NHL on Thin Ice as CBA Set to Expire

The National Hockey League’s current collective bargaining agreement is set to expire September 15, and as we inch closer to the deadline, the NHL’s future appears to be on increasingly shaky ground.

It’s an all-too-familiar situation for the league; just eight years ago, the NHL became the first of the U.S.’s big four professional sports leagues to lose an entire season to labor disputes. At that time, it was a different world of sports, and the amount of money negotiated was significantly less.

Labor talks between the NHL and the NHL Players’ Association are in the fifth week of discussions in Toronto. The NHLPA is sitting down with Gary Bettman and league owners before making its first counter proposal to NHL executive’s recent labor demands.

Less than two weeks ago, owners submitted their first proposal to the NHLPA, asking for major concessions spanning several areas. NHLPA executive director Donald Fehr has indicated the union is getting closer to responding to the league's initial demands.

The split of the total revenue from the league’s business operations is in focus. Reportedly, the NHL is asking for a bigger chunk of the revenue share, seeking to increase its current stake of 43% to 54%. League revenue reached an all-time high of $3.3 billion last season, so an 11% drop in player’s revenue share roughly represents a $300 million loss.

Critics of the collective bargaining dispute question the motives behind NHL commissioner Gary Bettman’s proposal. After the NHL successfully dodged the economic slowdown by posting seven consecutive record-setting revenue seasons, should owners risk slowing down momentum?

Marc Edelman, Barry University School of Law Professor, states one major threat of a lockout will be losing fans, which can lead to lower ticket sales.

“If you look back to 2004, it took three years for the TV audience to return to levels reached prior to the lockout,” said Edelman. “It’s clear neither side will come out a winner.”

The NHLPA will likely fight the proposal, raising the possibility of a standoff from both sides.

“I don’t think this will be easily resolved.  The initial proposal from the owners to the players is a fairly draconian proposal,” said Robert Boland, NYU Professor of Sports Management & Sports Business.  “For the NHL to issue a proposal like this after what was a pretty good couple of years including an improved TV contract and consecutive revenue increases seems to be unjustified.  To demand such radical changes from the players is an extremely strong proposal.”

Player sympathizers argue fans buy tickets to see the action on the ice. It’s the players who bring the excitement to the rink, generate revenue and attract major marketing deals.  Lucrative league-wide TV contracts which are a major element of revenue generation will stale.

NHL owners are likely encouraged by the results of last summer’s CBA negotiations in the NFL and NBA where player unions were forced to concede to revenue reductions.

“Following two significant lockouts in the NFL and NBA and no legal resolution in favor of the players, the NHL’s proposal has to be regarded as the league using leverage to change the economics of the game,” said Boland.

Both leagues experienced brief lockout as the result of CBA disputes.  The NBA’s first month of the season was wiped out and the NFL experienced a shortened training camp.   Revenue division is not the only topic in the collective bargaining discussions; salary caps, salary arbitration and player contracts are also being reviewed.

The salary cap, which correlates directly to revenue, rose from approximately $39 million in 2005-2006 to about $70.2 million this year. The rise enables teams to offer lucrative contracts, exacerbating the issue that financially struggling teams’ bottom lines get squeezed by high-priced players.

And as the salary cap rises, so does the salary floor.  The minimum payroll rose from just over $21 million following the last labor dispute to approximately $48 million last season, further straining fiscally unstable clubs while the most valuable teams like the Toronto Maple Leafs, New York Rangers and Montreal Canadians headed straight to the bank.

The salary cap and floor will attempt to maximize parity while ensuring financial success for all teams, whether in a small or large market.  CBA negotiations highlight franchises attempting to cut labor costs to boost profit, but widespread financial achievement is no easy feat.

However, creating an environment in which all teams can thrive economically is nearly impossible, and it will take more than renegotiating revenue shares and salary caps to come up with a solution.  Franchises will also need to increase and maintain total profits. NHL players and owners will wrap up talks in Toronto this week and resume negotiations in New York on Monday and Tuesday.

The NHL regular season is slated to start October 11.