Wednesday, October 22nd, 2014

Bettman in Boston

12

David Staples attended this year’s MIT Sloan Analytics in Boston and reports out on Gary Bettman’s talk at the conference. Bettman’s remarks made David more optimistic about prospects for labour peace. They do not make me more optimistic. (I might agree with David if I had heard Bettman speak, but I’m assuming David has caught the highlights and is quoting accurately.)

David makes two points:

First, there is clearly a different tone coming from the NHL as negotiations approach. Second, the bright and bubbly revenue picture being painted by Bettman can hardly be consistent with a league about to go to war over league finances.

There is a different tone, but only because circumstances have changed. Bettman could have made exactly the same claims about revenue in 2003. The lockout in 2004 was about a fundamentally different system and to get it Bettman had to de-market hockey. The message was “The system is broken. If we get cost certainty, we will have fairness, competitive balance and financial stability in all 30 markets. Edmonton can be great again because they will be able to keep all their good players.”

Bob Goodenow’s position was dismissed when he pointed out that revenues had exploded in the previous decade. The dispute was not about revenues – it was about failing franchises and controlling costs.

Bettman’s point here – setting aside the bragging – was that the lockout did not impact on revenues. The fans and the fan’s money immediately returned once the dispute was done. He’s confident he will have the support of the fans and the owners will be united again.

The dispute is not going to be about system this time. It is going to be about money, plain and simple. The story will be positive and upbeat. They certainly do not want to talk about how the CBA is driving the best players and teams into the best markets where they can generate the biggest revenues. They do not want to discuss whether this system is making it far harder for the smaller markets or whether it has done precisely the opposite of what he promised. This time the dispute is about money and a strident tone only makes the owners sound greedy.

“The game has never been greater and parity has never stronger. Record attendance. Record revenue. The system – with a few tweaks, maybe, – is working great. The only problem is that the players are still making too much money and salary inflation will kill us eventually. If the NFL and NBA can’t afford to pay their players 57% of revenues how can the NHL?”

David’s second point:

Is there now too much money on the table for both sides to risk another labour disruption. That’s my bet. That’s certainly the feeling you get after hearing Bettman crow about revenues. I’d be astonished if there was any kind of NHL strike or lock-out as both sides are making so much right now. They can’t risk alienating the fans.

They can’t risk alienating the fans? Gary just finished telling the crowd that this was not a risk! That’s what the NHL owners learned in 2004. They locked the players out for an entire year and fan support did not waver. They came roaring back when hockey came back. Gary does not think it will take a year this time, but he is not afraid to shut things down again.

Is Gary prepared to shut down hockey when there are savings of nearly $250 MM in the first year? When the players can be forced to give up say $2 billion over the next seven years?

Absolutely, yes he will.

Postcript: I wish the moderator – the media – was a lot more specific with questions for Bettman. “What is the dealbreaker for the league? Will you lock the players out if they refuse to take a $2 billion pay cut? Or can the fans count on hockey next season?”

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12 Responses to “Bettman in Boston”
  1. David Staples says:

    Tom, you’re right that Bettman was also very much crowing about how fans had sided with the owners in 2004-05, especially fans from small-market teams like Edmonton.

    I see no evidence, though, that the NHL is on war-time footing right now. It’s not prepping the fans for a big battle. It’s not trying to convince us of the league’s poverty. It’s not saying the system is broke and must be fixed.

    All of those things were said before the last lock-out in order to build fan support and ownership unity for the coming altercation. I see none of that happening right now. Instead, I saw Bettman all bubbly and positive.

    I frankly astonished. Now, after the speech, when I asked Bettman in an interview what we were to make of his two different messages, now vs. 2004-05, he made it clear he was NOT talking about labour negotiations here.

    So that lends strength to your interpretation. But I still hold that there’s something to the strong impression I got from all that Bettman optimism/bragging in the speech.

    • Rajeev says:

      I see no evidence, though, that the NHL is on war-time footing right now.

      I know Tom hates lawyers, but no one with meaningful litigation experience would ever say stupid shit like that. And the hockey consuming public would be better for it.

      The best way for Bettman to play it this time is exactly the way he is playing it.

      Correct. And obviously so. It’s why people that say Bettman is a bad commissioner are more or less idiots, proprietor excluded. They don’t understand that serving the owners and serving the interests of the game are mutually exclusive and often contradictory.

      All that said, I do think the players will take an unjustified haircut and a lockout will ultimately be avoided.

      • Tom says:

        All that said, I do think the players will take an unjustified haircut and a lockout will ultimately be avoided.

        I think the players are best served by giving up immediately. That will avoid a lockout. But I also can’t see Donald Fehr riding into town to sign Gary’s sequel to the 2005 CBA. I have no idea what will happen except that Bettman will be on that ~$2 billion like a dog on a bone.

  2. Tom says:

    I see no evidence, though, that the NHL is on war-time footing right now. It’s not prepping the fans for a big battle. It’s not trying to convince us of the league’s poverty. It’s not saying the system is broke and must be fixed.

    This is my biggest point. They are on war footing. They are just fighting differently this time around. The propaganda campaign last time was critical, but it was very costly to the brand. They spent two years telling everybody that the game was shitty and the system was unfair. Not this time.

    This time it is just about money, very big money and the players have no leverage. Zero. I wrote about this a lot during the lockout. Once the players were stuck in this system they can’t stop the owners from continually cutting their pay relative to the revenues. Bettman has them by the balls and he’s going to squeeze. It’s the continuing payoff for the 2004 lockout.

    The best way for Bettman to play it this time is exactly the way he is playing it.

    The league has done their prep work. It is a given among the media that the players have to take another pay cut. There has hardly been a piece on the negotiations that do not mention the NBA and NFL. If they do have to lock out the players for a while, the fans will side with the owners.

