by Richard McAdam aka RGM81

Hockey fans across the world are waking up today to a grim reality: for the second time in eight years, the National Hockey League has chosen to lock out its players in an attempt to restructure the collective bargaining agreement with the Players Association. For many fans, both younger ones and fans gained in the past seven seasons due to the game’s incredible growth, this is a new experience. For long-time fans, it is a stark reminder of the events of September 2004. We do not know how long this lockout scenario will endure; we may lose only a few weeks of the 2012-13 season or we could end up losing all of it. The NHL is the only professional sports league in North America to lose one entire season, and the ultimate fear of fans, players, owners, the media, local businesses, and everyone associated in any way with hockey is that we may lose a second.

There is a real and significant gulf between the positions of the NHL and the NHLPA. The League and its owners feel that the 57% of hockey-related revenues paid to the players is far too high. The players, who were forced to accept a salary cap and a 24% salary rollback in 2005, feel that they have given back enough already and will not accept an immediate reduction in their salaries. The NHL tells us that small market teams cannot keep up with the pace of growth from the past seven seasons. The players point to the example of the Minnesota Wild signing Ryan Suter and Zach Parise to contracts worth a combined $196 million. Indeed, throughout the summer, numerous long-term big-dollar contracts were signed that were “lockout proof” as they included substantial signing bonuses which will be paid regardless of whether or not the players play. This begs the question: did the owners agree to those dollar terms knowing that they would be seeking to pay only a portion of them, and did the players push for more money fearing that they would only be receiving a portion of what was agreed upon by both parties?

Throughout the past several weeks there have been a number of meetings between the NHL and the players association. Gary Bettman and Bill Daly have been the sole voices for the League; indeed, they have a rule in place that expressly forbids the 30 team owners from speaking publicly about the CBA negotiations. Donald Fehr has led the players but he has always had a rotating cadre of stars attend the meetings and stand behind him in the post-meeting press conferences. The two distinctive messages could not be a more stark contrast: on one side, Gary Bettman is completely and totally in charge of handling the League’s affairs; on the other, the players are standing united and will not be broken as they were in 2005. When the final formal discussions before the lockout concluded on Thursday, Bettman stood alone in front of a black cloth emblazoned with the NHL logo, while there were more than 50 of the NHL’s top stars (including Sidney Crosby, Henrik Lundqvist, Zdeno Chara, and others) supporting Donald Fehr as he spoke in front of the blue and red players association background. Optics are important in a situation such as this, and the players are clearly winning the public relations campaign in these contentious negotiations.

Public opinion is much different in 2012 than it was in 2004, both in style and substance. Back then, the owners side much more effectively managed the public relations campaign and had the support of many fans. Granted, they largely relied on selling snake oil to the fans. They promised that with “cost certainty” in place, there would be a better competitive balance and, more importantly for cash-strapped fans, ticket prices would come down. While it is true that there have been seven different Stanley Cup winners in the seven seasons since the ’04-’05 lockout, many teams are in even greater financial peril than they were before the salary cap system was instituted. There is not one rational hockey fan that can look at the New York Islanders and Columbus Blue Jackets and describe them as a “healthy NHL franchise.” At the same time, ticket prices across the NHL have steadily increased. The Toronto Maple Leafs did not make the post-season once in the seven years since the last lockout, yet they have increased prices every season, putting an even larger financial burden on the team’s long-suffering fans. These are legitimate problems that the NHL told us would be resolved, yet they have only been exacerbated under the current system that is in place.

Where does the responsibility lay for controlling salaries and ensuring healthy franchises? Most would argue that it should fall to the owners. They approve the contracts. They are tremendously wealthy. Yet it is has been the players that have been the largest proponents of increased revenue sharing in the NHL. Currently, teams must meet certain provisions in order to qualify for additional revenues, and there is a significant gap between the “haves” and the “have nots” among NHL clubs. Many fans do not like a salary cap system that prevents their well-off franchise from spending to its content while also having to give large sums of its revenue to a weaker cousin in the League. But that is a short-sighted position; for the benefit of the League’s 30 teams costs must be controlled and there must be a semblance of competitive balance for a franchise to succeed financially and on the ice. Nobody wants to pay money to see a team that is so poor and so hopeless that it the perennial whipping boy for the other clubs. So it is to the players’ credit that they have assumed some responsibility for finding ways to ensure that the struggling clubs can at least get some relief and support. That said, the owners have thus far rejected any revenue sharing proposals that are not linked to a reduction in player salaries. They want the players to carry that burden.

