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How much blame do NHL owners deserve for their economic woes?

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Until last season’s playoff run, their first berth since 2000, the Panthers were a mediocre to poor club and tough box office sell, factors that have nothing to do with the NHL’s expired CBA. (Eliot J. Schechter/NHLI via Getty Images)

By Stu Hackel

On Monday, we looked at Jimmy Devellano’s strange remarks about NHL players, who he suggested are viewed by ownership as “cattle.” How many owners actually feel that way might be in question, but another of his remarks might be a more accurate representation of this group’s sentiment as the lockout continues. “The owners simply aren’t going to let a union push them around,” Jimmy D. said. “It’s not going to happen.”

And, apparently, they are going to assert themselves even if it means losing another entire season — or maybe even two, or however long it takes until they can get the players to yield. When former Florida Panthers executive Stu Siegel writes in this week’s issue of Sports Illustrated that he’s “depressed” to see another work stoppage and notes “there’s plenty of blame to go around,” you have to take into consideration that the owners’ intransigence is a big component.

That’s somewhat problematic if you hold the belief that both sides are going to have to compromise for an agreement to be reached. If moderate voices exist among the owners (and Ted Wyman of The Winnipeg Sun believes there are), they’re irrelevant at the moment. Not letting “the union push them around” is tantamount to the owners as a group not backing off from any of their positions in these negotiations. That is, at least, what the players allege is holding things back at the moment. Of course, the league makes the same charge against the players, saying the owners are the ones who have done all the bending on economic issues. The result is we still have no talks scheduled on that front.

From the players’ perspective, the owners’ stance borders on self-destruction. Blackhawks captain Jonathan Toews, among the most respected leaders in the game, articulated that on Monday after an informal practice by Chicago players. “We saw what the (owners) did in ’04-05, and who knows if they’re willing to do that again,” Toews said (quoted by Chris Kuc of The Chicago Tribune). “To me, it’s just carelessness. It’s them just trying to show everyone that they’re the owners and they’re the league. They can do whatever they want. If they want to hurt their own game and drive it into the ground, that’s what they’ll do. Even if it comes down to that, it doesn’t matter as long as they get what they want.”

Precisely what they want is now fairly well-known: They want to pay the players quite a bit less than they did under the previous agreement. Ownership’s contention is that the economics of the game don’t work, even after they overhauled them in the recently expired CBA by locking out the players for a season to achieve a salary cap system that was designed to fix things. If that tactic worked once for them, the owners are prepared to do it again.

But when that system also brings about record revenues and the healthiest state the NHL has ever been in, it’s worth asking if the economics are as bad as the owners claim. “I know it’s tough to muster sympathy for multimillionaires,” Siegel writes, “but when most of these owners say they’re losing money every year, they’re telling the truth.”

As Siegel points out, Forbes magazine listed 18 NHL clubs that lost money last season in their 2012 team valuations while simultaneously pointing out that the game’s economics have never been more favorable to the owners. (As a caveat, the NHL has always said the Forbes numbers are not accurate;  but they remain the best information we have and constitute legitimate estimated and educated guesses.)

This contradictory situation between record revenue and an allegedly troubled business inevitably raises questions that have made it hard for many fans to comprehend the owners’ problem, especially when, as Siegel acknowledges, the owners turn out to be their own worst enemy. “Circumventing the intent of the cap by signing free agents to long, front-loaded contracts that reduce the hit to the club’s total cap does them no favors in the p.r. battle when they claim their cash flow is suffering,” he writes.

There’s no room for argument about this system having shortcomings when a team as seemingly well-run as the San Jose Sharks can’t break even and reportedly lost $15 million last season. There are no doubt that a few other franchises are in the same boat. The Penguins, for example, didn’t turn a profit in 2010-2011, according to Forbes. Neither did the Ducks or the Blues. These clubs put a decent product on the ice, in some cases they even get fans regularly to fill their the arena and yet they can’t help but bleed some red ink. That’s a reality the players must face.

