Saturday, November 22nd, 2014

Framing the Issue and Reasons for Optimism

13

A friend of me recently asked whether I thought the media was doing a better job covering the CBA negotiations than they did in 2004. “The players seem to be winning the PR war,” he said, “And the hockey reporters seem to be a lot more sympathetic to the plight of the players.”

“They are winning the the PR war because Gary isn’t bothering to fight,” I replied. “And the sympathy for the players stops short of opposing Bettman on the only issue that matters.”

During the 2004 dispute I wrote things that I thought were blindingly obvious but found myself completely out of step with the hockey media. Once again I find myself reading the same facts and hearing the same quotes as all the other hockey writers and drawing conclusions that are completely different than the ones suggested by the narrative playing in the MSM.

The media narrative isn’t exactly wrong, but I don’t think it is right either. Here’s a typical framing of the dispute from Rick Gano at the Globe and Mail:

The league wants the players to give up a significant amount of salary to stabilize the industry while the union maintains that goal would be best accomplished with the wealthy teams doing more to help their struggling counterparts.

I frame the dispute: “The league wants the players to give up a significant amount of salary. It is money. They don’t need a reason.” The distinction may be subtle, but making that distinction puts a different spin on things. This negotiation is not about a need to stabilize the industry and it isn’t about the plight of struggling counterparts. The lion’s share of the money Bettman drags out of the players will end up in the pockets of the rich teams just like it did the last time. Even if the league had zero struggling teams they would be demanding the money and threatening a lockout.

I think everybody in the process understands this. It is the same plan that was sucessfully executed in both football and basketball. The league expects to get this concession because it will bring the NHL into line with the NFL and the NBA. Plus, it is a lot of money and the players are there for the plucking. End of story. As Chris Campoli said, “They just want the money.”

(Speaking of the hockey media not biting the hand etcetera, on this issue – the only one that counts – almost every hockey writer pretty much agrees with the league because, well, just because. Does Gary need more from the press this time around?)

Anyway, Donald Fehr understands what is going on:

“One of the things which appears to happen in the capped sports, is no matter what the economic circumstances are claimed to be, whether they are claimed to be losses as we had in basketball this last time, or whether there’s an acknowledgment there are no financial problems, as we had in the NFL this last time, it doesn’t matter. The position is, we have a cap and the cap has to be lowered.”

Sooner or late the owners are going to say, “This is our final offer. Take (about) 50% of the revenues or you are sitting until you do decide you want to play for (about) 50% of the revenues.” For a host of reasons, the best the players seem able to do is surrender quickly. Caving in is the smart choice – and that’s exactly why Bettman is squeezing very hard.

“I still don’t see how the framing of the issue changes anything,” my friend said. “Yours is just a more cynical view.”

When the problem is framed “Who bails out the sad sacks?” there is a mess. The owners say the players. The players say the rich teams. Some fans say dump the sad sacks. There is no good answer. There is no deal. There is nothing.

When the problem is framed “The owners want more and the players will have to give it to them” there is a more interesting story, a story being missed in the media. I was fairly skeptical when the players hired Donald Fehr because I didn’t see what he could possibly do to change the equation or do anything to get the players out of their box. He’s obviously been wrestling with this seemingly impossible problem for more than a year. What is his plan in the face of the owner’s position? Surely it is more than an offer to take a paycut and some meaningless revenue sharing suggestions. Why does Fehr want to negotiate in dollars and delink the percentage? What’s with the final year option? What is (the famous and brilliant) Donald Fehr up to?

His opening proposal surprised me and after chewing it over, I think we can guess at the outline of his strategy. I can even imagine how he can push the league into a settlement.

On the other hand, the hockey media is filled with doom and gloom after Gary Bettman airily dismissed the player’s proposal. Harrison Mooney puts it as well as anyone when he wrote:

Hockey fans hoping that CBA negotiations could be resolved quickly were disheartened early this week when Donald Fehr described a “meaningful gulf” between the players and the owners. A few days later, another pretty important gulf has sprung up: with less than a month to go until the owners’ September 15th deadline, the NHL and the NHLPA have still yet to agree on which proposal is the basis for their negotiations.

Anyone hoping the two sides are on their way towards bridging the gap had best be concerned, because it should be clear by now that, as it stands, they’re building two separate bridges.

They are indeed building separate bridges, but that’s okay in this case. It appears to me that Fehr and the players have decided they will give up the money. They are going to settle for (about) 50% of the revenues hopefully before they miss any games. The objectives are to push the (about) part as high as possible, b) change the system enough to give the players a chance to hold on to their (about) 50% over the long term and c) end the regular threat of work stoppages in this industry. (Good for them, I say, on all the objectives, but most particularly the one that spares the fans from this soap opera every few years.)