Player salaries are ultimately the major issue in this current round of negotiations. It all comes down to the NHL’s position that the players make too much and that 57% of HRR is far too high to be sustainable. The League feels that a reduced number, more in line with the other sports leagues, is the only way to keep the NHL healthy. They seem intent on reducing the players’ share to 50% which is a dramatic reduction that can only be met with either an immediate rollback or through increased escrow payments. The players are willing to concede a phased reduction in their share of HRR, but they do not feel that a rollback or higher escrow payments are the correct path to that destination. The actual percentage cut in salaries suggested by the NHL in its latest proposal works out to approximately 17% This would mean that the new 12-year, $104.4M contract signed by Sidney Crosby this past summer would be reduced to an $86.6M deal. While that it still a fabulous amount of money, asking a player to forfeit more than $17M of a mutually agreed upon contract sounds like a gesture made in bad faith. As alluded to previously, what are we to make of these long-term contracts signed this summer and what they actually mean?

For the players, the rollback means forfeiture of an incredible amount of money. The Crosby example is just one of many deals signed this summer that are seemingly–if the owners get their way–targeted for a significant discount. Carey Price’s new 6-year, $39M deal is another one that is of note. The rollback would work out to roughly $6.6M, slightly more than a full year’s current salary for the Habs’ netminder. The contract remains six years in term length. The NHL is basically asking Carey Price to play a full season for free vis-a-vis the contract that he had originally signed in July. Very few people would agree to work a significant amount of time for free after signing a contract that promises them X amount of dollars over a defined period of time, so one can see why there is more sympathy for the players from the fans in this ongoing negotiation process.

There has been considerable talk amongst fans of the game that the owners are basically demanding to be saved from themselves or their own general managers. It is not a situation of a handful of “rogue” owners handing out these big contracts. The two longest-serving members of the NHL Board of Governors are Philadelphia Flyers owner Ed Snider and Boston Bruins owner Jeremy Jacobs. Here are the contracts awarded by the Flyers and Bruins this summer:
• Jakub Voracek – 4 years, $17M
• Scott Hartnell – 6 years, $28.5M
• Wayne Simmonds – 6 years, $23.8M
• Braydon Coburn – 4 years, $18M
• Milan Lucic – 3 years, $18M
• Tyler Seguin – 6 years, $34.5M
• Brad Marchand – 4 years, $18M

Total = $157.8M. That is a lot of money from two of the NHL’s most hawkish owners when it comes to player salaries needed to be kept under control. There is something else to consider here as it applies to Ed Snider. He is a major reason that the NHL was able to secure a 10-year, $2B TV deal with NBC/Comcast, in no small part because Ed Snider owns Comcast. NBC/Comcast will pay the NHL $200M for rights in 2012-13, even if not a single NHL game is played. The deal, much like many player contracts signed this summer, is lockout proof. Essentially, Ed Snider is funding the NHL lockout through NBC/Comcast while at the same time demanding that the players take less money from his team.

As we wake up to this grim reality, we are seeing a torrent of news coming in via Twitter. Players are already signing contracts to play hockey in the KHL, the Swiss League, the Swedish Elite League, the Czech League – anywhere that they can play hockey. During an NHLPA conference call last week, Josh Gorges of the Montreal Canadiens made it clear that the players just want to play hockey, and that they were willing to report to training camp and prepare for the NHL season while continuing to negotiate a new CBA. Now, with talks breaking down and stalling, several players are demonstrating just that: they want to play hockey. Thanks to the technology of the day, fans will be able to watch them play in the far-flung corners of the Earth, all the while hoping that the business side of the NHL sorts itself out so that they can see their favourite players in their favourite uniforms.

We do not know when this lockout will end. Everybody is hoping that it ends soon and with a fair deal that will hopefully result in labour peace in the NHL for a long time. The NHL endured through two World Wars without losing a season. Under the leadership of Gary Bettman the NHL lost half of the 1994-95 campaign and all of 2004-05. He speaks to the media about the damage being done to the game on a daily basis during this process. If the CBA in place now was his architecture, and it is deemed so hopelessly harmful by the League and its owners, to the extent that another season hangs in the balance, at some point serious questions have to be asked about Bettman’s leadership.

In the meantime, until the NHL lockout is resolved, the fans will continue to support hockey. We will go to CHL games. We will go to AHL games. We will go to US college games. We will find ways to watch the KHL and other European leagues. We will even simulate a 2012-13 NHL season on our favourite video game consoles. The fans are the ones that are being hurt the most. Many, perhaps even most of us, will come back to the NHL when play resumes. But there will be consequences and we will not soon forgive those responsible for depriving us of seeing Sidney Crosby, Carey Price, Alex Ovechkin, Shea Weber, Steven Stamkos, Claude Giroux, Daniel and Henrik Sedin, Tyler Seguin, Taylor Hall, Jordan Eberle, and our other favourite players as they come into the prime of their careers. Hopefully the NHL and the NHLPA keep this in mind.