Some Thoughts on the NHL’s Proposal



In case you missed, the NHL has published their proposal to the players union on today in stark black and white for the public’s perusal. Getting past any cynical deductions about why the league would choose to finally share a proposal in living color with the fans at large, the deal itself contains a number of fascinating items that go well beyond the primary issues that were reported yesterday.

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A few Bullets

I haven’t had much time for the details to sink in, but here are some of my initial thoughts on the thing –

 – The retention/lack of change to the salary floor means bottom feeder teams are going to continue to struggle financially under the current framework. 

Both myself and Graphic Comments concluded at NHLNumbers recently that a major determinant of individual franchise financial strife in the most recent CBA was the cap floor and the fact that the cap rapidly ballooned well past the poor teams’ ability to cope. This proposal does nothing to change that disparity with a projected 2012/13 lower limit of $43.9 million and upper limit of $59.9 million based on a 50/50 split of HRR revenues. In fact, the league has inserted an additional proviso that the cap floor must be reached with base salary and not through the additional bonuses – meaning the bottom feeders won’t be able to cross the finish line with contract performance clauses that may or may not be triggered.

From a players perspective, this is significant in a couple of ways: while it forces poor clubs to pay guys in the short-term, perhaps artificially raising some individual salaries here and there, in the long-term it’s a systemic failing of the collective bargaining agreement which will likely lead to more problem franchises like the Phoenix Coyotes and Atlanta Thrashers. Perpetually cash negative clubs like that drag down the league’s earning and growth potential, shrink the overall revenue pie and give the owners ammunition to cry poor again in the future when the next CBA is up for re-negotiation.

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– Related: there is a section on revenue sharing, with a committed pool of $200 million for 2012/13, which is about 6% of the 3.033 billion in total revenues form last year. At least one half of the pool will come from the top-10 grossing teams (as determined in a manner decided by the NHL, whatever that means). 

It sounds like a lot of money, but in fact if there are, say, 12 teams looking for revenue sharing dollars by the end of the year, it means a bump of about $16M to those clubs bottom line assuming even distribution. To put that in perspective, the Coyotes lost more than $67M last year alone.

It’s not nothing, but this form of revenue sharing still won’t be able to meaningfully prop up the league’s true problem children.

– The introduction of cap/expense "sharing" between teams trading players is interesting and could result in more trade flexibility:

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In the context of Player Trades, participating Clubs will be permitted to allocate Cap charges and related salary payment obligations between them, subject to specified parameters. Specifically, Clubs may agree to retain, for each of the remaining years of the Player’s SPC, no more than the lesser of: (i) $3 million of a particular SPC’s Cap charge or (ii) 50 percent of the SPC’s AAV ("Retained Salary Transaction"). In any Retained Salary Transaction, salary obligations as between Clubs would be allocated on the same percentage basis as Cap charges are being allocated.


That is interesting from a purely media/fan perspective because more trades is more interesting. It’s hard to say what the true implications of this rule would be though.

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– The limit of year-to-year variability on player contracts (maximum increase or decrease in total compensation year-over-year limited to 5% of the value of the first year of the contract) might be a good thing for the general members NHLPA. The result should mean teams and individuals can’t front load deals that rob Peter to pay Paul so to speak (example: player X has a $4M cap hit, but $10M actual salary in years 1-3. That takes a bunch of money out of his union pals pockets through escrow since total player compensation is capped at $X dollars).

Of course, NHLPA is always fighting for less rules and more contractual/negotiation freedom for individual players so they’d fight against this on principle. Still, based on collective utility, BS, front-loaded contracts are bad things for the players who aren’t getting them.

– Further, this proposal makes clear the ownership group wants to put an end to long-term, cap circumventing contracts. An additional clause in the proposal is that current contracts over 5 years will be honored, but with the proviso that the cap hit of the deal will stick the original club that signed the deal like glue even if that player retires and even if he was traded to someone else over the of the deal. 

That means, if Ilya Kovalchuk is traded when action resumes and decides to retire in three years, his annual cap hit will nevertheless be charged to the Devils for the remainder of his deal. Ouch.

– The system changes of shorter entry level contracts and capped contract lengths strike me as almost non-issues from a player perspective. Long-term deals are only the province of high-end players whom owners will always find a way of paying to retain in one fashion or another.

