Monday, September 1st, 2014

The 2012 CBA

17

In the wake of the NBA settlement, a panel on Bob McCown’s show talked about the possibility of a work stoppage in the NHL next season. All participants thought a stoppage was likely but that it will not be a long one this time, presumably because the players will give up more quickly than they did the last go round.

The results from the NFL and NBA do not auger well for the NHLPA. NBA players used to get 57% of revenues just like hockey players get 57% today. Now they get about half the revenues. Why should the owners of basketball teams get so much more that the owners of hockey teams? Why shouldn’t hockey players take another cut when the owners can easily force another cut? The players have no leverage in collective bargaining and they never will have any leverage:

1) A work stoppage is almost never in the financial interest of the player. Careers are too short to recoup the cost of a strike or lockout. For the individual player, a pay cut is almost always better than missing a season or a substantial part of a season.

2) A work stoppage to force substantial pay cuts works fine for the owners, even for ones with a wealthy team. Lost profits can easily be recouped once the players give in.

3) Fans don’t really care about the CBA. They want competitive balance which is why the owners always market a lockout as necessary to protect small markets. This is nonsense – leagues do not want a level playing field because they do so much better when big markets are advantaged. Still, it is easy to paint the players as greedy millionaires standing in the way of a fair league. Particularly since…

4) The league owns the hockey media and, as a result, controls the coverage of the lockout. The most interesting part of the exchange on Prime Time Sports came after Michael Wilner questioned how hard the owners would work to avaid labour strife. The players and fans wanted it settled, but how about the owners?

Elliote Friedman: “One smart thing that [Bettman] has done is he’s dialed down the rhetoric. Remember the year leading up to 2004, it was unbelievable. It was every day if you wanted a clip from one of those guys, you could have gotten one saying how the system needed to change.”

John Shannon: “More importantly, there was a lot of reminders to people in the media ‘Hey, we’re keeping score.’”

[Murmurs of agreement from the rest of the panel]

“There was a lot of, ‘If you start to criticise us, we’re not going to help you.’ And there was a lot of that and people won’t admit that today. [The NHL ran what] was more like a true political campaign, somebody running for office rather than someone trying to settle a labour agreement between a sports league and the players.”

I don’t think Shannon’s revelations are a surprise to any one who experienced the coverage of the 2004 dispute but I was shocked to hear him say it out loud. I don’t expect him to keep saying it when Gary fires up his 2012 campaign machine and the hockey reporters start playing his re-election tunes.

5) The league is a cartel, offering a product the consumer can’t get elsewhere. Work stoppages may anger fans, but most come right back when the games resume.

Donald Fehr or no Donald Fehr, the players do not have either leverage or a viable bargaining position. Therefore they probably can’t avoid taking another big paycut. One wonders why the players are so attached to collective bargaining when the best they can expect is a long term between reductions in their revenue share.

If the fans are lucky, the players will give it up quickly and quietly. I won’t blame them if they decide to squawk a bit as they get screwed over, but the ending seems inevitable.

Wake me up when the NHLPA disappears.

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Comments

17 Responses to “The 2012 CBA”
  1. Tom says:

    For the record, I predict there won’t be another work stoppage. The players will agree to another pay cut, and in return they’ll get either the elimination of escrow or a cap on escrow payments, plus they’ll have their contracts guaranteed, they’ll retain their arbitration rights, maintain the UFA eligibility age at 27, and the cap remains tied to revenue.

    The players will take a pay cut, but they won’t get anything important in return. They certainly will not get any change in escrow. Escrow is the device that ensures the players get a fixed percentage of revenues. Escrow (or something like it) was the single thing owners wanted – and got – last time. Unless the players are willing to refight the 2004 battle – they are not – escrow is off the table.

    • Fehr Time says:

      I think pushing the revenue sharing card would be a good shot across the bow for the players. The small revenue teams need more of it and the big revenue clubs want it gone I bet. Ultimately the best bet is for the players to decertify and see where the cards fall in to place, as you allude to Tom. Otherwise the NHLPA is really nothing more than a tool of ownership to enforce collusion.

      • Tom says:

        I agree. The problem the players have is getting from here to there, particularly since both NFL and NBA players have used decertification as a bargaining tactic. I expect the owners would lock out the players anyway and hope they re-form the Union. It might take a year or two to get the courts to get the game going again. The players would still have to be prepared to go without hockey for a while.

        Eventually the result would probably a system like football in Europe with a tiered league and relegation. I think the players (and the game) would be better off. But that’s eventually. In the short run I think the players take a big cut or get locked out until they do.

        The rich clubs complain about the revenue sharing, but I think that is mostly noise. Gary answers those complaints by pointing out that the players are – directly and indirectly – paying for it.

