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An Analytical Framework for Coming to Agreement Between NHL Owners & NHLPA

An Analytical Framework for Coming to Agreement Between NHL Owners & NHLPA

Doug Abrams

Watching the NHLPA and NHL owners posturing and pounding their chests is like watching a combination of slow motion trainwreck and a high school romance (I love you, I hate you, I love you). As a fan vested in NHL hockey to a significant degree, it's emotionally draining to watch otherwise highly intelligent people act like lovesick teenagers. Nobody is going to win; and unfortunately, unless the dynamic changes and changes quickly young NHL players will likely pay the heaviest price.

I start from the premise that the players are not at all over-paid; and that the owners are misunderstanding the fundamental issue. Rather than having the overhead costs of labor, that is players' salaries, as their chief focus, the NHL owners need to find a better means of revenue sharing among big, medium, and small market teams. Toronto has managed to make a fortune spending enormous amounts on salary and fielding non-playoff teams. The Rangers likewise have made almost a tradition of failing to win a Stanley Cup while putting together teams that play into the playoffs only to lose.

By over-emphasizing the role played by players' salaries and under-emphasizing the need to reinvent revenue sharing processes, the NHL owners are making it harder and not easier to find a workable CBA. On the other hand, I am highly skeptical that Don Fehr is the right person for the NHLPA. I have no doubt he is intelligent. I wonder if he is wise.

Fehr may love the NHL players, and I have no doubt he does because as a group NHL players are grounded, humble, and devoted to their game. His actions, however, will be the test of whether he the ability to bridge disagreements. Unlike MLB players, the NHL players have very limited true power. Hockey is not the heartthrob of all America. You don't see fathers and mothers taking their sons and daughters to the park to teach them to hit hockey pucks against the wall in anywhere near the same number as one sees baseballs thrown. The size of the stadiums for baseball versus hockey says it all.

I will applaud Don Fehr if he successfully negotiates a reasonable and equitable CBA; but at this point, my impression is that he is heading toward a labor disaster that could rival the Air Traffic Controllers' failed efforts to strike under the Reagan administration. Knowing the limits of one's power is essential in negotiating any settlement. Fehr's prodigious intelligent seems to me to be overmatched only be his ego. This negotiation has become too much a battle of wills between Fehr and Bettman. When the negotiator becomes the star, things fall apart. One does not win negotiations unless one side holds virtually all the cards. In this situation, the owners have vastly more leverage than the players.

There is, however, a basis for a reasonable settlement. The first step is to recognize that as the revenue stream increases, the percentage of labor costs should not increase and in all reality should decrease as a percentage of the cost of doing business while the total amount of revenue increases. Resolution principle #1 then would be to set specific revenue benchmarks. As revenue increases beyond those benchmarks in a given year, the revenue stream above the benchmark would decrease. Assume simply to show the math that revenue of the NHL is $3 billion totals for all Hockey Related Revenue (HHR). For year 2012-2013, the first $3 billion would be divided 55% to players and 45% to owners, above that $3 billion the players receive 50% and the differential of 5% would go to a trust fund called the Owners Equity Fund which creates funds to assist teams that have financial struggles (the small market teams) reach the salary cap. These funds would have specific guidelines on how teams qualify for the funds and mismanagement would exclude the team. If no team qualified, the funds would be retained for future use. The idea is that the 5% differential would go toward players salaries as needed to have virtually every team spend to the salary cap. The teams benefit because there should be a correlation between successful franchises and funds to lure and retain top players despite the Toronto exception. The owners benefit because the more competitive the teams are, the more revenue they generate. The players benefit because they are essentially funding themselves.

Teams should be allowed to designate one Franchise Player per team. The Franchise Players has to agree in writing to the status of Franchise Player. 50% of the Franchise Player's salary would not count against the salary cap; but there would be a required NMC for the length of the contract; and the compensation for any year cannot be less than 50% of the highest year's pay. If teams truly want to pay to retain a player like Ron Francis, Crosby, Ovechkin or Malkin as the face of their franchise that's great for hockey; but they have to keep the player the entire contract term and pay him as a Franchise Player.

The ELC period should stay at three years. The length of UFA contracts should, other than one franchise players be no more than ten years, with the right to extend the contract another five years after five years; however, no single year can be less than 40% of the highest year's salary. Arbitration for RFAs should be retained. It's really a non-issue and is more of an aggravation that a business issue. Teams should be able to trade cap space for 1st or 2nd round draft choice no more than once every four years. Players for salary cap space is not tenable; but if a team is struggling and needs to rebuild once every four years, the trading of cap space for a 1st or 2nd round pick would be workable. The UFA period under the present CBA should be retained and not lengthened to ten years. Finally, this CBA period should run seven years. It's untenable to have a constant labor battle either brewing or freshly in the memory of owners, players, and fans. It opens far too many wounds, and undermines the unity needed in a sport that needs to increase revenue.

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