STL Post Dispatch: Blues [players] get economics lesson
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11-13-2003, 06:37 PM
Join Date: Feb 2002
Originally Posted by
Nothing personal, but you are singing the same old tune that player's unions in all major professional sports have been repeating for decades. The script goes like this:
Player's Union: "Owners need to disclose their financials!"
Owners then provide financials.
Player's Union: "These numbers are incomplete and manipulated to favor the owner's agenda! We don't believe them!"
It is soooo predictable and such a red herring, IMO. Player's union doesn't trust the owners? Fine, that's their perogative. As it is the perogative of owners not to accept a CBA that doesn't meet the needs of
their business investment
The owners have, in fact, gotten themselves into this economic mess, no doubt. (And the players aren't even questioning the fact that the league has financial problems; only the most cynical idealogue would at this point). The next CBA is the owners' "hammer" to rectify the problem of skyrocketing
payrolls. I'm looking forward to them using it.
I'm not saying that the league doesn't have financial problems; it's pretty obvious that it does when you look at the NHLPA's initial offer. However, what is the extent of the league's financial problems, and how much of that can be fixed without a salary cap? I think a pretty darn good solution can be made without a cap. Anyway, the fact still remains that without complete financial disclosure, the NHLPA is at a
of being exploited by the NHL once again. Sure, we can tie a salary cap in at 60% of "Defined Gross Revenues," but without the NHLPA knowing all of the sources of revenue for the teams, it is too easy for the teams to find ways around the rules. In a labour agreement, especially one that will be as highly scrutinized as this one, before agreeing to anything, each side must know exactly what they are getting themselves into; any tiny slip-up or loophole can be magnified to a tremendous extent, and without complete financial disclosure, the potential for a tiny slip-up, and the cost of it, is enormous for the NHLPA. It's just like the little slip-up by the NHL with the rookie salary cap; Barnett found a way to exploit that through a lucrative incentive structure, and now teams are paying huge cash to their top draft picks.
As a general and easy to visualize example (in reality, discrepancies won't be nearly this obvious), the NHLPA and NHL may agree that all revenues from ticket sales going to the team must be included in "Defined Gross Revenues." However, this simple statement does not mention revenues going to the arena due to ticket sales. Now, if the team owns the arena, what is stopping them from changing the agreement with the team such that the arena receives a much higher percentage of ticket sales revenue. That could decrease "DGR" immensely, thus significanlty decreasing the portion of revenues going to the players. Revenues can very easily be shifted from one company in a corporation to another, or from one business unit to another. If the NHLPA doesn't examine all of the possible options for the owners, they ARE going to get burned, plain and simple.
Another question that would come to mind if I were the NHLPA is...what is the revenue recognition policy for NHL teams, and are they allowed to change it freely? If the teams can freely change their revenue recognition policy, that could have a HUGE impact on revenues. Teams receive huge amounts of money for advertizing, tv revenues, and ticket sales. I'd assume that many of these revenues are included on financial statements as soon as a contract is made, or as the contract is being fulfilled by the teams. However, what's to stop teams from waiting until they are actually PAID for the services, which could take years, especially if they are very lax on receiving this payment; other companies would be extremely happy to hang on to their money for longer and gain interest, and if it saves the teams money on player salaries, the players would clearly be the only losers. Heck, the league could even completely dominate this little slip-up through TV revenues. The league could hold on to TV revenues until the next CBA, at which point they could pay it all in a huge sum to the teams. In the years between CBAs, teams would be recognizing no/little TV revenue; imagine the impact on salaries if they are tied to revenues! The impact of deferring revenues can be enormous and, once again, greatly magnified if measures are taken through the use of companies that own NHL teams. Cablevision could have a ton of fun with this.
Though the situations above are rather far-fetched, I chose them because they are easy to understand and can have a tremendous impact. Because financial statements get a lot more complex than this, the search for potential loopholes becomes just as complex. If the owners have significantly more information about revenues than the players, they have a distinct advantage and should be able to exploit that advantage to benefit extraordinarily. I'm taking just my first University accounting course right now, but if I were the owners, I know that I would spend weeks analyzing my financial statements, looking for every little thing that the NHLPA may miss, hoping that it results in a loophole that lets me cheat (unfraudulantly of course) at my own game (salary cap).
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