But for Siegel or anyone to merely cite the Forbes figures uncritically and out of context misses a big point. A good number of the NHL’s money-losing clubs have not been well run or have been uncompetitive and unattractive for too long. If you’ve been unable to put a good product on the ice for a very long time, that’s not necessarily the fault of any system, but of ownership and management. We can start with Siegel’s former team, the Panthers, who squandered whatever excitement they built in their early days as a trapping team excelling in a trapping league by missing the playoffs for 10 consecutive seasons until this past campaign and, for many of those years, continuing to put a pretty boring product in their somewhat out-of-the way arena.

Speaking about out-of-the-way arenas, what about the Coyotes, who have lost more money than any NHL club and likely will continue to do so? The league never should have permitted former owner Steve Ellman to forsake a proposed Scottsdale location over a relatively small financial disagreement with that city’s government and instead stick the club in Glendale, a place the established fan base in the East Valley has difficulty traveling to even when the team is competitive, which for quite a while it wasn’t. Making numerous poor hockey decisions, the Coyotes failed to qualify for the postseason six straight years and seven out of eight prior to their bankruptcy fiasco that ended up with the league owning this money pit of a franchise. That sad tale is well known. It has drained the owners substantially and has nothing to do with any failures of the current economic system.

The Dallas Stars were one of the big Sunbelt success stories until team owner Tom Hicks overextended himself while constructing his sports empire, forcing him into bankruptcy, rendering the Stars unable to maintain their winning ways and souring the fans on him and his hockey team. Can’t blame the NHL’s economic system for the Stars’ losses, can you?

The Kings lost money in 2010-11, before this past Cup-winning season. They’d missed the playoffs for six straight years before a rebuild started to kick in that ultimately paid off with the championship. That kind of long drought dampens fan enthusiasm for the product and hurts the bottom line. It’s too bad, but it’s not the fault of the league’s economics when clubs become chronic losers.

How about the Islanders? That team is still reeling under string of poor decisions made by their hockey department coming out of the lockout in 1994, a succession of terrible trades and silly signings that torpedoed a once mighty and beloved franchise on the ice and alienated a once-loyal fan base in the process. You can add poor ownership (and even fraudulent ownership, in the case of John Spano) to the poor management here as well as the inability to solve an arena problem that continues to drag on and fuel talk of relocation. No one can blame the NHL’s economics for that mess.

What about the Devils? Here’s a team in North America’s most populous region, an established hockey area, that has never done any sort of creative marketing or promotion whatsoever and regularly had trouble getting fans into their new arena until they made a deep playoff run this past season. Is the NHL’s economic system at fault for that?

Columbus? Badly managed from Day 1, they’ve been unable to build a winner other than for one season out of 11 — and when they finally got a decent coach, Ken Hitchcock, and made the playoffs, they dismissed him when the team slumped the following year. After splurging on questionable acquisitions last summer, they flopped again and a small group of fans even staged a protest against the current regime last season. Sorry, but their plight has less to do with the failures of NHL economics than the failures of their hockey department.

Then there’s the poor Nashville Predators who finally built a good team, attracted committed ownership, and pledged to their growing fan base that they’d finally start to retain their best players rather than continually lose them to free agency. What happens? Other clubs raid them anyway, making pitches for their two best defensemen, one of the raiders being the cash-poor Minnesota Wild who snared Ryan Suter. The ultra- rich Philadelphia Flyers’ outrageously structured RFA offer sheet to Shea Weber forced Nashville to match and, in doing so, probably fated the Preds to red ink for the foreseeable future. That is the NHL’s system and it was exploited by one of league’s the most powerful owners who was preying on a club struggling to find its feet. It’s hard to have sympathy with the owners’ plight when they pillage each other in this fashion.

The point here is that the owner’s portrayal of the NHL’s economic landscape is more complicated than the picture some like to paint of it. They want the players to make sacrifices in the next CBA to correct flaws from the last one, but in a good number of instances, the fiscal problems some teams have experienced have little to do with the way the old CBA worked. In some very significant cases, it comes down to the owners hoping they can force someone else to repair their own train wrecks and they seem to be willing to sacrifice a season or more to accomplish that.

