DKM Hockey Podcast

Saturday, July 14, 2012

Perspective: The NHL CBA

The opening salvo, the first salvo, the pending lockout, doom and gloom for hockey fans.  The NHL is not popular in the United States where 23 of it's franchises are located.  Yet, the sport is as popular as it's most likely ever been.   At then end of 2011, 18 of the 30 teams lost money, up from 16 at the end of the 2010 season.  And these aren't clever accounting numbers, they are revenue over expense.  In fact, if taxes, interest, and depreciation were considered, I'd be shocked if more than 8 NHL teams are actually making money, and that's with the NHL's version of a government assistance program. Yet, the sport is as popular as it has ever been.

 The first thing any business enterprise does when it's not making money is change benefits and compensation to employees.  It is not always the right thing to do, but it is typically the largest expense and the only non-question mark on a balance sheet.  Right now the United States' most unpopular of the 4 major sports, the NHL, awards 57% of generated revenue to the players.  The worlds most popular sport, which has probably the least player friendly CBA, gives 48% of the revenue to the players.  The NHL's last labor stoppage, Commissioner Gary Bettman's second, was all about 'cost certainty' for the owners.  The owners got their cost certainty in the form of a hard salary cap.  The players actually got an impressive amount of revenue at 57% and a generous salary floor, albeit a good portion of their salaries go into escrow with no certainty they will see it. 

Since Bettman's last labor stoppage, the average worth of an NHL franchise is up 47% more than what they were before the lockout 04-05 lockout, yet more than half the team's franchises lost money in 2011.  The NHLs "worth" has gone up 47% while over the same time NHL revenue has increased 29% and inflation of roughly 20%.  If you watched the news in 2008 or 2009, this should sound eerily familiar. Bubble economy.  9% real growth (excluding weakening US dollar against he CAD) and 47% increase in value.  Sounds like a Clinton-era policy.  The top five income generating teams would be hurt by a lockout, they made heaps of money and will continue to do so under just about any CBA.  This CBA is about teams with bad arena deals, weak TV markets, and fan apathy leading to an inability to be profitable - and they're taking it out on the players.   It's worth noting that teams in Toronto, Detroit, Vancouver, Boston, and Montreal make tens of millions a year while teams in Tampa Bay, Miami, Phoenix, Columbus, and Raleigh combined to lose 58.9 million in 2011 and take league money generated from those top teams.  Which of those 10 teams sound like 'hockey cities' and which don't?

So fans, what to do?  Remember, owners got what they wanted in the last lockout in the form of a hard cap, you lost a year of hockey.  They got their cost certainty, you got made fun of at work.  NHL revenues are up 29% since the lockout outstripping inflation so there is legitimate 'growth' in the NHL's revenue.  The owner's ability to turn a better profit did not have an affect on revenue, your interest as a fan did. 7 years after the owners got their cost certainty, which above all else, would provide the Columbus Blue Jackets with the same opportunity to succeed in the market place as the Toronto Maples, now sees those two cities $100 million dollars apart in profitability for 2011.  That's what brings us to the pending CBA negotiations.  This CBA is all about the owners ability to make a profit, forgetting they have terrible arena deals located in markets where hockey is foreign to the populace.  If revenue was down, attendance was down, and all of hockey was at the brink of ruin, I'd expect a CBA like this and I would expect the players to sacrifice.  Hockey, while not vastly popular, is as popular as it's been in decades in just 7 years after a season was wiped out.  Baseball has NEVER recovered from it's lost time, so don't get too over zealous NHL owners.

So my advice to those glaring sticking points in the latest CBA offer:

Players - NFL and NBA get 48% of revenue and they are more popular than you, it's time to accept that fact.  If you get to 49%, take it and don't look back - assuming of course you no longer have to put 17% of your salary into escrow.  Don't accept a 10% revenue cut without fixing the escrow problem.

Owners - you don't like 13 year contracts?  Then DON'T offer them. A reduced amount of revenue, a hard cap, AND max 5 year contracts with UFA after 10 years?  Does Vaseline come with that Mr Sandusky?  A reduction in revenue is a good place to start, but lets be fair.  How about a little RETRACTION if things are that bad (counter intuitive, I know but a move I support).  You put out a product for 10 years that no one wants, but you worth and revenue is up?  Shame on you and it's not the players burden to bear 100%

NHL - 1) change you're freaking transfer agreement with the CHL so your top draft picks have another option for development.  2) If a player gets their hands, elbow, or stick up on a check - suspend them.  3)Go to no-touch icing. 4) If a team can't make money and wants to move, let them.  5) How about a little marketing, that might help.

#CBJ - changing the revenue split won't help the fact that you're attendance is down 25% since 2002, that your team will still not make any money without NHL assistance, and your front office is made fun of by every other front office in the NHL.  You hit the lottery with the Nationwide Arena deal.  The new land lord is motivated to keep collecting the lucrative sin taxes from the arena district on game nights and bought the arena for pennies on the dollar.  Make the most of this opportunity and lose the front office, STAT - assuming of course affable, capable, and knowledgeable replacements want to come to Columbus.

PS - Gary Bettman, your number one job is to make sure progress is being made on the CBA and that not one second of the 2012-2013 season is lost regardless of where the CBA is.  Don't screw the fans out of hockey because a niche product can't turn a profit in markets where 'play hockey' is 8th or 9th on a list of a sports to play.  However, you will remain commissioner as long as you fight the good fight for the ownership group and continue to use the same marketing plan as the Turbo Grafx-16 and Pepsi Clear.

1 comment:

  1. Does your inflation statement "of roughly 20%" cover North America or US only?