TORONTO – The first tense moments of the NHL’s collective bargaining negotiations have arrived.
With Gary Bettman and Donald Fehr not scheduled to sit across from one another until the middle of next week and the sides unable to even agree on the core issues that need to be addressed, a sense of uneasiness has suddenly enveloped the talks.
After Wednesday’s session, in which the NHL dismissed the union’s initial proposal, Fehr set off for pre-scheduled player meetings in Chicago. The union boss will also oversee a session with players in Kelowna, B.C., before returning to Toronto and resuming CBA discussions on Aug. 22.
At that point, the league and the NHL Players’ Association will have just 24 days left to reach a new agreement and avoid a lockout.
But where do they start? There is very little common ground between the proposals each side has put forth and neither seems particularly willing to move off its current position.
“What the issues are and how they get solved and how deep the issues go are something that we’re not yet on the same page,” Bettman said Wednesday.
Meanwhile, the hockey world remains on hold—and many are starting to brace for the worst. The Detroit Red Wings announced Thursday that they’re cancelling their annual September prospects tournament in Traverse City, Mich., due to the “uncertainty” surrounding the CBA.
Eight teams had been scheduled to participate.
“We have determined that it is in everyone’s best interest to cancel this year’s tournament,” Red Wings GM Ken Holland said in a statement.
Sub-committees from the league and union gathered Thursday to discuss non-core economic issues such as travel, ice conditions and training camp. Both sides seemed encouraged about the status of those talks, but as deputy commissioner Bill Daly pointed out: “I don’t think that’s where this CBA is going to get cut or not.”
In simple terms, the owners want to pay players less—much less. Despite the fact the NHL’s revenues grew from $2.2 billion before the 2004-05 lockout to $3.3 billion last season, a number of teams are still struggling.
The financial success of the wealthiest franchises over the last seven years ended up hurting the poorer ones.
That’s because the salary cap was tied to overall hockey-related revenues and rose dramatically from $39 million in 2005-06 to $64.3 million last season, bringing the salary floor (the minimum teams must spend) up along with it. If next season was played under the current system, the cap would have been set at $70.2 million and the floor would have been $54.2 million.
However, a new deal needs to be put in place before the NHL resumes operations.
Under the proposal put forward by the owners in July, the players’ share in revenue would be cut from 57 per cent to 43 per cent and would include a change to the way the salary cap is calculated. Instead of being set at $8 million above the midpoint (total league revenues divided by 30 teams), the upper limit would be reduced to $4 million above.
As a result, the salary cap would drop to $50.8 million next season, which is below where the floor currently rests.
The league also called for the elimination of salary arbitration, contract limits of five years (with equal money paid each year, essentially eliminating signing bonuses) and 10 years of service before unrestricted free agency kicks in. All of those proposed changes are designed to slow the increase in salaries.
The NHLPA estimated the league’s proposal would cost players approximately $450 million per season.
Rather than making a direct counter-offer, Fehr elected to design his own system. He attempted to appease owners by keeping the hard salary cap in place and putting a drag on salaries by delinking them from overall revenues, but called for an expanded revenue-sharing plan that would see the wealthy teams distribute more than $250 million per season to the poor.
Under the union’s plan, the salary cap would fall at roughly $69 million next season. It would increase to $71 million in 2013-14 and $75 million in 2014-15.
In other words, the owners would only realize significantly more profit in the deal if the league continued to grow at a level beyond the seven per cent it averaged since the lockout. There’s no guarantee of that, especially since the strength of the Canadian dollar has helped fuel the growth.
The offer is based on the premise that the players would give up revenue for three years—the system would revert back to the current rules in the fourth—so that the NHL could work on getting its struggling teams on stable footing.
“If there are issues remaining, they are club-specific issues,” said Fehr. “And that if the clubs that don’t need assistance are willing to partner with the players to help get at the issues of the clubs that may need it we’re prepared to do that. But it’s not a circumstance in which the players are just going to say ‘OK, take everything from us.”‘
History is also at play here.
The players are still smarting after being locked out for an entire season in 2004-05 before eventually accepting a 24 per cent rollback on salaries and a salary cap. At the time, Bettman repeatedly talked about the need for “cost certainty” to keep the league healthy—something the union eventually capitulated to.
Now in the next round of negotiations, the sides appear to be back where they started and the threat of yet another lockout seems very real. The league is contending the players need to give up a significant amount of salary to stabilize the industry while the union maintains that goal would be best accomplished with the wealthy teams doing more to help their struggling counterparts.
Against that backdrop, the first signs of animosity are beginning to surface.
After talks wrapped up Wednesday, Fehr hinted the NHL was working from a “playbook” that involves using the lockout as a negotiating tactic and called for the owners to present an offer that moved in the players’ direction. Bettman, meanwhile, seemed to suggest that this wasn’t a good time for Fehr to step away from talks and hold regional player meetings.
“Where we go from here is I come back next Wednesday to resume negotiations when the union’s ready,” said Bettman.
Fehr contends that he doesn’t need to be present for talks to continue.
“As we go forward … what we have to do is sit and negotiate until we get the deal done,” he said. “It doesn’t mean that every single person has to be in the room on every single meeting, but the parties have to be going at it regularly.”
Here’s a look at how the salary cap and salary floor would be impacted by the current CBA along with proposals from the NHL and NHL Players’ Association for the 2012-13 season:
Salary cap: $70.2 million
Salary floor: $54.2 million
Salary cap: $50.8 million
Salary floor: $38.8 million
NHLPA’s proposal (assuming a fixed $16-million gap is kept in place)
Salary cap: $69 million
Salary floor: $53 million