Employees

Jonathan Willis
November 14 2012 08:58AM

There’s an idea floating around that the NHLPA has lost its grasp on exactly what its constituents are. It works something like this: owners are owners, employees are employees, and the latter have no right to be dictating to the former what share of company revenue they deserve.

I suspect it’s an idea born of frustration with the NHL lockout, and an apples-to-oranges comparison between employment as a professional hockey player and employment in a more blue-collar job. In that sense it’s understandable. It’s wrong, but it’s understandable.

A Brief Look At The History of Hockey-Related Revenue

In a September interview - right before explaining that the NHL is the ranch that allows the player-cattle to feed – Detroit executive Jim Devellano explained why there’s a salary cap in the first place:

Each owner / team has a decision as to how they want to pay their players, as long as they are under the cap. Now Donald Fehr would have you believe by getting rid of the cap, the owners would make more money and that the sky is the limit, but trust me Scott, the owners would lose their asses. We've tried that. It doesn't work. There is just too much cost involved in running and owning a team.

Devellano is right. He goes on to say that this is “very complicated and way too much for the average Joe to understand,” but there he’s wrong. It’s actually very simple. Even in a system with drags on player salary – items like an entry-level cap and restricted free agency – owners spent more money than they could afford. There are, as I see it, two reasons why they spent so stupidly:

1. Many weren’t treating teams like businesses. Owners, just like fans, like to win. Players were not treated like financial investments and paid commensurate to the value they brought to the business; instead, they were paid whatever it took to get them because a $10 million deficit fades but Stanley Cup rings are forever. Or something like that.

2. There were slight competitive imbalances. In 2003-04, the last year before the lockout, teams like New York and Detroit would each spend as much as three teams at the league’s bottom tier. While the Rangers were sort of funny (seven consecutive years without a playoff appearance, heading into the 2004-05 lockout), the overall effect on player salaries made it impossible for small market teams to compete. It also made it very, very difficult for them to ice any kind of team without bleeding red ink.

The NHL’s solution to both problems was the salary cap. Now, big-money teams are in a system where – barring an obscene waste of money on hockey operations staff – they can’t possibly lose money. They have cost certainty. No matter how much money they make, they’re only allowed to spend a percentage of it – based on league-wide hockey-related revenue – on players.

The NHL fought hard for this. “Cost certainty” was the buzzword in 2004-05: they wanted a salary cap, and they wanted it linked to revenue.

The Problem With The Ranch/Cattle, Employer/Employee Dynamic

The primary issue saying something like ‘the players are employees and have no right to bargain for a percentage of revenue’ is this: the NHL is not a regular workplace. There’s an artificial structure in place – a structure that includes not just the salary cap but also things like the entry draft and free agency. It’s a structure that in most businesses would be illegal.

Let’s go to the implicit apples-to-oranges comparison to show how crazy this is. Imagine a tradesman, fresh off completing his interprovincial exam in Edmonton. This is roughly analogous to the situation of a hockey player coming out of Europe/major junior/college hockey. Instead of going out and finding a job, all of the companies in his line of work have formed a league. He’s picked by a company in Whitehorse – they’ve been struggling lately, so they earned the right to pick first in the annual electrician’s draft, and they like his grades in school and his practical experience with PLC’s.

After eight years, or by age 26, if he doesn’t like Whitehorse he can sign as a free agent with a team in Alberta.

It’s ridiculous, but that’s just because the comparison is ridiculous. NHL teams have rights that other companies don’t get, and they only have them because of the existence of the NHLPA and collective bargaining.

If the NHLPA ceased to exist, owners would get some things that they would like. Guaranteed contracts would come to an end, for example. But they would also lose their ability to dictate the course of an NHL player’s career – and as a group, there would be no way to artificially cap salaries at a certain percentage of revenue.

That would mean a return to the old days – where any billionaire who wanted a Stanley Cup ring could spend as much money as he liked in his efforts to get one. That would lead to all sorts of problems – in the current climate, it would kill teams like Florida; in the climate of a decade ago it would re-kill Winnipeg.

But players make too much money…

There’s a reason players make too much money: people spend too much money on the NHL.

As long as individuals are willing to pay extremely high prices for tickets, the NHL will charge them. As long as companies are willing to fork over cash for a luxury box, teams will build arenas with a plethora of luxury boxes and charge the money. As long as governments are willing to subsidize big new arenas and then offer favourable rent agreements and even subsidies, NHL teams will suck that money up.

As we’ve seen, without a salary cap, rich men will spend all that money and more in a quest to win. The NHL is limited in terms of how hard that salary cap can be: once they reach a certain point, the NHLPA membership will decide they’re better off sacrificing guaranteed contracts and just taking the money these guys will spend in a free market system. The league’s interest is in pushing the cap as low as they can without bringing that about.

