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What the NHL needs to fix its labour problems: more Canada

So who’s to blame? There is no disguising the obvious candidate


 
What the NHL needs to fix its labour problems: more Canada

Stefania D'Alessandro/Getty Images

Canada has made two significant contributions to professional sporting success: the Stanley and Grey Cups. Too bad these storied trophies are heading in opposite directions.

This year marks the 100th anniversary of the Grey Cup and the league has commissioned a specially designed train to mark the occasion with a cross-country journey bringing this momentous event closer to fans. Over at the National Hockey League, things aren’t as celebratory, historic, or fan friendly.

Hockey’s current collective bargaining agreement is set to expire and, with no progress in sight, Canadian hockey fans must now steel themselves for a third lockout in just 18 years. So who’s to blame?

The obvious candidate is NHL commissioner Gary Bettman. As Maclean’s national correspondent Jonathon Gatehouse details in his upcoming book The Instigator: How Gary Bettman Remade the League and Changed the Game Forever, since coming to power in 1993 Bettman has ushered in an era of tremendous change for the NHL, including massive revenue increases, huge player contracts and a controversial expansion across the southern United States. The league today is very much Bettman’s vision.

Under his guidance, the owners dominated the players during the 2004 lockout. At the cost of a lost season, the owners successfully forced players to accept a salary cap. Their victory was so complete it led to the immediate departure of players’ association head Bob Goodenow.

Having tasted success, the owners are now back looking for more. The initial offer from the NHL this summer proposed to take the players’ cut of total revenues from the current 57 per cent to 43 per cent. A subsequent proposal has offered players something closer to 46 per cent of the action. Not surprisingly, negotiations have broken down.

The owners’ argument is that the economics of hockey have changed substantially since their last victory, and thus many teams are now struggling to survive. Of course such a situation is entirely of Bettman’s making. The teams in the weakest financial condition are those in unlikely U.S. locations such as Columbus or Phoenix. There is no Canadian financial crisis in hockey.

Players have responded with a scheme that would see owners share revenues in order to prop up financially weaker teams, plus a three-year reduction in players’ share of revenues.

We thus have two distinct and competing visions of hockey economics. One entails a new, lower salary cap to keep poor clubs afloat. The other sees a more financially integrated league with a temporary reduction in costs. What’s best for fans? Whatever plan avoids the need for a lockout every time a collective bargaining agreement expires. That means healthy and sustainable hockey economics at every arena.

The problem with Bettman’s current scheme is that its advantages vary hugely from city to city. Cutting the salary cap from the current $70.2 million per team to $58 million, as the NHL’s latest offer contemplates, may bring temporary financial relief to teams in Phoenix or Columbus, where fans are scarce. However, for currently profitable teams that play to sellout crowds (the Montreal Canadiens or Toronto Maple Leafs), such a cost-cutting move will be nothing short of a cash bonanza.

The ultimate goal of the NHL should be to see all teams make a comfortable profit. Simply lowering the salary cap without changing other features of the league will only entrench the financial disparities between teams. We can also expect this approach to lead to further demands for lower salary caps in the future if teams in poor locations continue to limp along.

The only real, sustainable answer to hockey’s tricky economics is to ensure every team is in a city with fans prepared to support their team. And that inevitably means less Sunbelt hockey.

Last year, prior to the Atlanta Thrashers’ move to Winnipeg, the Mowat Centre for Policy Innovation at the University of Toronto calculated Canada could support up to 12 NHL teams. Such a conclusion was based on the fact hockey depends for the most part on gate revenues and Canadian television rights. The report noted the five (at the time) Canadian teams produced a third of total NHL revenues. Want to fix hockey? Give Canadian fans more teams to cheer for.

From this perspective, the player proposal comes out the winner. It requires Bettman and the owners to take proper responsibility for the strategic flaw of creating so many weak teams in the first place and offers the league a three-year transition period to fix it. This ought to be plenty of time to arrange moving notices for U.S. teams that will never be profitable whatever the salary scale. Oh, and Quebec City’s new NHL-sized arena should be open by 2015. Just saying.


 
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