Tuesday, September 2nd, 2014

Kudos, Donald Fehr

13

We have hardly any details about the player’s proposal, but we can see the way the NHLPA wants to restructure the agreement of 2004-05. I think it is very clever. It will be difficult for the owners to reject it out of hand, but I can’t imagine that they will find it acceptable. We’ll see, I guess.

Fehr is prepared to surrender (some of) the money the owners are demanding. He is also assuring the owners that they get to keep cost certainty. And (I suspect) that he’s willing to give a wink and a nod to revenue sharing. (He’d prefer that it was meaningful, but he won’t let it get in the way of a deal.)

All he wants in return is to start negotiating cost certainty in dollars rather than a percentage of revenue. Since linking player salaries directly to revenues was the critical issue in 2004, Gary Bettman is very unlikely to go along with this idea. Still, it is not a bad way to structure cost certainty for the NHL and for the fans.

The most important point I’d make about the player offer is that it would be great for the fans in one respect: It will make future work stoppages almost unthinkable.

The players have not conceded anywhere near the $430 MM a year Bettman has demanded, and probably isn’t even close to the $200 MM a year that I figured Bettman would accept. But it is a quantifiable number and it is negotiable just like Bettman’s $430 MM is negotiable. The money can be worked out under the NHLPA structure. The owners still get cost certainty – I assume escrow will continue to be a feature of the CBA in order to assure that the player salary level is neither too high or too low – but both the player percentage and the owner profits depend on revenue growth. The player proposal locks in actual player costs through the first three years and unless revenue increases are zero, the players will be taking substantially less than 57%.

The key piece of the puzzle for the players? After three years, the players have the option of reverting to the old system with a fourth year at 57%. This is key because it provides leverage to the players the next time they sit down to negotiate. In a perfect world, the NHL and the NHLPA will sit down after three years and quietly negotiate a new player salary level for 2015-16 (and perhaps beyond). If the league has done well, the players can expect a raise. If the league revenues have stalled, the players might have to take less again.

There will be conflict over that number, of course, but the parties will have a strong incentive to settle. The owners will want to cut a deal because the alternative will be a year with a 57% share going to the players. The players will want to cut a deal because after that year, the players will be in the same situation they are in today – facing a lockout and arguing about a percentage of revenue without any leverage.

The benefit – for everyone – would be stability in labour relations. The owners maximise their share of the future pie with the existing structure, but they also face an ugly fight and a possible work stoppage every few years. Will the owners give the players some leverage for the sake of long term labour peace? How far will the players go to get their structure? Will the players endure a lockout now to gain some leverage four years down the road?

Kudos to Donald Fehr for at least making it interesting. Back to you, Gary Bettman.

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Comments

13 Responses to “Kudos, Donald Fehr”
  1. rbj says:

    This is a proposal that doesn’t change anything for the better. It sheds a few points off of the players share for a few years then, without exaggeration reverts back to the old deal. It juices up revenue sharing and expands the salary cap range, both of which will likely decrease long term HRR trajectory through disincentives and decreasing the competitive balance.

    What it does do successfully is frame it in such a way as to confuse media types into thinking it is something different. Kudos, indeed.

  2. Tom says:

    This is a proposal that doesn’t change anything for the better. It sheds a few points off of the players share for a few years

    This is true, but does seem to me to be a change for the better. Bettman started by shaving 14 points from the player share. Fehr offered a few points. Sounds like a negotiation to me.

    then, without exaggeration reverts back to the old deal.

    It does not revert unless the players exercise their option. Obviously, they will only do that if they can’t cut a deal. They will be reluctant because it would make a lockout certain the following year. The owners would also be reluctant because they will always be negotiating a number that is less than 57%. They will have to pay more – probably much more – for a year in order to lock the players out.

    • rbj says:

      Disclaimer: I believe the magic number is 50%.

      1. True, it is a more than appropriate counter-punch to Bettman’s 43%. Maybe more of my issue is how the media thinks that this is some genius, season-saving deal. If Fehr would have offered 55% (which this essentially is) nobody would have applauded him, but he was smart enough to structure it creatively.

      2. I think the PA (assuming it is their option) will always take it, and it obviously gives them leverage as the owners try to avoid 57% by offering something a little less over a longer term.

