Two new proposals, two new sets of numbers to look at.
I’m not going to even disguise the fact that this entry won’t be for everyone; if you’re not into the various financials involved in the CBA talks, feel free to move along and have a wonderful day.
But if you are looking for a more in-depth review of all this, here’s an explanation of what the NHL and NHLPA proposed on Wednesday in New York and what it means.
First, a quick explanation of the two deals on the table:
What the NHL offered
The NHL’s six-year proposal is fairly straightforward. In Year 1, players would get 49 per cent of hockey-related revenues. In Year 2, it would be 48 per cent. And in the final four years, it would be 47 per cent.
From the current 57 per cent arrangement, that would mean a 8 per cent pay cut in Year 1 and roughly $400-million less a season over the life of the deal (assuming 7.1 per cent revenue growth). Which is obviously substantial.
What the NHLPA offered
This one is far more complex and I’m going to get into some of the nitty-gritty details here because I don’t believe they are available anywhere else at the moment.
First of all, the PA’s offer is based heavily off of the $1.87-billion the players received last season (57 per cent of the $3.28-billion in revenues). Over a five-year deal, they are offering to take a 2 per cent increase on that in Year 1, a 4 per cent increase over Year 1 in Year 2 and a 6 per cent increase over Year 2 in Year 3.
Those increases would be independent of whatever growth the league has, so anything beyond 2% in Year 1, for example, goes straight to the league. (That could be $220-million or so.)
Now, in Year 4, the PA’s proposal calls for players to receive their Year 3 share plus 54 per cent of any “new” revenues beyond those the league generated in Year 3.
Year 5 follows a similar pattern: Players would receive their Year 4 share plus 54 per cent of any “new” revenues beyond those generated in Year 4.
(There are two exceptions to those final two years based on if growth is very low or very high, but I’ll leave those out to simplify things. Basically there are “safety” measures if the player share is lower than 50 per cent or higher than 57 per cent.)
Still with me? Might need a snack at this point.
This likely all makes more sense if I just present the numbers rather than trying to explain it all in prose.
Based on revenue growth of 7.1 per cent, which is what the league has had since the last lockout, this is what we’re looking at:
So it’s about a $1-billion difference over five years, or $210-million a season. That’s down from the previous difference of about $320-million a season, so they are getting closer.
Now the thing to remember is that’s all based off of 7.1 per cent growth. No one truly knows if the NHL makes more or less than that going forward.
What will the new Canadian television deal look like? What about the dollar? Do the Coyotes relocate to the Greater Toronto Area and boost revenues $120-million? Is there expansion?
So anyway let’s say revenues increase only 5 per cent. That means the difference between these two proposals grows to roughly $290-million a season.
What if they go up 8.5 per cent a year? Then the gap gets narrowed to just $150-million a season.
And on and on. But that’s the general range.
The league doesn’t like the PA’s system because there’s some uncertainty here and, well, the players share is still 52 per cent or so if revenues grow at the rate they have lately.
The players don’t like the league’s proposal because it’s a whopping $1.9-billion cut over five years from the old agreement of 57 per cent of revenues. (Not that they have a chance of retaining that...)
Both sides obviously want revenues to grow, but the NHLPA wants to put together an agreement that makes revenue growth massively more beneficial to the league than it is currently.
Relocate a troubled team to boost revenues? Great – you keep them. Use revenue sharing and other methods to improve sagging markets? The revenue benefits pay off leaguewide with a smaller players’ share.
Here’s my takeaway from all this: Despite what has been written in some circles, the players have offered some givebacks here. Even if league revenues grow at just 5 per cent (which they have exceeded in all but one of the last six years), the players will be offering back about $340-million (or $70-million a season) from where they are now at 57 per cent.
If there’s big-time growth (8.5 per cent or more), the PA gives up $250-million or more a year. That’s not nothing.
The key difference between the two deals is that the union is trying to stay at or above that $1.87-billion figure earned last season in order to avoid big-time escrow payments by its players right away. That’s one of the things players have asked Fehr for, and he is listening and trying to deliver.
There’s likely some sort of reasonable agreement somewhere in the middle of all this, between the 52.7 per cent the PA has asked for and the 47.5 per cent the league has on the table (in a 7.1 per cent growth scenario), but it won’t come with just an across the board 50 per cent share beginning in Year 1. (Which, by the way, is what the owners likely offer at some point.)
Instead, the union is trying to protect what it has already and gradually shift down closer to 50 per cent while (a) pushing the league to grow revenues by abandoning or helping small markets and (b) upping the overall revenue sharing contribution considerably.
It’s not working so far in terms of persuading Bettman and Co., but there’s certainly some reasoning to it. If there’s a bit more room to give in there, could it work to solve some of the league’s economic issues?
Something to mull over as we count down to Saturday’s inevitable lockout.