Union: Yes! Why I Support the NHLPA

Before I take your questions, I think a bit of background is in order. During the 04-05 lockout, I backed the owners. Given the financial situation at the time, a cap didn’t seem to be such a terrible thing to me. By linking the cap to revenues, it also gave the players a financial interest in the health of the game and the league. In return for taking a 24% pay cut and the limitations on the cap, the players got to enter free agency a bit earlier. Overall, it worked out pretty well for both sides – revenues jumped 50%, average player salaries tripled, and the league had (finally) gotten an American TV deal. Sounds great, right?

Wrong.

It turns out, the league is in serious financial straits. Worse than ever. Some clubs are on the brink of collapsing. Well, if you listen to the league from July onwards, that is. Before July, Gary Bettman crowed about “another record for revenues for us (the league)” and “record ad sales, record sponsorship activation”. Go ahead, read it for yourself. 

Accordingly, the league decided that the only way to assist the clubs in need was to cut player salaries. Again. The first offer from the league was a blatantly insulting reversal of the 43-57 split, along with the elimination of arbitration, lengthening the time to free agency and limiting contracts to five years and a 5% variance on a year-to-year basis. Oh, and if the players didn’t accept it, they’d be locked out.

And this is why I’m backing the players this time. The league was doing just fine under the last CBA, but the owners got – in my mind – greedy. They wanted more, and decided that they’d just wait out the players again until the NHLPA caved in. Just like the 2004-05 lockout. It seems to be irking ownership that Don Fehr, the NHLPAs executive director, seems to have prepared the players for the eventuality of a lockout ahead of time. Overall, the players are pretty sure of themselves, and you’re not hearing near the grumbling that was heard during the last lockout. For the owners, this is bad news. They had expected for a division in the ranks, to be able to starve out some players in an effort to break the PA. It isn’t happening, and many are not happy about this.

I’ll take your questions now.

Forbes Magazine says 18 teams are losing money, smart guy. What do you say to that?

I have two things to say about the Forbes lists. First, they aren’t accurate. Also, according to the latest list, we’re down to 12 teams losing money. With that in mind, I’m going to send you to read this very good article about just how Forbes is missing the mark. (You should also follow @mc79hockey on Twitter. He’s a smart fellow).

The second point I’d like to make is a business lesson I learned very early in life: Get. A. Good. Accountant.

For instance, the movie “Harry Potter &  the Order of the Phoenix”? It took in over $1 billion in revenue. It also lost money – over $165 million. Go look and come back when you’ve picked your jaw back up. Is it really that big of a stretch to think that maybe, just maybe, those savvy billionaire owners just might engage in legal and legitimate, yet loss-producing accounting tricks? They didn’t get to be billionaires by not taking every advantage there was. I see no reason to assume that they would not attempt to massage the numbers to create a more advantageous tax situation for themselves.

That being said, accounting trickery can’t cover all the losses. I fully acknowledge that there are teams that are in trouble. Of course, in many of those instances it is poor business decisions combined with poor hockey decisions creating a vortex of suck. Of the 12 teams on Forbes list that lose money, you could safely remove San Jose, Washington, Nashville and Minnesota. That leaves eight teams that might be really losing money.

You’ll also note that the notion of revenue sharing amongst franchises hasn’t really been a big deal in these negotiations. That would mean that the owners would have to learn to share, and they don’t seem terribly keen on doing that. I know there isn’t the same pie to divide as in the NFL, but if the owners are so worried about the health of the league and these other franchises, maybe they could help shoulder some of the load? Maybe each team puts 10% of revenue into a pot, and then re-divide it out to each team? Teams at the bottom would gain some, teams at the top would lose a bit. (No, I haven’t run these numbers. I’m brainstorming).

Well, yeah, but why shouldn’t the owners get 50%? Or more? It’s their money on the line if the team loses money!

Yes, the owners take the financial risk. They also take none of the physical risk. Let me know when owners need to worry about this. Or this. Or can no longer run their business because of post-concussion syndrome.

And I’m not sure about you, but I’m not going to games to see Mark Chipman square off against Charles Wang. The players are why fans go. Remove the starting six players from every team – send them to the KHL, say – would you be as interested? Or do you want to see the best. Seeing a hockey game is easy – the AHL did quite well here in Winnipeg. Seeing the best players in the world is why we want to see NHL games.