– That said, the switch to two-year ELC’s may be a non-issue for the players, but it does make it easier to bring in European talent. Alexander Radulov, for example, would never have held out in Nashville because his contract would have been over before the holdout year. *

– Changes to the disciplinary system – there’s also a third-party option to appeal suspensions, though the "clearly erroneous" standard seems like a steep one.*

– Also interesting is how poisoned the well is when it comes to the PR/media aspects of the negotiation. Bettman and company are considered such untrustworthy villains that even when they make a move like this to publicly stamp out a clear position, it’s immediately and cynically denounced as mere posturing and a bad faith tactical ploy.

Which isn’t too say those who are suspicious are wrong, just that the guys running the show are reaching the heights of cartoonish-super villainy – not only in the eyes of their employees, but also in the eyes of those they want to buy their product.

One begins to wonder how long the league can labour beneath such a corrupted public profile, even if they "win" this fight over the PA again.

*Thanks to Jonathan Willis for sharing his thoughts and contributing to this piece.

    • Colin.S

      I don’t think thats entirely acurate.

      “So, for instance, if an assigning Club agrees to retain 30% of an SPC’s Cap charge over the balance of its term, it will also retain an obligation to reimburse the acquiring Club 30% of the Player’s contractual compensation in each of the remaining years of the contract”

      So I’m just going to use some rounded numbers and won’t be entirely acurate. But lets say Calgary and Columbus make a trade(we’ll look at both sides).

      Columbus trades 3.0M player to calgary, retains 50% of the cap to stay close to cap floor, so 1.5M, but they still have to pay 1.5 million to calgary for the player, that doesn’t help. Essentially it’s just trading a 3.0M player for a 1.5M player(On Columbus’ end of the deal anyways, not so much for Calgary). There is still actual dollars being traded which doesn’t change the problem with bottom feeders, they don’t want to spend money.

      It doesn’t work the other way either cause Calgary retaining 1.5 million in cap doesn’t help Columbus achieve the goal of reaching the floor.

      • RexLibris

        or if Calgary trades a 5 mil player to Columbus, and Columbus trades a 3 mil and keeps 1.5 mil. Then it looks as if Columbus started with 3 mil on the books and ends up with 6.5 mil, and Calgary started with 5 mil and ends up with 1.5 . Columbus closer to the floor and Calgary further under ceiling.

        • Colin.S

          You missed the point entirely, Columbus is still on the hook for the ENTIRE 6.5 million. Right now with things like bonuses and all that, cap floor teams can achieve reaching the floor without actually paying to the floor. With this cap trading scheme that doesn’t help them at all. That 6.5 million on Columbus books is ALL cash, that is not what they want, they would want to get those contracts where there is little salary and high cap. This cap trading doesn’t do that.

          The point I was making is that this WON’T help teams reach the floor the way that floor teams would like to reach it, they are still paying out cash because as the CBA states: “it will also retain an obligation to reimburse the acquiring Club ##% of the Player’s contractual compensation”

          This is a ploy to help CAP teams only by getting rid of undesirable contracts to other teams by sharing the cap AND actual dollars owed to that player.

  • I’m thinking the 5-year contract limit is an awesome deal for players. Now teams must commit substantial sums for top-end talent for the duration of contract. No more keeping Kiprusoff for $1.5million – he can make $4million somewhere else.

    Listening to Steve Montador this morning, he clearly has zero grasp of economics. Instead the players engage in rhetoric like “sacrifice”. No wonder it’s been up to the owners to get things going.

    • Colin.S

      How do the players have no grasp in Economics, they are well aware of the economics. The Owners originally wanted 24% of their salary, now they only want 13%(and thats a generous 13% depending on the definition of HRR).

      As Kent stated in the article:

      “- Related: there is a section on revenue sharing, with a committed pool of $200 million for 2012/13, which is about 6% of the 3.033 billion in total revenues form last year. At least one half of the pool will come from the top-10 grossing teams (as determined in a manner decided by the NHL, whatever that means).”

      Right now the pool for revenue sharing is 150 million. So right now with the NHLs current proposal, they want approx 250 million back from the players but they are only going to put back 50 million of that to revenue sharing using a formula the league is coming up with. It’s the league that doesn’t understand economics essentially.

