Wednesday, October 1st, 2014

The Question

13

Greg Wyshynski has landed a nifty interview with an anonymous player on the CBA negotiations. The player does a good job of setting out the players’ position:

If the League asks us to reduce our share to a straight 50/50 split, thus lowering the cap via what amounts to a 12.3-percent rollback, our question will be, “Why?”

One could predict that the NHL will concede that while some teams are doing well, others are barely hanging on. If that is the case, is it the players’ responsibility to bail them out? Haven’t we been down that road before?

Bettman got the system he wanted, one that he assured us would give us 30 healthy teams. My opinion is that if we have teams that are “sick,” as we surely do, then simply re-setting salaries once again will neither be palatable to the players nor will it really fix the problem. Not in the long term. History has shown us that.

Clearly the system, as it exists now, does not work for everyone. If we simply roll back salaries again, who’s to say we won’t find ourselves in the same position five or seven years from now? Once reset, the cap (and the floor) will simply rise again over time as revenues rise.

I’m sympathetic to the argument he presents. (He does lose me when he suggests that the problem of zombie franchises should be addressed with more revenue sharing. Sink or swim, I say. Failing franchises should be relocated or folded.) Still, I think his argument is irrelevant.

If the League asks us to reduce our share to a straight 50/50 split, thus lowering the cap via what amounts to a 12.3-percent rollback, our question will be, “Why?”

I don’t think Bettman will respond as predicted. Oh, he might bring up the problem of the zombies, but he knows Fehr has an obvious response – articulated very well by Wyshynski’s source – and any pleas of poverty for the middle class is laughable. Craig Leopold actually had the gall to declare that the contracts he handed out to Parise and Suter showed that the system had to change! Nobody can buy that line and Gary won’t even bother to trot it out for the NHLPA. The small potatoes revenue sharing system implemented last time was no accident and I don’t think the rich want to pay more. Gary may have convinced the big markets to provide somewhat more given the anticipated windfall from the players, but significant sharing? I doubt it.

Why should the players give up more money? Bettman’s answer will be “Why? Because we want the money. Why not? Some of it will be used to prop up the zombies and protect some jobs, if that makes you feel better.” (Job protection even might become a pressure point if the league decides to solve the mess in Phoenix by folding the franchise.)

[I]s it the players’ responsibility to bail them out? Haven’t we been down that road before?

It should not be the players’ responsibility, and yes indeed it is a familiar road. It is nothing but a punt of the problem far enough to get the league through several more years. And yes, several years down this road, the players will be in the same place again. But this road was built to last in 2005 and there is no easy exit.

I would caution anyone following this process to abandon any traditional ideas of what is “fair” or “unfair.” In a negotiation of this magnitude, both sides will be looking for the best deal possible for their collective membership. Period. The owners will try to take whatever they think they can get, as is their right, and so should we.

Exactly. The owners think they can force the players to give them another big whack of cash. They appear willing to shut down the sport to get what they want. They believe the players will give them pretty much what they want before too many games have to be cancelled. They don’t think the players are willing to stay out long enough to threaten the season. This negotiation is not about resolving issues between the parties. It is about leverage and money and how the owners will go about the task of taking all they can possibly take.

All of this seems fairly obvious to me. The only outstanding question in my mind was not addressed by Greg’s source. Gary Bettman is coming with his mask and his gun. The question?

What are the players going to do?

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Comments

13 Responses to “The Question”
  1. Tach says:

    Totally agree. The Players’ strategy should be focussing on how they can break the league monopoly as opposed to how to continue to extort their share out of it. The owners are a smaller group with a longer time horizon to recognize revenue for the game. A lockout wins them concessions from the players every time unless the players have a counterpunch. The NFLPA had the de-cert and anti-trust suit. What does the NHLPA have?

  2. Rob says:

    Tom, while I understand and agree that the owners have all the leverage in this round of bargaining, they have to at least pretend to have arguments as to why they deserve more money this go around. If they don’t, they’ll be accused of not bargaining in good faith. If the NLRB agrees that this is the case (and how could they not if all Bettman has is “shut up and give me more money”), then the owners cannot declare that bargaining is at an impasse, and thus, cannot unilaterally impose new employment conditions or lockout the players.

