Only in the sports world do regular folks side with Mr. Scrooge.
Topics: Entertainment News
Urged by puck-loving readers, I’ve tried to back off the anti-hockey statements lately. I’ve even made an effort to watch more NHL games, even though I continue to believe the real season doesn’t start until April.
It may be nothing more than wishful thinking on my part, but it has seemed to me that the play this year is a little less sludgy, with marginally more skating and less clutching and grabbing. I’m probably imagining that, because scoring chances are still exceedingly rare, and scoring itself is down even from the historically low levels of the last few years.
The main event in the NHL, though, is off the ice, where the sport is headed for a lockout when the current collective bargaining agreement expires Sept. 15. Seven months from a labor deadline is way, way early to be making predictions, but most observers believe owners and players are both ready for a showdown and a long work stoppage, one that might change the very structure of the sport. It’s not outrageous to think that several teams wouldn’t survive a long shutdown.
The owners, who are making the exact same claims of economic disaster that baseball owners have made for the last decade, want a hard salary cap. The NHL Players Association, like the baseball players union, doesn’t believe the cries of poverty. If times are so hard, the union wants to know, why have the owners allowed payrolls to increase by 212 percent since the last contract, in 1995? The union won’t even negotiate on the salary-cap issue. Things look grim.
If you followed the baseball labor wars a couple of years ago, the arguments on both sides will sound familiar. As I’ve said before, labor battles in your own industry are boring, in someone else’s, they’re deadly, but there’s one thing about both the hockey and baseball labor wars that I find intriguing.
Why do so many of us take management’s side?
In almost every context, our culture identifies with the working stiff over the boss. The evil capitalist is a stock character, from Dickens to “The Simpsons.” Over and over we cast our emotional lot with the hard-working little guy. No country singer ever caused a single tear to fall into a single beer by singing, “Had to lay off all my workers.”
Only in the sports world are we in the corner of Scrooge McDuck.
Two weeks ago the NHL announced the results of a yearlong study into the league’s finances, conducted by Arthur Levitt, a former chairman of both the Securities and Exchange Commission and the American Stock Exchange. Levitt, who says he had complete independence, found that the NHL’s 30 teams lost a combined $273 million last year on $1.996 billion in revenue. Levitt said the league was on “a treadmill to obscurity” — an odd phrase; if you’re on a treadmill, you won’t get there, right? — and said he wouldn’t invest a dollar of his own money in the hockey business the way it’s going now.
That sounds pretty dire, but predictably, the players association dismissed the study. “It is clear the Levitt report is simply another League public relations initiative. To suggest the report is in any way independent is misleading,” said NHLPA chief Bob Goodenow in a statement. Goodenow criticized the league for “still not disclosing any individual team information or providing an opportunity to examine the actual records upon which the conclusions are allegedly based.”
Still, the $273 million figure has already become gospel, relayed in the media as a simple fact, and I think it’s accepted on most buses and barstools that NHL team owners are in deep, deep trouble.
Goodenow said the union was given full financial information on only four teams, and it found “just over $52 million in hockey related revenues and benefits not reported in the League’s voluntary and unaudited [financial reporting] process.”
He’s saying that teams are hiding revenues to appear poorer than they really are, to the tune of about $13 million per team. If you extrapolate, multiply by the league’s 30 teams, you get $390 million in unreported revenues, and the league’s overall $273 million loss, about $9 million per team, becomes a $117 million profit, about $4 million per team. That’s my calculation, not the union’s. The union only said it had no way of knowing what the real numbers are.
I don’t know which side to believe. I mean, I’d need to study for weeks just to get to “ignorant” on the subject of hockey economics. On the one hand, it’s awfully easy to hide revenue in the sports franchise business. On the other hand, if we’re to extrapolate from the union’s claim as I just did, we’re talking about hiding $390 million in a $2.386 billion business. That’s 16 cents on the dollar.
And incidentally, that would mean the $1.5 billion paid in player salaries is not an untenable 75 percent of revenue, as the owners claim, but more like 63 percent, right in line with the percentage paid to players in Major League Baseball (63 percent), which doesn’t have a salary cap, and the NBA (58) and NFL (64), which do.
It’s one thing to sneak some money out of the revenue column by charging the brewery you also own 38 cents a month for a top-level sponsorship, so that what’s really team revenue ends up on the brewery’s books. But hiding a sixth of your revenue sounds like pretty heavy lifting, especially when you consider Levitt’s claim that his report accounted for such familiar sports bookkeeping tricks as underreporting broadcast or luxury suite revenues by teams that own their own media outlets or arenas.
And let’s not ignore that Levitt is a man with a formidable résumé and reputation. As chairman of the SEC during the Clinton administration, he campaigned loudly — and, of course, unsuccessfully — against loose corporate accounting practices.
“It’s time to get past the rhetoric and work with the facts,” NHL commissioner Gary Bettman has said. “That’s what I’m hoping will come out of this.” But if that’s the hope, why not bring the union in on the process of that study? Why not have it done by someone agreed upon and paid equally by both management and the union? Why not let the players see the figures? If things are as dire as the league claims, the union would have to soften its position, or its members would all be thrown out of work when the league collapses.
That brings me back to how I don’t understand why so many people are so quick to buy into the league’s arguments and dismiss the union’s. Why don’t more of us identify with the players, the employees? It can’t just be because they’re rich, because the owners are way richer.
Let me put it this way: If you have a boss — as most of you do — and he or she says, “Business is so good and you’re so valuable that I’m going to more than double your salary over the next few years,” are you going to take the raise or refuse it? I think you’re going to take it, just as the players have. (Full disclosure: I took it too, during the dot-com boom. Then I gave it back in the bust. But I wouldn’t have if I hadn’t believed the bust was real.)
On the other hand, if you’re making a living, surviving, but hardly getting rich — as most of you are — and the kid you pay 10 bucks a week to mow your lawn says he has an offer to cut another lawn for $20, so he needs more than that to stay, you’re going to send him on his way, aren’t you? Even if he does a great job, edges and everything, you’re not going to pay him more than you think his work is worth.
But the owners have either done that very thing, or they’re a bunch of liars. Either way, these guys are not like you and me, and it’s not just because they have more money.
So why do so many of us believe it’s the players’ fault that owners are spending too much on salaries, even if we believe the dubious assertion that they are?
As the union’s Bob Goodenow put it, “At the end of the day the reality of the numbers will be borne out by the actions of the owners. The owners pay the players a reflection of what they’re worth. That’s the way a marketplace functions.”
The elephant in the room when Levitt said he wouldn’t invest a dollar in an NHL team was why that would be, in his words, “a dumb investment.” It’s because the owners, if the numbers are accurate, have grossly mismanaged their money. Exactly who forced them to more than double salaries in less than a decade? Why should we ask the players, who each did only what you would have done by accepting the salary offered, to bear the brunt of cleaning up the mess?
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