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Playing to the Undecideds
by Gabriel Desjardins on Jul 22, 2005
After 301 days in limbo, NHL owners and players finally settled and put to rest any questions about whether there would be a 2005-06 season. The new collective bargaining agreement looks very different from the previous landscape:
– Total payroll is capped at 54% of league revenues. This could quite easily be more than a 40% reduction from 2003-04, bringing the league back to 1996 salary levels.
– An automatic 24% rollback in player salaries, combined with a maximum payroll of $39 million, $5 million less than the average payroll in 2003-04
– The maximum pay for any one player is $7.8 million per year. Lower-spending teams could be restricted to as little as $4.4 million for their highest-paid player. This would cut down the contracts of about 5% of players.
– Revenue sharing to further narrow the 4:1 payroll disparity between the richest and poorest teams
So basically, the owners got pretty much all they wanted, which was a guarantee of more profits. The players -- after capitulating to the owners demands in February and being rebuffed -- ended up with less money than if they had merely given in a year ago. There are limited improvements for younger players: free agency after nine years instead of thirteen, and a minimum salary of $450,000, but by and large, the players simply agreed to be paid less.
There is an assumption out there that lower payrolls will result in lower ticket prices. I doubt it. This is a deal that is designed to benefit the owners, many of whom made bad business decisions over the last decade, and they want to recoup some of those losses. There is also some discussion of rule modifications -- no red line, shootouts, smaller goalie equipment, etc. -- all window-dressing as far as I'm concerned. Nothing here is going to solve the NHL's fundamental problem, which is that it has spent more than half of the last 40 years vainly marketing itself to places that will never get excited about the game of hockey.
At this point, a little history is in order. The NHL has enjoyed two significant periods of stability -- one is the original six-era (roughly 1950-66) and the other, the high-scoring eighties (1979-92). What those two periods had in common was that hockey was played, for the most part, in cities where people liked it; the Los Angeles Kings were the furthest afield from hockey country, but with 500,000 Canadians in Los Angeles -- more than there were in Calgary when the Flames moved there -- it was hardly a handicap to the league.
We're now at the NHL's second nadir (is it possible to have two nadirs?), the first being 1967-79, when the NHL tried and failed to establish franchises in Oakland, Cleveland, Atlanta, Kansas City and Denver. What saved the NHL last time was contraction (its competitor league, the WHA, folded) and consolidation in areas that actually like hockey (three new Canadian cities, plus New Jersey and Hartford.) Contraction seems unlikely this time, as does a return to northern cities, but the net effect of the CBA -- chopping $19 million a year off the bottom line for every team -- means they probably won't need to happen anytime soon.
But there is an inherent problem in the agreement, one that will certainly lead to future labor strife: some 15% of player salaries are held in escrow until the league's revenue is added up at the end of the season. Sports franchises are not known for their honesty in reporting income (taxpayer funds used to build stadiums, for example, are usually left off the books) and much of the revenue generated by a sports franchise comes from such sundry items as tax-deductible losses and long-term capital depreciation. So the billionaire owners -- who've already shown that they're willing to cancel the Stanley Cup to get their way -- could almost arbitrarily reduce player salaries by 15% in any year they choose to do so. Since player salaries are now coupled to the income that owners report, there will be annual disagreements over that reported figure, which is a recipe for disaster.
Ultimately, the NHL owners have to realize that they need teams in Canada and the Northern US, not the south. Keeping teams in Phoenix, Dallas, Nashville, Raleigh, Atlanta, Tampa and Miami is not going to increase league revenue, and eventually players will revolt against depressed salaries and owners who aren't doing their part to make the league more profitable. The entire American TV audience for hockey is about eight million people, while the Canadian one exceeds five million. At some point, to use a tired political analogy, if you want to succeed, you really do need to do something for your "base" rather than trying to appease people who haven't made up their minds about hockey. The NHL will never see the stability of the 1950s, 60s and 80s that so many people long for until it plays to its core fans. The sooner the owners realize this, the sooner we'll see an end to labor strife and endless ugly haggling over the spoils of league revenue.
Gabriel Desjardins quit watching hockey in 1996, but knows the NHL doesn't care. Email: [email protected]
by Gabriel Desjardins on Jul 22, 2005