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  • Published On Sep 25, 2012
  • 25 comments
    AnthonyHatchetChatburn
    AnthonyHatchetChatburn

    So, when the NHLPA voted to artifically inflate the Salary Cap each season by 5%, they weren't hand-in-hand with the owners in creating the largescale fiscal mess? Any number of seasons under the old CBA it was clear that the cap did not rise 5% even with the NHLPA's articial inflation. Any attempt by the teams/owners to limit contracts would have been rightfully called collusion - so please let's not act like the players weren;t creating a perfect storm - that many in the media simply are ignoring on the doppler. Each time the NHLPA pushed the 5% increase, it ran the risk of kicking on the ESCROW monster that is now their chief villain. When revenues failed to meet the 5% increase the NHLPA engaged at the beginning of each season, it meant that players had to payback dollars on their contract. The NHLPA willing chased Big Dollar Contract Signings - knowing full well that the $$$ they took  in July might need to be refunded come June if revenue didn't break that 5% mark-up. More than once in the course of the previous CBA, the NHL cap ceiling would have declined had it not been for the NHLPA's gamble. Sure it would mean some RFAs and UFAs would not have been able to sing contracts as big as the previous summer's fa's but that's the nature of revenue, isn't it?This "Owners bad, Players good" nonsense does nothing to push both sides to negotiate - and it misrepresents the situations to fans who don;t waste time reading things like the CBA.

    RobBoyko
    RobBoyko

    Stu - one more question for you - when GM went into bankruptcy and required a bail-out from federal tax payers the union still gave massive concessions to get back to work. Because all parties realized the model was broken. No one said GM was being managed exceptionally well. All agreed GM had significant mis-management but that had no bearing on whether or not the model was broken. And what was broken with the model? Paying workers too much as a share of the revenues earned, including via pension plan contributions and health care benefits payments that were simply unsustainable in economic terms where the company had owners asking it to make a reasonable profit in exchange for having their own cash invested in the company.

     

    So if the UAW can concede that they were being paid too much as a function of what constitutes a reasonable profit expectation in the free-market system regardless of the management acumen at GM, why can't the NHLPA concede the same? In other words, mismanagement is not a big issue here. It's not even a meaningful issue here. 

     

    The only issue is that many clubs lose money and the owners want to fix that, and that starts with a more reasonable split of HRR than what existed under the last CBA.  Or am I missing something in understanding whether or not club management is a big issue?

    RobBoyko
    RobBoyko

    Stu - can you explain to me why the owners should agree to the players' demands when the top players are choosing to sign for no more than 65% of their NHL salaries to play hockey this year (by signing in other leagues)?

    Doesn't that tell us that the players will play for a lot less money, in far more remote (read: away from their families) places, with far less perks than they receive as NHL club players, with far less off-ice endorsement revenue opportunities - and therefore the owners' proposal that would pay players about 87% of last year's salaries, with all the added benefits of playing in the NHL (endorsement deals, perks, best competition, pension system, etc) is more than a reasonable offer?

     

    Furthermore, the future of professional hockey is clearly (at least in the short term) in the hands of the NHL. The KHL or another league cannot earn the television revenue to support NHL-level salaries - so either the players sign with the NHL, and work to grow their share of the pie using the best vehicle available to them (the NHL), or they choose to take a lot less money now, and choose to grow their share of a much smaller economic pie..

     

    Help me understand, Stu, Adrian, Allan? What am I missing?

    JIM26
    JIM26

    How quick everyone forgets that the owners wanted to start talking at the begining of last season.  It was the players who said no.  Fehr came from baseball which lost one full season and had two delayed starts under his watch.  Gary has tried only for Fehr to say no. 

     

    USAmjs
    USAmjs

    Wish I could care about the owners, but I can't. They complain about not having money, but those same owners sign contracts with players worth an amount of money they - the owners - don't have. Whose fault is that? What it sounds like, to me, is a group of owners being led by a guy who cares very little about the sport of hockey - Gary - who are asking for a bailout.

     

    I'm a capitalist. I believe businesspeople and owners have the right to spend as much money on whatever they please. I still believe that, even after this. But, as an American and a hockey fan, I will NOT support a bailout of the owners for their crappy job at selling the game and handling their pocketbooks.