      If you want to keep teams like the Phoenix and Columbus of the world, you need to enhance revenue sharing a lot more than that, especially with the amount of money that the league is asking back from the players. The reason that the Phoenix and Columbus of the world are doing so poorly is they can’t keep up with the growth of the NHLs best Markets, the Torontos, Vancouvers and Bostons of the NHL. It’s up to the NHL to move some of that growth from teams that are growing exponentially to teams that are having stagnate growth if the NHL truly wants to keep teams in those markets.

      The players understand the economics, they understand the league is asking for a ton of money back from the players to fix a system that can’t be fixed simply by asking back for salaries. Players know that if the NHL is serious about fixing the system, they need to buck up and commit to REAL revenue sharing.

      • BurningSensation

        The league wants to give some money to “bad” teams, but they don’t want to give so much that they’re simply money pits.

        The players don’t understand that. Hell, most of the public and certainly journalists don’t understand it.

        If a team is doing poorly, then they will keep sucking forever if they’re simply given money to stay afloat. What’s the motivation for them to get better?

        The problem I see is that you’re ready to cut a team loose far earlier than they should. Phoenix, et al, should be considered long term projects (> 15 years, minimum, ideally 25) before the NHL needs to do something about them.

        There’s also no guarantee that:

        a) There’s a buyer in those markets you claim are profitable.
        b) Those teams will do any better in those markets. After all, if it’s the same team members and management, why on earth do you think that people in Seattle will put up with the crap that is the Blue Jackets? Are they dumber?

        • Colin.S

          So if the NHL eventually gets players salaries down to a level to make some of those low revenue teams viable(think like 30% HRR), is that okay as well. That the teams are just floating, always spending as little as possible just to break even but still be a bad team? So the NHLPA should give up all their salaries to make Phoneix and the like Viable. It was the NHL and the owners that wanted these expansions and the money that comes from them. It is the Owners and Bettmans baby. Let them use THEIR money to keep them there for the 25 years that you suggest.

          If the NHL owners don’t want to up NHL revenue sharing as they see it as making a bad team a money pit then the NHL owners should REMOVE the cap. That will enable those bad teams to spend to a level that they don’t have to be supported through excessive amounts of revenue sharing.

          b) It wouldn’t be the same team running say a Columbus in Seattle, VERY rarily do you see a new owner keep the previous staff, they bring in their own people, why on earth would they keep the people who ran a franchise into the ground around.

          There’s a buyer right now in Seattle(2 if you count Edmontons Owner), there’s a lineup of guys for a second team in Toronto, a telecommunications company(Quebecor) for the team in Quebec city, hell there is a market for a second team in the lower mainland of BC as well. Portland has been mentioned as well.

          There are places to put other teams to, however the problem is, If you move some of the really low revenue teams to really high revenue markets then the next level of low revenue teams start to suffer as well. The NHL has to fix it’s biggest problem which is the MASSIVE difference between high and low revenue clubs.

          • There is no innocent party here. The players also are benefiting from the number of teams ie. more jobs. Both have to see that it takes two to tango and solve it accordingly. Seems to me that most of what is going on is that the two sides are pointing fingers at each other and saying “we know the problem but we want this group to pay for it”. The players are stuck to the whole “we got hosed last time and we are not going to take it up the rear this time” and owners are crying poor.

            There is a real problem in the league with the parity of teams financially. If the league AND players are decided on keeping 30 teams then both have to figure out a plan to make it work where everyone is profitable. With 3.3 billion…doesn’t seem like a real difficult thing to do. When you add some greed however, you get the situation we are in now.

