The Complete NHL Lockout FAQ, Part 1

XCel CenterWe’re less than two weeks away from the opening day of the 2012-13 NHL season, which can only mean one thing — the players are locked out. For the third time in 18 months (yes, we have a lockout hat trick), a major sport’s team owners have shut the door on their players in the hopes of scaling back player salaries. This is all depressingly familiar for NHL fans, who have now suffered through four lockouts and 1,698 missed games since 1992. By comparison, Major League Baseball has missed 938 games because of work stoppages since 1992; the NBA has missed 504; and the NFL has missed none, though their referees missed a doozy of a game last Monday night. It’s time to take a closer look at what the NHL lockout is all about and when we might see it come to an end. Here are some key questions and answers that will help guide you through Lockout: Part III.

Why are we seeing so many lockouts in professional sports?

I blame the European banking crisis. Why? I have no idea. But every time I say that while squinting my eyes and nodding my head slightly, people seem both impressed and satisfied. Try it sometime.

OK, fine. In the past 18 months we’ve had the perfect storm of lockouts — two lockouts in the NFL (referees and players), an NBA lockout, and now an NHL lockout. Part of the reason is simply bad timing. For the first time in a while, the CBAs in all four major sports (MLB avoided a work stoppage last year) expired within a year of each other.

The lockouts are also part of a broad trend in labor negotiations in professional sports. From 1968 through 1994, the NFL, NBA, and NHL underwent seven work stoppages. All seven of those were player strikes, orchestrated in a fight for free agency, basic player rights — including minimum salaries and pensions — and increased salaries. In the late 1990s, however, the tide turned as the owners, often claiming “poverty,” took the offensive to gain control of the escalating salary structure (as has been the case in other industries across the country). Since 1994, the NFL, NBA, and NHL have experienced eight work stoppages. All eight of them have been lockouts designed, at least in part, to limit player salaries.

Surely, you’re tired of writing about lockouts, right?

I will never tire writing about lockouts. And don’t call me Shirley. The real lockout fatigue is among fans, who have clearly grown weary of reading about labor negotiations, lockouts, unfair labor practices, and injunctions in the sports pages.

Are there any simple lessons we can learn from the NFL and NBA lockouts?

Yes. The NFL and NBA lockouts may have helped teach us at least two interesting lessons about collective bargaining and the games themselves. First, a season can be saved even if the deal does not get done before the old CBA expires. As we saw with the NFL, much of the action (in their case, dissolution of a union, multiple lawsuits, and then some frantic last-minute bargaining) actually took place after the CBA expired. Second, life will go on even if a portion of the regular season is lost. The NBA had a shortened season in 2012, and the games lost to the lockout have been long forgotten. In fact, the shortened regular season may have even enhanced the popularity of the league.

Why did the 2004 NHL lockout erase the entire season?

Because the owners claimed that the NHL’s economic system was broken (the NHL released an audit showing the league had lost $232 million in the 2003 season) and that they needed a fundamental shift in the structure of the league to save the sport. That fundamental shift was the imposition of a salary cap to curb player salaries, provide “cost certainty” for the owners, and promote competitive balance. Enough owners believed that the old system was so broken that they were better off missing an entire season rather than playing under the old rules or accepting the players’ final offer. The players dug in their heels and the entire season was lost.

Is Slap Shot the most underrated hockey movie of all time?

Absolutely not. Slap Shot is appropriately beloved. Mystery, Alaska, however, is wildly underrated (38 percent on Rotten Tomatoes?? Really??). It’s the “Rocky of Hockey,” written by David E. Kelley and starring Russell Crowe, Burt Reynolds, Colm Meaney, and Hank Azaria. Actually, imagine Gladiator if the whole thing took place in Alaska, Joaquin Phoenix’s role were played by a snarky Hank Azaria, and the Coliseum scenes took place in a massive hockey rink. And they played hockey instead of gladiating. Are you not entertained??

So, did the owners get their salary cap after all of that?

