With the cancellation of regular-season NHL games certain after labour negotiations broke off again Tuesday, there is no doubt this will be a long winter for hockey fans.
And for what? By their own admission, the owners enjoyed record revenue of $3.3-billion (all currency U.S.) last season. But they cannot agree with the players, or among themselves, for that matter, about how to divide that money and at the same time fix a lingering problem: Only 10 to 12 teams make scads of money while the rest make a little, break even or lose millions, depending on their accounting.
What is needed desperately is an injection of common sense into the meeting rooms. And maybe a new approach, like taking another look at what a soft salary cap might do for the NHL’s economic problems rather than sticking to the hard salary cap the owners say is killing them.
Before you roll your eyes and say that means another season lost to a lockout, ask yourself why not? They are not making any progress arguing over a hard cap right now.
First, a recap:
The owners’ solution (read the owners with the loudest voices like Jeremy Jacobs of the Boston Bruins) is to relieve the players of the money necessary to prop up the poorer teams. That means a dramatic cut in the players’ share of the revenue, from 57 per cent to 47 per cent over six years in the owners’ last offer.
So far, the players are only willing to reduce the rate at which their salaries grow. They have offered (on the assumption revenue will continue to grow at 7 per cent a year) to take the equivalent of a gradual reduction of their share of revenue from 57 per cent to 52 per cent and change over five years. (That is a simplified summation of the offer, as it is more complicated than that, but your agent has only a faint grasp of high-school mathematics.)
It’s frustrating that anyone who has talked at length with those on the owners’ side knows they would take a simple 50-50 split in revenue under the present system if the National Hockey League Players’ Association were to offer it.
Similarly, there is a strong belief the players would agree to a 50-50 share if all the salary the owners saved were distributed to the bottom 10 or 12 teams on the revenue chart.
Using the $3.3-billion in revenue from 2011-12 as an example, if the players’ share were reduced to 50 per cent from 57 per cent, the 30 owners would collectively save $240-million. That means the bottom 10 revenue teams could each receive $24-million, which would double what the worst of them got in the limited revenue-sharing under the old collective agreement.
But there is little incentive for the rich teams to do that because it would mean they couldn’t spend more than their poor relations and would still have to fork over more money to them. However, what if the league were to adopt a soft salary cap that would allow the rich guys to spend more on payroll as long as they paid a luxury tax that would be distributed to the poorer teams?
In simple terms, a soft cap means there is a token limit to team payrolls with mechanisms that allow teams to spend more if they pay a price. The concern is that the richest teams like the Toronto Maple Leafs, Bruins and New York Rangers would spend two or three times what others could afford and enjoy the competitive advantage.
For the sake of argument, let’s ignore the evidence big spenders do not automatically win championships three years out of four. To ease those concerns, the NHL could put a limit on a soft cap. Don’t let teams spend more than $25-million more than the cap and penalize those that do with a dollar-for-dollar tax on any excess.
The limit would also encourage the eighth, ninth and 10th-place revenue teams to spend more, so the top 10 teams in the NHL could each spend the $25-million allowed over the cap, which would be set on a more equitable calculation of league revenue that takes into account the disparities among the teams. Each of those teams would have to pay a tax of $25-million, which is a total of $250-million, similar to the amount that would be saved by a 50-50 split in the current hard-cap system.
Voilà, you have $25-million for each of the 10 poorest teams or $20.8-million for the bottom 12.
So why is there a lockout again?