Lockout discussion thread 2.0
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11-14-2012, 05:34 PM
Join Date: May 2011
Location: Canberra, Australia
As an aside,
We have all discussed the cons of various proposals and behaviors in these negotiations, and I think it's important to state what a good agreement would look like, at least approximately. For me, as a fan, a good agreement needs to have the following attributes: long-term labour peace, parity, and high-player salaries to keep the sport attractive to talented teenage athletes. These are not mutually exclusive points.
According to Forbes magazine, the NHL has the most disparity of any of the major North American sports. Forbes estimated that 18 of 30 NHL teams lost money in 2010-2011.
The article points out that the five most profitable teams (Montreal, Toronto, Vancouver, Edmonton, New York) earned 212 million, and the remaining 25 teams lost 86 million (total league profit is 126 million). It says that the NBA had a problem nearly as bad, but that it tripled revenue sharing in its new CBA. The article then says Baseball (in the post-Fehr era) is the most equitable of major North American sports, with the 3 most profitable teams only making a mere 20% of total league operating income (!!!).
The full ranking of NHL teams by operating income is available here:
It says that 12 of the 30 teams are profitable. For hockey to be viable and to have labour peace, I'd estimate that you'd need ~22 teams to be profitable.
In order to have 22 profitable teams, you'd have to add 7.5 million to the total pool per team to make it down to the Nashville Predators (in 22nd place). That is 165 million, equivalent to 5% of HRR. Lowering the cap to 52% of HRR from 57% of HRR would immediately achieve this. However, the players have accepted a reduction to 50%, which would make 27 of 30 teams profitable -- but only in the short-term. In the long-term, this won't help, as growth is faster in the richest markets (which increases disparity), and owners shift more money into scouting, drafting, etc which raises the average expense to be competitive.
Thus, aside from the short-term solution of lower player salaries, the NHL will also need more revenue sharing, to be more in line with the successful North American sports. A fair agreement would be for the five most successful teams to have a 12.3% reduction in operating income (as with the players), and thus have their profits decrease from 212 million to 186 million. As their payrolls are dropping as well due to the new CBA by a total of 43 million, that means an addition of 69 million dollars to the revenue sharing pool, or an average of 2.76 million for the 25 other teams.
At this point, all teams would be profitable except for the Columbus Blue Jackets and Phoenix Coyotes.
You would seemingly have an incentive for the owners not to push another lockout if 28 teams are profitable. However, that wouldn't last on its own. For 28 teams to remain profitable, you would need a salary cap on non-player expenses (scouting, drafting, etc). As the owners have admitted, even though they have 176% growth hockey-related revenue since the last lockout after subtracting player salaries, they are worse off, because scouting, drafting, etc have become expenses. If player salaries are fixed, teams will try and compete by hiring better scouts, and we will eventually see a situation where people like Trevor Timmins are paid 30 or 40 million a year, because that's how much they're worth if player salaries are fixed and rookie salaries are kept artificially low, or a situation where every team has six or seven general manager equivalents pondering every move like with the Toronto Maple Leafs. This will lead to new disparity and a new lockout. This would wipe out any gains from the new CBA as it did with the old CBA. The solution is a cap (or a luxury tax) on non-player expenses. What that cap would be would depend on the internal details, which are not available to us. A good idea, I think, would be to put the cap at a few million dollars above whatever the current average is, and a 50% luxury tax for spending above that amount. That might be the mechanism to finance the revenue sharing mentioned above.
Thus, in summary:
- Lower player cap to 50% of HRR.
- Increase revenue sharing by ~70 million dollars.
- Have a soft cap on non-player hockey-related expenses (scouting, drafting, management, etc) with a luxury tax, that could finance the revenue sharing mentioned above. This should give total cost parity and certainty to the NHL.
Suggested concessions to the players:
- Get rid of the idiotic retirement rule that penalizes players older than 35, you could probably pull this off by having salary be more equal to average salary in each year of a contract.
- Raise the minimum salary to $750,000 or $1,000,000; increase pensions and health benefits.
- Reduce offer sheet compensations so that second contract players are paid comparable salaries for comparable production.
- Increase draft bonuses to attract more talent into the sport. Have the bonus be paid out at the draft.
- Have the CBA be long, so that players don't lose more money to yet another lockout in five years.
- Honour current contracts by having the convergence to 50/50 be gradual.
Last edited by DAChampion: 11-14-2012 at
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