The players are also on the hook for any downturn in revenue, too, don't forget. The linkage between revenues and the salary cap means that if crowds suddenly took a dive, they feel it in their wallet, too. The money players put into escrow disappears, and they don’t see it again.

Yeah, well, the players should just be thankful they get paid so much to play!

Most players are. What I suspect most players aren’t too happy about are about are owners who gloat about record revenues in one month, then cry poverty in another. How’d you feel if your boss talked about how business was so great, they could buy that new Corvette they’d always wanted, then told you the next month that you needed to take a pay cut “due to financial shortcomings in the company”? Oh, and your vacation time and health benefits were being cut, too. Times are tough, y’know. You should just be thankful you have a job.

The other problem is, players aren’t just guys from your beer league. They are, as I mentioned before, pretty much the best 700 hockey players in the world. The elite. How well do the elite get paid for their services, as compared to us mortals in other professions? How about, say, businesspeople? Lucky for me, Forbes has a nice list of CEO pay. Spoiler: they make a lot. In the 5-yr. category, the lowest (of the 350+ that have a 5 yr. average), is VMWare’s Paul Maritz, who made a paltry $4.15 million, and is left holding another $4.6 million in stock. (Warren Buffet is the actual bottom of the 5-yr. list, by the way, having only earned $1.9 million in that time. The $44 billion in stock probably keeps him in beer and pretzels, though.) So, if we’re going to talk about being thankful for being overpaid for what you do….

Ok, fine. But the owners and GMs need those contract limits to prevent abuse!

I’m actually in agreement with you on this one, fellow reader! The first thing that happened after the cap was imposed was for GMs to find ways to get around it. Backdiving contracts being a favorite way to reduce the cap hit. Smart businessmen exploit loopholes to their benefit - remember what I said about accounting?

Where I disagree with the owners is both in term and variance. To address the latter, I’m more comfortable with the PA proposition of a 25% move from top to bottom over the life of the contract. That is, if the top value for a year is $10 million, there can be no year lower than $7.5 million.  It gives some more flexibility than the NHLs strict 5%/year offer, yet accomplishes pretty much the same thing – getting rid of the $1 million/year “bonus years” when a player is in their late 30’s (and unlikely to play) to balance the cap hit of the contract.

The variance alone would likely curb a lot of the ridiculous contracts that have been signed (looking at you Kovalchuk!), but for the contract duration, I understand why the players aren’t thrilled about five year terms (seven if it’s the current team). For guys with star potential, that kind of term offers no stability. I also think it does a disservice to teams, as they will be unable to lock up guys for the long term / career. How would you feel, as a Penguins fan, if Crosby bolted after seven years? Or worse, after five? I don’t think the eight year cap the PA offered was so terrible. As others have noted, there are less than 100 contracts that are longer than five years anyways. I think the players would even be amenable to a sliding scale based on age – that way you could lock up someone like Crosby to age 35 and not worry about losing them to another team.

Of course, I also think teams should be permitted one amnesty buyout (that is, not counting against the cap) per year to get bad contracts off their books. That serves two purposes – one, it gets an overpaid guy off the roster and frees up cap space to bring in someone who is worth that kind of money. Two, it allows the market to correct itself in a way, by taking a highly paid “comparable” out of play. The player would likely be re-signed somewhere, at a far more reasonable rate. To prevent abuse, I also think it should only cover contracts with three or more years left on their contract.

But Donald Fehr is just in this for himself! He doesn’t want to make a deal!

Donald Fehr is no Bob Goodenow, I will give you that. For the players, that is a good thing. As I mentioned before, I believe Fehr told the players from day one that a lockout would be coming, and to plan accordingly. It follows the Gary Bettman School of Negotiating – make an offer (your “best”), add an ultimatum, and wait. Fehr just happens to be willing to play chicken with Bettman, and I think it is driving Bettman crazy that Fehr and the players aren’t backing down. The “best offer” in July has changed in the players direction on a monthly basis.

