CBA: Understanding the issues
The countdown is on. With the NHL's CBA set to expire in less than a year, here's what you need to know.
The countdown is on.
Exactly one year from now, Sept. 15, 2004, the NHL's collective bargaining agreement with the NHL Players' Association expires.
What lies ahead on the CBA landscape? Inquiring minds among ESPN.com readers want to know. We asked for your questions, and here are some answers to help you understand the posturing, quibbling and negotiating to come.
One of the key issues is the owners' pursuit, indeed, insistence, of a salary cap.
Q: "Even with a new system in place that involves a salary cap, how will teams like the Rangers, Stars and Red Wings, who have payrolls that could almost double the suggested value of a cap, reform to the new standards without totally dismantling the team?" -- Jeremy, Hewlett, N.Y.
A: If, for example, there is a salary cap of $35 million, as some suggest is the target, teams whose payroll exceeds that would have to pay a luxury tax. This would make it possible to spend above the cap, but financially punitive enough that it would act as a deterrent and only very large-market clubs could afford to do so.
• Gary Bettman
NHL commissioner, 51, lawyer, who has presided since 1993, is hell bent on achieving 'cost certainty' in the next CBA.
Working for: the 30 NHL team owners. Imagine a job where you had 30 bosses, 30 rich, powerful bosses with big egos. Not an enviable position. Even worse, some of the teams' governors represent not just one owner, but in some cases ownership groups comprised of dozens of private individuals or pension fund investors. It takes chutzpah to run in such circles and be the public face of a league, and Bettman deserves full marks for it. • Bob Goodenow
NHLPA executive director, 50, also a lawyer, who is in charge of negotiating a collective bargaining agreement on behalf of association members.
Working for: approximately 700 NHL players. In Goodenow's tenure, the average NHL salary has risen to almost $1.8 million from slightly more than $270,000. No wonder the players like him. • Bill Daly
Vice-president, chief legal officer, NHL. Essentially Bettman's right-hand man, Daly oversees all aspects of NHL business, and is said to be well respected by the NHLPA. • Ted Saskin
Senior director, NHLPA. He is to Goodenow what Daly is to Bettman, and focuses on NHL-NHLPA relations. Seen to be personable and a clear communicator who has earned the respect of the guys on the other side of the table. THE ISSUES
• The deal: The NHL's collective bargaining agreement with the NHLPA expires on Sept. 15, 2004. This deal was originally signed during the strike-shortened 48-game season in 1994-95, and was extended in 1997. The owners are striving for a system with a relationship between revenue and expenses so all teams can be financially stable and competitive in existing markets. • Salary cap: Calling it cost certainty, the NHL owners want it, to which Goodenow and the PA say "never." • Luxury tax: A fee the rich, large market teams pay for spending over the agreed-upon limit, or cap. • Revenues: The NHL's biggest single source of revenue is ticket sales. Ticket prices, Bettman says, have had to increase to keep up with the league's biggest expense -- player salaries. Goodenow says ticket prices have no correlation to player salaries. Ticket prices are determined by supply and demand in each market, while salaries are set by the owners, who receive revenues in the form of ticket sales. • Revenue sharing: Sounds simple enough -- the rich, big market teams help prop up the smaller market clubs to help build stability and profitability across the league. Bettman, however, says revenue sharing without cost certainty doesn't work. • Free agency: The age for free agency is currently 31 (by June 30), but players would prefer to see it slip under 30. From the league's perspective, lowering the age could be part of a bigger solution to obtaining cost certainty.
A: The league is convinced cost certainty is critical to survival. Without it, as is the case in the current agreement, too many teams say the economics just don't add up.
"I don't want any more Buffalo situations, any more Ottawa situations or any more Pittsburgh Penguins situations, as we had a few years ago," commissioner Gary Bettman said Sept. 9. "We owe it to our fans, we owe it the game, to fix it."
So, yes, if things don't change, survival for some teams is clearly at stake.