      • Hair bag

        Hahahaha so let me get this straight, you have billionaire owners who didn’t just find money trees in their back yards, they created there wealth through the businesses they own/built…and they don’t understand economics?!? But on the other hand a bunch of hockey players, most of which barely have a high school education let alone post secondary…they understand economics completely – riiiight. I’m not saying the owners are angels but I feel no pity for the players. They are not entitled to 57% that CBA is done. And as far as a roughly 10% drop in salary goes, well I have no sympathy for the average NHL player whose salary will go from $2.5million to $2.25million – boo f’n hoo! This isn’t like some regular Joe that makes $50k per year and is going to lose 10%, that is significant, these guys are already overpaid! A 50-50 split is completely fair in my mind. If the players don’t like it start your own league…

  • Subversive

    Kent, I know I had seen somewhere yesterday that the definition of HRR was left unchanged in this proposal. If this is the case, it would signal to me that there is actually a real chance to get a deal done. However, other sources I read, and audio clips from players made it sound like that’s not the case, that the owners are asking for 50% AND trying to redefine what HRR includes at the same time. Any clarification on that? (I assume you’ve spent more time perusing the document than I’ll be able to)

    • Colin.S

      This latest deal includes changes to HRR, such as players that are on NHL deals in the minors will be included in HRR(they currently are not). There are a few other small changes as well to HRR, however most of the other changes from HRR in the summer proposal have been dropped.

      • Subversive


        I’m fairly optimistic a deal will get done for Nov 2nd, then, in this case. The players are getting screwed, and they don’t deserve to, but they are just in such a worse position than the owners to do proper negotiating, given the typical career length of players, etc.

  • Quicksilver ballet

    Was just coming to terms with the benifit of not having to witness another lottery finish by the Oilers. With this proposal, if this isn’t all tied up with a bow on it in the next week, our wildest dreams will become reality.

    Even Calgary folk have to be looking at this as a blessing in disguise, no?

  • SmellOfVictory

    Personally, if a $16mill revenue split to the bottom line still cant get that franchise making money, then its time to get the gun & put the bullett to it. Maybe instead of trying to tell the owners how to Revenue share, which will go over like a lead rock, maybe the players negotiate a protocol & have a say in how long Bettman keeps bailing money into a sinking ships. This Phoenix fiasco was so un neccessary & it did nothing but cost the players & league Revenue. They have every right to have a say in something that impacts the profitability & health of franchises seeing they are on a Revenue split of 50/50.

    Not that I am an Ownership drum beater here, but Kent, myself & many I talk to have no sympathy for players when they get the min. salaries, guaranteed contracts & virtually no risk from the economics the world is currently in. I’m sorry, but I am sickened over this battle of filthy riches that I have been stupid enough to contribute to. They can go make their money but dont rub my nose in how badly I am as a fan getting bent over.

  • BurningSensation

    I think part of the solution the NHL is considering for the truly disastrous teams is relocation – at a profit the players won’t share in.

    Assuming for the moment that 1/3 of the teams in the league make buckets of money, 1/3 roughly break even and 1/3 are losing money, we can Aldo assume that of the 1/3 that ate losing money (say 9 teams), 3 are losing a few $m a year, 3 are losing $10m or so a year, and three are full blown horror shows losing more than $20m a year. I think we can safely assume the proposed deal will make all but the three worst teams profitable.

    As fort the horror show teams (Phx being the most obvious one), the best strategy isn’t to prop them up indefinitely, but to relocate them to more profitable locales (Que. S.Ont, Seattle, etc.), and to charge massive fees to do so (fees that would not be shared with players).

    After doing so all franchises would be at break even+, and the league would go forward with two more expansion teams to even out the divisions and reap huge profits for existing owners.

    • In a sane world you are, of course, right about relocation. There are three key reasons it isn’t happening.

      1. Bettman and the owners would be admitting that their vaunted ”southern strategy” is a bust, with Atlanta gone, Phoenix and a few other southern cow pies with no real hope of ever making money.

      2. The point of that strategy was to pretend hockey is a true national sport in the US, which it certainly isn’t, for the purpose of getting that elusive TV contract with a major network. Yeah, $200 million a year is chump change compared to the other major sports but it is pretty decent money and they hope that they will some of the occasional viewers over to the game. The more southern teams that shift to Seattle, Quebec City or the GTA, the less attractive the game is to NBC.

      3. Americans are incredibly provincial. Even when the Oil was the greatest offensive machine ever, they were often a poorer road draw in the US then crap US-based teams. The American owners control 23 of the 30 clubs and they are not enthusiastic about moving hopelessly failing US franchises in non-hockey markets to Canadian markets that will raise ticket prices and sell out every game.

