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ogreslayer

2012 Lockout Watch

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Here are the problems, in my mind.

1. Cap floor is too high.

2. Teams spending too much

3. Contract lengths too high

4. As a result, some teams not able to break even

The players association suggestion was decent, but it didn't go far enough. As you said, good starting point, but not a solution to the problem. What they need is more of a luxury tax system, a slight salary rollback by the players, limit contract terms to 8 years or so, and keep the arbitration. I could go on and on here, but thats the gist of things.

Of that list, only the first is an issue that the players need to help resolve.

Players shouldn't be punished because some owners can't stick to a proper budget. Contract length has nothing to do with financials, and even the front-loading is more an owner-discipline and parity issue than one of financial viability.

And even on the cap level, I'm not so sure it's really that much of a problem. It's hard to say without being privy to last seasons revenue numbers, but going by the latest Forbes data it looks like there were 4-8 teams that might have had a problem even spending to the floor in that season. One of them was Atlanta, and that problem seems to be solved. One is Phoenix, which is just a failure, and the players shouldn't be punished for that. One is the Islanders, who either need to relocate, fold, or at least be made fully eligible for revenue sharing. Then you have some borderline teams: St. Louis, Columbus, Nashville, Florida, and Carolina. With some on-ice success, those teams should be able to be profitable if they properly manage their spending (Though Carolina did win a Cup not that long ago, and it didn't really help them at all...), and that's at the 57% players' share and without any increased revenue sharing.

On the other end, 9 teams should have been able to spend at or over the cap and still make a profit. Another 7-8 should have been able to spend at or slightly over the mid-point, and the remaining 5-6 a bit below. In my estimation 20-25 teams should have been able to make a profit had they spent more wisely.

For those who aren't aware, the target average team payroll spending is the midpoint. So if half the teams can do that or more, and most of the rest can at least come close, the deal is workable. In fact, if some teams spend over the midpoint, other teams have to spend an equal amount under (or all players lose money from escrow). Looking at the Forbes figures, and doing a little adjusting for the skewing at the top, the non-player expenses look to be around 40% of revenue for an average team, and the actual dollar range ($33M-43M for most teams) is such that lower-revenue teams shouldn't be unduly constrained. 57% for a players' share should work. 54% as proposed by the union (and also the number the owners started with in 05-06) almost certainly would for all but a few "problem" franchises.

Of course, the floor as currently set is ~$11M higher now, and it may be unlikely that all teams have increased revenue by enough to offset that (plus other rising costs). That's something we don't the information to judge. However, even if it does make the problem worse, I'd say it's more of a revenue sharing problem than a cap problem. Or they may just need to adjust total revenue calculations to remove the skewing caused by Toronto, Montreal, NY, etc. (though that effectively lowers the players' share anyway...)

In any event, I'm still finding very little reason to put any blame on the union. At least not with their initial offer already making concessions. The owners crying for more "save-me-from-myself" concessions, and anchors like Phoenix and the Isles, aren't winning any sympathy from me.

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Here are the problems, in my mind.

1. Cap floor is too high.

2. Teams spending too much

3. Contract lengths too high

4. As a result, some teams not able to break even

Items one through three are ownership issues. Number four is a result of the first three.

"Parity" doesn't seem to be working as well as it was it was purportedly claimed.

Once again, Uncle Gary shows that he wants to crush the PA.

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I like how one person says that only #1 is the issue that the players need to assist with while someone else says none of them are issues the players have to deal with. It really is a pretty simple economic problem. You have billions in revenue. The owners attitude about the salary cap is just depressing. Its quite obvious a revenue sharing with a luxury tax system would be the best. Does it destroy parity? Not really. Parity has been part of the sport for a long time. There hasn't been a back to back cup winner since 1997-1998.

The sticking points are easy to acknowledge.

Owners: Roll back salaries, limit contract terms. In short, restart the clock like back in 2006.