Unlike in baseball, it won't do any good for the owners to threaten contraction. If the NHL can't get a major TV deal now, how will it ever be able to sell itself to potential partners and sponsors if it is viewed as a declining product?
Even with cost certainty, some markets naturally have greater revenue potential than others, which equates to a competitive advantage, which is why revenue sharing could provide an equalizer.
Q: "What is the likelihood of implementing an NFL-style revenue-sharing system? Contrary to what some big-market teams seem to think, they do have significant interest in maintaining competitive teams throughout the league." -- Bill Wyce, Philadelphia
A: There can be no "to hell with the small-market teams" rhetoric, like there was during the 1994 work stoppage, courtesy of former Devils owner John McMullen. A healthy and growing league (read: marketable product) requires stability, sustainability and survivability for all 30 franchises. The league hopes cost certainty delivers that. Even Boston Bruins owner Jeremy Jacobs agrees the big-market clubs have to "help bootstrap up this entire league."
Q: "Why doesn't the NHL just implement a luxury tax like baseball? The higher-level teams could flush some money into the mix for the lower-market teams. I just don't understand what the huge deal is with the owners." -- Brad Paradis, Ogdensburg, N.Y.
A: McMullen's famous comment, tells you all you need to know about the difficulty in reaching consensus among NHL owners. It's logical to think they'd all be on the same page here, but they probably are not.
Q: "What is so hard for the players' association to fathom when teams all across the NHL are losing money because players are being overpaid?" -- Dave K., Farmingdale, N.Y.
"Do the players have any consideration that their high salaries are pricing most real fans out of the market? Who can afford $80 for a ticket?" -- Mike, Pawtucket, R.I.
A: Despite the united front put forth by the NHLPA, and by executive director Bob Goodenow whenever he speaks publicly on the CBA issue, there is a sense that more and more players are coming to appreciate how serious this issue of survivability is, that salaries rising as rapidly as they have been is not sustainable indefinitely, and that something has to change. The smart players may admit that privately, but publicly, save for Brett Hull, few players will go on record as saying player salaries are too high.
As for ticket prices, obviously it's a matter of supply and demand. The richer large-market teams get away with having well above average ticket prices, and increasing those prices year after year, because they can. The fan support is there, and people are willing to pay those prices.
In other cities where the team is still trying to grow the fan base, clubs have to develop ticket pricing strategies that make it affordable for fans to attend games. Toronto, for example, has a very corporate, very affluent crowd, that is used to paying a lot for tickets. The people at Atlanta Thrashers games, on the other hand, may be newer, more casual fans, and the team has to work at building that relationship.
Few subjects generated as many questions, punctuated with colorful comments, as communications -- or lack thereof.
Q: "Why does Gary Bettman get away with blaming the players, when really, it's his owners who are paying the contracts?" -- Ty Murphy, Toronto
"It seems that Bettman and the owners have been trying to get things moving, and Bob Goodenow is basically saying 'I don't want to talk about it yet.' Is this what's happening? The sooner the owners and players start working on this, the more likely we'll be to have a season next year." -- Steve, Portsmouth, R.I.
"Why do the politics of these situations between the two sides allow absolutely no progress to be made until after the deadline has passed?" -- Jim, South Carolina
A: If you think the posturing and rhetoric is bad now, just wait. We're sure to hear all kinds of bombastic and threatening statements in the coming months. Just this week Bettman chastised the union for stalling on negotiations. "The difference between whether we are going to preserve what we have and grow, or whether we're going to blow it up and start over is really the union's call," Bettman said last week at the Canada Sports Forum. He later added: "I'm not looking for a fight. I'm looking for a solution to the economic issues confronting the game."
Clearly, Bettman and his NHL bosses are winning in the court of public opinion. Bettman claims to have made a proposal to the NHLPA, or at least invited the players to talk about one. Goodenow disputes this, saying there has been no proposal, but that he is open to reviewing one. Whom to believe?