  • Subversive

    I don’t understand the whole thing about no player roll back in salaries even if the team’s payroll is over the 59 million salary cap idea. I think there has to be a rollback. I think player should be willing to take a little roll back, so that teams can afford to surround the star players with some quality depth players. If not a rollback then maybe the implementation of a luxury tax so teams that want to spend more can spend more. The generated tax revenue could go in to revenue sharing. I don’t know just a thought.

    • Cheap Shot Charlie

      I wonder if the idea of the no roll back gives teams like Columbus, Florida, Calgary and Toronto who have no superstars, a chance to acquire one when teams like Chicago, Pittsburg, San Jose and Boston have to start adhering to a lower cap number.

  • vetinari

    I could easily see some of the financially struggling teams do some “sign and retire” deals where they sign or trade for a player on the verge of retirement and then when he retires, carry the cap hit forward to reach the salary floor without actually having to pay the player.

    To illustrate, Phoenix could offer someone like Hasek a one or two year deal at $3M per year and have them retire immediately after signing it. Phoenix would carry the cap hit for that period of time without actually having to pay Hasek but they would get closer to the salary floor.

    The only way to protect against this would be to have the contract count against the 50 man roster or else make the team continue to pay the player unless they retired for medical reasons.

  • Teams that consistently lose money bring the overall HRR down don’t they? If that is the case and 57% gets you a 70M+ salary cap then there are a number of teams making money hand over fist as a result of it.

    I can see why the profitable teams don’t want to give up too much. If they don’t have the weak sisters to keep HRR low AND they have to pay out a mittful of dollars to keep the weak sisters competitive they pay twice. Once to the players when they spend to the ever increasing cap (because HRR isn’t dragged down by the Phoenixes of the world) and once to the weaker teams.

  • RexLibris

    I’m in favor of 50/50 sharing of HRR, reasonable salary cap just so there’s some reasonable distribution of talent, no salary floor, no revenue sharing, 5 year limit on contracts, no front-end loading and no averaging of contract for annual salary cap ie.whatever a player makes that year is what is counted on the cap.
    That’s just my opinion and I guess I’m leaning towards the owners with this opinion.
    I’m also in favor of team contraction, no-touch icing, protection of players with expanded head hit rules, suspensions for diving, and no restrictions on mutually agreed fighting but we don’t need cheapshots especially guys running around and targeting the stars.

  • RexLibris

    Nice summation Kent. Very well dissected.

    The aspects if this that stuck out to me are that Bettman must have either received significant concessions from the presumed hardliners like Jacobs and Snider, or, the collection of so-called “smaller” owners overrode the minority of big-market owners to authorize Bettman offering this deal.

    Some of the details, AHL contracts counting against the cap, go directly against the vested interests of the larger markets and their perceived strategic advanatage. It amazes me, to some extent, that it was proposed in the first place.

    If this doesn’t resolve the cap-floor issue, then in six years (end of proposed CBA) we could very well be back here. Especially if a team is moved from Phoenix to Quebec. Another massive money-making franchise, especially one owned by a media company like Quebecor who can inflate overall revenues league-wide, will only serve to raise the cap and the floor along with it. The teams capsizing at a $45 million floor are going to be completely sunk by a $55 million dollar one.

  • BurningSensation

    After having a chance to dig a little deeper, this latest offer by the owners is more PR game than ‘serious’ offer. Here’s why;

    – the 50/50 split on HRR includes changes to how HRR will be calculated (meaning the owners get to collect more money from the pie before the players get their ‘cut’ of 50%)

    – The ‘no roll back’ is also smokescreen, the players wouldn’t have their current salaries cut, BUT, the revenues that they represent over the 50% are paid out of the future share of player earnings – meaning that Shea Weber will get his money but it will contract the pool of revenues that players get from future seasons.

    There is a reason that the math doesn’t add up (50/50 split AND no pay cuts) and that is because no matter how you add it up the players are supposed to lose.

    I hope Fehr hands Bettman his hat in these negotiations, as this lockout is purely for the purpose of making Bettman’s sunbelt teams profitable (revenue sharing + artificially low wages for players) when by any reasonable measure they aren’t.