Players: Roll back our cut to 53% this year, then 55% next year. It goes back up to 57% in year 3.

Which proposal solves the problem? Neither one.

A deal can be made, but it will take concessions on both sides to get it done. So far, neither side is willing to concede jack s***.

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I'm beginning to feel absolutely sick about this. The idea that we had a realighment plan that actually made sense, and an interesting offseason (well, outside of Detroit), plus an epic Winter Classic and Alumni Game set with players flying in from all over the world to take place....and it could be pissed away by another labor squabble. It's worse than how I felt in 2004 because at that point there wasn't even precedent for losing an entire year. I really think that Bettman and many of the owners feel like they'll do better in a new system, even if they miss games. For the bad franchises, they're saving money by NOT playing hockey.

But not only will Bettman have the precedent of the league bouncing back from the '04-05 lockout, but also the recent precedent of what happened in the NFL and NBA.

Except that I don't really think the league "bounced back" all the way from 2004-05...it just grew into something different, aiding largely by external circumstances (the growth of the Canadian dollar) and a few shot-in-the-arm gimmicks like the Winter Classic. I have friends that were HUGE NHL fans 10 years ago, and now they either don't care, or only care about their team. I think the TEAMS have many loyal fans, but the NHL has a very weak sense of a "league" compared to the NFL or MLB.

And if you do this to fans again....wow.

Edited by StormJH1

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I like how one person says that only #1 is the issue that the players need to assist with while someone else says none of them are issues the players have to deal with. It really is a pretty simple economic problem. You have billions in revenue. The owners attitude about the salary cap is just depressing. Its quite obvious a revenue sharing with a luxury tax system would be the best. Does it destroy parity? Not really. Parity has been part of the sport for a long time. There hasn't been a back to back cup winner since 1997-1998.

The sticking points are easy to acknowledge.

Owners: Roll back salaries, limit contract terms. In short, restart the clock like back in 2006.

Players: Roll back our cut to 53% this year, then 55% next year. It goes back up to 57% in year 3.

Which proposal solves the problem? Neither one.

A deal can be made, but it will take concessions on both sides to get it done. So far, neither side is willing to concede jack s***.

Different opinions do not mean both are wrong.

The players proposal does address the problem with the cap maybe being too high. And whether you want to admit it or not, it is a concession. They are willing to give up some of what they currently have. (And it seems we have some different information. From what I understand, the players offer was 3 years at 54%, then a 4th option year at 57%. As a starting point, it looks very generous to me.)

I'm sure both sides are willing to give some from their initial offer, the only question in my mind is whether the owners are willing to go to something at least reasonable.

Though if you have some argument as to why the players should concede anything to "solve" a problem with owners spending more than they can afford (and more than the current CBA says they have to), please share.

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Different opinions do not mean both are wrong.

The players proposal does address the problem with the cap maybe being too high. And whether you want to admit it or not, it is a concession. They are willing to give up some of what they currently have. (And it seems we have some different information. From what I understand, the players offer was 3 years at 54%, then a 4th option year at 57%. As a starting point, it looks very generous to me.)

I'm sure both sides are willing to give some from their initial offer, the only question in my mind is whether the owners are willing to go to something at least reasonable.

Though if you have some argument as to why the players should concede anything to "solve" a problem with owners spending more than they can afford (and more than the current CBA says they have to), please share.

The players proposal just addresses a problem with the camp temporarily. It gives temporary relief to the owners, but it doesn't look in the long term.

The players shouldn't have to concede anything when it comes to the owners overspending. What they should be doing is working with the league to create a system where everyone can win. The league things this is with a salary cap rollback. The players think this is with a temporary concession. Both of which don't solve the problem. Rolling back salaries will just bring the same demons back in the light 3-4 years later. The players proposal, which you are behind, only gives the same relief for a couple years. There has been no attempt to look at the big problem and that is with a rising cap floor that is forcing teams to spend money they don't have.

