But the NHLPA is not a union, it is a players association. Right? Well maybe. Not sure that it matters much but the PA does not negotiate salaries for most of their members, just set the universal rules of the workforce. In fact by trying to set up a hard salary cap it is the owners who are making the PA into more of a traditional union.

 

In the past I have supported the owners' position on things most often. The one thing that bothers me the most in sports has to be when a player holds out for a better contract! What happened to giving your legal word? However, in the most recent NHL labour negotiations I have found myself time and time again defending the players' position (but not the players themselves). While I may be in the minority as I put out arguments I find that most people can't offer an argument against them and don't usually disagree with me. The one fall back always seems to be that X number of million dollars should be enough for the greedy players.

 

When I heard about the NHL fansfighting back website I gave that a whirl. It wasn't nearly as busy as I expected and soon found myself one of only 4 regular posters on the message board. The board originally was very pro-owner, but soon as the real arguments came out it developed into either pro-player like myself, or screw them both arguments.

 

One day I might refine the following posts that I made to put them more into context, but for now I am moving them here simply because I don't want these arguments to be lost. When someone disagrees with me I would rather be able to cut and paste from my repetoire of material. I would expect the Fans fighting back message board to be gone soon.

 

So here goes, why I support the players' position for no salary cap (and other matters too).

 

Sorry if this sounds like listening to one end of a telephone conversation.

 

I spent many hours going over the report issued by Arthur Levitt. At first I had my doubts, but I found his methods and analysis to be very intriguing, especially the use of benchmarking other sports to make certain that teams were not hiding their revenue streams. There is certainly a little play in his numbers of course, but overall it seems pretty sound.

However, when he goes into his analysis about the NHL as a going-concern he doesn't try and stick "the blame". Yes we all know salaries are the big problem, nothing new here. These comments etc about how he's seen X number of industries, etc, etc, puts him into the realm of consultant and no longer strictly auditing the numbers.

As a consultant Levitt's integrity is not without question unlike his financial acumen. This is a man who has done, maybe still does, consulting for the Carlyle Group. Basically that is a group of politicians etc, who are given a lot of money especially after they retire in reward for greasing the political wheels in favor of the Saudi Arabians while they are still in power. Do you have any idea how many $$$ the Saudi's invest in the stock exchanges of America? This Carlyle group includes the who's who of Washington including George Bush (SR), and Colin Powell. I'm not trying to paint a sinister picture here, but just pointing out that Levitt is a political being, and not the impartial pencil pusher he is made out to be.

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Comparing revenue sharing systems under the NFL to potential NHL systems is like comparing economies of scale in the video distribution system to that of the produce industry - two completely different beasts.

The NFL's biggest revenue source is TV revenue (and oodles and oodles of it). The NFL has no local TV revenue, just national. Therefore, regardless of what they do with ticket revenue, merchandise, etc, the NFL would pretty much be operating under a revenue sharing system no matter what (as long as they divide the national tv revenue evenly amongst all the teams). All the NFL teams come from one nation.

The NHL's national TV revenue is small. The biggest bucks come from butts in the seats, local advertising, local TV revenue. The NHL is beholden to two nations,not one.

The NFL has a tremendous league, which is beloved across America. The NHL is basically a fringe sport. The NHL's primary mistake has been to operate as if they were a national sport in the U.S.

The CFL is strongest overall when the Toronto Argonauts have a good team, and can put butts in the seat. Likewise, the NHL is strongest when the Rangers, Maple Leafs, Canadiens and other places able to generate lots of revenue have good teams. While there is undisputably a correlation between success and the money spent, it is not without exception. The Flames on one end of that spectrum and the Rangers on the other.

Cities with smaller markets like Calgary and Tampa Bay (big city, but small hockey market) need to accept the fact that while they need to be able to compete, the playing field may not be level. Fans in Winnipeg, Quebec, and Hartford would accept that compromise about now I bet. For instance in Winnipeg's horrible 1980-81 season the Jets still ranked in the middle of the pack in attendence even while going through a 30 game winless streak.

When the NHL tried to go National and teams fled to non-traditional NHL cities they created a lot of the wage inflation. Winnipeg would put 13,000 butts in the seat even with a team destined to miss the playoffs. Tampa Bay, Nashville, Miami, etc, do not have that luxury. They need a shot to win to get people to come. So you had wealthy owners who outbid each other with this dream of a league to be the next NBA. When the bubble burst on that dream and many of the owners took personal hits in their wealth over the last couple of years, they find themselves in a mess. The NHL's losses (and player's salaries) would have been substantially less if the teams remained in those smaller markets.

Now the owners come to the players and say, "tie your foruntes in with us. Look at this mess we've created out of bad business decisions. In the future if we make more bad decisions then you will share the pain too. " Where do I sign up?

Let's say that 55% of revenue is the ideal amount that should go to the players, just for argument's sake.

Under a free market system where the owners operate sound business plans, you would have small market teams who if they were having a lousy season might operate at 80% of their potential revenues as they are supported by more diehard fans. However, if a team like the Rangers dips down to 80% at a minimum in terms of revenue streams due to a lousy season (probably a larger drop then that because of the number of options available to fans) then that lost 20% is a heck of a lot more $$$ lost then it is in Calgary.

If 55% is the amount to go to salaries, and the players do their jobs negotiating and the owners do theirs, then both the owners and the players come out ahead when local revenue is maximized.
Is that a pipe dream? Absolutley, because the owners won't do their own jobs. Back in the old days it was the players not doing their jobs, so the owners reaped the benefits tenfold. Now its the owners who wont do their jobs. No wonder the game is hurting.

IF a city refuses to support a team on 55% of their incoming revenue, then move them, fold them, or operate without profit.

The players need to give to the owners as well.