      I don’t see why/how the owners would consider this, nor how this encourages labor relations. After 3 short years do the owners grudgingly agree to 5 years at ~56% OR pay 57%, and lockout them out to get to ~50% after a lost season. I think the answer is ambiguous since most teams will still be losing money without cost relief. Revenue sharing will help, but it is still just moving money around. Owners will still want change, especially with their cross-town rivals (NBA teams) paying 50%.

      • Tom says:

        If Fehr would have offered 55% (which this essentially is) nobody would have applauded him, but he was smart enough to structure it creatively.

        Well, exactly. I agree that the NHL is aiming for 50% and one way or another they intend to get it. The problem from the player’s – and fan’s – perspective is not merely the 50%. It is that in five years, the owners will want it cut to 40%. Then… How do the players prevent having take a cut with every negotiation?

        I think the PA (assuming it is their option) will always take it, and it obviously gives them leverage as the owners try to avoid 57% by offering something a little less over a longer term.

        They only get it once, so I do not think they will take it. All it will do is put off a lockout for a year. Plus, the negotiations get turned around to the advantage of the owners. Instead of them continually asking for cuts, the players will be asking for more. The players never ask for more in collective bargaining. They just try to protect what they have.

        They are going to invoke this clause because the owners won’t go higher than – say – $2.3 billion in total salary in 2016? They want to play, they know they make a fortune and they have never asked for more.

        Suppose the numbers say they deserve a 10% raise and the owners refuse to give more than 8%. Do you really think they will invoke this clause to get perhaps a 20% raise for a year? When the result is certainly a lockout during which they will lose the entire 20% plus more? I think they will take the 8% every time.

        The owners would still be in the catbird seat in terms of the negotiations. They won’t have to be fair, but they will have to be reasonable. The big difference is that it makes it a lot harder and a lot more expensive for the owners to lock out the players. That will be the practical effect in my opinion.

        That’s why I’m going to insist that this is a great deal for the fans. The parties can quietly divide the spoils every year without any more strikes from the owners (or the players).

        • rbj says:

          Thanks for the reply, I think we agree across the board (my game theory may be a little off and perhaps the PA looks to re-negotiate after 3 years). This is really the only deal that gives the PA any leverage, which is why the owners are unlikely to accept and give the PA a leg to stand on.

          Does 50% today mean 40% tomorrow? Maybe, it will happen in the NFL and NBA first though. If they stay at 50% then it signals the split is a good deal. If those leagues do push to 40% while the NHL is paying 55-6%, I can see NHL teams losing further market share to NBA teams that are better marketed, scouted, and coached–and obviously not on financial life support (revenue sharing). Bottom line, the owners are going to push for 50% now and avoid giving the PA any future leverage, despite how ugly the PR battle goes for them.

          • Tom says:

            This is really the only deal that gives the PA any leverage, which is why the owners are unlikely to accept and give the PA a leg to stand on.

            I think you are probably right in this respect. They would rather maximise their share of the pie, and if that requires a lockout every few years, too bad for us.

            Does 50% today mean 40% tomorrow? Maybe, it will happen in the NFL and NBA first though. If they stay at 50% then it signals the split is a good deal.

            I don’t think it will signal anything if it stays at 50/50. The market is not producing these splits. In fact, the market if left unfettered would give the players much more. The split does not reflect the contribution of each party. It reflects the respective bargaining power. Players with short careers and huge paycheques can’t win because their best choice is always to take less. A lockout hurts today’s player financially while the benefits of holding out mostly accrue to the next generation of players.

            It is easy to say that the owners will want more next time because they always ask for more. The NBA and NFL will ask for more next time and the time after that and the time after that. The NHL wants to stay on the same merry-go-round. It almost seems reasonable to the fans because player salaries are so high and they keep rising – albeit a lot slower than they would without CBA wage controls.

            Bottom line, the owners are going to push for 50% now and avoid giving the PA any future leverage, despite how ugly the PR battle goes for them.

            Again you are probably right because the owners only care about money.

            As a fan, I don’t care about the money. I don’t care what players make. I used to care about competitive balance – before 2004 – but after Bettman won and installed a big market CBA, I gave up on that one. I cheer for a big market team so problems in that respect don’t affect me. What I do care about – and what I think the fans are entitled to – is uninterrupted service.

