"NHL Owners Make Most Serious Attempt To End Their Lockout, But It Likely Isn’t Enough"
The NHL has already canceled the first two weeks of its season, which was supposed to begin last weekend. If an agreement is reached before October 26, though, the league could still fit in a full 82-game schedule by adding just one game every five weeks, NHL commissioner Gary Bettman said Tuesday. Bettman’s offer deals primarily with the major economic issues dividing the two sides, including how revenue should be split and whether players will see reductions in salaries:
“Hockey-Related Revenue”: The NHL’s offer would split so-called “hockey-related revenue” evenly between owners and players, a significant reduction from the 57-43 split players received under the previous collective bargaining agreement. Hockey-related revenue is the portion of each team and the league collectively makes that is then split between owners and player salaries. Hockey-related revenue is calculated through a complex formula that allows owners to set aside some revenues and deduct costs from others. For example, owners can deduct the costs of operating concessions and parking before calculating revenue; they also only contribute a certain about of revenue from luxury suites to the hockey-related revenue pool. So the 50-50 split isn’t actually 50-50 at all, and it’s not completely accurate for owners to claim they need a larger split to pay costs, since they are allowed to deduct a portion of costs before hockey-related revenue is even calculated. Rather, the 50-50 split would be an even split of a certain portion of revenues, while owners keep other revenues to themselves. Prior to this offer, the NHL sought to make the hockey-related revenue formula even more generous for owners, but it abandoned that proposal.
Salary “rollbacks”: After the 2004-2005 lockout, players took a 24-percent immediate salary reduction (or rollback), and owners began this year’s negotiations asking for another 24-percent reduction. They abandoned that request in this offer, essentially agreeing to honor the contracts they already negotiated and signed (not exactly a major concession). The switch to a 50-50 split would necessitate a roughly 12 percent reduction in salaries upfront, but in this offer, owners pledged to “protect” players by making up salaries over time. It is unclear how exactly that would work.
Escrow: The NHL’s offer could also change the way its escrow account works. In short, because the league bases hockey-related revenue off of the past year’s revenue, it has no way to accurately project revenues that will be divided between owners and players. So players pay a portion of each paycheck into an escrow account, and if league revenue falls short of projections, the NHL takes money out to make the agreed-upon hockey-related revenue split work. If revenue exceeds projections, the escrow money is split among players to make the hockey-related revenue balance. An increase in escrow contributions could work as another form of rollback if league revenues fall short, something the players are already concerned about.
The owners’ offer came a day after Deadspin broke the story that the league was using GOP strategist Frank Luntz’s firm to figure out how to market the lockout to fans and the media. The 50-50 HRR split, which certainly sounds reasonable on its face, was explicitly mentioned as a strategy in the documents Deadspin obtained, and it is one that has had success before: National Basketball Association owners used that terminology during their lockout in 2011. It seems clear that the strategy was to make laughable offers all summer to make what the owners really wanted look generous by comparison.
Further, there is Bettman’s clear pitch that this is the only way to save the 82-game season, a claim likely designed to win over restless fans who already hold him largely accountable for one lockout (and the full cancellation of the 2004-2005 season) and don’t want to see another. But that claim ignores that Bettman could have saved the season this summer when players offered to play through the lockout while owners and the union negotiated a new bargaining agreement. Instead, Bettman and the owners locked the players out.
The 50-50 deal on hockey-related revenue is where owners wanted to end up all along. The offer, Bettman said Tuesday, “was done in the spirit of getting a deal done.” But this is probably the point where serious negotiations to end the lockout will begin, not where they will end. If Bettman was interested in preserving the 82-game season, the owners should have started making offers in the spirit of getting a deal done a long time ago.