A one time % reduction to all contracts, the right of the owners to fold and move teams within a reasonable limit, and the elimination of the binding arbitration system. They also need to realize that they have a limited shelf life, and that missing out on a year or two is going to have a much bigger impact on their career money earnings then giving the owners some concessions. IF I were them I would be very antsy when I hear that their leader isn't even calling for negotiations right now.

*********

As for the Canadian teams especially in Ottawa, Calgary, and Edmonton, they will be in bigger trouble if the CAD$ recovers. In the last 2 1/2 years the CAD has strengthened about 20%. When Bettman released the NHL numbers this past year the league lost less then expected, and the number one reason why he said? The Canadian dollar. What happens if it slides?

The biggest enemy to the Candian teams aren't Detroit, Rangers...it's Nashville, Phoenix.....where unless the team does very well on the ice they won't be able to draw flies. So the owners get into a catch 22 where they need to operate at a loss to avoid being embarrased at having only 5,000 fans in the seat. They then need to call on the league and PA to bail them out. If you take out the losses from the worst 6 teams, and eliminate just a bit of the inflationary pressure on wages it doenst take long to put the league into the black as a whole. Read Levitt's report and he says pretty much the same thing.

Here's a final point. I saw the numbers a year ago on National TV revenue (and this was based on the ABC/ESPN dollars nevermind the dollars going foward under the new deal.) If the Canadian teams were allowed to split the Canadian national TV money amongst just the Canadian teams, while the American teams split the American national money, each Canadian team would have pocketed an extra $3million U.S. per annum over what they actually did receive when all monies were split evenly.

In Canada, the Leafs, Canadiens, and even the Flames draw fans all across the nation. Leaf fans are found in Cornerbrook, NFLD as well as Prince George BC. HNIC ratings are high when Canadian teams play. US "National" coverage is nothing except for a package of regional games. A Kings-Rangers game does not have the same effect in St. Louis, as a Canadiens-Flames game does in Winnipeg. In other words, Canadian National TV revenue is actually more like "local" revenue, and actually takes away money from the teams. If there was no HNIC each Canadian team could earn more local TV money by selling lucrative Saturday night games. They are in fact subsidizing the American teams.

That $3million (and that figure is sure to grow) would go a longway towards equalizing out the effect of changes in the dollar.

A real solution is in the hands of the owners. Operate in the same free market economy that made you multi-millionaires in the first place, and operate under the same principles. You used to have more control over your own fraternity, regain that control. Players, stop making stupid comments about dog food and the fans that will hurt the game and your own pay. Get your leader to the table.

************

 

The owners can't discipline or control themselves now, changing the system won't change that. Whether it's the Colorado Rockies trading their 1st round pick to Boston for Dwight Foster, or two teams going out and signing Eric Lindors. Teams can still be mismanaged and parity but a dream.

I agree the free market system failed. How pathetic is that? In a virtual monopoly where your "competitors" should be your friends the owners can't even control themselves. What's going to stop their next stupid business decision? Let's move a team to Mexico City. Let's build a new 30,000 seat arena. There are other ways to drive up expenses and put teams in the red.

Tampa Bay and Ottawa were given expansion franchises for one reason and one reason only; they were the ONLY applicants to not flinch at the asking price. Granted they didn't actually have the money but that was only a technicality to the greedy owners. Ottawa would never climb out of that debt.

The owners wringed their hands in greed and took the cheques as high profile owners Wayne Huizenga, Disney, etc were added to the mix. Geez who would have thought this sort of thing might create wage inflation? Who would of thought tht these high flying owners would have been willing to compete on a level playing field?

Does a salary cap also come with a brain cap for the owners?

Cities like Calgary and Winnipeg don't need equal footing to support teams. They need the smaller markets to stop bidding up the players. Long after the Rangers, Flyers, Wings, and Leafs sign up the veteran free agents there will still be good talent to be had, if the teams that are making up 75% of the league's losses stop the insanity. Flyers, Rangers, and Leafs are 3 of the biggest payrolls in the NHL. How many Stanley Cups between them in the last 10 years? 1?

Parity will not make Hockey a national sport in the U.S. Stop drinking the water from the NHL cooler, Hockey never was, and never will be a national sport in the U.S. Do you see fans in St. Louis saying "Wow, Los Angeles and Anaheim are playing tonight, should be a good game because they are so even. Let's watch?"


The league will be strongest when its strongest markets have good teams (New York, Detroit, Chicago, Boston, Montreal, Toronto, etc.) There are 30 teams in the NHL but only 2 can go to the final. There are too many teams like Nashville, Tampa etc that will only draw good if they are in the top 4 in the league; and there are more bad teams then good spots.

There were many checks in place to control the bidding. Budgets, a finance committee, good business sense, but they were all ignored.

Who could have forseen this? Gary Bettman practically predicted it. It was part of his plan. His goal was to take the NHL national, he grew revenues I give him that. The owners bought in, they grew their salaries to national levels, but the revenues didn't keep pace. No big American TV deal.

Baseball has its Yankees, and other high spending teams. But it also has its Twins, Marlins, etc that while they dont have a great team every year still put out some great ball and win some titles. But MLB is a much better league when the Yankees, Dodgers, etc are strong.

Finally, how would a cap remove the NHL's obligation to help weak teams? If the team goes bankrupt the NHL will step in and run it. Under the CBA they won't be able to fold teams. Bettman has stated pretty clearly he is going to stick to 30 teams, no contration. How is their obligation different then today? Do you honestly believe they are are now going to hold each other accountable?

The players have offered $100million in salary cutbacks. 75% of the $400million in losses come from mismanagement of 6 franchises. But that's not enough because the owners need a way to control themselves.

How about an NHL by-law that requires budgets approved by the finance committee? How about forcing franchises to be sold or revoked for failure to come up with and stick with a budget that makes sense? Oh, but that would be putting the responsibility squarely with where it belongs - the owners.

