Two Dudes: Settling the NHL Lockout

Photo by Brian Bahr/Getty Images

As the players and owners do battle over a new Collective Bargaining Agreement, we wonder... would we be doing any better in their (really expensive) shoes?

Nearly two weeks ago, NHL owners locked out their players after the two sides failed to reach a new collective bargaining agreement before the expiring one, well, expired. There are plenty of seemingly insurmountable substantive issues, and probably even more acrimony and distrust as the two sides brace for what looks to potentially be a long winter without NHL hockey.

Did it have to come to this? Maybe, maybe not.

Instead of high-powered attorneys publicly battling out their kabuki dance on a public stage, what if it was just two dudes (low-powered attorneys, actually) trying to hash it out over beers? Well, that's what we've got here, with me (JP) representing the owners and Rob representing the multimillion-dollar working stiffs. Let's see if we can't fix this thing...

JP: Alright, so let's start with a batting practice fastball for you, Union Rep Rob - when NFL, NBA and MLB players all get right around 50% of their respective league revenues, why should NHL players be up at 57%? Surely you can understand where Commissioner Bettman is coming from when he says, "We believe as a league we are paying out too much money" - relative to their North American pro sports counterparts, they inarguably are, no?

Rob: So what? This is our own CBA, we aren't importing terms from other leagues. Other leagues have their financial realities, the NHL has its own financial reality, and the financial reality of the NHL is that since the last lockout, when the owners bludgeoned the players to get a salary cap and a 24% salary rollback, the players have held up their end and made the game more popular than it's ever been. League revenues are soaring.

The salary cap was supposed to be for cost certainty, the owners got that. Now they can't exercise fiscal restraint, so they expect the players to take another financial hit to help save the owners from themselves? MLB doesn't have a salary cap at all, should the NHLPA be able to use that as a relevant peer to base CBA discussions on? If we accept this "peer group" bargaining, what's to stop the owners from referencing a larger peer group next time (e.g. using MLS, or including other "entertainment industry" revenue splits like actors or musicians)?

The money is there. Small market teams like Nashville and Minnesota just signed contracts that are worth the GDP of a small country. Last year the New Jersey Devils, a team that has allegedly been in perilous financial circumstances, won the Ilya Kovalchuk sweepstakes. Several teams not only spend to the cap, but spend over the cap and have to rely on LTIR or burying players in the minor leagues to stay under the cap. The money is in the system; if the owners need to find a better way to split the pie, then that's in your house. But asking the players to give up more money (again) because the owners have no willpower is bogus.

How about one for the owners? Thanks to the last lockout, you got your "cost certainty." You got your parity. Big market and marquee teams have been well-represented in the Stanley Cup Finals. Literally billions of dollars are coming in annually. The health and quality of the game has never been better. So why are you slamming the brakes on a system that is obviously working? The players have delivered a quality product that the League has been able to sell to viewers, so why are the players the ones that should be punished for making the game so popular (unless, of course, you think that rising revenues is not a sign of popularity)?

JP: The growth and health of the game isn't based on the system that was established in the last CBA - the record growth would have been just as likely at a 52/48 split as it was at 57/43 - it's based on the quality of the hockey, the marketing, the television deal, the world's greatest fansTM and the popularity of the owners. Kidding. The players.

And while "the money is there," the market isn't there for the money. Sure, there are teams that could spend to the moon and back, but the reality is that there are plenty of teams that can't, even as revenues soar. Here's some simple math: last year the League paid out $1.7 billion in salary. That’s roughly 51.5% of the $3.3 billion the League took in in revenue. So what's the players' claim to that additional 5.5%? Teams are paying out in salary what they can and that's just 51.5% of revenue. Perhaps not coincidentally, that's in line with other leagues, more or less, and it's the absolute maximum the players should be able to claim as their fair (generous, really) share.