    • Tom says:

      I am sure that Gary Bettman and his lawyers will have a defense against an accusation of bad faith bargaining. I’m certainly not an expert on labour law in the U.S., but if the NFL could cobble together a position that makes 47% of the NFL revenue a reasonable player share, GB can satisfy the NLRB for a 50% player share in his league.

      • Rob says:

        I don’t disagree that the bar is pretty low for deflecting an accusation of not bargaining in good faith. I guess I just took you literally rather than figuratively when you said that Bettman would respond to the question of “Why?” with “Why? Because we want the money.” Bettman has to have an argument as to why the owners deserve more money, even if that argument is merely pro forma. As is clear from the player interview from Puck Daddy, the union is counting on that argument being utterly transparent, for all the good it will do them.

    • Rajeev says:

      US Courts have not exactly been very kind to NLRB positions – not that they are particularly radical – over the last 50 years or so. There is literally no chance any federal court would find the widely assumed NHL positions to be in bad faith.

  3. snafu says:

    I can understand why the players would ask why, with regard to the zombies, but why wouldn’t the owners and business men of the NHL ask the same question?

    Why is the NHL buying into a system that doesn’t pursue revenue and profit maximization? Yes, I understand that many owners are in it for the franchise values, but it’s not like that is decoupled from a franchise’s ability to generate revenues (and maximize revenues and profits— like any business).

    What exactly is the payback to the NHL (in real terms, not touchy feely bunk fans buy into) in pursuing and supporting a system that props up businesses its markets are saying have failed? Why should the players take less and have wealthier teams pay more into revenue sharing when there is no clear payback and ‘business’ person should care about objectively?

    • Tom says:

      I can understand why the players would ask why, with regard to the zombies, but why wouldn’t the owners and business men of the NHL ask the same question?

      They probably do ask the question, but the owners haven’t done all that much propping aside from advancing money against shares of shared revenue and revenue sharing. Phoenix has been a money pit, but the league was forced into that one. That was less about propping up Phoenix and more about preventing relocation into markets controlled by other franchises.

      And if the whispers are correct, the rich owners are tired of sharing revenues. But Bettman keeps them in line because the players fund the increased sharing and still deliver much higher profits to the larger markets. As long as GB works to minimise the sharing and maximise the player cut, the large markets are happy.

      They won’t be happy if a lockout goes on too long, but the arithmetic works for them and works against the players. An investment in a lockout pays off for the individual teams in the long run. It can’t pay off for the players.

  4. snafu says:

    If you’re the owner of a large revenue generating franchise, wouldn’t you be a little perturbed to see a revenue transfer recipient (Minnesota) handing out two cap-circumventing (in intent if not the letter of the law) contracts of gargantuan proportions?

    It just keeps coming back to payback for me. There has to be a point where sinking money into assets that cannot appreciate is counterproductive. You said that Phoenix was unavoidable, and in the sense that the NHL owns the team, operates it at a loss (just like Moyes), and won’t share the financial details with Glendale (just like Moyes), that may be true. What doesn’t fit with the unavoidable explanation is that they’re keeping the team there, and the only way anyone can possibly hope to breakeven is to have a city foot a good chunk of the bill. The best you can hope for is that one day, Phoenix may win the Cup, then follow the path of losing their best players to the cap and larger bidders, and it’s back to rebuilding and bleeding money.

    The increase in franchise values for the weaker teams immediately after the lockout was a blip– based on optimistic speculation (as if there were any other kind). When the reality of their revenue earning potential was juxtaposed to the realty of how costly it was to operate under Gary’s system, down went the franchise values. What is the best case scenario? Growth at the rate of inflation? That’s fine if you’re actually breaking even, but how many of these weaker teams actually are breaking even?

    So they can’t grow gate receipts at a significant rate.

    They can’t garner a large media rights contract.

    The NHL is locked into a 10 yr national broadcast contract, so their existence isn’t necessarily going to boost ratings, because as we’ve seen, the ratings are fairly weak in most of these markets, and maybe for much of the NHL markets, unless their team is involved.