 

 

 

NFL gets 60% of its revenue from National sources.

NHL gets about 10% of its revenue from National sources.

If an NHL salary cap is put into place at say $40million what becomes of a rich team like the Toronto Maple Leafs? IF there fans are willing to pump in 5 times the revenue that the Nashville Predators fans pump into their team, why should the two have equal footing? What becomes of the extra cash? Either the owners of the Leafs are going to reap an unbelievable extra winfall of cash, or more likely, their revenue will decrease if their team performance falls. What do you think of this trade-off for NHL overall revenues - Atlanta and Nashville rise to the top, while Toronto and Detroit plummet to the bottom of the standings. Sure, the losses of the league might go down but the overall revenue would also go down (hurting only the rich owners and the players). Before the Red Wings had a resurgence the Jets were outdrawing them at the box office. While the Leafs have always sold out, the fans of the Canadiens have in the past left seats unsold when the team's fortunes plummet.

Do you think that networks would pay more for national rights if a likelihood of a Red Wings - Leafs final is about the same as a Sharks - Lightning final?

If you had some poor performing workers in your office or shop floor, and you had some superstars, would you draw up rules specifically to prop up the poor performers and hamstring the ability of the top performers? Doesn't make much sense to me. I would look to replace those poor performers with better ones, or have the top workers help them along a bit more.

The NFL and NBA who have salary caps both benefit from having free developmental leagues known as the NCAA, while MLB and NHL both have extensive minor league pro systems.
The NHL under a cap would have to also cap the amount a player can earn in the minors or what's to stop Toronto from shedding a bunch of its free bucks to sign 3 or 4 quality players to minor league deals at major league bucks? This would be good business sense for them as both insurance policies as well as to keep them out of the hands of the other teams. If the rich 6 teams each did this with their 6 allowed AHL veterans that would be 36 quality veteran players you wouldn't be seeing in the NHL unless there is injury. Sure there is a waiver draft, but who would sign them, as teams would already be fighting their own NHL cap levels.

And if that doesn't work then buy a team in Switzerland and send a bunch of hot shots over there to play.

Not to mention the effects on youngsters like Pittsburgh goalie sensation Marc-Andre Fleury. Good young players would sit longer in the minors if their team was already against the cap, because his NHL salary would be higher then a back-up because of his bonus clauses.
That doesn't happen in the NFL.

The league earns 2.1 Billion in revenue? That's $70 million per team and they can't earn a profit?
Close down four teams. You drop probably $140million in revenue and gain back $200 million in profit.
The players have offered $100 million in wage concessions; lock them in for two years under that until you can go through a cycle of signings.

The league would then be a 26 team loop, or 28 if two teams could be relocated to more traditional hockey markets, drawing $2.0Billion and breaking even, or losing about $100million a year because the numbers obviously have a lot of swing.
Give the NHL credit in their ability to increase revenues. At the recent rate of increase, if they can hold the line on salaries then they will be operating substantially in the black after two years. Given the level of risk to individual clubs a bottom line before tax of 7% of revenue league wide would be an appropriate level. That's a profit of about $150million. That would be obtainable in 2 years as it only amounts to an increase in profit of $10million per team over 2 years. Increase revenues by 5% per year and hold salaries to their current levels and you are there.

The players need to give up salary arbitration to take away some of the inflationary pressure on salaries.
Players should also be held to their contracts. No hold-outs. If the players want guaranteed contracts then the same should be given to the owners.

The league can institute some (or a lot) of revenue sharing to level the playing field so that lowly teams like the Rangers and Capitals can compete with the powerhouses like the Flames and the Lightning...errr...wait a second..or vice-versa.

I'm really having a hard time understanding why a cap is needed?

Nor do I see how it is fan friendly unless you really think that the Predators and Thrashers have as much right to cap money as the Leafs and the Flyers even though their fans pay less into the system. And that's coming from a heartbroken Jets fan no less!!

 

There have ALWAYS been haves and have-nots in the NHL when it comes to finances. Back in the 40's-50's Tor, MTL, and Det had the backing which is why they were able to create farm leagues and give out signing bonuses to lure the best players. BOS was in debt to the Norris family who owned DET, and the Norris family also kept CHI and NYR alive through indirect ownership which while breaking their own by-laws was necessary at the time for survival.
The result was 3 haves, and 3 have nots.

Move forward to the 70's and 80's and while the playing surface was more even thanks to the amateur draft and no free agency yet which treated the players like cattel, some teams were still more able to sign players and make a profit then others. The Have-nots though were for the most part in good hockey markets where winning the stanley cup was not needed to draw decent crowds; Winnipeg, Quebec, Calgary, Minnesota, Buffalo, etc.

Look at the teams that had to relocate or go under from that era.
California Golden Seals, Colorado Rockies, Atlanta Flames, Kansas City Scouts, Cleveland Barons.

Look at what markets survived in the WHA against what markets went under. Same pattern.

The Haves don't lose money no matter how much they spend on players. Toronto, Philadelphia, and Detroit for instance.
The Have-Nots are worth less as franchises because their ability to draw revenue is less, therefore the owners can't expect to make as much profit as the big time owners. But they should and used to survive and make a small profit because the fans supported a team that was competitive but not necessarily goign to challenge for the cup every year.

Bettman however created a 3rd class of teams.

I like to call them the "Dangerous Have-Not's". They do not have the ability to generate a lot of revenue, but they need to be winning programs, not just competitive, in order to draw enough fans to come close to breaking even. These are some of the same markets where hockey failed in the 70's & 80's.
Teams fled the traditional markets for these new markets (Minn to SJ, Minn to Dal, Wpg to Pho, Qbc to Col, Har to Car) creating even more of these teams based on Bettman's vision of a "national" league which was just plain wrong.
They are the ones that require a cap to survive; not the rich teams, and not the teams in the strong small markets like Edmonton and Calgary. Revenue sharing though would certainly help out those teams.