Another reason for optimism is that while Gary Bettman grumbled about the significant gap, he did not specifically rule anything out. I think he is going to come back to the players ignoring the player request to negotiate the cap in dollars, but offering them a fatter percentage as he heads the negotiations toward (about) 50%. He would be building his own bridge, but it is still being built with money. He started by demanding $430 MM a year. The players offered $150 MM, albeit in different form. If he responds with a percentage that represents a clawback of $320 MM… Then Fehr tweaks his bridge again… Sooner or later they will have a deal that (whichever bridge is crossed) represents (about) a 50-50 split going forward.

At this point the players will have given Bettman his money. Bettman will have realized his objective. The only difference would be that the owners would have to pay a significant penalty to repeat the squeeze several years from now if they accept the player bridge. They would have to give the players a fat raise – back to 57% of revenues – for a year to set up a lockout. It provides the opportunity for the league and the NHLPA to quietly negotiate a split that is (about) 50% of revenues indefinitely.

If the NHL is playing a larger game in lockstep with the NFL and NBA they will not be knocked off their path. But if they really want a deal – a good deal – and long term labour peace, they’d have to look very closely at the last offer they see. Will they really want to shut down the sport today to preserve their negotiating power several years down the road? Pay a real cost today for gains that won’t materialize for several years? Is that worth a half season?

Perhaps not. Perhaps the owners will cut the deal. It might work out just as well for them as the current system and if it doesn’t work for them, they can always pay to get their hammer back.

Is that what Donald Fehr is doing? If so, I’m impressed. Is labour peace in our time really possible? I’ve got hope. Out of step again, but cautiously optimistic.

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Comments

13 Responses to “Framing the Issue and Reasons for Optimism”
  1. James Mirtle says:

    But who’s to say Bettman ever gives them a deal with that 57% year in there? It’s pretty well irrelevant if they can’t get a deal structured that way (which is the general consensus).

    Ownership will view that one year as a poison pill they have no interest in leaving in there.

    And yes, it’s all about the cash. But it always is.

  2. Fauxrumors says:

    1) I agree that the NHLPA final year option to revert to the current regimen seems to be out of place. Can’t imagine there would be anyway the NHL would agree to any CBA with such uncertainty/giving the players an option like that.
    2) For that matter I can’t envision a signed CBA deal that would de-link revenue to the salary cap number

  3. Tom says:

    But who’s to say Bettman ever gives them a deal with that 57% year in there? It’s pretty well irrelevant if they can’t get a deal structured that way (which is the general consensus).

    There is nothing to say Bettman will go along, but the owners have to look at it, don’t they? Right now they see the lockout as an investment. They will spend some money shutting down the game to get a whack of money back over the next several years. A no-brainer. So Fehr changes the equation. They get the money. Now they are spending money to shut down the game to ensure they can cheaply lock the players out again several years down the road. That’s an entirely different investment.

    Is it worth it to them? I don’t think that is a no-brainer at all. The owners won’t like giving up the hammer, but they won’t like the price they will have to pay to keep it either. They may not go along, but they have to think about it.

    The general consensus among reporters is the players can’t get a deal structured this way, but I’d at least like to see them get Fehr to explain why the option is there and how he thinks it can lead to long term labour peace. I’d also like to see the media force Bettman to explain why it isn’t at least worth a try. Can you imagine a lockout over this issue? That’s a deal breaker?

    How will the lockout get framed by the media?

    “The players are willing to give up the money but want to make sure they don’t get held up again next time. The owners are shutting down the game so they can easily shut it down again next time. The players are looking for a way to ensure labour peace over the long term. The owners like lockouts every few years.”

  4. Darrell says:

    While the 57% year at the end would seemingly encourage labour peace next time, it should be noted that the NFL had a similar sort of provision in there last CBA, namely, an uncapped year if no new CBA was implemented. The NFL owners (who didn’t even try to claim poverty) simply accepted the uncapped year as a consequence of lowering the players share moving forward. Furthermore, they negotiated new TV deals that paid them if there was a lockout and they (I think illegally) colluded to informally keep a cap during the uncapped year, culminating in cap space penalties for Dallas and Washington after the new CBA was signed.

    Now, uncapped is different than a guaranteed increase in the revenue percentage, and I think it stands a better chance of succeeding.

    I also think I agree with your analysis, Fehr clearly understood that there was no appetite for a long lockout to undo the cap, and that as you have pointed out before, the current cap situations give the owners a ton of leverage to slowly lower the players share of revenue. So in stating that Fehrs goal is to prevent this situation next time is very apt, and besides these sorts of provisions, the only other option is eventually trying to decertify.

  5. Dennis Prouse says:

    Tom, I think there’s a lot of sense in what you have written. There’s no doubt we are on track for a 50/50 split – that much is clear. The hard cap is also not in any danger, despite player agent Allan Walsh’s one man Twitter crusade to try to get it dumped.

