Gary Bettman

Day One…

Well so much for optimism huh?  NHL Commissioner Gary Bettman elected to implement a lockout of the players at 12:00am last night, and although he didn’t need it, all thirty owners voted to support his decision, making clear their intentions to implement a cap of payrolls in the NHL.  In hindsight it appeared that the decision to go to war was accepted a long time ago by both sides, a revelation that is only that much more frustrating to we the fans when you consider how long this has been brewing.

While both sides have made nominal attempts to bridge the gap, the lines have been drawn and neither side is willing to budge much, at least not until the stakes have become higher than they already were.  At the center of the debate is the degree at which the league is losing money.  The owners claim 75% of their revenues go towards paying players, while also claiming that the Rangers accounted for 40 million dollars of losses last season in order to support their argument.  On the other side is a union of millionaires who are looking to make a “decent living”.

Okay, it’s fair to say that there’s been plenty of exaggeration on both sides, but behind the exaggeration and spin there is truth, the NHLPA’s proposal admits as much, though perhaps gets a little optimistic with some of the numbers it presents.  The problem of course is multi-faceted and the longer this debate goes on, the more facts will arise.

The NHL leads the way when it comes to bankrupt teams and shaky ownership.  From Harold Baldwin’s questionable business practices that mortgaged the Penguins future in exchange for a few quick bucks to the convictions of Buffalo Sabres owner John Rigas and Islanders prospective owner John Spano, the NHL has been shown to be too willing to let owners put franchises in trouble.  Not to mention addition of nine franchises in the past 20 years…eight of them under the twelve year reign of Commissioner Gary Bettman.

But according to Bettman, the real killer has been salaries that have risen from around 60% of revenues to around 75% in the past 10 years, and while there’s no doubt that there is some question about the exact numbers, it seems fair to suggest that there is some truth to the claim.  Ten years ago the league was a much different place, there was no unrestricted free agency, arbitration didn’t exist and the players had little leverage to compete in the market. .

Even when the Players Association gained the concession to unrestricted free agency at 32 (changing to 31 at the end of the 1997-98 season) there appeared to be little consequence, as many players retired in their early thirties at the time.  Even a cap on entry level contracts that started at $850,000 in 1995 and ratcheted up to over the 1.2 million dollar mark in the most recent years seemed like a plus rather than a minus.

Oh what a wonderful thing hindsight is…

The first inklings of a problem came about in the late 90s, when general managers new to the UFA market started offering substantial sums to players who were past their prime.  The league had inadvertently created a burgeoning market for 31+ year olds that quickly saw salaries sky rocket as a select few teams looked for quick fixes to maintain their competitiveness.  The madness ultimately spread far beyond those few and even into the restricted free agent market, where players suddenly found leverage in holding out and forcing trades and/or salary increases.  Contract lengths and terms were being written on a sellers terms and the mess was being cleaned up by the likes of the New York Rangers, Toronto Maple Leafs and Philadelphia Flyers who were only to willing to accept the overpriced cast offs from other franchises.

As for arbitration, instead of being an objective evaluation of a players abilities and worth, the process became little more than a process for splitting the difference between a club and a player…almost always including a substantial raise.  And then of course there was the entry level contracts that were being written on an ever increasing basis at the maximum, and the need to hand out a 10% raise to players just to keep their rights, regardless of how they had performed in the previous season.

In hindsight the system was flawed…

The end result is a salary structure that exaggerates some of the natural inequalities between markets, gradually squeezing out the smaller markets, or at the very least forcing them to move.  If left unchecked, the league could theoretically kill off franchises and consequently the fans that support those lost teams…a situation that might have a reverberating effect as interest and confidence in the league changes.  At least that’s what the owners might contend.

The Players might also point out that several teams have successfully changed ownership in recent years and that there are owners in the wings waiting to purchase a franchise.  What they might neglect to mention however, is that three franchises have been forced to relocate in the past 10 years (Hartford, Winnipeg and Quebec) and that only Colorado has really secured financial stability in their new market.  The threat still remains over Edmonton and Pittsburgh, while Buffalo and Ottawa were saved only by deep pocketed owners, not by an improved business model.

So what about the options…

The owners have put forward a hard cap salary proposal as the core piece of their solution.  Ultimately it represents a way of controlling the bigger franchises and their spending habits in a way that allows the smaller markets to survive financially.  It is all about protecting ALL 30 existing franchises from each other and the league from itself, and the owners will argue, that by protecting the league the players very positions within that league are protected…albeit at a price.

The players for their part have countered with a less unilateral approach, favoring a multi-part package that does not outright prevent spending, but penalizes (and redistributes the “taxes”) those who decide to exceed the guidelines.  They include revenue sharing which would help distribute some of the wealth of the bigger markets to those of the smaller markets…a kind of social security for NHL teams.  The biggest problem of course is how those monies would be handed back to owners in need, something that has not worked well in Major League Baseball where owners pocket rather than spend their share.

In theory both solutions should be able to be employed equitably if one or the other side was willing to compromise, but there’s the rub.  With both parties unwilling to “go over to the other side” lest they appear weak, we are left at a seemingly interminable impasse.  There is also additional motivation for the owners to force the Players Association’s hand, and perhaps create a system not unlike that of the NFL, while avoiding the possibility of a much more powerful organization akin to that found in Major League Baseball.

Under such a scenario the owners would be able to craft an even more favorable solution, eliminating guaranteed contracts, maintaining the existing rights to a player or even rewinding some of the changes implemented in the previous CBA.  The owners have more to gain, the players more to lose.

Still a cap does open up some additional concerns…

Slowing down (or winding back salaries) allows the Europe to better compete in terms of salaries with the NHL.  While the stars would still likely make their way to the NHL, their remains the distinct possibility of the second and third tier players remaining or even moving to Europe, where salaries would continue to grow further depleting the talent pool.  It’s possible that the NHL could reduce roster sizes to compensate with the NHLPA out of the picture, but the individual club’s position on such an eventuality remains unclear.

A cap also does not protect against rogue owners, bad business decisions or even investment in the market…something that seems unlikely to be addressed in any fashion while the attention is focused on salaries.

Where does that leave us?

Unfortunately we, the fans of hockey are considered a hardy and loyal bunch, both sides feel that the majority of fans will return and it appears the league in particular believes that a healthier league in financial terms will do more for keeping the existing fans than the alternative.  The bottom line…if the players don’t blink, then there will be no hockey in 2004-05.

0 0 votes
Article Rating
Notify of

Inline Feedbacks
View all comments
Would love your thoughts, please comment.x