Tuesday, August 14, 2012

The NHLPA's Proposal And What It Reveals

Today the NHLPA submitted its own proposal to the NHL.  The head of the Union, Donald Fehr, characterized the offer as an “alternative proposal” and for that reason it is not appropriate to describe it as a counter proposal.

What Was Said By Fehr

The NHLPA believes that the proposal “once implemented can produce a stable industry and one that going forward can give us a chance to move beyond the recurring labor strife that has plagued the NHL for the last 2 decades”.

Fehr said that the settlement must be “fair and equitable” for players - as well as owners.

Players have offered to take a reduced share of hockey revenue “going forward for next 3 seasons”. That would be under the existing league formula for calculating the player share of revenue – and not the new proposal that calls for players to get 46% of revenue.

If league revenue grows at the average rate it has under the old agreement, the NHLPA estimates the amount of reduced player compensation to be about $465 million over the next 3 years.

The Union also proposed significant “expanded” and “aggressive” revenue sharing among clubs. Revenue sharing could reach and "probably would reach" about “$250 million”.

At the end of 3 years the players would have an option for a 4th year.

The hard cap is here to stay with some modifications.

Fehr said no significant changes to player contracting rules were proposed and the “current system would not be modified”.

Player Share of Revenue

The NHL proposed dropping the player share of revenue from 57% of hockey related revenue to 46%. Fehr did not indicate what percentage he countered with today. We do know that he said that the players are open to taking a cut of $465 million over the next 3 years. As well, this is based on a current 57% share and a growth rate consistent with past 7 years.

We also know that the Union has said that the NHL’s proposed 11 point drop in revenue share would result in a loss of $450 million next season assuming revenues of $3.3 billion. This is about $40 million per percentage point in the first year.

So it is possible that the NHLPA has proposed a 3% to 5% rollback on revenue share compared to the 11% drop the NHL has tabled.

However, we don’t have the actual proposal so this number may be off by a couple points. However, based upon the NHLPA’s proposed reduction, it does seem that the Union’s proposed cut of revenue is north of 50.

CBA Length

Fehr suggested today that CBA could be 3 years in length with an option to renew for a fourth year – by the players.

CBA length will be really important to the NHL. Long term CBAs promote stability and help grow a league. It helps with television and sponsor deals. Owners and the league will want something closer to the NFL – which is a 10 year deal. Even the NBA is 6 years with an option to extend.

If the proposal is indeed 4 years, that won’t cut it. Look for a minimum of 6 years.

Contract Rules: Largely Unchanged

Fehr said today that the Union didn’t call for significant changes to contract rules, like length.

The NHL has proposed a 5 year max on contracts.

This is a meaningful divide. The NHL wants something like the NBA has, which in part is a 5 year limit on contract length. The league wants to try and reign in the long term and lucrative contracts that seemingly are handed out on a regular basis.

Presumably, the NHLPA did not agree to the proposed rollback on UFA eligibility either – although that is a guess. They may have given away year. See here why this is a big deal for the NHL.

Team Sharing Revenue

Fehr called for an aggressive and expanded form of revenue sharing among teams. This is not a surprise. This is a common and recurring theme among Unions. Billy Hunter proposed it for the NBPA and DeMaurice Smith did the same on behalf of the NFLPA. The idea is that if teams share revenue then weaker clubs get stronger and the league as a whole is stronger.

Next Steps

The NHL will look over the agreement today and expects to have a response by tomorrow. We may learn new things then that can help us better understand where all this is headed.


Anonymous said...

Great work Eric! Your articles are always more informative and respectful than trying to convey how you personally feel on the subject, which doesn't happen very often in the blogging world.

Eric Macramalla said...

Appreciate it thank you

Anonymous said...

Do we have any idea on what the conditions would under which a team could exceed the cap? We keep hearing "hard cap remains" but we also hear that there are exceptions. This sounds more like a soft cap with strict rules. When I hear hard cap, I interpret that as NO ONE can go over the cap.

Eric Macramalla said...

At this point no details.