Yes. After the year without NHL hockey, the owners and players agreed to a new CBA that contained a hard salary cap, a 24 percent rollback of existing contracts for all players, and a guarantee of 57 percent of hockey-related revenues (HRR) for the players (down from the approximately 74 percent of revenue they had received the previous year). Of course, the players and owners were left with a weakened sport in a soon-to-be weakened economy that left the league without a real national television deal.

How has the NHL world changed since the 2004 lockout?

Well, it’s mostly good news. NHL revenues have grown from about $1.9 billion in 2004 to $3.3 billion last season. The league now has a healthy national television deal with NBC (more on that below), and the NHLPA has a dynamic, proven, and stable new leader in Don Fehr (with brother Steve Fehr at his side).

So what are they fighting about now?

Money, of course. The good news is that they’re not fighting over the imposition (or removal) of a salary cap. The bad news is that they are fighting over how to split up the $3.3 billion pie.

From the league’s perspective, 18 teams lost money last season, the growth of league revenues was in large part fueled by the Canadian dollar, and the deal they struck in 2005 “turned out to be more fair than maybe it should have been,” which is a bit like Seahawks fans saying regular refs would have made that play more fair than it should have been. In other words, despite locking out the players for an entire season, the league believes they gave the players too much by guaranteeing them 57 percent of HRR. The league now wants to scale back the players’ share of revenue to about 49 percent next season — which is actually up from the 43 percent they offered earlier in the negotiations — and down to 47 percent by the end of their proposed new six-year deal.

From the players’ perspective, the league has experienced unprecedented financial growth — an average of 7.1 percent per year since the previous agreement — and they feel as if they got hosed during the last negotiations. The NHLPA is thus seeking (according to their latest proposal) “small, but fixed” increases over the course of their proposed five-year deal. In the first three years of the CBA, the players are seeking $1.91 billion, $1.98 billion, and $2.1 billion, which would amount to 54.3 percent, 52.5 percent, and 52 percent of projected revenue (that assumes that revenue will continue to grow 7.1 percent per year). In the final two years of the deal, the NHLPA has proposed that the players get $2.1 billion plus 54 percent of the growth in revenue in the fourth and fifth years of the new deal. According to the NHLPA’s projections, their proposal would save the owners nearly $900 million. And, rather than taking money exclusively from the players to pay the owners, the players believe that many of the owners’ financial woes can be resolved by sharing greater revenue among themselves. The PA has therefore proposed $260 million per year in revenue sharing, with $120 million earmarked to assist troubled teams.

At this point, according to the latest reports, the two sides are still about $1 billion apart.

What percentage of revenue do players in the other major pro leagues get?

The NBA saw their percentage of revenue drop from 57 percent under their old deal to 51.2 percent for the 2011-12 season. That number will continue to drop to 49 percent as the deal progresses.

MLB players, who are not limited by a salary cap, took home roughly 45 percent of team revenue in 2010. As of 2011, MLB players received 51 percent of baseball revenue.

NFL players received as high as 54 percent of revenue under their old CBA, but will see that number drop to approximately 47 percent under their new deal (give or take a percentage point depending on whom you ask), though the NFLPA has said the players got 55 percent of league revenue in 2011.

Other than splitting the pie, what issues are the players and owners fighting over?

There are a host of other issues on the table, all of which are secondary, at best, to the share of revenue that will flow from owners to players. Here’s a quick list:

The owners want:

  • Five-year maximum on player contracts
  • Ten seasons in the NHL before a player can become an unrestricted free agent (currently they need seven seasons or to be 27 years old)
  • Elimination of salary arbitration
  • Five-year term for rookie contracts

The players want:

  • No changes to required lengths or limits on contracts
  • A limit on “non-player spending” by the teams, which would in essence serve as a salary cap for coaches, general managers, and other front office executives
  • Increased revenue sharing among the teams

If games are lost, can I buy a Chexx hockey game to get my hockey fix during the lockout?

Yes. Yes you can.

Check back later in the week to read more about the specifics of the negotiations and the likelihood of the league missing games before a deal is struck.

Gabe Feldman (@SportsLawGuy) is a law professor at Tulane Law School and the director of the Tulane Sports Law Program.

Filed Under: NHL, NHL Lockout

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