By Sean McCafferty aka 30ranfordfan

My, how time flies! It seems like just a couple of years ago that the 2005-06 NHL season started. The long awaited end to a yearlong lockout had come, and the NHL was ushering in a new era. One with rules that would promote a better, faster, more exciting game. One with a new breed of superstar unlike any we had seen in a generation.

Gone would be the days that clutching and grabbing would impede the NHL’s best players. With the likes of Sidney Crosby & Alexander Ovechkin now the poster boys for the ‘New NHL’,

Caps & Pens draft budding Superstars

the league would be better poised to market itself than ever before. The battle that had cost us the entire 2004-05 NHL season was won by the owners, and a salary cap was now in place to give the league the cost certainty it needed to run a successful business going forward.

Unfortunately, only some of what the NHL promised us would actually come true.

The league has succeeded since that 2005-06 season. League wide revenues have climbed to a history high, of $3.3 Billion. There are more people watching and following the NHL than there ever were. Crosby and Ovechkin have come exactly as advertised, and they’ve been followed by even more young superstars like Steven Stamkos, John Tavares, and Taylor Hall.
The games appear to be played at a faster tempo. The reworked rules added an element of speed that had been nullified by the lax calling of hooks & holds for too long. This didn’t lead to the scoring increase we were promised, coaches devised new systems to counter those elite players, but the game was certainly more exciting. Many fans like myself may never truly embrace the shootout, but as a spectacle designed to break ties, one has to admit that it entertaining.

What’s most frustrating looking back on that lockout though, is that the year off didn’t do a thing to stabilize the business model of owning a franchise. It did nothing to achieve the parity or cost certainty that the league insisted it would. The owners may have thought they won the battle, but the same problems have returned, and it looks more and more likely we’re headed for another lockout.

The Owners got everything they wanted. A salary cap was brought in. One that guaranteed players 54% of Hockey Related Revenues (HRRs), but their share would climb if revenues rose enough. It was one which also meant other revenues the teams generated were sheltered from being shared in this agreement. It also meant an immediate rollback of 24%, on all existing NHL contracts. It was the only way that salaries would be able to fit under the $39 Million salary Cap, with a projected $1.8 Billion in revues for the 2005-06 season.

Where the league anticipated would happen to revenues can only be speculated on, but one can only imagine that even they didn’t think that they would be entering into an era of unprecedented growth. In the seven years since the lockout, revenues have nearly doubled from that $1.8b, to $3.3. Based on the soon to expire CBA, the salary cap is projected to be just a hair over $70m in 2012-13, $31m higher than when the deal started. The cap floor has risen just as dramatically, going from $23m in 2005-06, to a small-market crippling $54m this year. Yes. Teams must now spend a minimum of $15m more now, than the maximum they could spend seven years ago.

The problem lies in the fact that not all teams have seen their revenues climb equally.
For the rich teams, the ones in the big markets, the cap has worked wonders for their bottom lines. Teams like the Rangers, Maple Leafs, Flyers, etc – they were spending in excess of $60m before the lockout started. The cap forced them to shed salary, but they were still able to offer annual increases in ticket prices. They were still bringing in big money for local TV deals, and they were still able to sell jerseys for hundreds of dollars. The new system just added to their bottom lines.

Bettman delivered for some, but teams like the Coyotes still in trouble

The smaller market teams (or more correctly, the “lower revenue” teams) didn’t fair nearly as well. Their businesses were now much easier to run, and rich teams were no longer able to buy away their best players in unlimited fashion, but a yearlong work stoppage didn’t help their already slagging ticket sales. It didn’t make the game more popular in Columbus or Florida. It only reminded people that they could do without hockey altogether.
On one hand, the NHL does look brilliant in it all. The new era they ushered in has led to more fan interest across North America. The young stars that have taken over the league are good for business, and the overall bottom line of the league shows this. The staggering jump in HRRs means that somebody is getting rich. It’s just that it’s still the same dozen, or so, teams that were doing so before 2004.
By neglecting to include any meaningful kind of revenue sharing in the last CBA, the rich owners essentially got everything they wanted while setting up their poorer partners for failure. Until the NHL learns to divide the teams’ share of the money more equitably, it won’t matter how good of a deal they think they can get from the players: half of the thirty teams will continue to bleed red ink.

This does not mean to suggest that the Toronto Maple Leafs should be forced to accept the same profit margins as the Phoenix Coyotes. That would be lunacy. But it is also equally laughable to suggest that teams with smaller fan bases, and comparatively tiny revenue streams, will ever be able to compete financially when the league ties their expenses to the profits of the big market teams.
The current system will only work if one of three things becomes true:

  1. The league contracts, dropping to the range of 16-20 teams
  2. “Low Revenue” teams are bought up by multi-billionaires who don’t care about losing money on their hockey teams
  3. The league finds a way to shift a higher burden of player costs to those teams that can afford it, through better revenue sharing, a soft cap, creative contracts, or some combination of the three

Using any sound sense of logic, it’s pretty plain to see that those first two will likely never happen. Reworking the system to help the teams that need it, therefore, is the only way to fix what really ails the league.
Based on the latest proposal from league Commissioner Gary Bettman, that doesn’t seem to be the case. Nope. The owners seem more focused on limiting contract lengths, curbing free agency rights, and extending entry level (i.e. cheap) contracts, while lowering the players’ share of HRRs (and likely re-defining HRRs, so there is a smaller pie for the players to draw from).

NHLPA boss Donald Fehr is getting ready for a fight

While it’s plain to see how any of these things would make ownership of an NHL team more viable, and a more affordable business to run, they will do little to curb the disparity amongst the NHL’s teams. They won’t spell an end to the massive losses incurred in cities where the current model doesn’t work.
The 2004-05 season was truly wasted. The league has not learned a thing from its mistakes seven years ago. I fear that that NHL is about to continue their cycle of stupidity, and cancel more games in the name of achieving a system that just doesn’t work.