NHL CBA Negotiations: Owner’s Opening Demands Leaked.

According to Renaud P Lavoie of RDS these are the opening demands of the owners in the NHL-NHLPA collective bargining agreement negotiations:

1: Reduce players hockey related revenues to 46% from 57 %.

Cutting the player’s portion of revenues this much reduces the player’s take by 19%. It would also reduce the salary cap to 56.6 million from 70.2 million if the definition of hockey related revenue remains constant. However what makes up HRR is looking like a fight in of itself.

2: 10 seasons in NHL before being UFA.

This is a massive curtailment of player freedom. Few careers last 10 NHL seasons and this will make unrestricted free agency a privilege of top players on the downside of their careers.

I very much doubt this rule remains as written, no way the players agree to that. Its terrible for European or college players that don’t even join NHL organizations until 21-23 years of age, or late bloomers that don’t crack a lineup until they are 25 or older. 10 years or 30 years of age is something that might actually happen though.

3: Contracts limited to 5 years

The one nuts and bolts part of the proposal and a fairly sensible one. Allowing contracts to span a massive amount of years was the biggest source of cap shenanigans during the last CBA. Rumoured to be included in this proposal is that contracts will be of the same value every year which eliminates other games GM’s can play.

This might be negotiated to something like a 7 or 8 year cap, but its a sensible addition that should remain.

4: No more salary arbitration.

This one sounds small but has heavy implications. The threat of arbitration is the primary negotiating power of RFA players. Without it they are limited to contract hold outs, threats of leaving to Europe and signing offer-sheets. Arbitration is an ugly, little used process but its existance is crucial. Removing it could lead to far worse ugliness as players resort to other tactics to regain some leverage. No one should want a return to the holdouts we saw in the 90’s.

The increased RFA years and no arbitration would probably have a effect the owners are not anticipating here. Use and threat of use of offer-sheets on RFA’s will become accepted practice for GM’s. With such little talent going to UFA under these kinds of rules there are bound to be teams that decide to break the unspoken accord amoung GM’s during the last CBA and like Lowe that one summer, seek to use their cap space to sign young stars away from other teams. Draft pick compensation has deterred that so far but I doubt that lasts if the current market for UFA’s as a place to use excess cash dries up.

5: Entry-level contract 5 years instead of 3.

This is something that the players may give up to save themselves and screw the next generation, but I doubt it survives in the current form. Forcing 5 years of minimal money on everyone coming into the league is a good way to stop the flow of talented players in Europe to the NHL. The risk/reward for Europeans would start shifting towards the KHL and other Euro leagues, a prospect the NHL should be heavily against. Any ELC rule needs to have provisions for shorter contracts for players that sign at an older age. Cost controlling players on an ELC until they are 23-25 isn’t so harsh, controlling them from say 25-30 as a Euro league import means much fewer imports.

What Does This Mean?

Obviously an opening bid is calculated to be something to be negotiated down from. But even in this context the NHL`s proposal is seen as harsh. This is not the actions of a side looking to perform minor tweaks on the current agreement to solve unforeseen problems when it was enacted, such as removing the salary cap floor, limiting contract lengths, enhancing revenue sharing and maybe bumping down the player`s percentage of revenues a few percentage points. This was the action of a group that wishes to signal that they want changes in how the NHL`s business is done and is willing to fight and willing to lose games from the schedule to do so.

The NHL looks like its gearing up for war just like they did during the 2004-5 lockout. The thing is, 2012 does not resemble 2004 in terms of how healthy the league is. Prior to the lockout there had been a flurry of franchise moves as well as a number of owner`s declaring bankruptcy. There was horrible competitive imbalances due to financial disparity and many signs that free agency had spiralled out of control.

Not so much the case in 2012. Presently, the league is boasting of its massive successes post-lockout with revenues growing through the roof during an bad economy in North America. The main problem with the league has been that its been to successful resulting in the big marker`s revenue going up faster than the smaller market teams. But there aren`t the same kind of signs of overall ill-health in the league`s weak sisters this time around. Minnesota just signed two of the biggest free agents ever, Tampa Bay was one of the top buyers for talent on the UFA market and Carolina added a Staal they intend to pay 6 million too and were looking to add 7.8 million`s worth of Rick Nash for the foreseeable future.

