Teams seek equity on score sheet and balance sheet

Originally Published: May 10, 2004
By Darren Rovell | ESPN.com

With the Calgary Flames, San Jose Sharks and Tampa Bay Lightning playing in the conference finals, convincing the NHL fan that a salary cap is needed to fix competitive balance is becoming a more difficult task for the league and its teams.

League officials have long contended that some form of cost containment is in the best interest of fans, as it would enable smaller-revenue teams to better compete with larger-revenue teams for the Stanley Cup. And while a recent poll on the NHL's collective bargaining agreement Web site, www.nhlcbanews.com, shows that 65 percent of fans believe that their small-market team can't compete without change, recent evidence points to the contrary.

The Flames, Sharks and Lightning rank 19th, 20th and 21st in salaries, respectively, with payrolls ranging from $33.5 million to $35.2 million. If any of them win the Stanley Cup, their payroll will rank the lowest among champions in at least the last decade (the New Jersey Devils were ranked 15th during the 1999-2000 season).

"The league has clearly never had any better competitive balance than under the current system," said Ted Saskin, senior vice president of business affairs for the NHL Players' Association. "When the season started, fans of more than 20 teams could have said that they had a chance of competing for the Stanley Cup. That certainly wouldn't happen in baseball or basketball."

While the competitive balance in baseball has improved recently, with the Anaheim Angels and Florida Marlins winning the last two World Series, the NHL has a better track record. Including this postseason, 12 teams have participated in the Stanley Cup conference finals during the last three seasons, including the Minnesota Wild, which sported a league-low payroll of $20.7 million last season.

Moreover, 15 teams -- or half the league -- have reached the conference finals in the last five seasons. During the same span, baseball has featured 11 different teams and the NBA has featured 12. Even the NFL, which has a hard salary cap, hasn't had the same level of parity. Only 12 teams have advanced to the AFC and NFC championship games over the past five years.

"Spending money does not a championship make," quipped Greg Jamison, president and chief operating officer of the Sharks, whose highest-paid player is center Vincent Damphousse at $4 million. "Just because some teams spend more does not mean that they are guaranteed to be successful. Some of the biggest spending teams are not there in the end."

While playoff success is reliant on smart managerial decisions, regardless of payroll, Jamison points out that the current unrestricted system that has created the payroll disparities makes it difficult -- if not impossible -- for teams with lower payrolls to stay on top. Even if the Sharks played in a seven-game Stanley Cup finals, Jamison said the team still would lose money. The team's payroll has risen by 314 percent -- $8.4 million to $34.8 million -- over the past decade.

"Fans talk about competitive balance as in their team having a chance to win," said Jeffrey Citron, associate counsel to the NHLPA from 1995 to 2000. "Many league and team executives are now talking about competitive balance as if it means that their teams should have an equal chance of turning a profit."

Survey a host of team decision makers and that's exactly what you'll find.

"Everyone wants to go into a season knowing that their team has an opportunity to win the Stanley Cup," said Doug Moss, president of the Phoenix Coyotes. "Teams like ours should also have the opportunity, should we run the business well, that we have a chance to make money."

Lightning president Ron Campbell said the team will turn a profit if it reaches the Stanley Cup finals. However, the financial windfall shouldn't be interpreted as long-term security.

"We're more like lottery winners than constant competitors," Campbell said.

Last season, the Lightning won the Southeast Division and qualified for the postseason for the first time since 1996. This year, they won their division and finished on top of the Eastern Conference, buoyed in large part by the performance of winger Martin St. Louis, who led the league in scoring and is a finalist for the Hart Trophy as the league's MVP. St. Louis, in the final year of a two-year deal, made $1.5 million this season. Under the NHL's current pay scale, his next contract would raise him to four or five times that much. Throw in the $6.5 million option for goaltender Nikolai Khabibulin -- a $2 million raise from this season -- and that's $7 million the Lightning will spend to keep two players.

This season, the Lighting posted an 8 percent increase in attendance, averaging 17,820 fans per game. Campbell noted that even if the team sold out every game next year -- The St. Pete Times Forum has a capacity of 19,500 -- the team still couldn't accommodate the pay raises that would be required to keep this year's team together.

"If we want to keep this team together," Campbell added, "we'd have to raise payroll by at least $10 million, and you can never forget that this is a business."

Campbell said a new system is needed because teams that spend much more money have such a competitive advantage.

"To start the season, you know that Detroit, Toronto, Philadelphia, Colorado and St. Louis are going to be in the playoffs," Campbell said. "That doesn't leave too many spots for the rest of us lower-revenue teams."

Union executives argue that the team executives themselves have every right to decide how much they should spend to make business still work, but that owners shouldn't feel that, no matter how they run their business, they are entitled to a positive cash flow every year.

"The fact that some are saying that everyone has a right to a profit doesn't make any sense," said Saskin, who noted the players association's next meeting with the league to talk about a new collective bargaining agreement will come in the last week of May. "There isn't any business in the world that operates in a way that guarantees that everyone is going to succeed financially."

Ironically, Citron says, competitive balance might be good to fans of teams but is not good for the state of league business. The more balanced the teams are, he reasons, the lower the scoring and the less exciting the game is for the fringe fans. Competitive balance also breaks up large-market dynasties, which are usually good for solid television ratings. In the first 20 years after expansion (1968-87), five teams won the Stanley Cup. Since then, including the 2004 champion, 10 teams will have won the Cup.

"The game today often reminds me -- and other North Americans with a love for action sports -- of the tedium of soccer," Citron said. "If that type of competitive balance is the objective, then the game is in trouble and will not be able to grow to another level."

Darren Rovell, who covers sports business for ESPN.com, can be reached at Darren.rovell@espn3.com

Darren Rovell | email

ESPN.com Sports Business reporter

ALSO SEE