  2. snafu says:

    I think one of the features Bettman would like to add to the next CBA is contract limits. As we’ve seen, there are plenty of legal means for cap circumvention but most ornery of these requires term to help GMs massage the cap hits. The other apple of Bettman’s eye has to do with burying contracts in the AHL. He pointedly reminded everyone that the NHL wanted to plug that possibility by having AHL salaries (one way contracts) count against a team’s cap hit. I don’t think richer teams or players like that option.

    • Tom says:

      Bettman has a laundry list of such items. He would not initiate a lockout over any of them. And he will concede the NHLPA position each and every one of them to avoid a stoppage. His sole objective is to get the player share as close as possible to 50% of revenues. (I think the AHL loophole position is a charade. The richer teams – the ones who count – like the option of stashing salary in the minors.)

      Do I think he will lockout the players over $200 MM a year? Over $2 billion over the life of the contract? Yes, I think he will. Donald Fehr is going to be told to take a cut or take a hike. What does he do? The only really good reason for the players to keep holding out in 2005 is that caving put them in exactly this position.

  3. speeds says:

    How can the union get their best settlement? What angles do they have to create any bargaining power? Is there a way they can include revenue sharing in the CBA such that they can pit 20 teams against 10, and even if they can, what can it get them in negotiations to try to play some teams against others?

    • snafu says:

      I don’t think the players association can get a settlement that really favors the players, speeds. It always has been what they can eek out by playing off one set of owners against another. As long as the owners are united, the association is going to lose every battle.

      That said, the NHL owners really don’t have as many common interests as Bettman would claim. The NHL has always been a league where the majority of the teams’ revenues comes from the local market. The franchise valuations will be based on that actual HRR/potential HRR moreso than a league like the NFL which has a massive revenue stream from the league itself. It may have been possible to sell the big markets on the virtue of the cap since ultimately that should have saved them more money, and it may have been possible to sell the small markets on the virtues because it would limit player spending by the big teams— but has that helped the guys who needed the help? I’d say it has amplified the problems from the revenue gap instead of giving the weaker teams the time to build up their local revenue base. Every time they grow, it just goes to the same pot that pushes the cap up further. Everyone is locked in unless they can grow at 2-3x the rate of the bigger teams (in real terms).

      I think the push would have to come from the smaller market owners if they realize they’re worse off. If they cannot sell their franchise for much more than they paid years ago, and they’re basically doomed to just making ends meet, or worse, losing $10-20 million per year (as has been the most routinely cited figure for several hurting teams, why would they continue to support this system? So the league will say the players’ share is still too high, but in reality all that means is that the richest teams save even more money. Maybe they can get coaxed into increasing the revenue transfer. The issue with revenue sharing however is that you don’t need the NHLPA to foster that process. Teams can share as much or as little as they want in theory (although once they wrote it into this particular CBA, they’re stuck with it). Would the players really oppose a proposal for teams to share 50% of gate receipts, for example? Why would they?

      Who would be more likely to oppose that, players or owners? ;)

      • speeds says:

        I guess what I’m wondering is, if the NHLPA plays with the revenue sharing a bit, can they come up with a way to make the players union and ~23 teams better off than if they don’t try to pit teams against each other?

        I haven’t worked through the math, but is it possible that 23 of the 30 teams can be better off, financially, with the players receiving 52% of revenue and increased revenue sharing from the top 5-7 teams than they would be with continuing the current revenue sharing and the players earning 50%? If it is, I would think that might be an avenue the players try to explore.

        • Tom says:

          If so, the same teams will be better off with 50% share and increased revenue sharing. Ultimately that’s Bettman’s offer. More revenue sharing to keep the zombie franchises afloat, funded by a player paycut. Same as last time – big teams are on board because the salary cap limits their costs and improves profits, small teams are on board because the revenue sharing cheque goes up.

  4. stephen says:

    One of the changes to the NBA cba is apparently that escrow is now capped, although it remains to be seen if it a actually becomes consequential. It does seem to foreshadow a bargaining route though.

    I think the NHLPA should push for a revenue cap. The obvious problem for the NHLPA is that every time league revenues rise, the owners need to claw back more money from the players in order to even things out again, to maintain the 30 equal teams and parity that comes from salary rollbacks.

    If not, we can see the owners conundrum. They first penalized the revenue sharing cheque of the struggling teams by 25%. The 2nd yr 33%, and finally if they still don’t get it by 50% in the 3rd year. If the team hasn’t got the message after all that, the owners have no choice but to lock the players out to claw back more money for revenue sharing cause the existing system obviously isnt working.

    One interesting effect during this cba has been that the top ufa salaries have remained relatively constant while the cap and max sal. have nearly doubled. It is the middle class that is bulging. I was expecting a much more polar salary distribution concentrated at the high and low ends with the elimination of the middle class. Is this surprising/explainable?

