August 17, 2012

NHL lockout looms as talks hit wall

Players and owners can't even agree on core issues and won't meet again until next Wednesday.

The Associated Press

TORONTO - The first truly tense moments of the NHL's collective bargaining negotiations have arrived.

Donald Fehr
click image to enlarge

Donald Fehr

Gary Bettman
click image to enlarge

Gary Bettman

With NHL Commissioner Gary Bettman and NHL Players' Association head Donald Fehr not scheduled to sit across from one another until the middle of next week and the sides unable to even agree on the core issues that need to be addressed, a sense of uneasiness has suddenly enveloped the talks.

After Wednesday's session, in which the NHL dismissed the union's initial proposal, Fehr set off for pre-scheduled player meetings in Chicago. The union boss will also oversee a session with players in Kelowna, British Columbia, before returning to Toronto to resume discussions on Wednesday.

At that point, the league and the NHL Players' Association will have just 24 days left to reach a new agreement and avoid a lockout. The current agreement runs out on Sept. 15. The regular season is slated to begin Oct. 11.

Where do they go from here? There is very little common ground between the proposals each side has put forth and neither seems particularly willing to move off its current position.

"What the issues are and how they get solved and how deep the issues go are something that we're not yet on the same page," Bettman said Wednesday.

In simple terms, the owners want to pay players less -- much less. Despite the fact the NHL's revenues grew from $2.2 billion before the 2004-05 lockout to $3.3 billion last season, a number of teams are still struggling. The financial success of the wealthiest franchises over the last seven years ended up hurting the poorer ones.

That's because the salary cap was tied to overall hockey-related revenues and rose dramatically from $39 million in 2005-06 to $64.3 million last season, bringing the salary floor (the minimum teams must spend) up along with it. If next season was played under the current system, the cap would have been set at $70.2 million and the floor would have been $54.2 million.

However, a new deal needs to be put in place before the NHL resumes operations.

Under the owners' proposal -- issued in July -- the players' share in revenue would be cut from 57 percent to 43 percent and would include a change to the way the salary cap is calculated. Instead of being set at $8 million above the midpoint (total league revenues divided by 30 teams), the upper limit would be reduced to $4 million above. As a result, the salary cap would drop to $50.8 million next season, which is below where the floor currently rests.

The league also called for the elimination of salary arbitration, contract limits of five years (with equal money paid each year, essentially eliminating signing bonuses) and 10 years of service before unrestricted free agency kicks in. All of those proposed changes are designed to slow the increase in salaries.

The NHLPA estimated the league's proposal would cost players approximately $450 million per season.

Rather than making a direct counteroffer, Fehr elected to design his own system. He attempted to appease owners by keeping the hard salary cap in place and also put a drag on salaries by delinking them from overall revenues. But he also called for an expanded revenue-sharing plan that would see the wealthy teams distribute more than $250 million per season to the poor.

Under the union's plan, the salary cap would fall at roughly $69 million next season. It would increase to $71 million in 2013-14 and $75 million in 2014-15.

In other words, the owners would only realize significantly more profit in the deal if the league continued to grow at a level beyond the 7 percent it averaged since the lockout. There's no guarantee of that, especially since the strength of the Canadian dollar has helped fuel the growth.

(Continued on page 2)

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