 

 

Hello Mr. Bettman and various other NHL dignataries and Ivy league grads;

As a Canadian hockey fan (that's redundant so from here on in I will only refer to myself as a Canadian) I have a couple of questions for you on how the salary cap would work for Canadian teams, eh.

First of all, you speak of cost certainty and don't want to use the word salary cap except as a sub-context of cost certainty. Although our teams here in Canada would know that our costs for salaries would be $32 million USD, it kind of defeats the purpose of cost certainty when our incomes are in Canadian dollars. The swings, as the last 3 years have shown can be fairly dramatic. If the Canadian dollar goes down then our revenues will remain the same but our player costs will increase in relation to revenues because they are in American dollars. Mr. Bettman where exactly is the cost certainty for Canadian teams under a salary cap?

Second of all, if you have read one of our favorite books up here in Canada "The Wealthy Barber" you would know that what should concern the players is not their gross pay but their net pay. As much as we admire you Mr. Bettman for your socialist leanings (salary caps, revenue sharing,) unfortunatley the USA where 24 of 30 teams reside do not. As a result our taxes are higher here in Canada, in fact I believe you will find the tax differentials between Montreal and some of the American states to be quite substantial. How do you think that a salary cap will create a level playing field when some franchises will be able to stretch their salary cap dollars as much as 20% further then other teams?
Should we as Canadians change our tax laws so that Les Canadiens and Leaf Nation can get to a level playing field? Or should we give pro athletes a special tax credit to level the playing field? In the latter case Mr. Bettman you might expect some general public backlash as talks of tax cuts for millionaire players tends not to go over well in Canada. In addition such tax cuts would likely be seized upon yet again by President Bush to challenge as an illegal subsidy under NAFTA if your American owners contribute to his campaign fund.

Could I offer a possible partial solution to the problem?
If the Canadian teams were allowed to divide up the Canadian National TV revenue, and the American teams did the same with the American National revenue (instead of throwing it all into a mixing pot), then our Canadian teams will come out ahead somewhere to the tune of $3-$5 million (American, I think).
Given that the dollar may swing 10% in a year that would act as a partial hedge against the dollar dropping.

Signed your friend,


p.s. don't worry so much about your height, we love Michael J. Fox and he isnt much taller then you.

 

I'll tell you why the losses are important depending on whether they are $100 million or $200 million.

First off I didnt see a team by team breakdown, but if you look at Forbes team by team breakdown from 2002-03 it brings up an interesting point. There are several teams intentionally losing money or being grossly mismanaged (NY Rangers, Detroit, Colorado, St. Louis) that are in the top 10 in league revenues. So maybe its not the southern expansion that has brought the league down (as I always thought). If those teams mentioned operated fiscally responsibally like the Maple Leafs then the league would break even. The NHL can say that is EXACTLY why they need a cap to control those teams, or the players can say that if those teams want to lose money because chasing the cup is more important to them then why shouldn't they have that right? And the players benefit. But the focus goes away from the southern teams to the rich teams. It goes to owners choosing to lose money.

The second reason it matters is because of the level of any potential cap. I did an analysis which I may post when I get a chance, and surprised myself to find that a $32million cap as suggested by the owners was pretty close to fair based on the Levitt numbers. However, if you chop off $100million that increases the cap by about $3.3million or $143,000 per player. That's important.

The third reason as Knucklehead alluded to, is the integrity of Levitt. Let me spell it out; Levitt is not some pencil pusing beaurocrat; he is a paid politician. He takes consulting money from the Carlye Group (Saudi money paid retroactively to politicians and businessmen who help the Saudi's while they are in powerful positions). In Levit's case he oversaw the SEC while the Saudi's had $600-$800 Bilion invested on American exchanges. Can you say conflict of interest? Can you say questionable integrity? Now Forbes claims that one club didn't even include their luxury box income in their UFA's. That shocked me. Now I have to question even his financial integrity.

 

The Forbes piece was the first positive for the PA in the negotiations.

My opinion may be really tainted in favor of the players but I try my best to be objective. I was thinking that the PA might be able to swing things around in a hurry.

Wait until the league issues a drop dead date. Then give the league the following offer.

The players will return to work immediately, open camp, and the NHL can decide how to do the rest of the schedule (let's assume this is December or January already). The players will work for $250,000 U.S. each, no exceptions. That's less then $6million for the whole team. This in effect would be their "strike pay" paid by the league. Since the NHL season would resume (without a new CBA) this would allow almost all the players to get out of their European obligations. The players would offer this in good faith and explain that the players value the integrity of the game and don't want a season to passby without awarding the Stanley Cup. The season must be saved.

In return the players would ask the following from the owners;

Immediately open up negotiations. Rent a floor at a nice hotel, and both sides sit down and begin to hammer this out. As long as negotiations continue then the players will play. If an impasse occurs then an arbitrator will be brought in on a non-binding basis.
[The owners are currently refusing to come to the table to negotiate unless cost certainty is in place to start. In Bill Watters' words the owners keep getting trounced at the table so they don't want to negotiate. However, under this plan the PA can get them to the table or it makes the League look like the bad guy. That is part of what I don't get. The Players are willing to negotiate, its the owners who are saying "my way or the highway" and yet public opinion favors the owners.]


The owners will guarantee the contracts of the players that currently exist in case of injury.
[Currently most of the players playing in Europe aren't making $200,000 especially after paying their own insurance. This plan will allow all the players to start getting a paycheque again without any more bad publicity about taking away jobs].