So it isn’t that Fehr doesn’t want to make a deal. He does. The players do want a deal. They just want a deal they can live with. Right now, Fehr is staring Bettman down and getting the owners to come back to the middle. I suspect that we will eventually see a deal and a portion of this season, but it won’t be the deal the owners originally thought they would get, that is for sure. The reason for that is Donald Fehr doing his job – standing up to the owners and ensuring that his constituency (the players) is prepared for what is going to happen.

Right. Fehr wanted the deal from this past week to fail. I know it!

No. The owners insistence on three different items being absolutely non-negotiable caused the talks to fail. Their hardline stance on contract length, variance and CBA term caused the failure. Fehr said the money was agreed on, which is a huge deal. And no, I don’t think Fehr was lying about that. If the money wasn’t agreed on, he would have used terms like “very close” or “in the neighbourhood”. Something that wouldn’t be a lie, but may not have been the precise truth, either. Saying there was agreement between the two sides mean just that – that they had agreed on the financial issues.

For the NHL to walk, rather than negotiate from the PAs counter-proposal is appalling. The league didn’t like the 8 year CBA (option to get out at 6)? Why not come back with a 7/9 offer? Or just eight years, with no option? And shave a bit of the “make-whole” money based on the term. See! That is negotiating. It really is that easy! The PA offered 8 year contracts? Maybe the league could have said six, with one year bonus for home team re-signings. That is why we don’t have a deal, my friend. Because Bettman can’t actually negotiate. He only gives ultimatums. When he doesn’t get a yes or no, he runs off again to prepare his next “best offer”.

My fingers are getting tired now. I may be back for a second Q&A, if this lockout drags on. Drop more questions in the comment section below.

YawAxis vs. Bettman: A True Tale

With all this CBA talk going on, I thought I'd offer a bit of a distraction. Allow me, if you will, to tell you about the time I met Gary Bettman. (I can hear your squeals of delight already.)

Our tale begins in early June 2011 with the Best Wife in the Universe - that'd be mine, in case there was any doubt. "Yaw," she says, "WestJet is has a deal to see the NHL Awards in Las Vegas. Would you like to go?" (I told you she was the best, didn't I?)

It took me all of two seconds to reply that yes, in fact, I would very much like to go. It was already confirmed that the Jets were coming back, and hockey fever was surprisingly high in the city. 

So off I went.

The Awards is just what you may have seen on TV - celebrities (or reasonable facsimiles - I don't count being on a Real Housewives of... as being a celebrity). Afterwards, there is a party by the pool where most of the nominees (and other dignitaries who are around) put in at least an appearance. We fans get a chance to say hi, get an autograph or two and generally have a good time with other fans.

So, there I am waiting to go into the theatre when who should come drifting by but Deputy Commissioner Bill Daly. Cool, I think. And then I ask the question that has been on every Winnipegers mind since TNSE announced their purchase - "Hey, Mr. Daly - any word on a name for Winnipeg?"

He stops and looks over with a grin and says "Not yet. I might hear something by the end of the night, though. Ask me again later."

"Wow. Umm, thanks. I'll do that!" 

And with that, Bill Daly wanders down the red carpet, nose-deep in his Blackberry.

The Awards come to an end, and everyone files out to the after-party. I've been mingling, meeting some people, talking hockey - Barry Trotz is happy to see Winnipeg get a team, Jeff Skinner looks younger than 18, Cam Neely still looks like he could drop me with one punch. The cup is sitting on a riser in the pool.

Yes, someone dove in the pool to try and touch it. 

And then, as I'm wandering to snag another beverage for myself, there they are - right in front of me.Bill Daly and his boss, the High Priest of Evil himself - Gary Bettman. I can't help myself. Daly told me he might have info. I have to ask the question.They both smile as they see me approach. It's a good night to be a fan, to be part of hockey. Everyone - even the Commissioner - is in a good mood. 

Which one looks like he actually wants to be there?

"Hey, guys! Any word yet on the Jets name?" A slip made out of habit. The NHL team in Winnipeg has just always been the Jets in my mind. The team hasn't actually been named yet, and won't be until draft day. 

Bettmans smile vanishes, replaced by a scowl. "You mean the Winnipeg team, don't you? No. No word." He turns and starts to walk off, Daly at his side.

Pre-flight paperwork

I will admit to being afraid of what might occur when the NHLPA hired Donald Fehr as it’s Executive Director. I didn’t like his confrontational attitude when he was in the same position for MLBs players, nor his unwillingness to get drug-testing into the game. Inflexible would have been my one word summary.