Right now, the current deal is good for the players and the owners of lucrative teams. There are too many teams that cannot spend to the cap floor and still remain profitable. The Devils just broke even last season and they made it to the cup finals. 17 other teams aren't able to break even and are infact losing money.

Lowering the cap floor is going to bring forward a luxury tax system or a more stringent cap system. Neither will pass because Bettman is married to the cap system and the players want the cap floor higher because it brings up salaries.

Uncle Gary already knows who he can count on to get him out this mess:

He is right too. I know I will be back thats for sure.

Just don't count on me buying tickets to games or other merchandise.

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Came across a copy of a New York Times story from 1993, when Bettman was named as Commish...

Bettman's mission is simple: Put a stop to labor unrest; sell the product in television's mainstream marketplace; change the violent image of the game; curb salary inflation; force enlightened self-interest on reluctant, old-fashioned owners; expand contacts with European developmental leagues and markets; settle the divisive issue of possible Olympic involvement, and help launch several new expansion teams.

Oops. Oh well, 6 out of 8 aint bad, right?

And...

He already has talked informally with Bob Goodenow, the head of the players union, and hopes to soon move the dialogue toward serious negotiation aimed at developing a true partnership before next season.

Oops again. That certainly worked out well, didn't it?

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Came across a copy of a New York Times story from 1993, when Bettman was named as Commish...

Oops. Oh well, 6 out of 8 aint bad, right?

And...

Oops again. That certainly worked out well, didn't it?

I think you're being too generous.

I don't think Bettman has:

changed the violent image of the game - concussions anyone?

forced enlightened self-interest on the owners - another lockout looming greatly due to an absurdly unrealistic proposal by ownership

settled the divisive issue of Olympic involvement - isn't that up in the air too?

By my count he's actually done three of those. sell the product in more mainstream marketplace, expanded contact with European leagues and markets, and added expansion teams (one of which has already failed).

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The players proposal just addresses a problem with the camp temporarily. It gives temporary relief to the owners, but it doesn't look in the long term.

The players shouldn't have to concede anything when it comes to the owners overspending. What they should be doing is working with the league to create a system where everyone can win. The league things this is with a salary cap rollback. The players think this is with a temporary concession. Both of which don't solve the problem. Rolling back salaries will just bring the same demons back in the light 3-4 years later. The players proposal, which you are behind, only gives the same relief for a couple years. There has been no attempt to look at the big problem and that is with a rising cap floor that is forcing teams to spend money they don't have.

Right now, the current deal is good for the players and the owners of lucrative teams. There are too many teams that cannot spend to the cap floor and still remain profitable. The Devils just broke even last season and they made it to the cup finals. 17 other teams aren't able to break even and are infact losing money.

Lowering the cap floor is going to bring forward a luxury tax system or a more stringent cap system. Neither will pass because Bettman is married to the cap system and the players want the cap floor higher because it brings up salaries.

...

Yes, it's a CBA with a set term. Any proposal by either side will be temporary. Yes, the players proposal reverts back to the current rules in the 4th year, but to say that it won't work you'd have to know what the league financials will look like in 4 years. 57% should have worked in 10-11 (albeit, it doesn't leave a ton of profit), there's no reason to assume that it wouldn't work in 2015-16, especially when you consider that, according to the Forbes data, non-player costs have been rising slower than revenue. It should become easier for teams to afford to devote a higher percentage of revenue to player payroll.

The owners say 57% is too high, and the union is willing to concede on that (for 3 years at least). The numbers available to us strongly suggest that even 57% should work, so I'd have to see the recent numbers to believe the owners proposal is even in the same realm as reasonable.

You can't just look at "18 teams losing money" and conclude that the deal is untenable. You have to try to determine why they are losing money. You say 18 teams "aren't able" to make money, but that doesn't appear to be true. It's true that they didn't, but not that they weren't able to under the current rules.