And if fans don’t like to see hockey players both treated and paid like rock stars, there’s an easy way around it: stop spending money on tickets and TV packages. Vote against governments that spend money subsidizing professional sports. The only way to bring down player wages in a substantive way is to bring down league revenues along with them.

I’m not advocating that, personally. While I find the economics of professional sport distasteful, I understand that the only reason leagues like the NHL make money is because as a society we’ve decided that the entertainment value we receive warrants it. In my estimation, even the renewed cry that the players make too much money is a symptom, because it’s spurred by a desire to get back to paying for high-level hockey.

Recently by Jonathan Willis

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Jonathan Willis is a freelance writer. He currently works for Oilers Nation, Sportsnet, the Edmonton Journal and Bleacher Report. He's co-written three books and worked for myriad websites, including Grantland, ESPN, The Score, and Hockey Prospectus. He was previously the founder and managing editor of Copper & Blue.
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#51 Wanyes bastard child
November 14 2012, 05:00PM
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@Matt Henderson

When did you work at Bioware? I've done a lot of work at Terrace plaza over the years... it may have been me annoying you with all the noise from renovations :P

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#52 oilers2k10
November 14 2012, 05:38PM
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how about this.. All owners unofficially agree to spend only to the league minimum(of the salary cap)..no written agreement, just by using the old fashion honor system..

In a world where there would be honor amongst all the owners this might work.. Hey, better yet..why not have the NHL themselves own all the teams..forget individual owners..own the whole damn thing, like the UFC owns rights to all the fighters, there are no agents/individual owners/cry babies, etc..unlike in boxing and all the other sports, fans get to focus on the sport only, not on all the stupid politics and business drama.

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#53 Oiler Al
November 14 2012, 05:58PM
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Forget revenue sharing with players. There is no percentage of Rev. The NHL, has a Upper Cap and a Lower Cap for their own control if you may.For their own protection .

You can still have a entry level contract 2/3 years . You can still have free agencies at whatever 7/27 6/26 etc. its up to the league to make these rules.. the players have no say.

In return you give them gurantee contracts. All segments [ years] of the contract are all equal. None of these front loaded deals.

So if the NHL wants to set up Cap at say $65 million upper and $45 million lower, players fall into those numbers.

If the NHL wants to share revenue, its up to them to come up with the draft. The players have no say in this matter.

Pretty simple, someplace along the way this got complicated, and I think the Agents had a lot to do with this.

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#54 DonDon
November 14 2012, 06:25PM
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Oilers2k10 states:

"Hey, better yet..why not have the NHL themselves own all the teams..forget individual owners..own the whole damn thing, like the UFC owns rights to all the fighters, there are no agents/individual owners/cry babies, etc.."

Under this arrangement, who would own the NHL? A trillionaire? A huge corporation? The Russian mafia? The Peoples Republic of China? It would take a ton of money. I don't think the present owners would agree to take a piece of the whole league, no ego gratification, no fun and Stanley Cup rings would be worth squat. If the present owners sold their NHL franchises, what would the Toronto Maple Leafs, New York Rangers, etc. expect in compensation from the new NHL owners? Maybe the players should own their own league. Then the present NHL owners and Betman could form a new AHL!

If the cry baby players owned the league, there would be no lockouts. You just opened the door to exciting possibilities. The employees become the owners. I like it.

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#55 Quicksilver ballet
November 14 2012, 07:08PM
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Should just send the revenues straight to the NHLPA and let them divy it up amongst the players.

No more teams having to deal with agents. Take the negotiation out of it and let the PA divide the pie up as they see fit.

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#56 book¡e
November 14 2012, 07:16PM
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db7db7db7 wrote:

Here is the problem. Everybody keeps calling them employees. However, that is not the right term. They are contractors.

They negotiated contracts past the end of the current CBA, and that is the owners fault. If you owned a company and agreed to a contract with a contractor to pay him for 5 years, even though the current job will only last 2 years, that is entirely on you. If you withhold payment after two years, the contractor will sue you and win.

Except that these contracts are under the CBA legally, they are not independent contracts such the kind you are comparing them to. The minute the CBA ended to be in force so did those contracts.

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#57 Matt Henderson
November 14 2012, 07:17PM
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@Wanyes bastard child

From the summer of 2009 to summer 2010. One year contract maximum = sad archaeologuy.

Roll the credits in Mass Effect 2, I'm in there. Very cool experience.

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#58 book¡e
November 14 2012, 07:18PM
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BingBong wrote:

What he said.

If the NHL were a free market, teams like Phoenix wouldn't exist, Edmonton would of been gone a long time ago, player contracts wouldn't be guaranteed, etc.

The NHL would revert back to a 6 team league.

