There won't be a lockout.
Seven years ago, the owners held a powerful upper hand. And more important, the issues were different. Gary Bettman wisely hired Arthur Levitt, the former Chairman of the United States Securities and Exchange Commission (SEC), to produce an audit showing the NHL lost $232 million US in 2003-04.
That gave Bettman public support and believability. The owners were told by their agent, the NHL commissioner, that they could gain $1 billion with a new CBA and they certainly faced the prospect of losing money if they ran a season. It was an easy decision to shut down.
All Bettman is after in this negotiation is to do what both the NFL and NBA did and trim the players’ percentage of revenues. With the wonderful growth since the last CBA, the players now earn 57 per cent of hockey-related revenues (HRR) and have been getting larger absolute dollar amounts.
Smaller percentage of a shrinking pie
The NFL and NBA sliced the players take, and Bettman wants to achieve a similar deal. In simplest terms, he’s out for 50/50, with a few alterations in the definition of HRR – which would further chisel the players’ share.
A smaller percentage of a shrinking pie. He'd like the free agency and arbitration concessions from the last CBA to go and to limit contracts to five years in length. In addition, the owners propose not tying the cap amount to a percentage of revenues, suggesting players receive $58 million, then $60 million then $62 million before tying the cap to revenues over the last three years of the deal. This too would grab back cash for the owners.
Lastly, Bettman's offer to split any revenue growth beyond 10 per cent equally with the players is shrewd, because by redefining HRR, it’s unlikely the growth rate will be larger than in years past.
Don Fehr's response was in the realm of Bettman's hiring of Levitt. Instead of countering the NHL offer, he created an alternative mechanism to slow the growth in absolute amount of pay over the first three years of the new CBA. Not a cut or reduction in pay, just a slowing of growth in pay, thus reducing what the players would have received at 57 per cent, a concession to ownership.
He also suggests a revenue-sharing kitty, distributed by the commissioner to assist weak teams. Fehr is saying the players gave the NHL what it needed in 2005, a cap, a rollback on salaries of 24 per cent, and that the gains the players made on contract structuring are off the table. That's very Marvin Miller. Contract structure always trumped dollars for Miller, the former MLBPA executive director.
Role of agents?
In 2004-05, the player agents were all over the map in their bid to outflank their own leadership, and I always felt they played a divisive role which busted that union. They’re not really sending great signals this time either. By signing veteran players to long deals, they’re indicating they believe the owners will win and that they only stand to make less in a new deal. It doesn’t matter. And these agents will not tangle with Fehr.
Times have changed. The owners face losing 7.1 per cent revenue growth and the profits that entails.
I want to thank Rod Fort, economics professor at University of Michigan, as always for his guiding hand in dissecting the game we're in. As Fort points out, Fehr has been in precisely this position many times at the MLBPA. Every time the PA stood its ground, there was never a lockout. The wildcard would be player solidarity. Fehr will keep them in check, and Bettman will make a deal.