     

    Business is business. If you can't handle it, go somewhere else. The players who are being locked-out HAVE gone somewhere else. Why? Because they'll get work and a paycheck, even if it means a pay cut. No bailout needed for them.

     

    For the first time in my life, I stand with the players.

    Bruce
    Bruce

    Stu, how come you never mention just how poorly ran the Atlanta Thrashers were before the basement-bottom price selling to True North Sports and Entertainment?  Phillips Arena, located squarely in downtown Atlanta, has shown moments of excitement and enjoyment for the fan, yet mismanagement of the team is never mentioned.  Atlanta has always came out for winners on a regular basis, and that happened during the playoff year, before, during and after.  Can you actually make me believe that the NHLPA, in the long run, supports the move to Winnipeg, or was it just a way to dispose themselves of bad management?

    dmbpr
    dmbpr

    I haven't heard much about this, but do you think the NHLPA may have helped fan the flames of the lockout last year when they did not pass realignment plans? I definitely side with the players in this mess, but I thought they didn't do themselves any favors when they didn't side with the owners on the realignment structure (one that I think most hockey fans supported).

    hockey4by6
    hockey4by6

    The owners are out to bust the union. If they can bust the premier sports union organizer in Donald Fehr they will never have to deal with a players union again. This has nothing to do with money. If it were only money the players would be in camp right now. 

     

     

    RockyFortune
    RockyFortune

    there goes stu..hacking away on the flyers and ownership..last blog post he wailed about the broad street bullies..now ed snider is a bad guy for playing within the rules and signing players via RFA....if the teams can't compete with the economics they need to find another sport to invest in...i'm not feeling bad for the poor nashville predators. 

    geeon1
    geeon1

    Too many are thinking that ownership is the big evil here, no as Mr. Hackel points out some may be stupid but they are not evil. Once the Players brought Fehr into the equation many of us that also follow baseball said this would be a long protracted event. Fehr, will not budge from his position until the players tell him to.

    Mr. Hackel,  The islanders even when they were winning never drew the big crowds like the Rangers. Wang, is an oddity in that he wantd to create a "family" type atmosphere for his team. The long term deals, Garth Snow's hiring all were done to bring consistency to an organization that had lost its way.  His loyalty to Millubry and now to Snow has cost this team in talent. They had ok (mediocre) drafts but made some serious head scratcher deals. This is a team that needs to be contracted or moved ( as a Rangers fan I would DESPISE either, the rivalry though weakening is still there). The Coyotes deal you berate above was not something that was going to be settled quick, the owner took the next best deal. Another team thats needs to be contracted or moved. Predators are a very well run organization bereft with location issues. They have been building a quality team, yet the fans are not interested. This is a team that needs to move. Stars, will be fine. once they start putting a better product on the ice the fans will return. Panthers, bad drafts and as you mentioned the trap defense. Nothing is more boring than to watch the trap. Another team that does not draw, location issue? Perhaps better to contract this team.

    So many other teams are not in the black, many as you point out are very well run.  So it must be addressed, no owner of any business should be giving up such a large percentage of their Revenue (HRR not all revenue). The past CBA, as evidence by the fact that the players would be more than happy to maintain, was bad business.

    Matt Keves said it very well, Hockey has dropped out of the number 4 sport slot, replaced by tennis, Golf and NASCAR. Both sides helped this slide: Strikes, lockouts, the damn Trap, not bringing more focus upon their teams.  The NHL and the NHLPA have not done enough to excite and bring in new fans. Bettmans Winter game outdoors was a stroke of sheer brilliance now this.....

     

    Matt Keves
    Matt Keves

    The biggest problem with the NHL and their ownership groups is they clearly don't  or didn't understand where their sport fits into the landscape.  There is no 'Big 4" anymore because hockey isn't part of it...their TV revenue relative to MLB, NFL, and NBA is a joke, and that revenue is a huge part of those leagues' bottom lines. 

    I'd also bet that they mis-evalutated the TV revenue hit they'd take...they probably assumed that by now they'd have a better TV deal along the lines of what they had with NBC and ESPN before the last lockout.  Alas, all they did was help the networks understand that the NHL is a niche sport and it wasn't that missed by the general sports public.  Some teams like the Rangers, Red Wings and Flyers still get good local TV revenue, but that's not helping the overall league because it's so disproportionate to what teams like Columbus and Nashville get. 

