Revenue Sharing Key to NHL Pact

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The New York Sun

The NHL’s labor dispute is entering its final hour, at least where saving the 2004-05 season is concerned. Both the owners and players have dug in their heels regarding one key issue – the institution of a salary cap – and neither side has shown any inclination to capitulate. With each passing day, the NHL – and hockey in general – falls further off the North American sports fan’s radar.


In an interview with the New York Sun yesterday, NHLPA Senior Director Ted Saskin discussed the union’s vehement opposition to a salary cap.


“We’re not prepared to agree to an arbitrary formula intended to apply to all teams whether they’re in Toronto, New York, Nashville, or Atlanta,” Saskin said. “We believe that there should be some marketplace where owners can continue to set the values for players, and we’re prepared … to accept a significant restructuring of the system in favor of the owners. But we’re not interested in setting a salary cap at a level lower than the marketplace would freely dictate.”


Of course, as long as there is a collective bargaining agreement providing mechanisms like salary arbitration and entry-level salary caps, there is no free marketplace. And as long as ticket sales represent well over 50% of total league revenues, fans are going to frown upon any references by the NHLPA to that so-called marketplace.


The owners’ proposed salary range of $34.6-$38.6 million is designed specifically to reduce the amount spent by the league’s most aggressive teams. The usual suspects – Detroit, Philadelphia, and Toronto – would all be impacted, but it is the traditionally frugal Devils who are the biggest surprise. They have committed over $60 million to player salaries for 2004-05, and even with the players’ proposed 24% rollback, would still find themselves nearly $8 million beyond the league’s salary maximum.


At the other end of the spectrum are the league’s six weakest teams, who accounted for approximately $175 million of the league’s $225 million in reported losses last year. While the proposed salary range will surely increase profits for the Red Wings and Flyers, it is unclear how teams like the Thrashers, Predators, and Panthers would be helped when they must each raise their payrolls by $10 million or more in order to reach the league’s proposed $34.6 million minimum.


In a recent presentation to the Edmonton Chamber of Commerce, NHL Commissioner Gary Bettman spoke about how the league’s desired cost certainty was essential to the Oilers’ survival.


“No longer should we have to go through drives to save the Oilers,” he said. “No longer do we have to go through competitive droughts.”


Bettman received a standing ovation, but he neglected to mention that the Oilers’ revenues are at a strong enough level that they wouldn’t even qualify for any economic relief under the league’s proposed revenue sharing plan.


Could an NFL-style salary cap work for the NHL? It’s possible, but significant concessions would be needed from the owners with regard to revenue sharing. The NFL shares approximately two-thirds of its aggregate revenues amongst the teams equally, effectively eliminating any disparities between big-market and small-market teams.


“The NFL has committed to very significant revenue sharing,” Saskin said. “The NHL has never been committed to revenue sharing, but wants an NFL-style cap to restrain player costs.”


The primary difference between the NFL and the NHL is their national revenues. The NFL is scheduled to earn $1.34 billion per year from CBS and Fox for the right to televise Sunday afternoon games and an additional $700 million per year from its exclusive partnership with DIRECTV. The rights to Sunday and Monday night games are still being negotiated, and will be worth at least an additional $500 million per year.


In sharp contrast, the NHL would have been guaranteed only $60 million for the rights to broadcast games this season, all from ESPN. The national television deal is a revenue-sharing partnership with NBC, in which the league is guaranteed no money up front.


The league’s most recent proposal suggested that the bulk of the shared revenue would come from playoff income, despite the fact that only 7.3% of total revenues are accumulated during the playoffs. By forcing playoff teams to share revenues, the league would be attempting to reduce economic incentives usually provided by on-ice success. More importantly, though, they’d prove their unwillingness to implement a revenue-sharing program similar to the NFL’s.


“What this should be about for the NHL is figuring out how to reduce labor costs,” Saskin concluded. “There is only one method that they’re willing to explore. It’s intransigence on their part, only seeing this in one way.”


Can the season be saved? From a dollars-and-cents perspective, the two sides aren’t very far apart. Only $40 million separates the owner’s proposed salary-range system from the players’ proposed 24% rollback. If the owners were to propose a meaningful revenue-sharing program (at least 35%-40% of league revenues), the players could possibly consider a salary cap.


In the next two weeks, we will find out once and for all whether the NHL and NHLPA are willing to make the significant concessions needed to save the season…and the sport.



Mr. Greenstein is the editor-in-chief of INSIDE HOCKEY (insidehockey.com).


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