Explaining why I say 57% should work is a little tedious, so feel free to skip this part if you want to take my word for it.

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First, I'll expand on my earlier post regarding the "midpoint". That is intended to match the "Players' share", and is what all teams, on average, have to spend. It's derived from total "Hockey Related Revenue (HRR)" using the "Applicable Percentage" (This is supposed to be what teams can afford to spend on players. Variable, but we don't need to go in to that. It's 57% whenever HRR is $2.7B or more.). "Total League-wide Player Compensation (TLPC)" is the sum of all salaries and bonuses paid to all NHL players, and can not be more or less than the calculated players' share. (Since the initial players' share is estimated, they periodically recalculate using actual season HRR, and an escrow account to correct any discrepancies.)

The players' share (and in turn, the salary cap) is calculated as follows:

HRR from the prior season multiplied by the Applicable Percentage. From that subtract estimated cost of preliminary player benefits (Pensions, insurance, etc. No idea what the actual values are, but it seems when the CBA was written they expected it to be less than $81M. The example in the CBA was $66M.) and then multiply by an estimated growth factor (5% growth by default, though the league and players can agree on a different amount). The result is the Players' share. Divide that by 30 to get the "Adjusted midpoint". Add or subtract $8M to get the salary cap or floor. (The cap and floor really aren't that meaningful, since cap spending is determined by average salary rather than actual, so it is possible to spend over or under the cap/floor. But I'll go by those numbers anyway.)

Non-player expenses in 2010-11 worked out to about 39% of revenue, league-wide. This number has been dropping, as revenues are increasing faster than these costs. However, I decided to use 40%, to adjust for skew.

So with 57% and 40%, we cover our expenses and we're left with 3% for profit. Of course, percentages alone mean nothing. We have to look at actual numbers.

The cap for 10-11 was $59.4M, midpoint $51.4M, and floor $43.4M. There is no cap/floor/midpoint for non-players, but 21 teams spent between $33.2M and $43.1M. Average was $40.2M. There's some skewing from the top spending teams, but $33.2 seems a good figure to call a floor. We'll call $40.2 the midpoint, and $47.2 the cap (5 teams spent over that cap, and 2 spent under the floor.).

From the Forbes revenue figures (which is after revenue sharing and 'Stadium Debt Service', whatever that is):

Taking 57% of each teams revenue for players:

  • 10 teams could afford to spend to the cap
  • 7 more could afford between the midpoint and cap
  • 10 more could afford between the floor and midpoint
  • Only 3 could not afford the floor. In aggregate, $13.9 below where they need to be.
  • The sum of all teams spending 57% (without going above or below the cap/floor) is $46.9M over the players share, meaning teams on average have to spend about $1.5M less than they can technically afford to.

Taking 40% for non-players:

  • 7 teams could afford the cap
  • 4 more the midpoint
  • 11 more the floor
  • 8 teams can't quite make the floor, but 5 of them could if taking from the 3% profit pool.
  • However, adjusting player spending to get the correct share, the 5 teams above can afford the floor without touching profits.
  • The other 3 teams (same 3 that couldn't afford players) just suck. Good thing one of them already moved. Aggregate $18M under.

In short, you had three problem teams, two now. The other 27 could all make a profit if they actually budgeted properly. Granted, teams won't be perfect in predicting revenue, and sometimes more spending may be required in order meet revenue expectations. So there's maybe another 7 teams at risk, though all are historically low revenue earners, and so should be budgeting as such to at least minimize any losses.

It's worth noting that Forbes revenue numbers don't jive with what the cap figures suggest the HRR was for that year. However, since we don't know the actual HRR, and it doesn't appear to be all that big a difference anyway (dirty estimate suggests around $4M/team average, I didn't bother trying to work it out. Probably pushed St.Louis out of the bubble, but not a substantial difference, big picture.

It's also worth noting that changing to 54% doesn't change much either, it just doubles the size of the profit pool/safety net.