    I think these owners are now thinking that TV deal isn't coming, so they need to dig their feet in and fix the mess they created.   Unfortunately, they either don't get or care about the PR because while the die-hard fan will always return, casual fans view the league as a joke and don't care if/when it comes back. 

    I live in Columbus, and the only thing I've heard anyone hear care about in regards to the NHL is making sure COlumbus isn't on the hook for the lost revenue from the arena and the All-Star Game.  The team is run so poorly that it's a back burner issue here.  I grew up loving the NHL, but I could care less when they come back, especially since I'm an Isles fan and they only play in Columbus every other year and are never on TV.

    The NHL could be in for some dramatic changes, whether that be more revenue sharing or even going to a league with less teams and more of them in Canada.  Either way, they need to look more at the MLS business model than the NBA or NFL.

    StaceyHanrahan
    StaceyHanrahan

    Regardless of the outcome, it's the fans who will end up being the losers.

    John9
    John9

    When an agreement runs out, you negotiate a new one - this is not an extension, this is a new agreement.  The idea that the players are being asked to take less is absurd - take less than...the current agreement that doesn't exist as of 9/15...?  The increase to 57% was the bonus that the league was giving the players in the case of substantial revenue growth.  Hooray - that was realized and the players got their bonus!  Now back to reality.

    Nick Mileo
    Nick Mileo

    So how come no one has asked this question yet...  if the NHL economic system is in such a bad state, and has been for so long despite record revenues.... why does Gary Bettman still have a job as league commissioner?  One would think that 20 years of economic struggles would lead to a change of leadership.  Or maybe their full of it..  hmmmm

    Stu Hackel
    Stu Hackel moderator

     @RobBoyko I can't speak for the NHLPA as to why they, as you put it, "can't concede" their members have been paid too much, but from what I understand of their proposals, they have included salary reductions. However, they are not as much as the NHL wants.

     

    As to your analogy to GM, I don't think it holds up. The NHL experienced record revenues in the last seven years. They weren't bankrupt as GM was. So I assume the NHLPA's thinking, based on what they've said publicly, is that they didn't believe the league was in such bad shape that it necessitated the kind of harsh measures the NHL's proposals have called for. 

     

    Further, my point in writing this post was to state that when the NHL claims its system is broken -- a system under which the league experienced unprecedented growth -- they overlook the fact that the reasons some of their teams don't do well is not because of the system but because of mismanagement. You write yourself, the essence of GM's problems were not mismanagement but the system. My contention is that the system isn't as broken as the league claims and that in fact, it's mismanagement that has put many of the troubled franchises where they are. So again, your comparison to GM doesn't hold up. 

     

    Thanks for your comments.

    Stu Hackel
    Stu Hackel moderator

     @RobBoyko Rob - You are right. The KHL or another European league can't replace what the NHL can theoretically offer pro hockey players for all the reasons you bring up.

     

    But what you are missing is the primary reasons these players are signing to play in Europe. It's not to maximize their income, they know that. Instead, they want to stay in shape for when the NHL season starts, and if the season is cancelled, they don't want to have lost the whole year sitting at home and not doing much more than practicing or playing in non-contact charity games.

     

    They are pros, of course, and they are happy to be paid, but they are not fooling themselves about the money. In fact, some of those who have to pay the costs of their own insurance are playing for next to nothing, just to play.

     

    And, you know, they also do love the game, it's what they do, they've done it all their lives -- in some cases, it's all they know -- and they just want to play. If someone is willing to pay them to play, they'll take it, and they're taking it with the understanding it's only temporary, even if they're playing below what they feel they deserve. It beats not getting paid, and if you've ever been out of work, you certainly understand that.