The owners will only be allowed to charge 60% of the stated ticket prices to fans. Also, 500 tickets per NHL game will be donated to charities for their use. Jointly appointed independent auditors will keep tabs on the league finances. Any profit above $1million per team made for the abbreviated season will be given to charity.
[Since the players are playing for so little financial pressure most also be brought to bear on the owners to get a deal done. Also, this will win some good PR with the fans, as it is the players bringing it to the table, not the owners. Ticket scalping will be a PR nightmare though. 60% is just a throw out figure, I'm too lazy to do the math for what would be fair. ]

Another benefit of this is that it pre-empts the owners from using replacement players. With such an offer in place to return to work while negotiating their is no way the owners can use replacement players without establishing the anti-trust case for the players.

Bottom line, while it is easy to say that public opinion means nothing to either side, ultimately it does matter to both side's finances. So far all the PR is in favor of the owners. If it shifts away from the owners then it puts more pressure on the owners because sponsors and advertisers will begin to shift their dollars to other programs. Cap or no cap, player salaries are still linked to revenue.

Ultimately the players want to get the league to negotiate, and they want to avoid the replacement player scenario. This plan solves both objectives, and puts public opinion in their favor. Judges in any future labor action or anti-trust suit will be effected by such offers.

 

Please keep in mind that I did this write-up before the recent Forbes report, so some figures may now be outdated.

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How much profit do the owners deserve to make? That’s a tough question and one that fans may be even more alien towards then determining how much the players deserve to make. It’s kind of like a pandora’s box that we don’t want to open.

Perhaps the best way to determine what is fair is based on the worth of the franchise, starting with the price paid. Forbes has made estimates on the value of franchises. However, I believe this method is severly flawed. Value should depend on future earnings potential and risk. In pro sports though there is a “hobbyist” or intrinsic value that can not always be measured. How else do you explain that despite being near the top in revenues the Detroit Red Wings knowingly spent themselves into the red? Ditto for the Rangers. Some folks want to own teams for reasons other then pure profit. Therefore, they are willing to pay more then they should. Some recent purchases were probably also influenced by Gary Bettman’s persuasive vision of the future of the NHL from the 49th parallel to the Gulf of Mexico. So I don’t think we can simply say that a franchise is worth X number of dollars according to Forbes and thus deserve to return Y number of dollars to the stakeholders.

In his report to the NHL, Arthur Levitt states that under the current conditions he could not conceive of himself investing in the NHL. He had problems seeing the NHL as a going-concern. Therefore, under those conditions the value of the franchises can not be measured anymore then he was able to audit the books of two teams who could not produce audited statements because they had going-concern issues.

So, let’s look at another way to measure what the return should be. Let’s base it on revenue, since the owners seem to think that revenue % is a feasible method of income allocation when it comes to the players. What's good for the goose...

I’m going to pull some of these numbers out of my ass here because I am too lazy to double check them. These numbers are based on industries that I know something or two about.

Warehouse/Distribution/Retail tends to be at the bottom of the food chain. Low margin or low turnover, high inventory, low technology, high expenses, etc. Look for businesses in these industries to make a profit of between 1% to 6% of revenue.
Manufacturing. Because of the costs associated with machinery and other infrastructure, the entry costs to the markets are higher so profits tend to be higher at between say 3%-10% of revenue.

Sports, specifically the NHL. While the price tag of the franchises is high I have already said that this decision does not mean anything if the purchase price was irrational. Therefore, the interest costs involved should not be included.
Operations wise the amount of fixed assets and infrastructure is not very high if you separate out the arena side of the business (which I believe Levitt did in his analysis). So if I was handed a franchise for $1 it wouldn’t take a ton of working capital or further investment to get it up and running. Under cost certainty banks would lend me the money I would think. So its not a capital intensive investment, and its not a big time commitment for the owners if they don’t want it to be (I would think that the owner of an NHL team is needed less in day to day operations, then is the owner of a steel mill for example). Furthermore, its barriers to entry are high but only because the league is a monopoly. So, the only factor that I can find as to why the NHL teams should feel entitled to above normal returns is because of the high level of risk involved. However, if a salary cap was put in place then how much risk is there? More then that of a manufacturer who has neither a monopoly nor cost certainty? Not likely. So if the NHL & NHLPA was dividing up the pie how much of the $2billion in revenue should they expect as profit? 8% seems more then fair. That means a league wide profit total of $160million, or $5.33 million per team. It would be up to the teams to then revenue share to make sure all teams had a chance to make money, or not.

So if the owners are to receive $160million in profit and only want to pay out $960million in salaries (30 teams x $32million) that leaves $880million for other expenses. Other expenses in 2002-03 were $775million (how many owners’ private planes, wife’s clothes, and drinks do you figure are buried in that line?).
That leaves $105 million on the table. If the owners say the players deserve $32million per team, and I say the owners deserve a 8% profit, then that must mean that the fans are overpaying for tickets by about 9%. Not as big a number as I would have originally expected. See I can be even-handed. So the players get 48% of the revenues, the owners turn a profit of 8%, and the clubs reduce the price of tickets and merchandise by 9% (roughly). It’s a nice dream anyway.

I still have a problem with Levitt’s report. People say his financial acumen is unquestioned, which I can live with, and that his word is gospel, which I find hard to believe. Here’s a guy who ran the security and exchange commission, where the Saudi’s invest $800Billion. Now the guy gets cash from the Carlyle Group whose main function is to pay important politicians and dealmakers retroactively for favors done while in public or private office, as well as for opening doors to the new breed running society. He’s a politician.

