NHL dead for 2005. Lessons learned

What's interesting that I read in the AP article is that Bettman had never seen an NHL game before being named commish. That's really smart. Although, Don Garber has done a hell of a job. But he had the experience of being in the same situation with NFL Europe.

 

well, not London, of course...

 

1. The NHL business model makes no sense for modern sports. It's based on selling tickets (b/c they don't get diddly from TV or cable revenue--b/c they don't have viewership). You can't make it big time in sports in the USA if you're depending primarily on ticket revenue to fund your sport.

2. B/c their budgets are then calculated on season ticket revenue, the teams that make money tend to do so off of playoff ticket sales (b/c that is "found cash"). It also is a disencentive to shorten the number of games in a season (which makes it easy to pick up a ticket b/c there are 80+ games) and decreases the value of each individual game. Heck--it also means there is an encentive for 7 game playoffs (rather than a 3-game series) b/c you can sell more tickets that way.

They don't have significant revenue outside of ticket sales (yes, there is sales from jersey's, some broadcasting rights, some sponsorship--but it all pales when compared to other national leagues, either in the US or in the UK or some other major sport).

My sense is that some of the US owners who originally went into hockey did so b/c they had basketball arenas--and the hockey team became another tenant for the arena. In that sense, it was like some of the same folks who went into MISL or women's basketball--it was about filling empty days in a venue.

I think key lessons learned from the NHL:
1. Have a salary cap that is meaningful.
2. A league mostly dependent upon ticket revenue to make money is in fragile shape.
3. Corporate sponsorship and non-game revenue sources are critical (which is where the AEG model of get the stadium and then fill it with MLS, tractor pulls, concerts, etc. makes sense).
4. If it's a true "National Sport" than the sport is bigger than the league. And when the owners and players forget that, they do the sport a dis-service. If it isn't a true "National Sport" than it disappears from everyone's radar screen and threatens the viability of that league when the strike ends. For instance, don't be surprised to see the NHL contract 2-6 teams within a year of coming back.

 

Lesson 1: Never EVER pay Jagr $11M/year.

 

???

Carolina is 20th in revenue...not great, but there are 10 teams in worse position. And that's with the team completely sucking the last two years, and the tech industry doing poorly. I don't know how the arena deal compares around the league, but Carolina is NOT one of the weakest franchises.

What a crock...first, the players proposed something like a 27% CUT in salaries, AND a luxury tax. You don't know what you're talking about, by a mile. Second, you seem to think it's completely groovy if the players take a big pay cut just so the owners of the high revenue teams suddenly own the most valuable franchises in American sports, and one or two or four of them own the most valuable franchises in the world. Third, no player ever extorted money from any owner. Every contract is a freely negotiated agreement between two parties. I mean, yeah, the sport's in trouble, but were the players supposed to accept less than their market value and less than they could get? Do owners lower ticket prices for the good of the game?

I don't know if the level of the players' proposal is right, but it's the right approach. In a non-socialist league like the NHL, a cap is dumb.

And, again, I find the predominance of knee-jerk, uninformed pro-owner sentiment comical. Sports fans put a moral burden on players that's about a thousand times greater than they put on owners, and about a million times greater than they put on politicians. Hell, the typical sports fan accepts more bullsh** from his SO than from players.

 

I think the issue with the NHL is all the owners fault. They followed the MLB model and shot themselves in the foot. Sports Illustrated had an article about the Minnesota Wild called "Noisy House on the Prarie" in the December 29th, 2003 issue about how the Wild made the playoffs with a $25 million payroll and a $20 million profit. They were fiscally prudent in one of the biggest hockey markets in the US, and were rewarded with the good-old capitalist motive of profit. If other teams had shown fiscal restraint and not spent possible future revenues they wouldn't be in this mess in the first place. If they want a salary cap to work, they need true revenue-sharing like the NFL has or the single-entity that MLS has.

In regards to the NHL, I'd rather go to a Badgers-Golden Gophers game at the Kohl Center any day. The atmosphere is so much better and the rivalry is very heated.

 

This is so faroff topic its not even funny.