The players don't want a free market anymore than the owners do.

Wrong. There would be more teams and players would make a lot less.

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#59 Wanyes bastard child
November 14 2012, 08:01PM
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@Matt Henderson

Yup, that would have been me making all the noise :P

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#60 Richard Reid
November 14 2012, 09:51PM
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@Jonathan Willis

What we should be doing in the media and in the public is throwing our total support behind the owners. If public and media support did not put up with the players overwhelming sense of entitlement, this would never happen. As for public subsidization of hockey arenas. It is not a fluke that the only successful privately funded arenas are in Toronto and New York who both are very profitable. Here in Edmonton we complaining that Katz made 15 million last year which is less than a 10% return on his investment during boom times (can dollar + fan interest). Anyone who thinks that is a heathy organization should have their heads examined. If the owners where taking home the lions share then there would be no public money required. As for the argument that the owners do this to themselves... Hogwash, the players and agents leverage against each other, using comparables, and we fans demand that we keep or go after these players. Any owner or gm that does not is attacked. They are also competitive people all going after the same goal... a Stanley cup. For us to expect them to all play nice and responsible, is like asking the players to play in the Stanley cup finals all nice and by the rules boys , no need for a ref here, ya right! As for these players they have not showed me one logical argument for holding out this long. The truth is the media is scared to say anything to drastic less they loose access. Also funny how players can use comparables, but when the league does it (NFL, NBA) it's un fair? Or we are disgusted by the owners first offer (47%of HR) but its ok for the ones who write the checks. Think about this, Shawn Horcoff is making more money than about half of the owners! Some would suggest that the owners should just say no to these ridiculous contracts... Well the CBA is really the only time (legally)when they can do this (police themselves)and they still get attacked.. crazy!

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#61 Devolution
November 14 2012, 10:27PM
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The owners will win this standoff, and here is why. Let's just say, for the sake of argument, that 10 teams and making money and 20 are losing. This means that for every week of the lockout, 20 owners are BETTER off financially. On the other hand, every single player loses. Eventually the players will cave, right or wrong.

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#62 StHenriOilBomb
November 15 2012, 12:28AM
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...zzzzzzzzzzzzzzzzzzzzzzzzz...This lockout has become boring. Wake me up when Eberle's back in Edmonton.

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#63 Richard Reid
November 15 2012, 12:46AM
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Jonathan Willis wrote:

I completely agree - I'm not particularly pro-player or pro-owner. Guaranteed contracts are one of those things players get in exchange for guaranteeing owners a fixed percentage of revenues, and submitting to an artificial system.

Do you have any idea how ridiculous you sound? The players are in control of how much revenue the owners get? This my friend is the kind of backwards thinking that has led to all of this self entitled bs that we are now witnessing. Until we go back to a system where the owners are truly running the show like the NFL then and only then will we have stability. You say you are not on either side but every time you write or speak, for me you sound like your trying to get some street cred with the players.

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#64 Mumbai Max
November 15 2012, 05:12AM
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I am becoming more militantly pro-owner as each minute passes.

I have such a simple and elegant solution.

Take this year off, to make a point.

For 2013/14 institute a 30 million cap, 15 million floor.

No entry level deals. No free agency limits. No contract length limits. NO CBA. No guaranteed contracts.

Offer the players the chance to come back for 40% of the face value of their previous contract. If they want to, they are welcome back. If they decline, they become free agents. Sign where they want.

Some will scream about the old contracts. The old contracts were linked to the old CBA. They do not stand alone. Get over it, that is a legal fact.

The cold reality is that 40% of the current average of 2.4 M is still almost 1 M. How many of the current players could get a better deal in Europe. If they can, go for it! The league would be populated with largely the same players, but it would be cheaper and healthier.

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#67 ShakyDS
November 15 2012, 02:06PM
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The players are being spoon fed indoctrination by the man who almost ruined baseball. The day they hired Fehr I for one knew it was trouble. The players can't actually believe they will win this, or do they? I am university educated and can't understand most of the complexities of the CBA. The vast majority of players are not educated past high school, so they count on Fehr to lead them, and right now it looks like he's leading them to no pay cheque or Europe.

I for one hope the owners hold the players locked out until this system is fixed.

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#68 SB
November 15 2012, 07:55PM
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Jonathan Willis wrote:

@ Richard Reid:

Your whole argument is a big pile of crazy, but my favourite part was this line:

The truth is the media is scared to say anything to drastic less they loose access.

Yes. The media refuses to criticize the NHLPA because they are afraid that if they do the NHL owners will take their press passes away. That makes perfect sense.

There was a lot of negative reaction from a lot of the players towards media who were perceived to have sided too strongly with the owners. You are trying to convince us that players never shut out those who dare to criticize ?

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