Tuesday, February 15, 2005

Gary Bettman's Ultimatum or "To Bob, with Love"

I got this in a newsletter e-mail from the NHLFA:
Mr. Robert Goodenow Executive Director National Hockey League Players’ Association Toronto, Ontario Dear Bob: We attempted to reach out to you with yesterday’s offer of a team maximum cap of $42.2MM ($40MM in salary and $2.2MM in benefits) which was not linked to League-wide revenues. As Bill told Ted, “de-linking” a maximum team salary cap from League revenues and total League-wide player compensation has always been problematic for us, especially since we cannot now quantify the damage to the League from the lockout. This presents the risk we will pay out more than we can afford. As you know, if all 30 teams were to spend to the maximum we proposed, and if the damage to our business is as we discussed at our meetings in New York, then the League would continue to lose money. I know, as do you, that the “deal” we can make will only get worse for the players if we cancel the season – whatever damage we have suffered to date will pale in comparison to the damage from a cancelled season and we will certainly not be able to afford what is presently on the table. Accordingly, I am making one final effort to reach out to make a deal that will let us play this season. We are increasing our offer of yesterday by increasing the maximum individual team cap to $44.7MM ($42.5MM in salary and $2.2MM in benefits). This offer is not an invitation to begin negotiations – it’s too late for that. This is our last effort to make a deal that’s fair to the players and one that the Clubs (hopefully) can afford. We have no more flexibility and there is no time for further negotiation. If this offer is acceptable, please let me know by 11:00 A.M. tomorrow, in advance of my scheduled press conference. Hopefully, the press conference will not be necessary. Sincerely, Gary B. Bettman Commissioner
Gary sent that off earlier this evening. Here is TSN's current "living article" (to use a phrase Brian and I have coined in conversation - if you've ever checked TSN articles at different points in the day, you know what we're talking about) discussing this final offer. This is what our hope hinges on, an offer made with no room for any changes, if Bettman's words here are to be believed. I find it hard to believe Goodenow will swallow his pride and accept the offer but hopefully he will prove me wrong. This has gone on long enough. We will know tomorrow. I don't know about you guys but I'm praying that I'll be surprised by what happens because I'm expecting bad news (as practical matter, defense mechanism, whatever). UPDATE: Well, four hours after Bettman made his ultimatum, the NHLPA made a counter-offer, despite being told by the League there would be no more negotiation. They proposed a team-by-team cap of $49 million, which is not exactly a meeting in the middle. Needless to say (but I'll say it anyway), it was flatly rejected by the NHL. Here's Goodenow's fax to Bettman (from ESPN):
Dear Gary,
Yesterday afternoon, Bill Daly presented us with an offer from the League that, for the first time, was not linked to League-wide revenues. We appreciated your willingness to adjust your position and we worked to respond in kind. By evening, we had fashioned and reached out to you with an offer from the PA that included, for the first time, a team maximum cap. This offer built upon the 24% rollback and other changes in favour of clubs, which were presented by the Players on December 9, 2004.

As you know, and as Ted told Bill, our offer of a team cap represented a radical step for the PA. We took this step because we too believe that our sport will be damaged greatly by the cancellation of this season and the continuation of the lockout through next season.

We wish that the NHL had offered a "no linkage" proposal before yesterday so that negotiations in that arena could have commenced sooner. However, we recognize that they did not and we agree that time is short.

In that spirit, and in a final attempt to reach an agreement, we are adjusting our offer of yesterday in two respects. First, we are reducing the maximum individual team cap to $49 million in salary, which does not include the $2.2 million per team in benefits due.

Second, we will adjust our exception provision so that it is available to teams only twice during the six year term and for up to only 10% over the limit of $49 million (to $53.9 million), at the tax rate of 150%. The exception provision is important so that a successful team does not have to arbitrarily dismantle its roster after it has achieved particular success or is in a unique phase of its player roster cycle.

I have attached a short summary of the main deal points discussed by Bill and Ted yesterday, as modified above.

I can be reached at the usual phone numbers.


Robert W. Goodenow Executive Director & General Counsel

And here is Gary's reply:

Dear Bob:

It was disappointing to receive the fax of your "final" offer.

We would have been prepared to propose and negotiate over a "de-linked" maximum team salary sooner, but the NHLPA had been consistent in stating that the players would never accept a salary cap. We only learned in the mediation process on Sunday that you would entertain such an offer, which is why we asked for a meeting yesterday and made the "de-linked" proposal.

If every team spent to the $49 million level you have proposed, total player compensation would exceed what we spent last season and, assuming for discussion purposes, there was no damage to the game, our player compensation costs would exceed 75% of revenues. We cannot afford your proposal.

Our offer of earlier today was a $75 million increase over the offer we made yesterday. I hope you will accept it, and that we can move forward and negotiate the myriad of other issues that need to be addressed.

Sincerely, Gary B. Bettman Commissioner

It's not over yet but my optimism has not been helped, to say the least. Anything could happen now.


TSN gives us Goodenow's reply to Bettman's latest (above):

Dear Gary,

This is in reply to your most recent letter.

1. Your claim that the Clubs ''cannot afford'' our proposal is based on your hypothetical fear of what would happen if every team spent to the $49 million level the Players have proposed. The notion that ''every Club'' will spend at the $49 million level is contradicted by years of actual payroll experience under the old CBA system and by Exhibit 12 of your December 14 document (attached for your recollection), in which you projected 24 teams well below the $49 million level after the rollback. Further, this experience is based on an environment without revenue sharing, taxes on team payrolls and the numerous new system restrictions.

2. Based on your own calculations from Exhibit 12, over 21 Clubs are spending significantly less than your team payroll limit number of $42.5 million. I am at a loss to understand how you suggest your offer earlier today represents a $75 million dollar increase when it only impacts the spending of nine teams!

You will receive nothing further from us. (My emphasis)




Robert W. Goodenow Executive Director & General Counsel

Nothing further, eh, Bob? Wow. It's hard for me to believe the season will be canceled because of a $6.5 million gap. TSN's Bob McKenzie informs us that it's much more than that, though:

If you multiply $6.5 million times 30 teams means we're almost talking about $200 million. On top of that, the $49 million that the NHLPA proposed is a soft cap. They have two exceptions in six years that would allow teams to go 10% over the cap. So as far as the NHLPA is concerned, the real hard cap - at least twice - for each team would be $53.9 million. The NHL feels overextended at $42.5 million. That's a big difference and it's a difference that doesn't look like it's going to get breeched.
He doesn't have any hope that there will be a season and I must confess I agree.

Tom Benjamin thinks all of this correspondence could be for show and that they've actually reached an agreement. I wish.

We'll know at 11:00 AM ET. Be sure to check TSN, since I'll be at work and then class. I believe this is the "living article" they are currently working on.

If you're praying folk, as I am, shoot off some pleas for a miracle, why don't you?


At 2/16/2005 03:43:00 PM, Anonymous Dan said...

It is pathetic how this ended. Maybe I am wrong but I don't see how settling at 45-46 million for the salary cap would have hurt the NHL that bad.

RIP 2004-2005 NHL Season.

At 2/16/2005 04:24:00 PM, Blogger Matt Saler said...

I agree completely, Daniel. It IS pathetic.


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