            Fans should support th NHLPA structure because it will, in my opinion, make a future strike or lockout very unlikely. It gives the owners what they claim they need, and it gives the players a mechanism to protect their half of the pie. Does the league want peace on the labour front? Or do they like the idea of using work stoppages and the threat of work stoppages to squeeze every shekel possible out of the players? We’ll see.

      • Jon says:

        55% is 50%.

        Let me explain. Player salaries are tied to the previous year’s revenue. Let’s for the sake of simplicity, say that the 2010-2011 revenue was $100. Let’s follow two scenarios a) if players salaires were 50% of the previous seasons revenue and b) 55% or revenue. For the past season, revenue increased 10% (ish). That gives actual revenue of $110 for 2011-2012.

        In scenario a), players received $50 of $110, that is 45.4%
        In scenario b), players received $55 of $110, that is 50%

        • Tom says:

          It is true that the salaries are negotiated first under the player proposal is based on anticipated revenues. To carry your argument further…

          The NHL and the players sit down to negotiate and they will start with the last three years. They will say “Revenues over the past three years were $300 and the players only received $148 of that pot. For 2015-16, we expect revenues to be $110. We want $55 plus the $2 you owe us from the past three years. Player salary levels for next year should be set at $57.” The owners will offer $55 and off they go.

          If revenues over the next three years produce a player share that is 51%, the owners would ask for a catch up. And they might say, “Revenues don’t look that good for next year, so….” They might even say, “50% isn’t good enough any more. We want 52% this year, so…”

          It is a negotiation that will – in my opinion – always produce a settlement once they agree on the starting point because the alternative is not easy for the owners or the players.

          That is a huge benefit to the fans. Since the players got rid of Alan Eagleson – the guy who entered criminal conspiracies with the owners – the CBA has expired three times in 20 years. In every case we have had a work stoppage. This is number four. Fehr has produced a way for both sides to get what they want – and he has delivered up a system that should that will get us off this stupid “lockout every six years” cycle.

          As fans, what do we care how they split up the money they gouge from us? The only thing we should be entitled to is that they resolve their arguments quietly and without shutting down the league.

  3. Great take on the NHLPA proposal, Tom. The thing that surprised me the most was the relatively short term. I hadn’t realized that they were talking just four years. I had thought that it was back to 57% for “x” years rather than just an option for one. I know in the past you’ve said that going long would be advantageous for the players (since they’ll likely lose a bit each time in negotiations). Are you surprised that their first proposal is just four years in length?

    • Tom says:

      The proposal surprised me, period. I think it is very innovative.

      The length of this deal is surely negotiable. Making it longer is one way to drive the player share down to the 50% everyone – including the players, IMO – accepts as inevitable. Instead of 2%, 4% 6% over the three years, it might go 2%, 3%, 4% and 6% with the 57% option in the fifth year. A short contract and then going year to year makes it easy to get a 50/50 split. If the players are over or underpaid in a year, the dollars are adjusted for the next year.

      I think the players are saying, “You screwed us last time, and you are going to screw us this time, but we aren’t willing to let you screw us every time. We’ll give you the money but we get the leverage to keep the deal at 50% next time.”

      If the owners turn it down they are saying, “Sorry, we reserve the right to screw you every time.”

      The best the players can do if the owners insist on that is to do what the NBA players did – go long. That protects existing players and the next generation gets stuck.

      The interesting questions:

      1) Will the players endure a lockout to get their way on this one? I suspect Fehr is going to say yes.

      2) Will the owners take the hit of the work stoppage for the right to screw the players next time? Maybe not.

  4. Fauxrumors says:

    1) I can’t see anything in recent history that would make me think the players won’t give in (eventually)and the owners will stick together until they get what they want.
    2) If the NHL was trying to avoid a lockout their response to the NLHPA would have been more positive/they wouldn’t have rejected it out of hand
    3) Will be interesting to see what transpires when Fehr/Bettman meet next week. The tone of that meeting/what they say afterwards will be telling. If talks break off/down a lockout is inevitable. If they decide to work off both sides’ offers then we have a shot at hockey this October. Sadly I believe it will be the former.

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