An icy standoff in labor talks
NHL and players union remain at a standstill with deadline looming
TORONTO -- The National Hockey League and the NHL Players Association, only some three weeks from entering a potentially disastrous lockout, will sign a new collective bargaining agreement that will be a hybrid form of the CBAs that govern Major League Baseball, the National Basketball Association, and the highly prosperous National Football League.
At the moment, however, no one on either side of the bargaining table -- which is a movable feast that continues today in Ottawa -- has the slightest idea when or how that will happen.
For now, midnight on Sept. 15 looms as the hour that the current CBA, agreed upon in January 1995 and extended twice in recent years, is rendered a worthless document.
From the perspective of a majority of the owners, the CBA that now has begun its death rattle is worse than worthless, it's a hangman's noose, given that a league-commissioned audit of the 2002-03 season detailed league-wide losses approaching $300 million. One source, familiar with the specifics of the audit, said earlier this week that at least 10 teams, one-third of the league, could be forced to close their doors if the current CBA were renewed or its underpinnings used as the basis of a new agreement.
From the players' perspective, the same document has been the underlying tool that has helped their average wage more than treble, from $560,000 to $1.8 million, in less than 10 years. To tear it up, for the sake of accepting a new CBA pegged on a salary cap akin to the NBA or NFL, they believe is senseless and sacrilege.
"Why would they think differently?" one club owner said yesterday, speaking on the condition of anonymity. "That's all they've known for the last 10 years, that their salaries will keep going up and up. Is that their fault? Is that our fault? I don't know. Maybe we're all at fault. But it is where it is, we're all part of it, and it has to be fixed."
To that end, the league recently tendered the players six proposals, a veritable buffet of cap-based or cost-certainty plans, and all six were deemed unacceptable by players' bargaining committee last week. The refrain from The Players Association remained the same: only a marketplace system, unfettered by artificial, built-in or cleverly disguised salary restraints, will be the basis of a new agreement.
Of the half-dozen proposals, the players' senior director, Ted Saskin, said, "They were not going to lead to an agreement."
The owners see the CBA and say why, while the players ask why not. Therein lies the potential for what virtually everyone connected to the industry believes will be a messy and protracted lockout, one that could lead to the 2004-05 season being scrubbed. Prior to the start of the 1994-95 season, the owners locked out the players for 103 days, leading to a truncated, 48-game season.
The prospect of a 2004-05 season gone asunder has led club owners over the last few years to set aside $300 million, a pool of funds to draw on in the weeks and months ahead, if necessary, ostensibly to service long-term debt on arenas and maintain non-player team/organizational salaries.
The players' union in recent years also has advised its rank and file to set aside a portion of their salaries in case Sept. 15, 2004 came and went without a new or extended collective bargaining agreement.
Both sides have prepared for what now seems the inevitable, and now comes the harsh prospect of living off reserves.
"If there is a work stoppage, lockout or strike -- whatever you want to call it," mused Brian Burke, the former Vancouver Canucks general manager who is now a CBC broadcast analyst, "the owners will lose $240 million instead of the $300 million they'd lose [over the course of a season]. The players will lose $1.2 billion if they don't play."
League figures, some of which remain contested by the PA, show gross revenues of approximately $2 billion. According to the audit on the 2002-03 season, player salaries and benefits siphon off 75 percent, roughly $1.5 billion, a percentage that led the audit's overseer, former SEC chairman Arthur Levitt, to say that the NHL "is on a treadmill to obscurity."
"That's the way this league is going," Levitt said upon making the audit public Feb. 12. "So something has got to change. I can tell you . . . from an investment point of view, it's a dumb investment and they have got a serious problem."
According to one club owner, again speaking on the condition of anonymity, some of the clubs' newer owners -- he named Nashville, Atlanta, and Buffalo -- bought in with the inherent understanding that the current CBA would be replaced by a cap-based system, guaranteeing profits and, perhaps of greater importance, increases in franchise equity.
One US-based club owner, two sources with firsthand knowledge of owners' profits and losses confirmed, has lost some $200 million over the last five seasons. Neither source would identify the club for publication, but an obvious candidate would be Carolina owner Peter Karmanos, who entered the league by buying the Whalers, and then moved them to Carolina, first to Greensboro, then to Raleigh. Despite a trip to the Stanley Cup finals in 2002, the Hurricanes haven't been fully embraced by NASCAR-loving Carolinians.
"Whatever system it is that we come up with," said the anonymous owner, "we owe these people -- some of them very loyal hockey people -- a chance to get some of their money back. They might not get it back right away on an operations basis, but over time, with a good CBA, their franchise values could increase. We've seen how prices have jumped for NFL teams in recent years."
The NFL has, by far, the most owner-friendly CBA, containing a salary cap and non-guaranteed contracts. By contrast, the NHL has no cap, and contracts are guaranteed, save for a very restrictive buyout clause that allows clubs to discharge players at a one-third discount of their guaranteed wages.
Within the last two years, the NFL's lucrative national TV contract also has delivered approximately 12 times the dollars to each member club, per annum, that NHL teams have received from their national contracts.
The NBA's cap-based agreement last year limited team payrolls to just under $44 million, on league-wide gross revenues of nearly $2.7 billion. Major League Baseball's CBA does not contain a cap figure, but it does impose a luxury tax (commonly referred to as the Yankee Tax) if a club exceeds $130 million in annual payroll.
The NHL and the NHLPA picked up discussions yesterday in Ottawa, and league officials, having seen their six initiatives rejected out of hand last week, anticipate that the union soon will offer a proposal. The union last offered up a resolution at the end of last summer, a three-tiered plan that called for an immediate five percent rollback in player salaries, drastic cutbacks in the Entry Level System that governs what draft picks can earn their first three years in the league, and a luxury tax.
The PA estimated the first-year annual savings of those three initiatives to be in excess of $300 million, what would represent about a 20 percent discount on a $1.5 billion pay-and-benefits package.
NHL commissioner Gary Bettman, who leaves most of the negotiating to top lieutenant Bill Daly, repeatedly has refuted that he told the union in October, in response to its offer, that the league had to have a cap-based CBA with a ceiling of $31 million per team.
According to one league source, however, Bettman made it clear that the league could afford about $930 million in player wages and benefits, which works out to, no surprise, $31 million per team.
If the union does offer a new plan, be it today in Ottawa or during the next two planned negotiating sessions, Tuesday and Wednesday in Montreal, it most likely will be a revision of last year's proposal. Both Saskin and his boss, NHLPA executive director Bob Goodenow, have promised the rank and file that they won't accept a cap.
Cost certainty, according to the union, already exists in the CBA. Union chieftains repeatedly say they trust that the same club owners who are smart businessmen -- proven time and again in their other endeavors -- can make the NHL a profitable business.
Training camps, due to open Sept. 16, likely will be officially placed on hold on or about Sept. 6. In the US, that's Labor Day, what could prove a prophetic start to a stop.
Material from wire services was used in this report.
© Copyright 2004 Globe Newspaper Company.