When Forbes did their analysis on NHL operations they came up with revenues just shy of $2.1 Billion for 2002-03. Not sure what their 2003-04 numbers were, but revenue has been growing. If they were $2.2 Billion and Levitt only came up with $2.0 Billion, then that $200million is the difference between Forbes saying the NHL would lose $123million, and the over $300million in loses supported by Levitt. That’s a huge gap. Now Levitt had more access to books and information then Forbes, but Forbes is more independent in my mind then Levitt. The league says the players refused to look at the books, but I remember reading that the PA did look at 4 sets of books provided by the league a couple years back. Their estimates were that revenues were understated (hidden) by $52million. Now of course that’s probably padded too, but even if 25% of it is true, then league wide if Levitt wasn’t doing his job earnestly then you have about $100 Billion in hidden revenues. The overall effect of hidden revenues and the surplus that you know they aren’t going to use to lower ticket revenue, would still only be to lift the salary cap from $32million to $39 million. Big deal. I’m sure that if the PA threw that number out as their final counter-offer and accepted a salary cap the owners would take it in a heartbeat.

It’s rather a simplistic look at the issue, and I’m by no means saying that a salary cap is good for business, necessary, or fair. However, surprisingly even to myself I would say that the owner’s level of offer is pretty close to fair economics if a salary cap was agreed upon.

Under a $39million salary cap though about half the teams would still lose money if they spent all their cap money, unless revenue sharing was put into place. In fact based on Forbes 2002-03 numbers the only teams that a salary cap would convert from a losing money team to a making money team are the rich teams who lose money either on purpose or by gross mismanagement specifically the Rangers, Detroit, Colorado, Montreal, and St. Louis.

 

While its not perfect, there is a definite correlation between payrolls and ability to make the playoffs. Not that making the playoffs is the end-all, but even at the Stanley Cup level it still holds. I agree with Sal though, parity isn't all its cracked up to be. MLB is better when the Yankees are strong and we can hate them, the CFL is better when the Argos are strong, and the NHL is a better league when the Rangers and Leafs are strong. If national revenues were divided up between teams based on how many viewers came from their regions then the Rangers would take in a lot more cash then say the Wild. In essence, the cities with a lot of viewers (actual watchers, not potential viewers) are already subsidizing the weaker markets by dividing that pie evenly. Below are the playoff figures for the past 10 seasons.

RK Team Avg Payroll Made Playoffs
1 NY Rangers $49.58 million 3 of 10
2 Detroit $46.17 million 10 of 10
3 Dallas $41.27 million 8 of 10
4 Philadelphia $40.59 million 10 of 10
5 Quebec/Colorado $39.61 million 10 of 10
6 St.Louis $39.31 million 10 of 10
7 Toronto $36.16 million 8 of 10
8 Washington $33.65 million 6 of 10
9 Los Angeles $33.61 million 4 of 10
10 New Jersey $32.83 million 9 of 10
11 San Jose $31.79 million 7 of 10
12 Montreal $30.77 million 5 of 10
13 Chicago $30.04 million 4 of 10
14 Anaheim $29.69 million 3 of 10
15 Vancouver $29.51 million 6 of 10
16 Winnipeg/Phoenix $28.72 million 6 of 10
17 Hartford/Carolina $28.14 million 3 of 10
18 Boston $27.94 million 7 of 10
19 Pittsburgh $27.82 million 7 of 10
20 Florida $27.55 million 3 of 10
21 Buffalo $26.71 million 7 of 10
22 Columbus $25.55 million 0 of 4
23 NY Islanders $24.78 million 3 of 10
24 Calgary $23.36 million 3 of 10
25 Atlanta $22.46 million 0 of 5
26 Ottawa $22.34 million 8 of 10
27 Tampa Bay $22.18 million 3 of 10
28 Edmonton $21.32 million 6 of 10
29 Minnesota $20.35 million 1 of 4
30 Nashville $19.71 million 1 of 6


Making the Playoffs:
Top 10 Payroll vs Bottom 10 Payroll
Season Teams Top 10 Bottom 10
1994-95 26 9 1
1995-96 26 8 3
1996-97 26 7 6
1997-98 26 8 5
1998-99 27 6 7
1999-00 28 7 4
2000-01 30 6 1
2001-02 30 7 2
2002-03 30 8 4
2003-04 30 6 2
Totals - 72 35

 

Strike pay is funded from the PA out of the monies put in by the players. It's their own money, they are entitled to it. I don't feel sorry for the players, except that they work in a business where the owners are so incompetent that despite having a monopoly, free arenas, tax advantages, etc, they still can not make a profit. Now they are asked to lock their own salaries into a formula based on how much these incompetent owners can generate in revenue. I don't feel sorry for them, but I don't feel sorry for the owners who claim they can't make a profit on their own.

Oh, and don't forget that the players strike pay is not taxable either

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Tax free strike pay has nothing to do with rich/poor, it has everything to do with double taxation. The players contribute to their unions through contributions. Those contributions are tax deductions (at least in Canada) and that is very left-wing, socialist legislation. Maybe a cap on those dollars should have been set in legislation to stop players, doctors, etc from taking advantage of the situation. However, the logic is simple, its after tax dollars that fund your union's strike fund, therefore to tax it again would be double taxation. It's the same basis as to why in Canada we dont tax lottery winners (yet), or withdrawls from your savings account.

I believe there is also other legislation such as banks having to stop the principle amount of your mortgage payments upon your request when you are on strike or locked out. These laws were passed to help the blue collar workers, when unions were truly "locals" and not the multi-million dollar corporations that they have evolved into now in the name of bargaining power.

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I called it a Union, not them. Doesn't matter if they called it a "Self Congratulatory Society", if they contribute their money into a pool of money and then distribute it, it's tax free. If I get 10 middle managers at work to take money out of their pocket and put it together with the understanding that if one of us gets downsized he gets the pot - its tax free.

Nobody is asking you to feel sorry for them. I don't feel sorry for them (except that they have to deal with owners who are inept).

Yes, I feel sorry for the ECHL players and the others who got bumped. I also feel sorry for the hotdog vendors and barowners. I also feel sorry for the corner video store owner who was put out of business by Blockbuster so that Huizenga could buy the Panthers. I'm Canadian, I'm filled with sympathy. I also feel sorry for Gretzky for finishing 10th when Don Cherry finished 7th. I have to stop now, I'm getting very emotional.

