The Observer, February 18, 2005
Volume XXXVII, Issue 18
NHL first lost millions of dollars, now losing millions of fans
It's that time of year again! It's hockey time! But in case you haven't noticed, there is no NHL to turn to this winter. The season is skating on thin ice due to a labor dispute, and it could very well be canceled by the time this article comes to print.
I don't really expect Clevelanders to notice because they don't have an NHL team to cheer for. But for students from Detroit, Philadelphia, Toronto, and other great hockey towns, the lockout has been excruciating.
Most people don't even realize what the dispute is about, so here is a quick summary for those who haven't had the time or patience to keep track of it.
The current lockout began at midnight on Sept. 15, when the collective bargaining agreement signed in 1995 expired. The collective bargaining agreement (CBA) is the contract between the owners and NHL Players Association (NHLPA) that governs all terms and conditions of employment, from salaries and insurance coverage to free agency and draft procedures. A lockout differs from a strike, which is initiated by players who are unhappy with current conditions. This labor dispute was initiated by the owners, who decided to "lock out" the players because the NHL has been losing money over the last few years.
The NHL makes about $2 billion per year, but due to inflating player salaries and other costs, they operate at a loss of about $300 million. Revenue increases of 163 percent over the last decade have been offset by increasing player salaries, which have tripled over that period. Given the current downward trend of the league, the owners felt the need to overhaul the existing CBA.
The crux of the disagreement is regarding player salaries. NHL player salaries currently eat up nearly 75 percent of the league's total revenue of $2 billion. (Player salaries in the NFL, MLB, and NBA account for about 50 percent of total revenue in each of those leagues.)
The NHL owners want a salary cap, similar to those of the NFL and NBA. This will limit player salaries to 50 percent of league revenue like the other leagues. Gary Bettman, commissioner of the NHL, refers to this as "cost certainty." Salary cap… cost certainty… I think they should call it the "let's share a ton of money and all live like kings" model.
But the NHLPA refuses to accept a salary cap, no matter what it's called. They feel they deserve to make their fair market value, preferring a luxury tax system similar to that in baseball, where teams spending more than a set amount are forced to pay extra money to the league. This would help increase revenue across the league at the expense of teams which are able to afford to spend more.
But understanding that their salaries account for the bulk of the NHL's expenses, and hoping for a remedy to the current stalemate, the NHLPA proposed a 25 percent cut in salary across the board on Dec. 9. The owners rejected this proposal, citing it as merely a short-term solution. For long-term stability, they maintain that a salary cap is needed.
Occasional meetings over the last two months have proven unproductive, with neither side willing to budge on the issue.
Another problem often debated is exactly how much money the NHL makes, and what percentage is allocated to players. NHLPA auditors report different financial figures than the NHL's internal accountants. The differences are not substantial, though, accounting for less than 2 percent of the $2 billion industry. So while both sides argue, millions of fans wait… and wait… and wait….
Hockey fan and former esteemed Observer sports editor Erik Kenerson believes that "both sides are being incredibly dumb and blind to the fact that while they quabble over a few million dollars, they're losing fans by the day and will both be worlds poorer once the whole thing is done."
Ultimately, the main problems are player greed and owner mismanagement. Players are entitled to earn as much as they can. If a handful of franchises are willing to give you anoutrageous contract, more power to ya. But at this point, I am beginning to feel that the players' offer to take a 25 percent pay cut was nothing more than a gesture to appear less greedy, knowing that salaries will escalate again in the near future.
The increasing salaries are certainly not indicative of the league's popularity or revenue-making ability. Salary trends in the NHL have mirrored those of the other professional leagues, but unlike the other leagues, the NHL cannot substantiate such increases. The owners have now realized the error of their ways and want to implement a salary cap to prevent future overspending. For that, I have to commend the owners. But the players are unwilling to sacrifice the lifestyle they have negotiated.
So now, here we are. No pucks dropping. No fists flying. No goal scoring. No glass shattering. No Zambonis. No Barry Melrose. We are on the brink of losing the entire season and numerous fans that have been gained over the last decade. The owners hoped that by suspending the livelihood of the players, they could force a renegotiation of the collective bargaining agreement. But they miscalculated the players' resolve.
We can only hope they didn't miscalculate the willingness of fans to return to the sport they once loved.