    One effect of that could perhaps be that a critical mass of players will now come to see decertification as potentially worthwhile?

    The claim is often made that the small markets cannot keep up with the revenue growth. But is there evidence for that? Where is revenue growth actually coming from? And why isn’t revenue sharing which I thought was also linked to revenues keeping up?

    Or is all this just missing the point. The owners don’t need the money, they want it.

    • Tom says:

      The owners don’t need the money, they want it.

      There is a lot to this explanation. The NFL owners did not need the money. But they knew they could force it out of the players, so they did. NHL owners know it too.

      I don’t think it is quite so blatant in the NHL because the revenue disparities are so great there is a real problem. But no matter what they do, the CBA will provide for salaries that are too rich for the zombie franchises and a bargain for the wealthy ones.

      I don’t think it is possible to split the ownership ranks. Rich teams or poor, they all benefit if the players take less money. That’s why they call it money. I think they can force the players to take less – at worst they will have to shut down for two or three months – and so they will force them to take less. Profit maximization. Isn’t that Corporate Finance 101?

  5. beingbobbyorr says:

    The players have no leverage in collective bargaining and they never will have any leverage.

    They had/have more leverage than the other 3 major sports athletes in that there are more almost-NHL-quality leagues in Europe for them to sell their services (in the short term) to keep some income flowing and the skills sharp.

    I think it was a major error for the NHLPA members in 2004-05 to not take advantage of this. Too many of them stayed home to stew in their own juices (and get nervous as their bank account drained) instead of packing up for Sweden, Switzerland, or the Czech Republic . . . . all under some misguided notion that European players were some kind of “union cousin” whose livlihood they didn’t want to trample on.

    And, it was all their own fault . . . . . I know I read somewhere during 2002-04 Bob Goodenow warning his ~700 employers that the coming labor battle could last up to two years, and that they should prepare accordingly. They did not. When I started to see Sean Avery, Mathieu Schnieder, and Aaron Miller coming out to ($12) public sticktime sessions in December 2004 — instead of renting their own ice @ $300/hr as they’d been doing in Sept-Nov 2004 — I knew the jig was up.

  6. Matt says:

    What would things look like without a salary floor?

    Revenues would go up as more teams would break even – or approach it – accompanied by a diminished need for revenue sharing. The players and the owners are happy.

    Would ‘competitive balance’ suffer that much? Can the Blue Jackets and the Islanders get any worse worse? Teams that don’t spend would have the same PR problem they do now, the same trouble winning games and attracting fans.
    Perhaps you would see some ‘Moneyball’ style innovations among the low budget teams.

    With no floor, the league would no longer have to prop up the ‘zombie franchises’. Let each team’s market determine their floor as with ticket prices, scouting budget, etc.

    • beingbobbyorr says:

      With no floor, the league would no longer have to prop up the ‘zombie franchises’. Let each team’s market determine their floor as with ticket prices, scouting budget, etc.

      The ‘zombie franchises’ have to sell hope somehow to try to become living franchises.

      The old way was to suck and get lots of blue-chip 1st-round draft picks. That doesn’t work so well now that the lower UFA age (was 31 is 25/27) makes it harder to hold on to home-grown elite talent long enough to win.

      To compensate, the salary floor is a way to force poor franchises to sort of ice what appears could be a competitive team (in the short run, maybe) of more-expensive veterans. The NHL is counting on our short attention spans regarding how winning teams of the past were built . . . and the durations of their windows-of-championship-calibre (was 5-10 years is 2-3 years).

      The floor is the relief-valve to balance the cap. If you want currently-winning teams to stop winning (to pass the big silver thingy around to sell tickets in every market), you have to find a place for their excess talent to play (and get paid).

      • Matt says:

        I realize I didn’t think this through. Without a floor I don’t know how you could keeps salaries pegged at a percentage of revenues.

        • Tom says:

          I don’t think this is a problem. If the league as a whole underspends because some teams spend too little, the owners write a cheque to every player. The teams would all get hit with a, say, 10% surcharge. The big teams would spend more as a percentage of revenue, the poor teams would spend less.

          It’s just a different way to share revenue, sort of – the big teams don’t write a cheque to the zombies but they do take on a bigger percentage of the costs. For PR reasons and for competitive balance appearances, it is better to send the zombies a cheque and make them give the money to players.

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  1. [...] TOM BENJAMIN weighs in with a bit of a cynical take on the upcoming NHL CBA talks. Not that it isn’t justified, and as always, Tom makes some good points. For the record, I predict there won’t be another work stoppage. The players will agree to another pay cut, and in return they’ll get either the elimination of escrow or a cap on escrow payments, plus they’ll have their contracts guaranteed, they’ll retain their arbitration rights, maintain the UFA eligibility age at 27, and the cap remains tied to revenue. [...]



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