 

 

 

 

QUOTE (Fast @ Dec 10 2004, 01:35 PM)

The proposal is not very appealing. The 24% wage roll back is a one year thing which as you may have guessed wll be negotiated back in the players next individual contract, so the part = 0. The luxury tax starts at $40 million, that leaves a lot of upward room for most of the teams in the NHL. The owners are only looking at it so they can say they looked at it and can then declare an impass. Seems neither side is serious when it comes to settling any of this.

 

The fundamental reason I dont like a cap is that it sucks out potential revenue from the Detroit's and Toronto's of the league, and leaves huge profits in those owners hands by lowering the bar to the lowest level of the Nashville and Atlanta type franchises. I also don't believe obviously that it is the players responsibility to link themselves to a bunch of guys who make sub-optimal decisions and don't care about the game of hockey.

However; to be practical I think the players should seriously consider a cap that had a few exceptions built in.

Set the regular cap dollars at even less then Bettman's figure (I wont do the math, but it could be 48%, 50%, I don't know).

Allow a certain class of veterans (over a certain age and with a certain number of years experience, say over 29 and at least 8 years experience) to have an exemption. Only the first million of their contract would be counted toward the cap. Only teams that reach a certain level of revenue the season before would be eligible to sign players and qualify for spending money outside the cap. I dont know the level but you could have it pretty much the top 6-8 teams only. Of those 8 teams only 3 or 4 would have any serious extra spending cash. In addition these teams would still have a total cap including the exempted money at say 52%, 55%, or some figure of their total revenue. In other words if the Maple Leafs qualified then they would be able to use veteran players to exceed the soft cap as long as they still came in under the 52%/55% level of their revenues.

No team would be able to spend themselves into debt. Some of the lowest teams (even under Bettman's latest proposal too) might still lose a bit of money if forced to meet a minimum payroll.

The playing field for all teams is not level, but the number of "haves" would be limited, and would be based on actual revenue and fan support instead of owners looking to take the tin cup for a summer cruise on their yacht.

It also provides a mechanism to have the teams with the most revenue actually report their revenues in full instead of trying to hide them. They would want to qualify for as much cap money as they could.

In return the players should have more say in the business decisions of the league (since they are "partners" after all).

Some form of two way arbitration needs to remain in place to prevent young players from being totally "owned" and to stop players from holding out. However, teams should have the option of walking away from a player and giving him free agency instead of the arbitrated amount since it may not fit into their salary cap room.

FA age needs to be lowered to allow a more free flow of players. Perhaps as young as 26. I wouldn't want it too low simply because I hate how baseball players migrate from team to team. This would help the league achieve the parity they desire.

Limits on the young players salaries need to be removed in total. There is no point if you have a salary cap. Let the best players be paid accordingly. I think its really bad of the PA to bargain away the rights of future members.

And that's about all. It doens't lower the bar to the lowest common denominator, it allows for veteran players to still have a few years of free market contracts (kind of), and keeps the players from being totally "owned" as if cattle.

 

Well this is a fundamental question I believe. I give the league kudos for sticking to the guns and early in this process they had the press and public standing firmly behind them. But one area that they have failed in is fighting the "control yourselves" argument.

If that is the only purpose of a salary cap then they have an uphill battle to fight.

On the other hand, if the REAL reason is made clear by the league that they want to follow the NFL model of parity (and I'm not making a judgment here) then they have a better leg to stand on. But they really haven't hammered away at that point, instead insisting that the model is broken and not denying that the teams can not control themselves.

If the league answered your question by saying that all 30 teams look at themselves as partners and want to have the same level playing field, then a luxury tax doesn't work to fit their bill; then it's pretty hard to argue with them.

**************

 

After further reflection (and several sips from the NHLPA Kool-Aid) I have figured out why the owners are so adamant against accepting revenue sharing.

Because then they would have to hide their revenues from each other instead of the players, and they all know each other's various ploys. So when the Red Wings claimed X number of dollars for luxury boxes some wise owner (oxymoron?) in the Sun Belt would stand up and blow the whistle and would show us the money.

If they get a salary cap then they are all in it together, thick as thieves. What's hidden for one is hidden for all. But under revenue sharing, well, none of them is going to want to split the ill-gotten bounty with the other rogues.

It all makes sense now.

 

 

The scary thing isn't that the season is done (cause I believe it is) but now absolutely nothing will get done in all likelihood until late August.

One day these clowns are going to stand up side by side on a podium, grins a mile wide, and proclaim how they have finally reached a deal and saved hockey.

I almost hope that this actually goes to the courts, anti-trust suits and all. I'd rather see the lawyers make money then the owners, players, Bettman, and Goodenow.....ain't that something.

 

 

 

Yes it would seem logical that if the owners can wait it out they will win.

However, I'm still waiting for the other shoe to drop.

If the PA believes that their rank and file will break, or if replacement players will be used I'm betting anti-trust lawsuits will be filed by the PA. The owners control an industry. One of the reasons they are able to operate as they do is that they have a CBA. Without a CBA in effect they are breaking anti-trust laws. As I mentioned in an earlier post Tony Gallagher of the Vancouver Sun did an excellent article on this a couple months back.

**************

 

You say they are going to do long lasting harm to the game of hockey...but list all the things that are wrong with hockey right now...

Greedy owners in cities that don't support Hockey
Overpaid players
Overpriced tickets
Inferior on-ice product due to rules, and
Too many teams watering down the product

I'm sure there are more. So, if what you say is true and they suffer that sort of immense damage, and there is no McGwire-Sosa showdown, no Cal Ripken streak to bring them back. Under the kind of apocolypse you seem to be predicting, the kind of steps backward the game would take,

Isn't this exactly what we should wish for?