The general perception is that the league appears ready, willing and able to come to the table, and the NHLPA doesn't. And why should the players? They have a deal in place that runs for one more year that has proven very lucrative. Why invite negotiations that potentially could hurt that? This is where politics and posturing come into play, because no one wants to blink first in this standoff, least of all the players' union, which wants to appear united and strong.
There was also a landslide of questions about who created this mess in the first place.
Q: "What's to stop the NHL from creating a budget or spending plan that doesn't affect the bargaining agreement? All the owners should agree not to spend more than X-amount of dollars. Bettman is looking for 'cost certainty,' but why don't the teams just practice 'spending restraint'?" -- Bryan, San Francisco
A: Leaguewide spending restraint could be construed as collusion -- or antitrust by any other name -- and that's a risky proposition.
However, smart businessmen always do what they can to control their costs. And wouldn't it be great if there were more smart businessmen running NHL clubs, people who understood what it takes to be successful on the ice and off, to spend to acquire and develop talent, but also be conscious of the bottom line?
NHL owners such as Jacobs in Boston, and former GMs like Pat Quinn, now just coach in Toronto, have been vilified for being cheap, for caring only about the business side of their team and not about building a winner for their fans.
Well, people, get used to it. NHL hockey is a professional sport. Teams are in business to make money. Some do it better than others, while simultaneously succeeding on the ice. Other teams fail miserably at one, the other or both. But let's not chastise anyone for being responsible businessmen first, passionate hockey guys second. Blindly pursuing championships at the expense of huge losses benefits no one in the long term.
All of this discussion leads to the next question, which I'm going to take the liberty of choosing my own.
Q: What will the GM of the future look like?
A: When John Ferguson, Jr., was hired as the Toronto Maple Leafs' GM in late August, relegating Quinn to coach-only duties from the dual role of GM-coach, there was a chorus of groans from fans and media alike. As one of the most prestigious and historic franchises in the NHL, if not all of professional sport, the Leafs promised to hire a star. After months of an exhaustive executive recruitment process that short-listed candidates such as former Rangers GM Neil Smith and Hockey Canada president Bob Nicholson, the organization hired a 36-year-old, largely unproven rookie.
But let's take a closer look. He's a former Providence College and NHL player. He has a business degree. He graduated from law school. He was an NHL scout and player agent. He worked at the NHL's hockey operations and legal departments, studying, among other things, salary arbitration and collective bargaining. He was assistant general manager for the St. Louis Blues, and ran the Blues' top minor league affiliate in the AHL.
Whether Ferguson will succeed in Toronto remains to be seen. But he has all the credentials and qualifications the new generation of GMs should possess.
Go through the list of NHL teams and look at their general managers. How many have degrees in business or law? How many of them have any formal education that qualifies them to be the best hockey operations decision-maker?
Jacobs, for all his criticism of being a cheapskate, at least puts his mouth where his money is. When all teams are forced to operate under level playing conditions, aided by cost certainty and revenue sharing, success or failure will be determined more than ever by management.
"It will be very interesting when there is a cap and we all have to worry about the way we manage our teams. We'll see how good my management is," he says.
If there is a work stoppage in 2004, diehard hockey fans will have at least one alternative. The World Hockey Association -- yes, a modernized version of the same WHA that wreaked havoc on the pro hockey landscape in 1972 -- plans to relaunch. Leading the charge this time will be the same guy who caused all the trouble back then: Bobby Hull, who will be WHA commissioner.
Q: "What do you think of the recent news that the WHA will possibly be playing hockey in North America while the NHL faces a stoppage?" -- Thos Cavanaugh, Buenos Aires
"Do you see the new WHA as a viable option for players whose contracts run out at the end of the 2003-04 season. There are also rumors of Europeans heading back across the pond (or even retiring) in the case of a lockout." -- Nate, Philadelphia
A: The NHL paid little attention to the WHA in 1972, and look what happened then. Players such as Hull began leaving, and the new league gained credibility. Seven painful years later, player salaries were out of whack in the WHA and the NHL ended up absorbing the remnant WHA teams.
