NHL CBA: The Fun Begins

by J.J. Guerrero · July 17, 2012

While Tracy and I lucked out and bought our first place, a one-bedroom condo a few minutes east of Science World, before the Vancouver real estate market started to heat up, we, unfortunately, tried to sell it to move back to our new place in Surrey just as the financial crisis started to hit.

But while we conceded we wouldn’t be able to sell it for as much as we may have initially expected, nonetheless we had a good idea of its market value at the time and certainly expected to receive relatively fair offers.

As soon as we listed it, we received an offer for $60,000 – or 25% – less than our asking price – an offer we easily rejected as soon as it came in. His realtor asked if we had a counter-offer. We were so insulted by the initial offer that we didn’t bother with that particular buyer.

When the NHL and the NHLPA finally commenced their new CBA negotiations, both parties – at least publicly – said the right things about wanting to get a deal done and not missing any games.

But on Friday night, the NHL presented their first offer, which included:

Reducing the players’ share of hockey-related revenue (HRR) from 57% to 46%
Redefining what is included in HRR
Limiting contract lengths to 5 years
Eliminating signing bonuses
Eliminating salary arbitration
Extending length of entry-level contracts from 3 to 5 years
Raising eligibility for unrestricted free agency from 7 to 10 years

Considering league revenues increased from $2.2 billion to $3.3 billion since the last CBA was negotiated in 2005 – and not to mention the cordial tone in negotiations to date – you have to wonder why the NHL would start with such a low-ball offer. I suppose we’ll find out tomorrow when negotiations resume how insulted the NHLPA was and they respond.

In the meantime, here are some initial thoughts on the NHL’s offer:

It’s no secret NHL owners want a bigger share of the revenue pie. Now apparently, they also want to share a smaller pie.

If I’m the NHLPA, why wouldn’t I counter by asking for a 68% share of revenues with hopes of meeting in the middle?

Even before reducing the $3.3 billion revenue pie, a 20% reduction of the players’ share means reducing it from around $1.8 billion to $1.5 billion, and thus, also decreasing the salary cap from $70.2 million to around $58 million. Looking at CapGeek, almost half of the league – 13 teams – will have to shed players before next season starts. Obviously, if they do redefine – and reduce – HRR, then the players’ share – and the cap – goes further decreases as well.

While this would reset salaries, presumably to help teams the smaller revenue teams that can’t afford to spend $70+ million in player salaries, it doesn’t address the structural issue these teams face – that is, this move does not do anything to add to these teams’ revenues. For instance, what happens when league revenues (hopefully) inevitably hit $4 billion and the cap, using the current formula, is again near $70 million. In other words, it’s one thing for the Torontos, Montreals, New Yorks and Vancouvers of the league, who account for a significant portion of the overall league revenues, to make a boatload of money, but unless there’s more meaningful revenue sharing with the Floridas and Nashvilles, the smaller revenue teams will always be hard-pressed to meet the cap floor, never mind the ceiling.

For fun, if the NHL and NHLPA were to agree to give players a 51% share of revenues – which seems to be everyone’s guess as the NHL’s end goal – and don’t change what constitutes HRR, the cap would be pretty much the same as what it was in 2011/2012.

By limiting contract lengths to 5 years and eliminating signing bonuses, the NHL is obviously trying to put a stop to the cap circumvention deals handed out at first to the likes of Roberto Luongo, Ilya Kovalchuk and Marian Hossa. A couple of years ago, you could argue these deals favored the big market teams who could afford them. But last summer, the Columbus Blue Jackets gave James Wisniewksi a front-loaded 6-year/$33 million contract, and of course a couple of weeks ago the Minnesota Wild signed Zach Parise and Ryan Suter to matching 13-year/$98 million contracts that include $50 million in signing bonuses in the first 3 years. If this doesn’t prove the league is its own worst enemy, I don’t know what does.

If the objective is to prevent teams from using lifetime deals to play loose with the cap, wouldn’t it make more sense to simply make the cap hit equal the average of the top, say, 5 years of the contract?