Some Thoughts on the NHL’s Proposal

 

 

In case you missed, the NHL has published their proposal to the players union on NHL.com 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.

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.

– 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:

 

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.

– 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.