Tuesday, September 14, 2004

My thoughts on the CBA

If you've been living under a rock for the past year or so, you may not know that the NHL's CBA is about to expire, at midnight tomorrow, in fact. Negotiations for a new CBA have gone absolutely nowhere and have seemingly pretty much amounted to staring contests, with neither side budging one bit. This is my take on the CBA situation. It may seem like I'm a total advocate of the players in all this but that's only because there is so much more stuff to throw at the owners. I'm really more neutral than I seem. Really. First off, I have trouble sympathizing with owners who are generally billionaires who are making a killing with their other business interests and for whom their hockey team is more a hobby than anything else. They dug themselves into a pit by being over-competitive and now they want to blame the players for their own stupidity and shortsightedness. Sure, the players played a role in the salary hike through free agency negotiations but few of them would have gotten so much had owners and front offices said "No" like they generally have so far this off-season. You have to remember that the owners and NHL thought the players made great concessions in 1994 and that they agreed to the system that led to this. Now that they've realized that the players really won that round, they're trying desperately to correct their mistake. This summer has been a great example of how the current system can work (at least in terms of free agency) when the owners and front offices are smart with their money. The usual proverbial pee-ing contest (yes, we're a Family Friendly Content Site) have been pretty tame with most teams showing considerable constraint in their deals and the usual sense of cutthroat competition has been pretty much non-existent. Obviously, that is due to a flash of rare foresightedness on the part of the owners, who see themselves winning the labor dispute and getting their salary cap, but by refusing to pay the big bucks for the big stars, they have weakened their own argument. The system can work, all it needs is some restraint on the part of the buyers (and some changes in arbitration, but we'll get to that). That does not mean sticking with the current system is very smart since the buyers have not shown such restraint in the past and it's unlikely they can be trusted to do so in the future (which, by looking for a new CBA that would controlt heir spending practices, the owners are indirectly admitting). It is highly likely that once the gates were opened again for competition on the market, they would revert back to their over-spending ways and start throwing money around like rice at a wedding. So, the NHL cannot stay the way it is. But how to change it is the $300 million question. The current system has created a parity that the NHL has never seen and yet the League's argument for a change is partially based on there being an enormous imbalance. It simply does not exist any more, except from the very top team to the very bottom team. That's how it is in any sport and it needs to be remembered that not every team can compete for the Cup every year. Gary Bettman's dream of creating a system where every fan knows their team has a chance to win the Cup is unreasonable and goes completely against the structure of professional sports. Someone has to be in last place and that same team may, in 5 or 10 years, be the dominant one. It's the normal cycle in sports and fans here in Detroit have certainly seen their share of it. Everyone knows the Wings used to dominate in the 50s and even in the 60s but they had a 41-year Cup drought that was only broken through smart management and spending on the part of the front office and of Mike Illitch in the mid-80s and through the 90s. That's how you run a team and owners who expect similar results immediately are expecting too much, especially if they are in an area where the NHL never should have expanded to in the first place. However, not every team can have management as sharp and as good as we have here in Detroit. There obviously has to be some kind of mechanism for providing aid to the struggling small market teams, which do not have personnel of the same quality seen on the rich teams. Both sides in the argument agree on that but their methods for bringing that about are vastly different. Everyone knows the NHL wants a salary cap, a hard cap somewhere in the range of $32 million, according to reports but more likely in the range of $40 million. They would like to turn $300 million in losses into $150 million in profits by forcing player costs down from the 76% of total revenue from last year to 60% or less. They want like to emulate the other three major sports leagues, which have a much more reasonable player cost percentage as a result of either salary caps or luxury tax system. For them, it's salary cap or bust, which is evidenced by their full intention to lock out the players for up to a year and a half using their $300 million war chest fund. The League presented six different ideas to the players in July, of which only one was a salary cap. The NHLPA rejected the proposals and after seeing what they were, it is easy to see why. The NHL suggested: (quoted from FoxSports.com)
  1. A performance-based salary system, in which a player's individual compensation would be based, in part, on negotiated objective criteria and, in part, on individual and team performance.
  2. A payroll range system in which teams could spend within a negotiated range of payrolls.
  3. A system premised on the centralized negotiation of player contracts, where the league would negotiate individual player contracts, either with players and their agents or with the union directly.
  4. A player partnership payroll plan (P-4), which would involve individual player compensation being individually negotiated on the basis of "units" allocated for regular-season payrolls, supplemented by lucrative bonuses for team playoff performance.