The market has spoken... and Gary Bettman was right that the last deal was "too fair." Now it's time to get a deal in place that actually is fair for both sides. The League's long-term financial health depends on it, and that impacts owners, players and fans (I'll wait while you finish laughing about that last inclusion).

Rob: The owners got everything they wanted in the last deal, and it was still "too fair" to the players? Was it "too fair" last time around when the players offered a flat $49 million salary cap? Bet you'd like a do-over on that one, maybe you should just take the offer we put on the table and recognize it'll be best for all parties. I guess the players are lucky they have such magnanimous bosses. Things could have been really ugly for the players if they had been forced to negotiate with wealthy, sophisticated businessmen.

One of the huge upshots of the last system was the parity that a salary cap instituted. The split could have been different, but it wasn't. The deal isn't cumbersome, it isn't burdensome for the owners, and League revenues have increased 50% since that deal was signed. So, what again, is the problem?

Of course the League isn't paying players the full 57% of revenues. That would mean that all teams spent to the cap, which they obviously don't. But using the actual revenues to set the new cap would just push those player-salary-dedicated revenues down even further. Absent a mandate that all teams must spend to the cap, and given the owners' position on the salary floor, I won't hold my breath on the inclusion of a cap-max mandate to all teams; we'll still see ~10% less salary paid than the maximum allowable. So pushing the cap down to 51.5% would mean the players would get about 45% of the revenues. And giving the owners their actual demands (43% and then 46%), the players would get ~40% of league revenues. Nice reward for the players that just gave the league unprecedented growth and success.

JP: Of course, the revenue split isn't the only issue we're dealing with. Since only $1.7 billion was paid out in salary last year, it makes sense to drop the salary cap back a bit. Since 51.5% of revenue is what was paid out in salary last year, that's around a 10% haircut from 57%... so the owner's best offer here is a commensurate 10% haircut from the estimated $70.2 million cap - to $63 million. Oh, and to hold everything else constant, player salaries will have to take that same 10% haircut. Cool?

Rob: A rollback is unacceptable. If Owners wanted salary rolled back, maybe they shouldn't have signed Kari Lehtonen to a deal just under 6 million dollars per year on the eve of the CBA expiration. Or Milan Lucic to an even 6. Wade Redden. Jeff Finger. Scott Gomez. Need I go on? Again, the owners can't keep their pen in their pants, and so the players need to take a hair cut to help keep salaries down?

The league is a shared endeavor. The players have given. Their blood, their bones, their teeth, their money. Meanwhile, the rich owners keep getting richer (and the "poor" owners sign mega-contracts). What reason do the owners have to reject more revenue sharing? The money is in the game, use it to support the smaller market teams and let the players earn the money the owners believe they are worth when they put the ink on paper. Of course the rich owners won't like that, but we're all in this together, and nobody really wants to go back to the Original 6 (although I think Toronto would probably make the playoffs if we went that route...). Let our generous overlords show that they're willing to compromise and share among each other, and then come back and ask the players to chip in. We aren't shouldering the whole burden.

JP: The problem is that the League's costs are increasing at a pretty good clip - and will only continue to do so - while revenues aren't going to keep pace. Since the lockout, revenues have gone up 57%, the salary cap has risen 64%, and player salaries have increase 69%. That's not a sustainable business model, especially when the least sustainable rate of increase is in revenue.

We've had a nice run. Owners have gotten rich. Players have gotten rich. Fans have gotten soaked but keep comin' through the turnstiles. But now it's time to ensure the game's future by providing a bigger slice of the pie to the guys who actually pay these rapidly escalating costs.

Yes, the reason salaries have escalated is the, ahem, generosity of the owners (I'm surprised that someone representing the players' side would be complaining about that), but I see nothing intellectually inconsistent between doing business within established parameters and at the same time advocating that those parameters be tweaked. And one of those tweaks that is necessary is a rollback. Compensate players out of the escrow they've accumulated, but it's absolutely essential that the cap reduction be accompanied by an across-the-board salary reduction or the League will be a mess - teams and players have signed deals under a set of assumptions as to what percentage of the cap a certain player will occupy, and if (when) we reduce the cap ceiling, if there's no similar reduction in salaries, each player is instantly a bigger burden... and that's going to cost Union jobs, ultimately (but perhaps the higher-salaried players are willing to sacrifice rank-and-file members rather than take a pay cut).

