Wednesday, August 29, 2012

NHL's Latest Proposal & Why The Union Won't Be Too Happy

On Tuesday August 28, the NHL issued a revised CBA proposal to the NHLPA. This most recent proposal is somewhat of a departure from the NHL's initial proposal, which was dramatic and ambitious. However, ultimately, don't expect the NHLPA to being doing somersaults over this latest proposal.

Initially, the NHL wanted the players to agree to an 11 point reduction in its share of revenue, from 57% to 46%. This time around, the NHL appears to have toned things down a bit. They have proposed backing off 46%, and have also said they won't ask for rollbacks in salary. Seems nice enough - right?

This is what the NHL offered as far as the player share of revenue:

Player Share of Revenue

2012/13 - 51.6%
2013/14 - 50.5%
2014/15 - 49.6%
2015/16 - 50%
2016/17 - 50%
2017/18 - 50%

On its face, this initial part of the proposal is an improvement. It also appears that the NHL may have adopted an expanded definition of hockey related revenue (or HRR). This is the revenue that the league shares with the players. Things like expansion fees, for example, are not considered HRR and are therefore not shared with the players.

Defining HRR is important here. Really important. All along, Donald Fehr has been claiming that the NHL's definition of HRR is too narrow. As a result, the 57% of revenue the players got last year was, in Fehr's estimation, really 50%. As well, the initial 46% revenue proposal of the NHL was really 43% (that's why you may have been seeing some outlets reporting 43% instead of 46%).

So the big issue is not necessarily what share of revenue the players get, but HOW you define revenue to begin with.

Let's move on to the part that really won't make the NHLPA happy. The NHL is proposing the following salary caps:

Projected Salary Caps

2012/13 - $58M (fixed)
2013/14 - $60M (fixed)
2014/15 - $62M (fixed)
2015/16 - $64.2M (proj.)
2016/17 - $67.6M (proj.)
2017/18 - $71.1M (proj.)

In the first year, the NHL is proposing a fixed cap of $58 million. Here's the problem: there are 16 teams that are already over the $58 million cap. The Bruins and Wild, for example, are at $68 million. As well, there are another 7 or so teams that are really close to it. So a significant number of teams are either over the cap or within striking distance.

This means that for teams to come under the cap they will have to cut salaries or renegotiate deals. So while we would not see individual rollbacks in salaries, we would see team rollbacks in salaries - and by extension that would result in teams having to cut players or renegotiate deals (this presumes the NHL would put a system in place for that).

As the Union head, Fehr's mandate is to look out for the best interests of his members/players. This is a fundamental labor law principle and one that Fehr holds dear.

Part of that mandate is to ensure that his members remain employed. That's being threatened by the NHL's proposal. As well, as Union leader, Fehr is directed to ensure that his members do not take pay cuts unless it can be shown rather convincingly that reductions are warranted. To date, Fehr's position has been that no such basis has been provided.

The NHL's newest proposal is an attempt to broker a deal and the league has moved off its initial dramatic proposal. This is the good news, as we can now say that negotiations have begun in earnest. However, don't expect the NHLPA to be elated with this latest offer.

This will push back. They will resist. They will continue to fight.


Aric Litchy said...
This comment has been removed by the author.
Anonymous said...

Hey Eric,

I heard from other media that the proposal includes an increase in escrow. Could you explain escrow and its affect with this new proposal? Thanks.

Peter Drake said...

I don't think the NHLPA cares that much what the cap is, they care what the players share of revenue is. But as you said, if the cap drops and teams have to adjust then the NHLPA would want to make sure those adjustments weren't hugely negative for players.

But does a drop in the cap automatically mean player suffering? I think it depends on what transitional mechanisms (if any) the CBA contains. If there are none and the teams over the cap have to radically overhaul their lineups then that would be very disruptive. They might be forced to buy out players that would prefer not to be bought out.

But if they provide some flexible mechanisms that minimize the harm to the teams over the cap then the players on those teams might be supportive.

In the larger sense though, the NHLPA might prefer not to have that flexibility. Anything that keeps overall salaries high probably means more salary lost through escrow by each player.