The business of professional sports is big business.  Billionaire owners, millionaire players make it difficult for hockey fans to choose a side to support.  The hockey fans simply want to be able to watch their favorite players on their favorite teams.  As we all know, September 15 is the deadline for the current Collective Bargaining Agreement (CBA) between the National Hockey League and its Players Association.  While some reports suggest that the two sides began meeting in December of 2011, only in the past four or five weeks have the two sides began to meet to discuss what the future of the game will look like.  The owners want to retain more of their profits and the players are looking to maintain their handsome salaries.  The hockey fans are in the middle and have no say in the business matters at hand.  League commissioner Gary Bettman said the league was prepared to lock out the players on Sept. 15 if a new agreement was not in place.   The NHL owners obviously like what Gary Bettman has done as at around $8 million, Bettman’s salary has more than doubled since the lockout that canceled the NHL’s 2004-05 season.

NHL vs. NHLPA 2012 – Part One CBA Issues

Issue One:  What Percentage of Hockey Related Revenues Should the Players Receive?

So what exactly are the main issues at hand with regards to the new collective bargaining agreement?  The league and the NHLPA are currently negotiating a new collective bargaining agreement. The NHL presented its proposal on July 13. It asked for the players to accept a reduction in hockey-related revenue from 57 percent to 46 percent.   The NHLPA suggests that the figure is actually closer to 43%.  NHLPA President Donald Fehr has spent the past couple of days here in Kelowna, BC meeting with a number of players who have summer homes in the area.  Fehr is now off to Toronto to meet with the League over the next couple of days.  In the meantime, the players are getting used to the idea there might be a lockout looming.

League Revenues Have Continued to Rise

The league’s total annual revenue, including its 30 member clubs and other business operations, has increased since the last lockout in 2004-2005 from $2.1 billion to $2.9 billion for the 2010-11 season, an increase of 38 percent to $3.2 billion in the 2011-12 season.

The Sides Remain a Gulf Apart

As stated in this post from the Edmonton Journal, the league presented its players with its first proposal, draconian as it could have been, within less than two weeks of opening the negotiations. It took the NHLPA a full month to digest it and come up with an offer of its own. You can hardly call it a counteroffer. If anything, it was a sign that the two sides resemble two ships, passing one another sight unseen in the middle of the night, in a dense fog, somewhere in the ocean.

The NHLPA fully agrees with Bettman that the goal is to get the deal done on time.  Yet there has been ample opportunity to begin negotiations so why wait to get serious with three weeks left until the expiration of the current CBA?  Surely Bettman and Fehr are smarter than that and have some faith that a deal will get done.  One common factor in how quickly deals such as this are settled is the amount of realism the two sides have about the outcome before they start bargaining. Irrespective of how extreme the opening positions may seem to be if Fehr with the players and Bettman with the owners have done a good job at preparing their principles for where things will likely need to settle, negotiations can move forward quite quickly. If however, their principles believe the rhetoric that accompanies public positions and actually think they are going to get something near that, then a long process can be expected. We suspect that a deal will get done, just not by September 15th.  More like November 15th.  You have to remember that the NHL and NBC signed a $200 million TV deal which was negotiated based on the annual Winter Classic that the league conducts every January 1.  January 1st now becomes a very important date.

It does make sense that the owners are of the view that they deserve to run the corporations they have started (or acquired via purchase) using their own money as they see fit.  The players feel that they are key contributors to these corporations and should be compensated accordingly.

While a significant gap exists between the two proposals when it comes to the amount of money available to players, there is some common ground. The union’s decision to keep a hard salary cap in place was an important step in the process and its willingness to accept less than 57 per cent of revenues – for three years, anyway seems to indicate the NHLPA is trying to work with the NHL.

Issue Two: The NHLPA Wants Increased Revenue Sharing (read:  Luxury Tax)

The NHLPA has made it clear that it would like to see an increase in revenue sharing.  The NHL is ok with this just not with a “luxury task”.

Issues Three & Four: The End of Front-Loaded, Long-Term Contracts

The NHL has made no secret of the fact it would like to see the end to heavily front-loaded, long-term contacts.  Have you noticed how many of these types of contracts have been signed this summer.  The owners continue to make their own bed.

Here is something to think about as posted on a recent TSN article:

The NHL, in an ideal world, would mimic the reality of conventional businesses with salaried employees. Each year of the CBA there would be a modest cost of living/inflation percentage increase. There would be an established pay scale for all employees: The individual paycheck is based upon standard criteria. That person’s paycheck is based upon his/her ability/inability to meet these requirements. This person can also be fired if s/he fails to meet minimum requirements. Beyond that there is an incentive scale for bonuses which are paid at the end of the calendar year. Let’s say, in the case of the NHL, a 20 goal/20 assist player is paid $3,000,000.00 a year but if he doubles his production in a year, he is also paid the appropriate bonus…bringing performance based incentives back into the game. Similarly, if this same player halves his production he is subject to penalties, also collected at the end of the year, up to and including outright dismissal.

The issues are not that complex, the time to negotiate these issues is running out.  The outcome is predictable, another work stoppage and players giving up portions of their salaries.