    My best guess is that Bettman squeezes the union as hard as he can right to September 15, and then signs a deal if he can get 50/50, plus a few other concessions. This is a straight up power play – the owners want more cash, and they are going to squeeze the players until they get some of it. At the same time, though, I don’t think the NHL is going to be able to maintain the same degree of ownership unity that they did the last time. Last time out, it was about the cap – this time, there isn’t that fundamental principle at stake. Therefore, while they are willing to let him talk tough right now, I think the big markets will be quietly putting pressure on Bettman to get the best deal he can, i.e. 50/50, then sign it before any games are lost.

  6. Gerald says:

    Tom, you are of course correct about the money. Anything about whether the problems of some teams beig solved by revenue sharing or a reduced player percentage, while slightly legitimate (-ish), is secondary, and by a long shot at that. That part of any equation is about what to do WITH the money after it has been allocated. The money is still the thing.

    To me, however, there is another plotline that plays into this to a much greater degree, and it too has been ignored by the media. That plotline is the longer game of labour relations as between the NHLPA and the NHL. This plotline has the following aspects:

    1. Unity is everything in successful labour relations. The side which is more unified wins.

    2. Unity, coincidentally, was (and is) the hallmark of the MLBPA. Marvin Miller understood this very well, and wrote on it quite convincingly. He built MLBPA unity brick by brick, painstakingly with the three prongs of:

    (a) educating the players,
    (b) radicalizing the players through using the MLB owners’ repeated verbal arrogance against them, and
    (c) earning the players’ trust of the union through small, incremental collective bargaining wins (i.e., per diems, pensions, playing conditions, travel, etc.) until they were ready to endure tough strike actions.

    3. Having learned at the foot of the sports union master, Fehr knows the recipe well.

    4. To accomplish this, Fehr needs three things:

    (a) more time,
    (b) some NHL owner/leadership verbal gaffes or blatantly unfair/bullying tactics (perhaps elicited through verbal baiting by Fehr, for instance),
    (c) some bargaining wins (the bigger the better).

    5. Fehr’s short term offer of a 4 year contract is conducive to (a) and (c).

    6. Regardless whay one may think of Bettman, no one would deny his canniness and professional skill. He knows all of the above, and if he knows it, the owners know it because he has told them.

    7. The NHL has a fine line to tread here. While they would like to score some more – a LOT more – money here, they have to take care not to sow dragon’s teeth, as the saying goes. IF they are perceived to have bullied the players and taken them completely to the cleaners, that may very well provide the radicalization that Fehr requires. It might deny Fehr the small wins he needs (item c above), and Fehr might be seen to be neutered by the PA, but that is a risky strategy that could backfire big time.

    8. In making his offer, Fehr has offered the NHL an out that will get them a big, but not TOO big, win. Contrary to many others, i don’t really see Fehr’s offer (what has been reported, at least) being vastly different to the owners’ offer. What Fehr seems to have offered is simply a response to one aspect of the NHL offer – specifically, the TRANSITION PERIOD by which the league would move to the lower cap percentage.

    9. I can see the NHL eventually offering to glue the PA offer to theirs so that the players do not sustain a 24% haircut all at once. Rather, the percentage slowly glides down (whether by fixed dollar numbers, lower %’s or other techniques) until it settles in at the (almost) 50% level. Fehr could easily spin this as a win to his membership. If he could get a sweetener, whereby the % increases if the revenue growth is exceptional (also part of the PA’s current offer), that could be great too, since the new TV money will be kicking in over the next few years. As I calculate it, the NBC money will add over 4% HRR growth all by itself.

    10. So, to me, the main event fight is certainly about the money, as you say. However, the truly interesting undercard fight is whether Fehr will get enough time and ammunition to rebuild the NHLPA’s unity, and whether Bettman will either oblige him or try for the one-and-for-all knockout. Myself, if i were Bettman I would oblige Fehr IF i could get a longterm (10 years minimum) deal out of it.

    Sorry for the longwinded post.

    • Tom says:

      1. Unity is everything in successful labour relations. The side which is more unified wins.

      I don’t doubt that Gary Bettman agrees with everything you wrote. He thinks successful labour relations is about squeezing every penny you can from your employees, leverage, tactics, provoking a fight and then winning the fight. Call it class warfare, right out of the Gordon Gekko school of corporate management.

      On the other hand, most people think successful labour relations involves mutual respect, fairness, creating a safe work environment, resolving disputes with good faith and quietly making a deal that benefits the employer, the worker and the customer.

      Gary Bettman doen’t know anything about successful labour relations. Every time he needs a new agreement, there is a fight and a work stoppage. As long as he gets the most money, he thinks he’s a success. The more money, the bigger his bonus. I guess I just don’t understand the value of money because, by my lights, as soon as there is even the threat of a work stoppage, he’s a labour relations failure.

  7. Susan says:

    Congratulations, because this is the first article about the CBA that I have actually been able to finish without slipping into a coma! Well thought out and written, and you have given me a smidge of hope!

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