NHL exec: Lockout looking likely
- Blog Post by: Michael Russo
- September 5, 2012 - 4:51 PM
I talked this afternoon with NHL Deputy Commissioner Bill Daly regarding the increasing possibility of an NHL lockout Sept. 15.
Daly expected to talk this afternoon with NHL Players’ Association leadership about a number of issues, although none is the type that would stave off a lockout.
Daly still considers formal talks “stalled -- at least temporarily. Hopefully that changes soon, but it certainly does create a much higher risk that camps won’t be opening on time.”
Next week in New York, more than 200 players are expected to arrive for two days of meetings with NHLPA Executive Director Donald Fehr. Also on Thursday in New York, Commissioner Gary Bettman will hold a Board of Governors meeting.
It’s been reported by some that Bettman would seek approval there from the Board to lock the players out if no agreement is in place by midnight Sept. 15. Not entirely true, actually.
“Gary really already has authorization of the Board to lock out. I’m not sure he needs another vote of the Board,” Daly said. “It’s to update the Board on collective bargaining and we’ll see what they have to say.”
The damage is already being done to the business. The league never scheduled games to start in Europe because of the threat of a lockout. Last month rookie tournaments were cancelled. Today, the league scrapped the media tour where high-profile players come to New York prior to the start of training camp to meet with big media outlets and do all sorts of publicity.
Daly also said that just the possibility of a lockout is affecting teams’ ability to do business – i.e. sell tickets, suites, corporate sponsorships, etc.
After a lockout, other events could be cancelled, like say, the All-Star Game in Columbus. All this takes a slice out of the revenue pie, which is why Bettman bemoaned the fact last week that players didn’t seem to think Sept. 15 was the actual deadline.
After Sept. 15, the business changes, Bettman said, and concessions become more difficult because all this stuff takes a slice out of the revenue pie.
I talked to Daly about a number of issues. One was revenue sharing and Bettman saying last week that the NHLPA constantly talking about revenue sharing was a “distraction.”
What Bettman meant, Daly said, is that revenue sharing is not holding up getting a deal done, so in other words, move on and talk about issues that actually do.
“If you look at our last proposal on revenue sharing and their initial proposal on revenue sharing, we’re not that far apart in terms of absolute dollars,” Daly said. “At the end of the day, what Gary is trying to say is, ‘We’re in the ballpark on revenue sharing in terms of dollars.’ …
“We’ve offered already to increase that fairly significantly, make it more inclusive, … we’re not that far apart on revenue sharing. That’s what Gary’s point is. That’s why we want to focus on what the right share is and how we make this business healthy going forward. That’s what we should be focused on resolving in short term.”
The perception is also that the higher-revenue team owners aren’t willing to share with the lower-revenue teams and that’s why the league wants the players to absorb more of the burden.
Daly says in the NHL proposal, there’s greater contributions from the higher-revenue clubs.
According to sources, the NHL has offered $190 million in revenue sharing (up from $170 million in the expiring CBA); the NHLPA is asking for the league to share $240 million. So what Bettman means, according to Daly, is those numbers are negotiable and let’s focus on what the league feels is the real issue – that the league can no longer operate by receiving 43 percent of the revenue compared to the player’s 57.
“They did negotiate to the highest possible percentage they could get in the context of a cap system [seven years ago] and they did a pretty effective job,” Daly said. “Now, 57 percent is too much. It’s not good for the industry, and ultimately not good for the players because of that. The percentage needs to be lower. The economic realities of doing business in today’s world are different than they were in 2004-05. Canadian currency is worth a lot more than it was in 2004-05. The economy is not as vibrant as it was in 2004-05. And the cost of generating revenues is much more costly today than it was 2004-05.
“So the world doesn’t stay static. It continues to move.”
The NHL has been vocal the last few years talking about record revenues, which reached $3.3 billion last year. But Daly said that doesn’t mean the league is profitable as a whole. That $3.3 billion is gross revenue, not net, so when you start by giving 57 percent of it to the players and deduct all other operating costs, work backward from there and that number gets eaten up.
I asked Daly a lot about how the league can rationalize the fact that in its first proposal, it asked players to take what the NHLPA claims to be a 24-percent rollback on salaries (second proposal, 19.3 percent) when teams negotiated these contracts, agreed to these contracts and the league registered these contracts.
First, Daly said he doesn’t know how the NHLPA came up with the 24 and 19.3 numbers.
“What I will tell you is that our proposal last Tuesday would have reduced the players share by 11 percent in Year One, … 8.5 percent in Year 2 and … 5.5 percent in Year 3. In Years 4-6, it would have been at or above as we continue to grow revenues to prior levels. So I don’t know where they’re getting 20 percent.”
Second, as for rationalizing a demand for a decrease in player contract prices, Daly said that happens every year anyway in the NHL/NHLPA collective bargaining agreement.
“Our system contemplates the fact that in certain years there may be a reduction on contract value [anyway],” Daly said. “In fact, under those seven years operated under this CBA, there have been contract reductions in five of those years [because of escrow]. It’s not a feature of our system that every player is guaranteed every dollar he contracts for.”
In the previous CBA, the NHL and NHLPA agreed to a mechanism whereby the NHLPA could opt for an annual inflator that artificially raises the team salary cap. Add that to the vast majority of teams spending above the midpoint (which is really the number determined by the percentage of hockey related revenue, and you get a system where, virtually every year, players contract for more money than 57 percent of HRR.
That’s where the player escrow comes in to protect them.
In the NHL’s first proposal, the league asked for a player rollback. In last week’s proposal, the league got rid of the rollback request but asked players to put money into escrow that would essentially reduce their salaries and protect teams, like say the Wild, who are $12 million above the NHL’s current proposed salary cap level for next season.
Some claimed that was the exact same thing as a rollback, but Daly says this is the “exact same concept” as the escrow in the last CBA.
“Does it have an economic impact on the current contracts? Yes, just as escrow would normally have an economic impact on the current contracts,” Daly said.
Now, in the previous CBA, players typically got some of that money back. In fact, in a few weeks, players will get more than 8 percent of their withheld escrow back from last season back. In this new proposal, it would be pretty much guaranteed that the players wouldn’t get the majority of money put into escrow back in the first three years. In Years 4-6 of the NHL proposal, it would essentially bounce back to the current escrow rules – if revenue growth outpaced projections and teams didn’t largely spend to the cap, the players could get most or all of their escrow money back.
I talked to Daly a lot about the public relations battle.
Eight years ago, the players were largely thought of negatively during the lockout. This time around, it’s the complete opposite, in large part because the league has boasted about its record revenue and because owners have signed players to lengthy, lucrative contracts, especially this summer.
The NHLPA has done a masterful job painting Bettman as the bad guy. Players and some agents have been outspoken with criticism against the league. The NHLPA has used its Twitter account to get its points across and to tweet articles that have criticized the league.
The NHL has largely not responded. Owners and managers are not permitted to talk about collective bargaining, and the league is not about to bash its own players.
“Fan perception is important to us, but at the end of the day, we have to do an economic deal that’s going to work for our clubs and our owners and our business and that’s going to make the league healthy going forward,” Daly said. “We hope to do that with the support of our fan base.
“Do I think some [NHLPA] tactics may be over the top and inappropriate? Maybe. But look, it’s a free country, and they’re entitled to do what they need to do."
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