----------------------------------------------------------------------------------------------------------------------------------------

So in conclusion, in almost all cases, teams losing money are doing so because they are spending more than they should. Basically, it took only $76M in HRR for a team to break even. (For 11-12, that would be around $83M, and ~$91M with a cap of $70.2. With a $68.5 (going to 54% players share) cap it would be around $90M. 18 teams were at that in 10-11, several more close enough that they might be now.) With Atlanta moving to Winnipeg, it eliminated one problem team. Last season, they reportedly had around $100M in revenue and that was probably in the top 15. I'd guess around 24 teams should have the revenue to turn a profit.

Also, the players' proposal calls for a greater increase in revenue sharing. Reportedly around $50M more than the owners' proposal. That equates to over $3M more per eligible team. Maybe enough to make a few more teams profitable.

IMO, nothing short of relocation will help Phoenix or the Islanders, so nothing should done, except maybe make NY eligible for profit sharing. If their owners are willing to keep losing money, let them stay, but don't try to work the deal in order to compensate for them.

But I am curious what you think really needs to be done. How you think a luxury tax system would work and why it would be better. Seems to me just another way for teams to dig themselves a deeper hole, and makes it more possible for even the top earners to lose money. Prior to the cap, the Wings, Rangers, Flyers, Stars, and Avs were all among the top earners and all losing money. Boston barely making anything (though they're still not making much profit...). I don't think it would work.

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I very much prefer the way Mr. Abramovich approaches ownership of a sports team. I believe Chelsea F.C. have not been profitable since Abramovich has acquired the team but it does not appear to bother him. Owners should pad their egos by owning NHL team not their bottom line.

Also I do not see NHL players being at fault in this conflict in the slightest. Owners basically complain that they are losing money because they are spending too much. But how much a team spends is completely under owners control. If you spend money you don't have to buy stuff from a store and go bankrupt it is not stores fault.

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But I am curious what you think really needs to be done. How you think a luxury tax system would work and why it would be better. Seems to me just another way for teams to dig themselves a deeper hole, and makes it more possible for even the top earners to lose money. Prior to the cap, the Wings, Rangers, Flyers, Stars, and Avs were all among the top earners and all losing money. Boston barely making anything (though they're still not making much profit...). I don't think it would work.

Its quite obvious that the problem is two-fold. The first is the cap floor is too high. The second is the ownership can't budget or run a team. A combination of both is the real problem. I don't deny, in a perfect world, the current deal would work. This isn't a perfect world though. You point out specifics in your example that would be great in a perfect world, but the ownership in the NHL sucks a big one. Do i think the luxury tax system would work? I think it is worth investigating, because of the system in the MLB. You have rich teams and poor teams, and in the MLB there hasn't been a labor dispute in a long time. The small market teams can even compete in the MLB, and it has been determined that small market NHL teams can beat big market teams all the time.

Anyway, while you have the dumb ass owners who can't budget, you have smart owners who are forced to spend to the cap floor. The forced spend to the cap floor is a problem along with the ownership.

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I very much prefer the way Mr. Abramovich approaches ownership of a sports team. I believe Chelsea F.C. have not been profitable since Abramovich has acquired the team but it does not appear to bother him.

Every sports team owner needs a Dasha Zhukova.

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I still think a luxury tax system would be the best thing.

Why force owners to spend? If they don't want to fine, but don't cry foul if You aren't competitive. Same goes with owners who just spend senseless and then cry poor.

Players aren't at fault here they're just taking what owners are offering aren't they?

Sent from my BlackBerry

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Not all owners spend what they could be spending. They seem to be teams that are doing poorly in attendance.

Those teams doing poorly in attendance, and as a result not doing well money wise, shouldn't be forced to spend to a cap floor.

Edited by Nightfall

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Those teams doing poorly in attendance, and as a result not doing well money wise, shouldn't be forced to spend to a cap floor.

