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September 12, 2004
Brian Murphy
St. Paul Pioneer Press
A decade-long dispute between owners and players is ticking down to its final hours. The National Hockey League and its players have until midnight Tuesday to resolve their labor dispute and avoid what could be a long and damaging work stoppage unlike anything the league has experienced in its 87-year history.
The issue, of course, is money and how the NHL and its players can divvy up $2 billion without destroying themselves and their modest yet passionate fan base in the process.
Thirty owners backed by Commissioner Gary Bettman are preparing to lock out 700 players to force a new collective bargaining agreement with provisions they say are required to rein in escalating salaries and financial losses that threaten the solvency of two-thirds of the teams in the league.
The players, represented by NHL Players Association boss Bob Goodenow, have vowed not to cave in to demands that would greatly limit their rights to earn what the market and owners themselves have allowed.
Negotiations broke off Thursday with no bargaining sessions scheduled before the contract expires and the NHL's second lockout in 10 years begins.
"The association has been telling us for the last two years to be prepared to be out 18 months, even two years," said Wild left wing Andrew Brunette. "I'm prepared for as long as it needs to be."
Owners reportedly have built up a $300 million war chest to cover losses if their arenas remain shuttered for the season. As a group, players could lose $1.5 billion in wages if the season is wiped out.
Conventional wisdom says a lockout would last until mid-January, when the pressure peaks to salvage at least half a season. But the rhetoric points to a long work stoppage.
"Anybody can talk a tough game now," said 21-year defenseman Chris Chelios, "but when it comes time to closing the doors and losing money, it'll get serious."
POINTS OF VIEW
With talks stalled, the sides remain fundamentally divided over how to devise a system to distribute the sport's wealth.
Owners, who claimed operating losses of $224 million in 2003-04 and $273 million the season before, want to control costs by tying a percentage of revenues to player expenses. Players, who have seen their average salary increase from $733,000 to $1.83 million under the current agreement, interpret that as a salary cap and refuse to consider it.
At Thursday's bargaining session in Toronto, the union presented its first proposal to the league since October.
The four-point framework included a 5 percent across-the-board salary rollback "calculated to generate more than $100 million in savings over the next few years;" reductions in entry-level salaries totaling $60 million; a luxury tax that would redistribute $30 million to $35 million to financially troubled teams; and a revenue-sharing plan that would subsidize lower-revenue teams with $80 million to $100 million.
The Canadian Press reported the luxury tax would be levied on payrolls exceeding $50 million, a step back from the $40 million the union proposed 11 months ago. Still, the threshold would have taxed nine teams whose season-opening payrolls surpassed $50 million.
The league rejected the concepts, setting the stage for another round of finger-pointing.
The NHL, meanwhile, wants to find a way to control costs. The league claims 76 percent of income goes to pay salaries, a far higher percentage than in the three other major professional sports - baseball, football and basketball. Bill Daly, the NHL's chief legal officer, has presented six proposals that would generally give the players slightly more than 50 percent of revenues and ensure an average salary of $1.3 million.
"They've been planning for this since 1998, when they put together their $300 million lockout fund and by making their only issue the one thing we're not prepared to talk about - the cap," said Ted Saskin, the NHLPA's senior director. "I think they fully intend to commence a lockout on Sept. 15."
HARD BARGAINING
Vancouver Canucks center Trevor Linden, president of the players executive committee, said the players are frustrated that their concessions and proposed changes to the system were dismissed out of hand. Training camps, tentatively scheduled to open later this week, are in jeopardy. The Wild camp is scheduled to open Friday.
"We are making a serious effort to bridge the gap. We are offering hundreds of millions in hard-dollar give-backs," Linden said. "Their inability to look at the middle ground is frustrating."
Daly said the league's problems are too severe to be rescued by a luxury-tax proposal he described as "window dressing." He said it would result in more than half the teams losing money and a third losing more than $10 million.
"Our problem with a luxury tax is that, by definition, no one can ever know with any degree of certainty what impact luxury taxes will have on the behavior of the clubs," he said. "We're beyond the point where that kind of system is going to work for the league."
"At this point in the process, I don't know where we go from here," he said. "We've attempted to make every effort over the summer and really over the last year to engage the union in a meaningful dialogue. They've resisted those efforts at every turn. I have to say I'm disappointed, but I can't say candidly that I'm surprised."
HISTORICAL PRECEDENT
The NHL went down this road 10 years ago when the owners locked out the players for 103 days, wiping out 468 games and chopping the 1994-95 season from an 84-game schedule to 48 games.
Similarly, that labor dispute was over a proposed salary cap. To save the season, a compromise was brokered in January 1995 that was interpreted as a victory for the owners, then numbering 26.
Instituted was a salary cap for entry-level players, a non-binding salary arbitration system and free agency that remains the most restrictive in professional sports (a player cannot become an unrestricted free agent until age 31).
All were designed to create a drag on salaries.
Instead, there were not enough restrictions to keep teams from spending big money. In 10 years, revenues increased 173 percent while salaries shot up 261 percent, according to figures through February released by the league.
The union contends those figures are misleading because the impact of the current labor deal should be calculated beginning in 1995-96, the first full season under this Collective Bargaining Agreement. The union's analysis last year says player costs have gone up 170 percent while revenues are up 153 percent.
The league also says other revenue sources have dried up, including expansion fees from the nine teams that have joined the league since 1991, the last being the Wild and Columbus, which started playing in 2000-01. After the league's historic $600 million national television rights contract with ABC/ESPN expired in June, NBC negotiated a profit-sharing package in which the NHL would be paid only if NBC recouped its operating expenses.
In February, former Securities and Exchange Commissioner Arthur Levitt - hired by the league to audit its teams' finances - concluded that 19 franchises lost an average of $18 million while the other 11 earned an average profit of $6.4 million. Levitt warned the NHL was "on a treadmill to obscurity."
In three previous bargaining sessions, the union analyzed the business practices of all 30 teams. Without identifying them, NHLPA executive director Goodenow said six teams accounted for 75 percent of the league's claimed losses. He blamed the losses on outdated arenas and poor fan support, not the Collective Bargaining Agreement.
OMINOUS SIGNS
On Wednesday, the league's Board of Governors is scheduled to meet in New York, where a lockout vote is expected. Both sides say their solidarity is strong.
"Our board remains 100 percent unified that we need an economic system that works for this sport long-term," Daly said. "We've been missing that for a long time."
"At some point," Linden countered, "the owners have to realize the players will never accept a salary cap or a system linking payroll to league revenues."
Of course, all of this is being observed by a fan base that is diminutive relative to those of major league baseball, the NFL and NBA but among the most loyal in sports.
"The public berating of each other is sickening. It's just painful to watch," said Jim Boone, co-founder of the Ottawa-based NHL Fans' Association.
Boone counts 22,500 members from the United States and Canada in his organization, enough to fill an arena but far short of a potent political action committee. So they wait as time and hope run out.
"We're not saving the owners from blame for getting themselves into this situation, but our members are slightly more in favor of the owners this time around," Boone said. "If they have to lock the players out to get some type of drag on salaries, we'll be patient. A couple of weeks, we can handle. If it goes beyond Christmas, that's not fair to the fans."
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