Won't most of the above problems go away with a true hockey custodian?

I don't really care if my sport of choice is a fringe sport, I will enjoy it more when it is done properly.

So here's to hoping for the fallout.

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This was the first step in settling in 1995, meetings without the two heads.
It allows dialogue without it being seen as an offer. The players can say, "well would you consider this type of scenario as still being cost certainty?, without locking themselves in to an offer.

The WHA??? Why are these guys considered a threat? No way do they even register on the radar screen. I think a European Super League would be a threat before WHA, but the Europeans can never seem to get their act together in a swift enough manner (I'm thinking about my lackluster European RRSP's and cringing).

One thing though that I dislike hearing is how a short season wouldn't be credible. Going back to the original 6 days 2/3 of teams made the playoffs. Post WHA merger days and you had 77% of teams making the playoffs. Sure, sometimes a team can face a last game that will decide whether they will finish 5th in the confrence or 9th, but they usually don't win the Stanley Cup anyway. It's the playoffs that decide who wins the cup, and its almost always one of the top teams. I don't see the reasoning behind the winner of the cup being any different whether you play a 40 game schedule or an 84 game schedule.

 

I have no idea what his correct name is, you know the dude in charge of the Olympics, who was in Vancouver this week checking out the sites (Rogge?).
Anyway he made some pretty stupid comments about the lockout.

First off he called the players greedy (okay thats probably correct) and said that Olympians compete not for the money but for the gold around the neck. Do you honestly believe that? I mean some do, but come on, some of these "amateur" athletes earn more then the average NHL'er (and thats not even including the US Olympic dream team). Tell me what the 14 year old gymnasts taken from their homes at the age of 10 to go live with some tyrannical coaches are competing for? How would they even know? The Olympics are so messed up they make the NHL owners look competent. Then to top if off he shows his ignorance by saying the Olympic athletes wouldn't go on strike for $6million salaries. I guess he doesn't realize that they were locked out - but why let the facts get in the way of a good line right?


More or less the same day Chris Chelios went on a bit of a rant. Among the things he said were;
The NHL's expansion policies are largely to blame for the league's current fiscal mess and contraction is the only answer. He's right if the model is to to persist that allows rich owners to spend whatever they want on teams. He is in a bit of a unique position to judge this however, as he was forced to develop his hockey skills in the barren wastelands of California growing up, commuting to games all over California. He knows there is no base there.

"If I were a fan I wouldn't forgive us either. There are some teams that are going to go."
First off its kind of awful to hear players and owners constantly refer to the fans as a seperate group. You would think the players and owners would be fans of the game themselves - but apparently not by their actions or words. Secondly, unless Bettman is forced to fall on his sword there is no way any teams are going to fold. You can take that to the bank. Finally, it is refreshing to hear him say "forgive us", not "Forgive them", putting the players in the same boat as the owners as responsible for this lockout.

"People like Peter Karmanos deserve another chance because of what he's done for youth hockey and what he's done for this league. Other teams, they don't deserve second chances". Kudos to Chelios. It's good to see someone who like me in an earlier thread does not throw Karmonos into that group of idiot owners just because of one move (his Federov offer).

"the Red Wings shouldn't have to pay the same salaries as Nashville. The NHL should play to its strengths, Detroit, Toronto, New York. If the lower market teams spend more then $25 million they're going to lose money."
Sounds dead on the money to me.

"Revenue sharing...they haven't trusted each other, so that's not going to work either."
BANG ON.

About Bettman.
"He doesn't care about anything but his own personal agenda."

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So a salary cap is supposed to put all the teams on equal footing right?

Problem remains that Canadian taxes are higher then American so $US teams can attract with $40million what Canadian teams will require say $42 million, or $50million in a province like Quebec.

CBC pays big money for TV rights, and yes they make a profit off of it, but the money goes more to Americans. Do I have to remind you that CBC survives off of our Canadian taxes? It doesn't matter whether you like in Cornerbrook Newfoundland or Prince George BC, you are going to tune in to HNIC and you either love the Leafs or hate them. But you watch. How many Americans in Spokane Washington, or Bangor Maine care to watch a game between the Washington Capitals and the Phoenix Coyotes? Even when ABC had their supposed National coverage they had to have like 6 regional games to draw a 0.0 rating. So the American teams get to keep all their local TV revenue amd we have to send them our National reveneue which given the way Canada is about hockey is really LOCAL revenue.

But they know we will keep watching right? So screw the Canadians and give all the perks to the Americans who don't give a rats ass about the game.

 

 

 

 

 

I hear a lot of talk about this team being fine, and this team will be in trouble, but look at the numbers. I'm going to use the Forbes numbers just because the Levitt numbers are not available on a team by team basis.

Who lost money?

5 of the top 6 revenue producing teams LOST money. Rangers, Flyers, Dallas, Detroit, and Colorado. Some of those shortcomings were because those teams were hoping for longer playoff runs. Toronto was the only team in the top 6 in revenue that made money.

Boston, Montreal, Chicago, Edmonton, Calgary, all made money.
Teams that lost the most money were St.Louis, Anaheim and Carolina.

Whether a team makes money has more to do with the method by which, and the purpose with which they run their teams.

Now, did the players really kill the golden goose or did 6 or 8 of the greediest owners have a bit more to do with it? Colorado sold out every game but still lost money? Nothing short of a Stanley Cup birth was expected - is that not greed? Or is it just a hobby for some guys?

As for a salary cap, let me ask you the following question; If you were making $2million dollars a year and living in a state where you paid 20% to income tax, would you take an offer from a team for $2.4 million if you had to pay 35% income tax there? No you probably wouldn't. So much for a salary cap putting all teams on equal footing. So much for Montreal, Toronto, Vancouver, and Ottawa being on an equal footing.