Who is In Immediate Trouble This Time?

The current bad news from the franchises are these:

Coyotes are bankrupt and an embarassment. Given what has come out about how things have been mismanaged by shortsighted greed and stupity in Glendale, I don`t think that`s the CBA`s fault.

New Jersey Devils are in finacial trouble. That probably has more to do with management acting like they`re the New York Rangers in terms of spending while being based in Newark. No signs that the organization can`t survive as a mid-market team.

Long Island continues to be an embarrassment. That has more to do with an owner that has essentially abandoned his franchise (and his fanbase abandoning it in turn) while trying to get a real estate deal done.

And if the league needs to cut lose some failed experiments there are plenty of relocation markets out there.

There are rumours that 18 teams out of 30 are losing money but since the league won’t open the books I consider the teams’ accounting practices to be highly questionable.

The underlying reality is the league has its “cost certainity” it wanted last time, competitive parity, the american national television deal its lusted after and has grown from a 2 billion to a 3 billion business in 7 years under the old CBA. Claims of dire straits from the league are highly questionable at this point.

Any problems the owners have could be solved by the owners themselves by doing one of two things. Accepting competitive imbalance and removing the cap floor or increasing revenue sharing to the point where the lesser teams can spend a respectable amount.

What Is the NHL Hoping to Accomplish?

From the NHL’s proposal we can conclude the ideal outcome of CBA talks for the NHL is to achieve 3 things.

1. Maintain competitive parity.

2. Not make the league’s weakest teams lose too much money.

3. Not cut into the profits of wealthy teams by imposing a strong revenue sharing system.

The NHL’s proposed method to get there is to claw back a large proportion of current revenue from the players and to vastly curtail player mobility and bargaining power in peak performance years. The new rules basically neuter unrestricted free agency which means that players will be tightly bound to the team that drafts them and that franchises will be built almost entirely through the draft and trades.

This of course is only if the final results show an resemblance to the final product which they likely will not. I believe that the real battle is over percentage of revenue taken by the players and what counts as hockey related revenue. The demands for greater club control of players by restricting free agency, lengthening the ELC and removing arbitration seem to be things the NHL has proposed in order to give up for concessions on revenue.

What Isn’t in this Proposal?

Another interesting aspect of this proposal is what isn’t in it. Firstly, there is no mechanism to reduce the team’s current cap hit. A cap below 60 Million like proposed here would put a large number of teams above it. If final negotiated split ends up 50-50 like many speculate, the cap would be about 61.6 Million next year, which would leave at least  10 teams above the cap needing to make space. This number increases the lower the cap goes. The new CBA must include measures to allow teams to easily become cap compliant. No team will vote for a new system that screws them right out of the gate.

The cap can only realistically go down immediately two ways. A salary rollback or zero cap hit compliance buyouts. Last CBA had both, what this new one will require is dependent on how low the cap goes. Compliance buyout may be controversial between teams, many teams would like to rid themselves of certain contracts but many others would prefer their rivals not to get relief. This may be a point of contention between teams that the PA could exploit. On the other hand, a salary rollback is likely to be resisted strongly by the PA, who would prefer the teams to honour existing commitments.

Finally, another point rumoured about that was not included in the proposal from the owner’s side is the end of the AHL cap loophole that has been used by New York, Chicago and Toronto to eliminate unwanted cap hits. It seems that the current proposal was so weighted by the desires of small market teams that that big market advantage was left alone. If it remains, that’s good news for the Leafs, Canadiens and Ranger’s fans, especially if there is no amnesty buyout, as they have contracts they would much prefer buried in the AHL rather than on the cap ledger. Particularly Wade Redden’s 6.5 million that Rangers fans have largely forgotten about but would be returned to the Ranger’s cap sheet immediately if the loophole is closed.