NHL Lays its Cards on the Table

The NHL has reportedly presented a new CBA proposal to its players, offering a 50/50 split of hockey related revenues with no rollbacks on current contracts. The offer also drops many of the pie in the sky extraneous demands from the original proposal, most of which had little or no chance of ever coming to fruition.

In short, the NHL has put its cards on the table. The league has advanced the deal it was probably trying to get from day one.

I have always believed the 50/50 split of revenues was the owners’ end game. Most of what they included in their first proposal; including dropping the players share of revenues to 43% was a smoke screen intended only to create the range of negotiation. If you do the math; the average of 57% of hockey related revenue (what the players get now) and the 43% the owners originally “offered” is 50%. I doubt that’s a coincidence.

The league’s negotiating tact was no different than you or me offering $250,000 for a house listed at $300,000 with the hopes of meeting in the middle at $275,000. Sometimes that strategy works, sometimes it does not. It all depends on the resolve of the seller and/or whether they see through the smoke screen.

Of course as my real estate agent warned me back in 2003, there is also the risk of insulting the seller with too low of an offer. If that happens the situation becomes emotional; and emotion can be a powerful deterrent to getting a deal done.

Therein lies the problem with the owners’ original strategy. They created so much animosity with their first offer that the players walked away in a huff, refusing to make anything more than cursory counter proposals. As my old JV soccer coach Joe Findlay used to say, the idea was solid, the execution was poor. The owners could have accomplished the same goal with a more reasonable starting offer.

Regardless of the reason, the owners seem to have come to grips with that reality and definitively changed their strategy.  They have scrapped the dog and pony show negotiation process which requires both sides to slowly move to the middle.  They have done what so many pundits said they had to do; backed down from their hard line stance for the betterment of the league.

Now the question will the players do the same? Will they understand that the 50/50 split was the goal all the time and that the owners have simply moved up the time table for presenting it? In short, will they take a very solid offer, make a tweak or two where necessary and lace up their skates.

Or will they see this proposal as a sign of weakness and push aggressively for additional concessions?  Will they simply see this offer as the real "starting point" for negotiations to paraphrase Fehr?

Take the former approach and we will have hockey in early November. Do that latter and the BEST CASE scenario becomes last year’s NBA; a shortened season starting around Christmas. The worst case, nuclear option is a repeat of 2004-05; which means no hockey. The reality is likely somewhere in the middle.

So again I ask, where do the players go from here?

I simply do not see the owners moving too far off this offer.  The players must now come to them.  I have read articles suggesting anywhere from 18 to 25 NHL teams are in the red, some because of the revenue sharing dollars they are already required to pay. The NHL today may not be the economic calamity it was in 2005 but there are still very real financial problems.  The salary cap was a starting point solution.  Now the cap figure must be adjusted to a number that makes sense.

I remain SHOCKED at the amount of support the players have gotten from fans in this lockout. They are earning unprecedented salaries even as most of the teams are losing money because the salary cap REQUIRES them to pay 57% of revenue. More than that, fans typically refuse to accept the perceived trials and tribulations of millionaire athletes, even when we are not coming off the worst economic collapse since original Ottawa Senators were hoisting Stanley Cups in the roaring 20s.

In spite of this, public reaction to date has been shockingly pro- player; shocking given that most of us would donate a kidney to make 10% of what Shea Webber earns…to play a game.  I'm willing to bit some portion of it relates directly to the general hockey populace's extreme distaste (however misplaced) for Gary Betteman.

If the players reject this offer, which figures to be the best one they see in the near future, I believe the tide of public opinion will turn decisively against them. My impression is that most people believe a 50/50 split is the right deal, especially if it comes without rollbacks on existing contracts. Delay the season further simply because the all-powerful Fehr thinks they can extract more blood from the NHL stone and I assure you the players will resume their typical role as the perceived villans in CBA negotiations.  

To that end this proposal, for whatever reason they made it, is a brilliant strategic move by the owners. The risk of course is putting their best offer on the table now, before the PA moves closer to meeting in the middle. The reward is shifting perception of blame for the labor stoppage squarely to the players. My guess is this was intentional; given the included carrot of an 82 game schedule and the recent hiring of a political strategist. Even if it was accidental, my conclusion remains the same.

I doubt Fehr much cares about public perception but his employees very well might. Reject this offer and the Shawn Horcroff’s of the world might encounter a bit more backlash when they lament the reduction of their 6 Million dollar fully guaranteed annual salary.

While I do favor small rollbacks from the players, the reality is this deal can likely be made without them. The projected cap range at 57% of HRR was $54.4 Million to $70.4 Million. Taking the league’s oft publicized $3.3 Billion revenue figure, I estimate the cap at 50% of HRR at being between $46.7 and $62.7 Million. That’s a much more livable figure for the current NHL.

According to CapGeek.com, 17 teams are currently below that $62.7 Million payroll figure and 7 more are less than $2 Million above it. That means that for the most part teams can get to the new cap number without rollbacks. Yes it will create a cap crunch for most teams over the next two seasons but so be it. The NFL basically did the same thing this year which is why Mike Wallace is still living on the paltry sum of $2.7 Million per annum. The main point is the league will have an economic model that makes sense in the long-term. And rest assured there will be some mechanism to phase this in such that Boston does not have to drop $6 Million in cap obligations over the next two weeks.

The next move is up to Fehr and the players. I sincerely hope they do what’s in the best interest of the game and work with the model presented. Fehr’s first statement (“this is a good start”) not to mention his track record and the NHLPA’s badly misplaced anger are ominous signs but not unexpected. The question at this point is not what they say, it’s what they do.