    I read somewhere that international revenues were growing at a great clip. Does an European fan care really that there are teams in cities they may not know as well as the the NY, LA, and Chicago set? Or that there must be 30 teams instead of 20 or 24? I think they tend to follow the teams that have some of their countrymen. (Except Germany. They just seem to be fans of hockey, oddly enough.)

    I don’t know what the strategy or goal is any longer at the league level that supports this particular welfare system.

  5. Tom says:

    If you’re the owner of a large revenue generating franchise, wouldn’t you be a little perturbed to see a revenue transfer recipient (Minnesota) handing out two cap-circumventing (in intent if not the letter of the law) contracts of gargantuan proportions?

    I don’t think Minnesota gets much of anything from revenue sharing. In 2011, the team generated $41 MM in ticket revenue and ranked tied for 15th in the league. It’s a good NHL market. The zombie franchises took in less than $20 MM in ticket revenue. None of them would ever dish out a Parise contract.

    I don’t know what the strategy or goal is any longer at the league level that supports this particular welfare system.

    I’m not sure what you see as the alternative. I don’t think there are 30 good NHL markets in North America either, but contraction is messy and damages the NHL brand. Relatively speaking, the revenue sharing is peanuts, particularly since the zombies have problems meeting growth requirements and have faced cuts in their share.

    The path of least resistance is the path they are on. Minimise revenue sharing and lurch from crisis to crisis. As long as there is someone willing to pick up the tab, keep on trucking. When there is no one to pay the bills, move the franchise or fold it.

  6. Gary says:

    Tom,

    I agree with quite a bit of what you write, but the PA’s response this time will be a left hook followed by a right cross with horseshoe filled boxing gloves sported by Don Fehr, who isn’t Bob Goodenow. I think the PA will be able to make a case of bad faith bargaining stick if Bettman tries what you say and if the league winds up in court, they’ll get smacked down.

    • Tom says:

      I agree with quite a bit of what you write, but the PA’s response this time will be a left hook followed by a right cross with horseshoe filled boxing gloves sported by Don Fehr, who isn’t Bob Goodenow.

      Fehr is not Goodenow, but Bob threw some pretty hard punches – the players gave up a year following his leadership. Do you think the players will give up $800 MM to sit for half a year under Fehr? To save $200 MM a year? Even if they flat out win, it will take four years to recover when the average career is about five years. If they manage to split the baby by sitting out, the CBA would have to be eight years long before the players break even on the dispute.

      If it kills hockey for a year again, the players never recover their loss even if the owners cave completely after a year. Many of these players have already lost a year of their career to sign a CBA that Bettman would have signed without a lockout. Many others are close enough to the end of their careers that they lose if there is a lockout even if the owners lose the lockout. Others are stars have contracts that are longer than the next CBA.

      Do you really think the players will sit to save 12% of their lucrative salaries? They may know they are being screwed, but bending over is better than the alternative when the alternative is to give up another chunk of a short career and then probably have to bend over anyway.

  7. stephen says:

    I remain incredulous that so many fans seem to accept the idea that 57% worked, but since revenues exploded by over 50%, that number needs to be lowered now to fix things. After all times are tough in this recession.

    Say what? No really, am i being punk’d? Is there a camera around? Revenues have exploded so employees need to take a pay cut because they didnt grow evenly? After years of using one league related loss figure of $300 mil to justify the first lockout? How can so many people accept that without flinching? Seems a sad commentary on how easily we will be manipulated into the matrix.

    Perhaps the PA need two ideas. There’s one if owners are willing to create the matching revenue sharing system that one would expect after getting cost certainty. In that case, there are some easy trade-offs of concerns possible and no real adjustment to percentages needed beyond perhaps a slight increase to the players to continue the progression the owners were happy with last time.

    However, if the owners are not willing to put up the minimally required matching revenue sharing system that any sane person would expect from the owners after having won cost certainty, then all the other tinkering around the edges seems rather moot and quite a different bargaining approach would seem best suited.

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  1. [...] CANUCKS CORNER: Tom Benjamin believes the real question in this year’s CBA negotiations is how the NHLPA intends to address the league’s attempt to once again reduce their share of revenue. That, folks is the true sticking point. If the league insists on a 50-50 split and rejects the PA’s call for improved revenue sharing, this could get ugly. [...]



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