Interestingly, while the original WHA had the net effect of increasing player salaries for pro hockey in North America, the current version wants to bring things back under control. "The NHL system is broken," said Alan Howell, co-founder of the new WHA. "And history has made it too difficult to fix."
The timing of the relaunch, in 2004 when the NHL CBA expires, is no coincidence. The WHA hopes to encourage players who are not under NHL contract, or who are in the twilight of their careers, to jump. And on the other side waving them over will be the colorful Hull, who has already said he wants his son Brett, whose deal with the Detroit Red Wings expires after the 2003-04 season, to join him.
What a story that would make, of history repeating itself, of father and son teaming up to create a story that could just be compelling enough to attract some fans, sponsors, partners and suppliers.
But would it attract enough quality players? That's difficult to imagine. With a mandate to not allow player salaries to determine survivability, each WHA franchise will operate under a $10 million salary cap, except for one franchise player who would not be included in that figure. Other than Brett Hull, how many other marquee players would a) not be under an NHL contracts; b) be willing to play in a fledgling league for fractions of their former NHL salaries; and c) possess enough star power to draw fans in what will likely be a developing hockey market? The answer: not enough.
Even if there were sufficient franchise players to allow one per club in, say, a 12-team league, where do all the other 20-odd players on each of those rosters come from? Maybe some of them would come from the Alabama Slammers, Jacksonville Barracudas, Lakeland Loggerheads, Macon Trax, Miami Manatees and Orlando Seals. These are the six teams in the WHA2, a minor pro circuit starting up this season.
Last we checked hockey was still a team game, and one marquee player does not a team make, at least in the long term.
Not even in the WHA.
This brings us to the worst topic of all: the potential impact of a shutdown.
Q: "Do the players and owners not realize that any time lost on a full hockey season would destroy any gains the league has made in popularity over the past few years? The backlash against the NHL would be catastrophic." -- Chris, Texas
"We already know the TV ratings are nowhere near other sports." -- Eric, New York
"Will the NHL players and management learn from the public relations disasters of MLB (1994, 2002) and NBA (1999) so they keep the focus on the game?" -- Dan McCue, Las Vegas
A: Well, Dan, are you a betting man?
The NHL and the players' association are both fooling themselves if they think the league can afford a shutdown of any length. Too many teams are in trouble, not just with regard to the current economic situation, but also in terms of the fan base, long term. The two teams in the Stanley Cup final last season, the Anaheim Mighty Ducks and the New Jersey Devils, had trouble drawing fans last year. Success on the ice doesn't guarantee bums in the seats.
Meanwhile, the Toronto Maple Leafs haven't won the Cup in 36 years. Yet they never have to worry about selling out, a TV deal, merchandising or media coverage. These have all been slam dunks for decades.
But there are very few similar cities in the NHL. There are more and more franchises -- and not just in expansion cities but even Original Six markets such as Chicago and Boston -- that find themselves in increasingly tenuous relationships with their fans.
If people walked away from baseball, America's favorite pastime, what do you think they will do with hockey, a number four or five major league sport in the United States? If the NHL goes out for anything more than a matter of days, it will cost management and players dearly. Perhaps permanently in some markets.
There are also other industries operating behind the NHL, holding their breath, waiting to see what's going to happen. Equipment and apparel manufacturers, concession suppliers, arena workers, league sponsors, advertisers, partners, broadcasters -- all of them will have to formulate contingency plans and hedge their bets until a settlement is reached. For some of them, if there is no deal and the league shuts down, they may walk away from the game forever.
And thus we begin the countdown, 365 days and ticking, to Armageddon, labor harmony or, most likely, something in between.
But in the words of Bob Naegele Jr., majority owner of the Minnesota Wild: "Let's not walk in fear, let's walk in faith."
Wayne Karl is a freelance writer based in Toronto. He can be reached at firstname.lastname@example.org.
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