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09-25-2003, 03:23 AM
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Owner CBA Leverage

Recent threads have pointed out that the NHLPA will have some leverage in the coming CBA negotiations by having the ability to threaten to disband the NHLPA, and reform a new league, likely with a business partner (i.e. the WHA, perhaps a league in Europe, etc.). It was generally accepted that this alternative is a long-shot, as it comes at a great amount of risk and potential cost to the players or its business partners. The alternative does however give the players some leverage in negotiations though, as it gives them an out.

I had a thought about an equivalent or greater last ditch bargaining alternative for the owners: Consolidate all teams into one corporate entity. Let me explain.

Currently, the NHL is 31 different corporate entitities. One for each team, and one for the league itself. Each team is responsible to make most of their own business decisions and they receive the benefits and pay the costs of these decisions.

If the CBA negotiations ever turned ugly, the owners could decide to amalgamate all the corporate entities into one, and have thirty different "divisions" of the corporation, one for each team. Each current owner would receive a stake in the new formed entity which would be based on the estimated franchise value of their team. All assets of the team would then be owned by the new corporate entity. Each division would now have a manager who is responsible for making decisions relating to that division, however, they would be receiving various directives from the head office, including what their operating budget is. The NHL is able to set the salary budget of each team to whatever it wants, therefore it could decide to set them all at the same amount, thus creating a salary cap.

Because the whole league is one corporate entity, collusion is not a factor. The only potential legal problem I could see if there is a clause in the CBA that indicates that no owner can have more than one team. I think a rule like this is in place, but I don't think it is in the CBA directly. I think it is a rule that is able to change by a vote by the Board of Governors. If that is the case, I don't see anything in this alternative which would have to be approved by the NHLPA within the CBA.

There are a lot of issues that prevent this from becoming a reality, like the fact that owners would not be willing to give up their stake in a company, especially if the team is integrated with other corporations (i.e. broadcasting companies, other pro sport teams, arenas, etc.), however these issues can be addressed and negotiated. Also, any consolidation can be structured so that if the new system doesn't work, the old system can be restored, with all teams receiving all assets that they gave up in the original almalgamation. The profit/loss during that time period will be shared to teams on the basis of their share in the combined entity.

The main point behind this idea though is to identify an option that the owners will have during the negotiations. It's a difficult option, and one that the owners would not find ideal, but becomes an agreeable alternative to the owners if the league's future is put in jeopardy because of a stalemate during negotiations.

I'd like to hear your thoughts.

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