The NHL appears to be on the verge of exploding any hope for saving the 2004-05 season, the first two months of which have been wiped out by a lockout of the players by the team owners. The players association made a surprising offer last week, the highlight of which was a proposed across-the-board 24 percent pay cut.
Union representatives and league officials were to meet Tuesday afternoon in Toronto, where the league was expected to reject the offer and continue to insist on what it calls "cost certainty," which means a hard salary cap that would be a percentage of league revenues. The union has said it won't negotiate on a hard cap, mostly because it wisely doesn't believe the league tells the truth about revenue, which in the sports biz is easy to hide.
TSN, a Canadian sports network, got its hands on a memo to the teams written by NHL executive vice president Bill Daly and dated Sunday.
"We believe the union's offer was more about trying to unify the players and ensure player solidarity with what they would perceive as a very substantial proposal than it was about making a good-faith effort to reach agreement with us," Daly wrote.
Yeah, that sounds right. I've been a union member, I've been on strike. If my union leaders had said they were going to try to end the impasse by proposing an across-the-board 24 percent pay cut, that would have been a terrific way to unify the membership and ensure solidarity. We'd have been as one as we threw them under a streetcar.
But Daly's correct that the union surely didn't think its offer would result in an agreement with the owners, because the union knows the owners won't budge. There's no such thing as a "good-faith effort" the union could make to reach an agreement other than simply capitulating.
Aside from the 24 percent cut, there were concessions about arbitration and entry-level pay scales. There's a luxury tax that would kick in when a team's payroll tops $45 million.
Last year 12 of the 30 teams had a payroll above $45 million, according to USA Today's salary database. After 24 percent rollbacks, seven teams would be over that figure based on their 2003-04 payrolls: Detroit, the New York Rangers, Dallas, Philadelphia, Colorado, Toronto and St. Louis. That reads like a salary upper crust, all right.
The highest-paying teams below the cutoff, Los Angeles and Anaheim, would be more than $4 million below it, in danger of crossing the line, but only if they bump their payrolls by more than 9 percent. Given the sport's economics, raising pay by 9 percent makes no sense at all. Given the track record of NHL owners in making smart business decisions -- especially when they have windfall cash to play with, as they did every time the league grew and collected one-time expansion fees -- raising pay by 9 percent is practically a foregone conclusion.
This is the nut of the matter: NHL owners are like idiot children. They cannot be trusted with money, so they have to have a spending limit at the player store. They deserve credit for realizing what boobs they are, but for not much else, other than driving a perfectly good professional sports league into the ditch of history.
"In the business world, if a company makes a bad business decision, then they have to pay for it, whether the stock goes down or whatever happens," Islanders captain Michael Peca told the Canadian Press. The owners "want an idiot-proof system."
Player agent Rick Curran used the phrase "fool-proof plan" in describing what NHL commissioner Gary Bettman is insisting on. "I think that's unfortunate," Curran told the National Post, a Canadian newspaper, "because what he's essentially telling his people is they can't do their jobs."
Gee, where would Bettman get that idea?
Players association president Trevor Linden told a Vancouver radio station he finds it a bit hard to swallow that with the concessions the union is offering, the owners still say they can't stick to a budget like any other business would have to.
"I don't think there's too many businesses out there that don't have to set their own budgets and don't have to be responsible," he said, "and I find it amazing that they need us to do that for them."
Last season the average NHL payroll was about $44.4 million, which might give you a clue where the players association got the notion of $45 million as a luxury tax threshold. The median payroll was about $39.4 million. (I passed algebra but that was a long time ago and I always have to look up what median means if it's been a while, so for those dummies like me: It means the point at which half the payrolls are higher and half are lower.) After a 24 percent pay cut, the average payroll would be about $33.7 million, the median right around $30 million.
A $45 million luxury tax threshold therefore looks a bit high if it's going to be taken seriously, though not so high that it couldn't be negotiated over. Lowering it to $38 million would ensnare Los Angeles, Anaheim and Washington, meaning a third of the league would pay the tax. A threshold of $34 million would force New Jersey and Boston to pay but would spare Vancouver, the Islanders and Ottawa, based on last year's payrolls. Sparing those teams sounds about right to me.
Of course, $34 million would be less than 1 percent above the average payroll, so it would almost certainly drive salaries down. On the other hand, that tax revenue would be given to the lower-revenue teams, who would theoretically use it to improve their lot, though there's never a guarantee that a bad businessman will do the smart thing with a cash windfall, as we've discussed.
Here's Daly again, in the memo to teams: "While the immediate 'rollback' of 24 percent offered by the union would materially improve league economics for the 2004-05 season, there is virtually nothing in the union's proposal that would prevent the dollars 'saved' from being re-directed right back into the player-compensation system, such that the league's overall financial losses would approach current levels in only a matter of a couple of years."
Well, nothing except the business acumen of the owners. Paying huge and ever-escalating salaries to players has proved to be a disastrous business strategy for every owner, even the ones who have won the Stanley Cup, the owners say.
So the owners, understanding that they can't go down the road of spiraling salaries again, would deploy their resources more effectively and avoid the kind of financial crisis they find themselves in today.
Of course, that's assuming the 30 owners have two synapses to rub together among them. So Daly was right: There's nothing to prevent them going down that same old road. There's no wonder these fools want a foolproof system.
Many of us have worked for fools. Giving them back a quarter of our wages wouldn't have made them any smarter.
Eugene Melnyk, owner of the Ottawa Senators, told the Ottawa Sun, "There is one solution and that's what is being proposed by commissioner Bettman. If we follow that track, we will have hockey that is here to stay." He means the hard salary cap. Saying "There is one solution" is not exactly negotiating in good faith, is it? The owners are easygoing guys, but they have to have things their way.
The proposed pay cut isn't just an isolated, one-time, quick fix. It would reset the market. The mass lack of weeping and rending of garments by fans in the absence of NHL games this year gives the owners a pretty good argument that the high-dollar players aren't the huge box-office draws they've been paid to be and the pay scale has gotten out of whack.
Chastened by the mistakes of the last decade, and with a chance to undo the errors of about half of that time, the league ought to be able to make smarter decisions, not only about salaries but about legitimate revenue sharing, which, as we've discussed regarding baseball, ought to go to teams with low potential revenues, not low actual revenues. Otherwise it just rewards bad management rather than leveling the playing field. Or ice. You know what I mean.
Tuesday's expected robotic repeat of the demand for a hard salary cap will show that Bettman and the owners care not at all about repairing their relationship with the players, fixing the economics of the sport and doing the hard work of trying to turn things around and keep hockey from completely disappearing from the mainstream sports consciousness in the United States, where the vast majority of the league's potential revenues reside.
What they want to do is break the union and start over with a new, much lower pay scale. If you're a hockey fan you might want to look into catching a few minor league games this year. Some of those fellows might be the scabs of next fall. Enjoy.
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