Hard Heads Prevail as NHL’s Clock Strikes Midnight

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

TORONTO – As of midnight last night, the NHL locked out its players, threatening to wipe out the entire 2004-05 season. Now that the collective bargaining agreement between the league and its players union has expired, Commissioner Gary Bettman and the owners are determined to secure cost certainty, which the players say is tantamount to a salary cap.


Bettman said yesterday that the league hopes to lower the average player salary from $1.8 million to $1.3 million, adding that revenue losses have left the owners with no other choice. He repeatedly belittled the union’s bargaining position and made clear that declaring an impasse under U.S. labor law and unilaterally imposing new work rules was an option.


Bettman, citing $1.8 billion in losses over the last 10 years, claimed that about 20 of the league’s 30 teams would lose less money by closing up shop than by playing out the season.


The union insisted it would not bow to the pressure to accept a salary cap.


“Unfortunately, the league has rejected all opportunities for compromise, while stubbornly insisting that Gary Bettman has the single solution to every problem – a salary cap,” union head Bob Goodenow said. “An honest partnership can never be achieved under the leagues ‘my-way-or-the-highway’ approach. […] Gary and the owners have chosen, through a lockout, to try to force players to accept a system they know players would never agree to.”


As is so often the case when negotiating partners refuse to compromise, the reality lies somewhere between their opposing positions. While it is certainly true that the league’s financial system has become utterly untenable, Bettman’s stated idea that a salary cap would lead to competitive balance is demonstrably false, and the owners must share the blame for the current crisis.


Over the past 10 years, the NHL’s wealthiest owners have operated under the simple assumption that increased spending on players will yield extra home playoff games, which will in turn increase profits. That’s proven to be a fool’s bet: Of the seven teams that have consistently employed a “spend to win” strategy – Detroit, Colorado, Dallas, Philadelphia, Toronto, St. Louis, and the Rangers – the first three have combined to win six Stanley Cups in the past decade, but none of the latter three has reached the Finals since the Rangers in 1994.


While the spendthrift Rangers have missed the playoffs for seven straight years, the fiscally conservative Devils have appeared in three of the past five Stanley Cup Finals. Even more telling is the fact that 12 different teams have earned the 12 available Conference Finals berths in the past three years, most of them employing conservative financial management strategies. It is clear that NHL teams can and should exercise financial restraint without the aid of a salary cap.


Nevertheless, the seven big spenders have driven up salaries league-wide, and the current average salary of $1.8 million seems excessive in a league that raked in a mere $450 million in broadcasting revenues in 2003-03. Player salaries have increased by more than 300% over the past 10 seasons, and total over $1.3 billion, or a whopping 62% of the league’s $2.1 billion annual revenues. No matter how you slice it, it’s clear that player salaries represent an unhealthy percentage of overall league revenues.


The union must also share the responsibility for this state of affairs, as it has failed to demonstrate any foresight whatsoever. The players will grab as much money as the owners are willing to pay them, and they’ve used the powers granted them by the CBA to boost their salaries in every way possible. Their current refusal to even consider a salary cap is nothing short of irresponsible.


It’s clear that the NHL will not resume play until the owners gain some form of protection from themselves, be it a salary cap or a luxury tax. Right or wrong, the owners hold one distinct advantage in these negotiations: NHL salaries are at least five times what the players can earn in any other hockey league. The NHL has no real competition, and the players have little leverage in this dispute – no matter what Goodenow might say.


Given that the NHLPA has already proposed a luxury tax-based system, it’s obvious that they are aware that drastic change is needed. The question is how long they’ll hold out before going back to the bargaining table. Here are some elements that might eventually enable the NHL and the NHLPA to come to terms on a new agreement:


* REVENUE SHARING It is important


to remember that on-ice competitiveness does not inherently translate to profitability; one of the


biggest problems the league has in maintaining a competitive landscape is the disparity of wealth between its various teams. The Detroit Red Wings and the Nashville Predators are operating with completely different economies, and a system where some of the wealth is shared will go a long way towards bridging that gap.


* PAYROLL THRESHOLD By establishing a maximum payroll (whether flexible or fixed), it will enable the league to restrict total player salaries to a more reasonable percentage of the aggregate revenues. The current 62% is unacceptable, especially given the league’s inability to effectively market itself. A salary cap of $40 million – with a punitive luxury tax imposed upon teams whose payrolls exceed that figure – would help restrain player salaries.


* “LARRY BIRD” EXCEPTION Inherent in the NBA’s salary-cap system, the Bird exception makes it difficult for teams to get out-bid when their players become free agents. By giving teams the option to go beyond the salary cap when re-signing their own players, a similar exception in the NHL would remove the worry that well-built young teams – like the Stanley Cup-winning Tampa Bay Lightning – would be broken up just as they become successful.


* QUALITY OF PLAY IMPROVEMENTS NHL on-ice officials do not adequately enforce the league’s rules, and as a result, the quality of play has deteriorated precipitously over the past decade. Hooking, holding, clutching, and grabbing have become the norm, and until the league takes a meaningful stance against interference and allows the skilled players to play their game, the quality of play will remain at a sub-par level.


* MARKETING Monies from the luxury tax would provide the funds needed to implement an effective marketing campaign. The $300 million slush fund the league accumulated to help owners during a lockout would also do everyone more good if it were spent reaching out to new fans. A lockout will only serve to alienate existing fans, a scenario that the league and players can hardly afford.


* TICKET PRICES Bettman said yesterday that he wants to “achieve an economic system that will result in affordable ticket prices and stable, competitive franchises.” If that is truly the agenda, then making affordable ticket prices a mandatory part of the new CBA will be an important part of restoring the fans’ trust.


Unless the owners and players take a drastically different approach with regard to the game’s future, the NHL’s revenue stream will not increase appreciably in the next five years. Additional expansion is not an option, and ticket price increases are similarly impossible. As a result, the league must do whatever it can to stabilize its economy.


The players have been publicly steadfast in their opposition to a salary cap, but behind closed doors, they’re probably aware of just how much is at stake here. The players have benefited greatly from the existing CBA, but it’s clear that they’ll have to make some significant concessions if their golden goose is to live another decade.


The bet here is that both sides will come to this realization in time to save the 2004-05 NHL season. Canceling the season – and going a year or longer without awarding the Stanley Cup – will put the league out of sight and out of mind for all but the most dedicated fans. The result will be a diminished economy – $1.5 billion or smaller – that will have a far more damaging impact than even the most unfavorable CBA either side can possibly imagine.


The New York Sun

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