  5. A salary slotting system, which would contemplate each team being assigned a series of "salary slots" at various levels, each of which would be allocated among each team's players pursuant to individual player-team negotiation.
The first proposal is a decent compromise, in my opinion, and would do more to generate healthy competition among a team's players. However, it would be easy for the team to take advantage of the system by limiting a player's ice time when he's playing too well for their tastes. I can see why the players would reject it for that very reason. The second proposal is very vague and seems a lot like a salary cap to me, which again, the players will not accept. Proposal #3 probably, more than anything, has opponents among NHL GMs since centralized negotiation would pretty much eliminate the need for the their position. It would also have the effect of having the NHL set and control player salaries, something they'd much rather have the owners do, since they are much more easily duped into throwing around money. Proposal number four is interesting, especially the playoff bonus part. That could have the effect of motivating players even more to perform at a high level in the playoffs, if that is even possible. I'd think the players would have less of a problem with that proposal than the others. It's easy to see why the players rejected #5 as well since it has the effect of setting a limit on player salaries too. The fact that a limited number of players would be able to be in the higher ranges wouldn't help the lockerroom atmosphere either. As I'm sure you all have heard, the players recently presented a proposal which was promptly rejected by the NHL on the basis that it was just a rehash of the Union's previous offer of a year ago. It was a four-point plan that consisted of a luxury tax, player salary rollbacks, changes to the Entry Level System, and a revenue-sharing plan. The luxury tax is believed to start at $50 million, instead of the $40 million they reportedly proposed the first time around. It is easy to see why the NHL rejected the offer, with their stance on a hard salary cap. The players, however, obviously see their proposal as a fair compromise between the current system, which they probably wouldn't mind keeping (but which they are also very willing to be rid of: "�we are not looking to preserve the status quo in these negotiations, as the league likes to claim."), and a salary cap system, which they are adamantly against. NHLPA President Trevor Linden said "We believe that our four-point proposal is the best available way to reach a fair agreement with the league. The actual percentages and benchmarks within our proposal would be subject to negotiation, at whatever time the league actually comes forward to negotiate with us." That seems pretty reasonably to me but the NHL doesn't think so and are continuing to take the hard line. The NHLPA has always been skeptical of the NHL's revenue loss numbers and have conducted their own team-by-team study. They found that six teams accounted for 75% of the losses the NHL is claiming but that none of those situations can be "fairly attributed to the CBA." Some of those teams are losing money because of bad building situations and others are losing money just because they are in areas that do not have enough interest in hockey, a direct result of the over-expansion the league has undergone in the past decade. The NHLPA also believes that some teams have "vast resources that are simply not recognized by the league's current financial reporting system." That just means that the players remember that many of the NHL's owners are already billionaires who make loads of money in other interests. The NHL has repeatedly suggested that the players are unwilling to compromise but there is no greater proof of the falseness of that statement than the fact that they are willing to do an immediate salary rollback of 5% on all existing contracts. Although that may not seem like a whole lot, it would generate $100 million in savings for the league, fully one-third of the $300 million Bettman says the NHL's teams lost last year. Who freely gives up 5% of the pay they were guaranteed? No one I know. Their proposed changes to the Entry Level System would save each of the 30 teams around $2 million a year for a total of $60 million. Their plan for a luxury tax system would help raise $30 to $35 million, which would be distributed out to teams needing money and their revenue-sharing proposal would give $80 million to $100 million to low-revenue teams. That is all according to the NHLPA, which we are inclined to disbelieve for some reason, probably because they have done such a poor job in getting their message out there. The NHL, which has done a much better PR job, had zero interest in the offer and sent the League on the road to a lockout. As of right now, no further meetings are scheduled and any hope for a midnight agreement has pretty much disintegrated. It's a shame that the owners are dead-set on a lockout because the players have said they will play without a CBA and continue negotiating so the fans can at least have hockey. When there is no hockey this fall, do not blame the players, blame the owners and Gary Bettman. Free agency is often cited as the cause for inflated salaries and it certainly is one of the biggest, if not the biggest. Another cause, which is not often talked about, it seems, is salary arbitration. The NHL's current arbitration system is "extraordinarily inflationary," according to the NHL's Bill Daly. For example, the players who filed for arbitration this