The thing is, I don't think Bettman even wants to get rid of the floor. In the NHL's proposal cap floor is lowered but in his quest for parity it seems like he doesn't trust all the owners to put a competitive team on the ice. And I'm guessing it has to do with revenue sharing too.

I honestly don't know if it's needed or not. In theory I could see how it would make a team spend the money to put a decent product on the ice. But it also seems to inflate salaries as a team under the floor overpays for a player or two to get up to the cap floor.

At the very least it should be lowered, but any new CBA would almost certainly have it lowered as they reduce the cap limit.

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Fact is other then the people here, no body cares what the NHL is doing. College football starts, NFL has started, and it's time for baseball to start the race to the playoffs. There will be no uproar if it doesn't start on time. And people will just think they are saving money because there's no games. I love the game of hockey and will be back when they choose to start, but have always thought it was BS what the players make. That goes for all sports. Players are being paid what a small city could use for a police force. And this is if they play or not. The worse thing is, we will be stuck watching poker on TV all winter long. I hope that some of the Wings still play in Michigan so we can watch them play.

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Fact is other then the people here, no body cares what the NHL is doing. College football starts, NFL has started, and it's time for baseball to start the race to the playoffs. There will be no uproar if it doesn't start on time. And people will just think they are saving money because there's no games. I love the game of hockey and will be back when they choose to start, but have always thought it was BS what the players make. That goes for all sports. Players are being paid what a small city could use for a police force. And this is if they play or not. The worse thing is, we will be stuck watching poker on TV all winter long. I hope that some of the Wings still play in Michigan so we can watch them play.

I do not have a problem with the money players are making. If large number of people is willing to pay to see you play hockey or dance or sing or anything else then you will make some money. I do not see anything wrong or unfair in this arrangement. This is a market in its rather basic and easily understandable form.

There are many other occupations where earnings are much more difficult to justify. Think the whole management chain of any large company, for example.

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Its quite obvious that the problem is two-fold. The first is the cap floor is too high. The second is the ownership can't budget or run a team. A combination of both is the real problem. I don't deny, in a perfect world, the current deal would work. This isn't a perfect world though. You point out specifics in your example that would be great in a perfect world, but the ownership in the NHL sucks a big one. Do i think the luxury tax system would work? I think it is worth investigating, because of the system in the MLB. You have rich teams and poor teams, and in the MLB there hasn't been a labor dispute in a long time. The small market teams can even compete in the MLB, and it has been determined that small market NHL teams can beat big market teams all the time.

Anyway, while you have the dumb ass owners who can't budget, you have smart owners who are forced to spend to the cap floor. The forced spend to the cap floor is a problem along with the ownership.

While you can keep repeating that the floor is a problem, that just doesn't seem to be true. We don't have all the numbers, but looking at the recent history, I'd be surprised if there aren't 24-28 teams that could afford the floor under the players' proposal. Some teams are always going to lose money. Every sport has some every year for the most part.

We shouldn't be worried about Phoenix or the Islanders. The bubble teams generally are teams that haven't performed well on the ice for at least several years. Many have never been good. Many are in small markets Most still should be able to turn marginal profit, or least keep the losses small. We shouldn't be overly worried over a few perennial losers in dubious markets suffering financially. The players have no say in how those teams are run or where they're located, they shouldn't have to suffer because of them.

I don't think baseball is a very good comparison. Even the "poor" teams make more than all but a few NHL teams, and most make substantially more than even the top NHL team. The tax threshold in baseball is $178M, and only a few teams have ever had to pay tax. The Yankees have payed the vast majority (95% according to Wikipedia). Only a few teams even come close, more than half the teams spend less than half the threshold. It's closer to an example of having no cap at all. I'd be all for removing the cap altogether, and letting the owners sink or swim on the merits of their own business acumen, and I'm sure the union would as well. But history says NHL owners can't be trusted to control themselves. Again, the players shouldn't be blamed for that.

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