Oct 192012

There seems to be a lot of pessimism after the NHL walked out on negotiations with the NHLPA yesterday but the reality is that the NHL and NHLPA have come a long way.  The initial NHL offer to the NHLPA was that the players would get a 43% share of revenue.  The initial offer from the NHLPA to the NHL was that the players would subsidize a larger revenue sharing pool for 3 seasons through a reduction in their share of revenue but then bounce back to a 57% share in year 4.  As of yesterday, both the owners and players now agree that in the long term they should split revenues 50/50.  The disagreement is that the owners want the 50/50 share immediately while the players want to phase it in part in order to ensure existing contracts are honored in full (which is a bit of a bargaining/propaganda ploy because contract values were never guaranteed and always tied to revenue and the CBA).

James Mirtle of The Globe and Mail has a good run down on the difference between the first two player proposals relative to the owners proposal.  In essence, the players proposals nets the players an additional $500M (approximately) over the next several years before the 50/50 level is reached.  This is not insignificant but it only accounts for approximately 2.2% of the projected $22.5B in projected revenue over the term of the CBA assuming 5% projected revenue growth per year.

The owners had a “make whole” agreement in their proposal which was designed to appease the players by honoring existing contracts but it was a bit of a marketing/propaganda ploy as well because essentially what it did was taking salary from players a couple years from now to make up the short fall in the first two years of the CBA.  The owners proposal called this a “Deferred Compensation benefit” but in reality it was a “deferred claw back penalty.”

The solution to this mess, I believe  is for the owners to step up and volunteer to pay the make whole amount which they estimated as being up to $149M in 2012-13 and up to $62M in year 2013-14 for a total of up to $211M (nicely somewhat close to half of the extra money they players want).  As stated above, projected revenue over the 6 year term of the contract is $22.5B.  I propose the owners take responsibility for the make whole portion of their proposal and they can pay the deferred salary in the amount of 1% of overall revenue until the up to $211M is paid in full.  This will essentially peg the players share at 51% and the owners share at 49% until the $211M in deferred salary is paid in full at which time it drops to a 50/50 split.  This seems like a perfectly reasonable compromise to me.  Now lets get it done and get back to playing hockey.


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