summer earned raises of in the neighborhood of 73 percent," while players who filed but reached agreements with their teams before their case was heard generally got in nearly 56% raises. What's interesting about arbitration is that the eight arbitrators are jointly picked by the NHL and the NHLPA from the National Academy of Arbitrators. They are then randomly assigned to the players who requested arbitration by a process described in Section 12.2.e.II of the CBA. Both sides agree on the arbitrators, who are supposed to be impartial. Their decisions should be fair but the NHL still thinks the players are getting too much in the cases since they win most of them. So let me get this straight: the NHL already has one of the most restrictive free agency policies in pro sports (where a player pretty much has to be 31 to become a Group II free agent or unrestricted) AND they want to limit their ability to get awarded a raise by an independent party? They need to realize they can't have both if they want a happy labor force and it looks as though they are beginning to realize that since they are looking lowering the age to 29 (according to one source of the illustrious NY Post). That means players won't have to play for a decade or more before being able control their own destiny, which kind of sucks for fans who are used to having the same guys on the same team for a long time but that's where loyalty comes in. The Wings have seen both sides of that coin but mostly the good side and have had a significant amount of roster continuity over the years because of loyalty. Anyway, one thing the NHL needs to remember is that the players can always go to Europe, where there is a large market, to play. They don't need the NHL. The NHL needs the players. If they think they have revenue problems now, they should try filling the league with a bunch of minor leaguers brought in to replace the real NHLers. The IIHF would love to have the best players in the world come play in their leagues, especially those guys who left to play in the NHL in the first place. There certainly are enough guys who want to go back and are barely held here by their NHL teams. Peter Forsberg, Nicklas Lidstrom and Markus Naslund come to mind as players the NHL could very well lose forever with a prolonged lockout. Any problems with salaries will be easily worked around, I'm sure. The players need to remember that they are going to look like the villains to most of the fans in this situation. The Union has done a terrible job in presenting their position to the public and they have been beaten up and down the ice by the League in that category. And something both sides need to remember is that a lockout will not just affect the lives of the players and NHL employees. It also will affect the lives of hundreds of small business owners whose very livelihood depends on there being a hockey season. The Detroit Free Press Business Section recently featured a piece about the effect a lockout would have on sports bars in downtown Detroit. It isn't pretty and I think the millionaires conducting the negotiations should be aware of the fact that their actions will go far in making it very hard on the poor little people they are lucky enough to have as supporters. It isn't just about the millions involved in team revenues and player salaries, it's about the thousands involved in regular people's lives. The impact a prolonged lockout will have the fan base is hard to quantify. It is obvious that many fans would abandon the sport but whether that is such a bad thing is up for debate. I'm sure many of us hard-core, serious fans would love to be rid of the annoying bandwagoners but the NHL owners have to be thinking differently. Those bandwagon fans are a huge source of revenue for the NHL and losing them would not help their cause at all, as good as it may feel for us "real" fans. Even "real" fans may find themselves getting disgusted with the League enough to find entertainment elseware, if the lockout is long enough. Bettman has to know that and so does Goodenow. Losing a large part of an already reletively small fanbase would put the NHL in a worse position than they're in now. Think about it, Gary Bettman and Bob Goodenow. Tell me you can't reach some sort of compromise. The players will play (Trevor Linden, in a letter to the fans: "� we've pledged to play next season while we continue to negotiate, if a new deal can't be reached before September 15."), if you let them. Tonight's World Cup of Hockey Final between Finland and Canada will likely be the last high-level hockey we'll see this calender year. Enjoy it. PS- I'd like to know if anyonce can answer this for me: What happens to the players' contracts if a salary cap does in fact get implemented? Will they all have to be re-negotiated and will teams have to scramble to fit under the cap or what? I cannot imagine that Bettman wants to grandfather his plan in, he must want it started immediately so the League can start making a profit as soon as possible. PPS- About the only thing we Wings fans have to hope for is a pre-midnight signing of Pavel Datsyuk, which will guarantee him being in the Red-and-White the next time the puck drops on NHL ice. Hasn't happened yet though. Sources: CBC's Faceoff 2004 Bill Daly's September 9th statements NHLPA Press Release (September 9th) The Freep's "POTENTIAL NHL LOCKOUT: Empty ice, empty coffers" (September 10th) Trevor Linden's letter to the fans (September 12th) The CBA, Article 12 Spector: A look at the NHL's proposals On thin ice (September 12th)


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