     

    But they don't want to play in the NHL for less than they've contractually agreed to play for and that's the difference. Europe is temporary and it's designed to keep them in game shape for the world's top league, which is where they belong. 

    richb688
    richb688

     @Bruce Atalanta is a horrible sports town-look at the braves attendance problems

    Stu Hackel
    Stu Hackel moderator

    @Bruce Bruce, I most certainly have spoken about how badly the Thrashers were run, perhaps not in this piece because they are no longer in the league. But here's just one post discussing their problems and if you read it, you can't miss it. http://nhl-red-light.si.com/2011/02/16/thrashers-plight-stirs-relocation-threat/ Now, that said, I'm unclear what your point is. If you are trying to say the NHLPA does not support the NHL's move to WPG, you are mistaken; they certainly do. They want the teams to do well so the revenue goes up and the cap goes up. If that's not your point, I don't know what it is.

     

    Stu Hackel
    Stu Hackel moderator

     @dmbpr You make a good point. I do think that what the NHLPA did disappointed (if not angered) the NHL and heightened whatever antagonism existed at that point. That antagonism at that time was certainly nothing compared to what exists now and I don't know how much it "helped fan the flames" as you put it, but it didn't make relations any smoother, that's for certain

     

    It wasn't so much that the fans supported realignment from the league's perspective as the NHLPA  undid a lot of hard work and horse trading Bettman engaged in to put it together. The players had a legitimate gripe from a legal standpoint; realignment changed their working conditions and, according to the CBA, they had to be consulted and weren't. It meant increased travel for some and, the PA maintained, reduced some teams' chances of qualifying for the playoffs.

     

    As the challenges to the labor laws on the lockout in Alberta and Quebec demonstrate, you're not going to get too many free passes, if any, from Don Fehr if you're on the other side of the table -- and the same can be said for Gary Bettman. 

     

    All that said, whether agreeing to realignment would have changed the course of these negotiations, I don't think we can really know. This stuff going on now -- or not going on now -- might very well have happened regardless.

     

    Thanks for the question.

    geeon1
    geeon1

     @hockey4by6 The players did themselves no favor by bringing in Fehr. He does not negotiate from his position very much at all. He won't budge until the players tell him too, and even then he will persuade them not to budge. As I have said before the day they brought in Fehr I was calling for this lock-out.

    Charlie5
    Charlie5

    @Matt Keves ... and I live in Columbus, and am a Blue Jackets season ticket holder. And I say you don't know what you're talking about. There is plenty of support for the team locally, and plenty of concern as to whether the team can survive here without a turn-around on the ice. Any fan base has a finite patience - you can't keep subjecting teh paying customers to a clown show without eventually cutting into the numbers. That said, I'd point out that there would appear to be much more concern from Jackets fans about the CBJ than from Isle's fans about the Isles.

    RW2
    RW2

     @John9 John, the idea that players are being asked to take less is not absurd. The owners are trying to reduce legally binding contracts, approved by 3 parties (Player,Owner,NHL) and reduce them by 24%. Regardless of status of the CBA these contracts are still binding. If the owners want to reduce the cap and percentage of HHR that is fine. But they should have to do so with the existing contracts in place, or buyout the existing contracts under new rules of a new CBA, or renegotiate the contracts individually. But to say all player across the board are to have a contract reduced by a set percentage.

    Bruce
    Bruce

    Both the NHL and NHLPA are looking at the short term financial opportunity here; I can't argue the fact that this did generate a good helping of money into the system with relocation fees, apparel, ticket sales, etc.  But having a team in Winnipeg isn't a slam dunk; the dollar versus the loonie can change quickly, and cause issues for Winnipeg getting the right players to succeed, as many rankings already have this team at the bottom of the league.  I hear the same song and dance that the MTS Centre is sold out over the next 5 years, but that's just a promise that the arena would be sold out.  Meanwhile, the youth hockey, high school hockey programs, and college team programs here in the metro Atlanta area continue to grow, even without the Thrashers.  You would think that the league and players association would have considered this versus before allowing the team to move.  (yeah, you can still say I'm bitter, because I supported the team; not the owners.  Just sick and tired of Atlanta getting a bad rap) 

     

    Honestly, I think it would be in the league's best interest to get a team back here to Atlanta sooner than later, but obviously with real owners.  I'm afraid that won't happen as long as ASG is still running the show at Phillips, or someone comes in and build their own arena on the north end of town, where the growth for hockey continues.