    Nothing more has to be said.

    As an optimist, how do you see this ending? Never mind the trivia. What’s the player percentage when the contract is signed? Do you think Bettman’s tone signals that he is willing to take less than $2 billion? Why would he take less? Or do the optimists thinks the players will cave?

    • Tyler says:

      Hah. When David was live tweeting this thing, I did the exact same math – I think my number, based on a 50/50 split of revenue, was $1.9B.

      Michael Grange at Sportsnet did a really good piece during the NBA lockout, basically saying that until such time as the players prepare for labour negotiations by coming up with some real leverage, they’re screwed and should take what they’re offered and shut up. I don’t think he’s far wrong. If I ran the NHLPA, I might have spent the past two years developing a league I can take off the shelf if there’s no deal by November 1. Stick 12 teams in Canada and 8 in the US, market it on pay TV, build the teams around local boys (lots of the Euros would go home) and show the NHL you can survive a year off pretty well. Without that, it’s “Why should I pay you two dollars more than you can make in Europe?”

      • Tom says:

        Michael Grange at Sportsnet did a really good piece during the NBA lockout, basically saying that until such time as the players prepare for labour negotiations by coming up with some real leverage, they’re screwed and should take what they’re offered and shut up.

        I don’t think they can come up with any leverage. They are stuck in a system that ensures they have none. In money terms, most players are smart to take a paycut rather than a work stoppage. They won’t recover the money lost in the dispute even if they win. They would be holding out as much for the players who followed them as for themselves. That worked when it was about a principle. Now it is just about money and it will never pay for them as individuals to shut the game down to protect the player share of the revenue.

        I think they should decertify and I don’t mean as a bargaining tactic. I mean for good. I think that the league would eventually be forced into a model along the lines of English football with relegation. I think the players and fans would be better off. The idea of collective bargaining for athletes seems so silly. Highly skilled people do not need the protection of a labour union. That decertification would kill teams and jobs is too bad. Alone players have terrific leverage. Collectively, they give it all away. That’s ridiculous.

        Unless they are going to dump collective bargaining, they might as well take Grange’s advice. Bend over and take it like men.

  3. David Staples says:

    I also see the players giving in more on a few points — no long-term contracts past six years maybe, a considerable lowering of the cap floor, a lower of the revenue share to 50/50, which is what the small-market teams wanted last time around.

    • Tom says:

      In other words, what Bettman says or does is entirely irrelevant to whether there will be a work stoppage. He is going to demand his money and the only way a work stoppage is avoided is if the players pony up. If the players decide to fight, there will be a labour dispute. If not, there won’t be. What the “optimists” are really saying is that the players will give the owners whatever they want, quickly and quietly.

      The players might very well give it up. If we accept Bettman’s $3.2 billion as this year’s revenue number, the average salary per roster spot was $2.64 MM this season. Assuming $3.4 Billion next year, they would be entitled to $2.81 MM next season at 57% of revenues. If Bettman has his way, they would be cut to $2.46 MM. That’s only a $180,000 cut from this year to next. How do they stay out for a half season – pay $1.32 MM – for that pittance?

      Six years later, when revenues are $4.5 billion, the difference will be nearly $500,000 a player. The only players willing to fight are the young ones, the ones who will surely benefit down the road. But only if they win the dispute and only if the stoppage is relatively short. And even those players will be making $3.25 MM six years from now (given these assumptions) if they let Gary have his way. That ain’t bad. For most players taking a paycut of less than 7% is preferable to losing half a season, despite the fact that the “average player” will lose about $2.4 MM over the six years.

      The worst part – from the NHLPA perspective – is that six years from now there will be nothing stopping the NHL from cutting the player share again to 45% or 40%. Their best strategy may be to sign for 20 years to protect the 50%.

      Either that or give it all up as a bad job and decertify – not as a bargaining tactic, but for real. Nothing is a lot better than a Union agreement that facilitates the fleecing of the membership.

  4. beingbobbyorr says:

    Either that or give it all up as a bad job and decertify – not as a bargaining tactic, but for real. Nothing is a lot better than a Union agreement that facilitates the fleecing of the membership.

    There had to be reasons for forming a union back in 196? . . . . What were those reasons and why can’t the (relatively) oppressive environment that led to the union’s formation not return? Has something fundamentally changed about American & Canadian labour law that makes those conditions non-repeatable?

    I’m almost ready to abandon the side of the players in this, simply because they don’t know how to listen. I distinctly remember Goodenow warning them in 2002-03 that the coming dispute could last 2 seasons, and that they should save and/or prepare for European employment (of which hockey enjoys more opportunities than any of the big 3 sports) accordingly . . . . . and yet, their resolve fractured in the middle of season 1.

    • Tom says:

      There had to be reasons for forming a union back in 196? . . . . What were those reasons and why can’t the (relatively) oppressive environment that led to the union’s formation not return? Has something fundamentally changed about American & Canadian labour law that makes those conditions non-repeatable?

      The conditions are non-repeatable. Before union’s, leagues had a reserve clause that tied players to their original team for as long as they wanted. Unions destroyed that and created free agency. Labour law has also evolved and been clarified for sports leagues. In effect a Union can trade off player rights to free agency (and other anti-trust measures like the draft) for other benefits. No union, no tradeoff.

      What do the players get today for allowing any restriction whatsoever on their right to try to get work with any employer? They do get to subsidize failing franchises and protect some jobs. They get to keep playing for big money even though that money is significantly less than it would otherwise be.

      Trying to get any change would disrupt the game and take a chunk of earnings out of a short playing career. The owners would actually go to court to prevent the players from decertifying! What does that say? In what bizarro universe will an employer fight to ensure their workplace remains a Union shop?

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