And revenue sharing already exists and will continue to exist, but we're not running a charity. We want all of our franchises to be self-sustaining and healthy, not propped up by the "excess" earnings of more economically stable teams so that they can just turn around and hand that money over to the players and increase costs even more. What we don't want is teams that are dependent upon revenue sharing, that believe that they are victims, that believe the League has a responsibility to care for them, that believe that they are entitled to handouts - that's an entitlement. My job is not to worry about those teams.

Wait, sorry, I blacked out there for a minute.

Point being, we need cost certainty. Yes, again. Except this time, it's the certainty that our split of revenues is one that allows costs to be covered by bringing those costs back in line with where they should have been all along. Otherwise, everyone's going to lose. Big time.

Speaking of getting costs back under control, it's time to extend the length of entry-level contracts and the age at which these kids become unrestricted free agents. Our teams are spending time, money and effort developing these players who can walk just as they're hitting their respective primes. Giving the teams that developed them a little longer will help us (especially the less well-off teams) keep costs down and fill seats. And let's be honest - you guys are ready to sell out future union members first, so we'll grandfather in current players and extend the ELC and RFA periods by a year each. Our concession to make this happen? We'll let your guys go play in the Olympics, despite how much we dislike the idea of our stars getting hurt for exhibition games that really don't move the needle in terms of advancing the NHL as a product.

Rob: So not only do the Owners want the players to give back a huge percentage of their revenue share at a time when league profits are going through the roof and the league is in the best shape it's ever been, but now you want to add another layer of cost-suppression by keeping players off the open market until they are 30-years-old? Once again, the owners punish the players for the owners' lack of self-control.

You say that owners need more time to recoup their "investment" (as if the owners are the ones that got the NHL players to the NHL. What percentage of the time and effort an NHL player puts in to get where they are is done while under contract for an NHL team?) because, apparently, 27-years-old is just too young to let the players go. We have short careers, we won't be making money off of hockey when we are old and broken down in our 60s like the owners can. We need to make our money and provide for our futures now. NHL players hit their primes before the age of 27, the average age of NHL retirement is 28-years-old, and the most common ages for player retirement are from 23-28, so what's the justification to control the players for longer? You get cost-certainty during the prime years (and for the entire careers of most players), why do you need to limit market options at a time when the remaining players are on the downswing and looking for their last 1-2 contracts just to take care of their families?

And in return for this double whammy of salary restriction, you offer to "give" the players the right to play in the Olympics, as if that was ever really in doubt. Last Olympics gave us the highest quality best-on-best tournament since at least the 1996 World Cup, an unforgettable gold medal game between two of hockey's biggest rivals, and a golden highlight from the league's biggest star. Yeah... let's not do that again. In return for the Olympics we'll go along with realignment. Olympics for 10% (or more) of our salaries (current and future) is a non-starter.

JP: Hey, who're you calling old and broken down?

While it's very noble of you to fight for the future rights of some 14-year-old Swedish kid dominating his peers as we speak, let's get real - this is no burden to current players and it gets us moving in the right direction (something I haven't heard much of from your side). And don't downplay the Olympics - it's all gain for the players and all risk for the owners.

So we start compromising now or... what? I can guarantee one thing here - owners can afford to take a longer view on this negotiation than the players can. We're willing to cancel a season or more because in the long run the math is in our favor - we'll recoup our losses over the life of the next CBA. Will third-line centers? Six/seven defensemen?

The ball's in your court. We'll wait. Because we can.

By the way... you're picking up 57% of the tab, right?

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