingness to hit the salary floor, you have to raise questions about the viability of the team’s location.
And the third…
Revenues are going to suffer as a result of this lockout. That’s going to hurt how much players actually take home. Tying salaries to revenues is extremely important to the league, but if the league falls short of growth targets, the players are affected more than the league. Nobody will ever complain that the Bostons, Philadelphia, New Yorks and Torontos are fine financially, but if the league grows [WARNING: back of the envelope math] at just 5% instead of 7%, that costs the average player about $300K in seven years.
If the NHL does better than expected like it did between 2005-2012, then the luxury tax ought to provide a safety net to weaker teams financially and still allow them to compete for free agents. If it doesn’t and the NHL falls short after the third year and the hard cap returns to being set by HRR, I think that the league and the big-market teams ought to take on some of the blame. If the lowest revenue teams can’t re-locate due to lease agreements, then I think the big market teams ought to cough up some of the difference rather than the players.
From Philadelphia, Boston, New York or Toronto’s bottom line, it doesn’t really matter how the league does as a whole since that doesn’t affect how those teams operate in their own markets. I think they ought to be more invested financially in ensuring the league continues to grow.
Everything afterward is elementary at that point. Contract lengths, minor-league contracts, those are the sort of things that ought to be determined by the free market. I think that teams ought to be afforded the risk of spending millions of front-loaded dollars on one player who may not work out in the long term. Good player management and effective use of available resources ought to be encouraged, but I think more teams deserve the opportunity to pay out long, dumb contracts on mediocre players. It’s just all part of the dream.