If that opinion were fact, however, the NHL and team owners would have never had to have made the absolutely laughable offer they did make to open the bargaining. The league could have waited for Fehr to make outrageous demands on behalf of the players, and then laugh at him, Instead, they take the lead in the laugh-a-thon and request a reduction in what counts as “hockey-related revenue”, a roll back on the percentage of revenue that players get, an increase to entry level contract length, and a longer waiting period until a player becomes an unrestricted free agent. Players would be facing an estimated 24% rollback on their wages. This is after a similar rollback in 2005. The NHL is asking for the farm - and the people on it, too.

If the league was still struggling as it was during the last negotiations, I could see why they would ask for this. Players aren’t on the hook for arena leases, contracts, and all the other costs associated with running a team. The NHL is not in the same position, though. Far from it. League evenues have jumped by about 50% from $2.1 billion in 2003-04 to $3.3 billion for the 2011-12 season. Here is the bargaining summed up in a nutshell:

In 2004 - “We are losing money. Players need to take a pay cut.”
In 2012 - “We are making lots of money. Players need to take a pay cut.”

In 2004, I supported the owners. A cap works for the league, and (mostly) keeps the playing field level. Yes, there are issues about the cap hits of contracts and “unlikely years”, but as shown by the consistently increasing revenues, the system in place is proving successful. The league is making money, the players are making money. The only people not making money are teams that are either 1. in non-traditional markets or 2. having multiple losing (non-playoff) seasons. People love a winner. In 2011, Forbes estimated that the bottom 5 were Phoenix, Atlanta, New York Islanders, St. Louis, and and Columbus. The first two are teams in non-traditional markets who have (or had, in Atlanta’s case) major ownership issues. The last three were steady non-playoff teams (and only St. Louis has changed that in the past season).

This tells us that if a team isn’t making money right now, it isn’t because the players are taking it all. It becomes an ownership issue - they put a team in the wrong area, or are handling it wrong in their particular market. (Phoenix, it should be noted, is still under NHL ownership.) Or they just aren’t winning. In some cases, it is both.

It is also why I’m backing the players on this round of CBA talks. Last time, they gave the owners the cost-certainty the owners felt they needed. They took payc uts. Top stars reduced their earning power in a capped system. The league is now better for that sacrifice. It just makes the owners look greedy, and ot of touch by asking for such drastic cuts when the league is showing strong growth. The players didn’t offer front-loaded contracts with tacked-on
cheap years to get around the cap. That hangs on ownership. If it is causing financial problems, look to close the loophole. Going after the players wallets for the owners lack of foresight is idiocy in its finest form.

Define "fan"

"Once we don't have the unlucky charms like PM Harper and Bettman there to jinx us and take up valuable seats for real fans ... all will be good." said vbmanitoba in a comment published at the Winnipeg Free Press.


Now, I may not be his biggest fan, but lets get one thing straight here - PM Harper is a fan of hockey. He is no stranger to the game, and regularly attends them. I'll go one further and commend him for actually watching the game. He could have spent the game sequestered in a suite, nibbling at the nachos, and talking politics in the back. He didn't. He sat down with everyone else and watched the game. He wasn't a big part of the ceremonies, but, as would be expected, his presence was noted.

Yes, it probably helps that he's the PM and can ask about (and get) tickets much more easily than you or I could. However, if he hadn't shown up, what would people say? That he only cared about Alberta and Ontario? That it showed his indifference to Manitoba?  You can spin his appearance (or not) either way. I'm looking at it from a (strangely) positive light - he came out to Winnipeg for something that we, as Winnipegers, considered a hugely important day. As a city, it enhances the level of importance given when our PM is there for the event.


As for Bettman, i'm willing to bet that even if there was a seat there for him, it was likely in a suite (quite likely the TNSE owners box), and that he probably had enough going on that he didn't get to take in too much of the game. Feel free to correct me, though - maybe he had a regular seat and I haven't heard about it. I suspect, though, with the season starting, multiple sales pending (Dallas and St. Louis, in particular) and the multiple media requests he would have had to deal with, I think Gary would have been a bit too busy to kick back with a beer and watch the game.