  • Also interesting is how poisoned the well is when it comes to the PR/media aspects of the negotiation. Bettman and company are considered such untrustworthy villains that even when they make a move like this to publicly stamp out a clear position, it’s immediately and cynically denounced as mere posturing and a bad faith tactical ploy

    I’m not sure this is accurate. The general response I’ve seen has been overwhelmingly positive in favor of the league after this latest offer.

  • Revenue Sharing really sounds like Canada Revenue Agency(CRA) & those guys really take the fun out of making money. I’m sure the owners that literally just print money from their NHL team hate both equally. So writing a Revenue Sharing cheque is no different than one to CRA. Perhaps a soft luxury tax for the big market teams will make those owners feel better about writing those cheques as they may feel this is way to have a step up on trying to win the Cup. & we all know what happens when you try to buy the Cup……..

  • John Chambers

    The NHL’s proposal definitely gives them a more realistic starting point to negotiate over, and I doubt we see the needle move very far, if at all, from the 50-50 mark.

    It’ll be interesting to see what becomes most important to players, if anything, during the coming negotiations. For example, do they die on the hill of contract lengths, years before UFA status, etc? Guaranteed they don’t put up a fuss concerning ELC’s – based on demographics, or any of the revenue-sharing aspects simply because those are hardly of concern to the individual player.

    Fehr could have a genius move that he lays out for these concessions, such as years of service before pension eligibility, or increased compensation for all-star or playoff performance, or even reduced escrow obligations, but otherwise I think this deal is already 90% baked.

    I think something gets worked out fairly quickly here, unless the players try to win anything that isn’t trivial or nominal. As long as the rollback is off the table the players will be motivated to play an 82-game schedule.

  • RKD

    This proposal is to get the season underway, it doesn’t fix the economic model. The rich teams will continue to make enormous profits and the poor teams will keep operating at a loss.

    After 6 years, the revenue could surpass 3 billion and then the owners will go back to Gary and tell him to reduce player salaries. This cycle will be never ending until they fix the model.

    • I don’t get this argument that you can ‘fix’ a system so that people (owners or players) won’t want more money. It’s human nature that no matter what you’ve got, you always want more. The only way to fix this is to not allow lockouts or strikes. All this talk about ‘why did they wait so long to make this offer’, ‘why didn’t they respond sooner’ – it’s all because it’s the best way to get what you want in this system. Having no teams losing money won’t stop the owners from wanting more than 43% of the revenues they’re taking in. It’s ridiculous. In six years, even if theres 10 billion in revenues, they’re proabably going to want more.

      I think the only way to stop lockouts/strikes is to have a neutral third party saying what is reasonable. Both of these lockouts, we all knew where it was going to end up. But the process dictated that neither side can give in. That’s the system that has to be fixed.

  • This problem won’t go away with a new agreement. The real problem is hockey is over saturated in the U.S. Other than the established northern markets, the Midwest and Southern markets are clearly not that interested in hockey. “Growing” the game in those markets hurts the rest of the league.

    Canada produces the best players with a much smaller population. It is a Canadian game that bleeds across the border to a lot of places that get cold in winter. Planting teams in markets where people are not interested in the product is the root of the problem. You can’t grow crops in bad soil, no matter how much fertilizer you buy to “fix” the issue.

    The league is run by an American with a proven history of conflict. His stamp on the game is the root cause. Until you fix the root problem, the conflict will never go away.

    • RKD

      Not sure about the NHLPA. I do know that out of 30 owners, Gary only needs 8 owners to side with him for a yes. That’s a really low percentage, which shows you a few wealthy owners control the league. Kinda similar to the occupy Wall Street where 1% of the population controls 99% of the wealth.

  • The NHLPA just released 3 counterproposals in reaction to NHL Proposals, as if they are shelling the NHL goalie.
    How about ensuring the NHL is covered for either recessions or lower USA TV contract revenues caused by a recession (lowering lowest cap bracket)?
    The 2 yr entry level seems reasonable considering the injuries happening in 20s to Green, Toews, Backstrom, Crosby, DiPietro…
    How aobut allowing an extra $1 of next yr salary cap for each rd of playoff win? It would encourage dynasties and I figure Entry Draft is very redistributive. I like the longer contracts in theory as it rewards loyalty: kids seeing stars for a while. All pissed when Hawerchuk left. Should’ve kept Housley. All those bad Jet trades…