The thing I'll say about the Wild is, that although they were profitable, they iced the least attractive team in the league, playoff run or not. They were an ugly team to watch and did nothing to inspire fans or attract new folk to thew arenas. A few more players with talent owuldnt have gone amiss, were it not for Lemeirre's trap hjockey they would have got nowhere. Kudos for Jackie making the most of the crap he had (due to his payroll restrictions), but its not goting to help the league if every team uses that as it's model.

I am on the owners side. I also agree the owners made this problem themselves. However, now they're trying to fix it, and the players need to learn the good old days of $11m+ salaries are gone. They should be thankful of what they had for too long, not refuse to accept realistic wages for where the sport is.

 

The lesson is very simple: don't spend money that you don't have. You know, have a budget and all that, and make sure revenues aren't dwarfed by expenses. It isn't that hard a concept.

And if you pay bare bones salary and still are losing money, sell the team or hire smart people to run it.

Oh, and never allow Cablevision to buy a franchise in your league.

 

I personally think our MLS officials can learn far more more MLB and their people's ability to skirt any sort of important issue... like it's happening right now with respect to steroids.... They make politicians look honest in comparison..... (just kidding: MLS should be as far away from this silent/unapologetic/ridiculously vague/sidestepping/amoral/self-serving behavior....)

Anyway, i don't know how many regular posters have actually advocated getting rid of the cap... What many people here want is some way in which each team can increase their spending slightly (within a salary cap) so that the product on the field can get better, faster... Of course, there would also be the issue of players looking at this money and asking for a raise, etc....
I believe that reserve teams should be a very helpful step in improving the product (even if a little bit, for now) We'll have to see by year's end....

 

I agree with your assesment of the Wild's play, but my point was that they didn't spend what they didn't have and still fielded a competitive team. The article also mentioned plans to increase payroll as they were only in the second (or third) year of operation and wanted to build a solid financial foundation before expanding payroll.

In regards to MLS, the slow growth formula is best for the league right now. The owners are putting the money in the right place for long term sustainability right now (stadia) and sacrificing some of the short term gains they could make by increasing payrolls.

P.S. The NHL players just agreed to a $52 million salary cap and the owners rejected it.

 

What I find interesting, is that 15 years ago the collapse of communism meant the number of high quality players that were available probably doubled. Based on the law of supply and demand this should have had a deflationary effect on salaries. But any potential savings was negated by expansion. Had the NHL stuck to there core markets they could of held down salaries.

 

I disagree with you here, superdave. As MLB will soon recognize, a luxury tax is not the way to go. Looking at what I understand to be the basis of the players' proposal, this is what I notice the most:

1.The players have an inflated sense of their value within the marketplace,
2. The players want a "capitalist" system most akin to MLB's deal,
3. The players want to continue the 100% guaranteed contracts that are central to avoiding natural market instruments that regulate player valuations.

Looking at MLB's latest deal, I have always believed that MLB didn't solve their long-term labor problems, they merely put a band-aid on a gaping cut. The NHL players’ proposal [with guaranteed contracts, arbitration, and a luxury tax] would result in many of the same issues that MLB has under their current labor agreement:

1. The ridiculous arbitration system continued, without any merit.
2. "Market maker signings," such as Kris Benson to NYM continue to cause artificial inflation in player valuations. [Now, EVERY mediocre pitcher is worth $21M?]
3. Players and their agents are rewarded for negotiating in bad faith. Example: Magglio Ordonez/Scott Boras neither allowed the White Sox to view his medical records, nor agreed to "out clauses" for health reasons. They later agreed to “outs” when signing with Detroit.
Example: J. Giambi in 2K1 signing w/NYY, and despite him no longer being the steroid-inflated freak he was, the team is still stuck with his guaranteed contract.
4. There is no brake on revenues flowing into, and concomitant to this, salaries to the players of the biggest clubs.

All of these are issues, exclusive to a salary cap, that the NHL had under the old system. All of these would continue under a MLB-style luxury tax system. The few wealthy clubs will continue to compete, with the mass of middle-market and small-market clubs clamoring for survival. True, the cut in pay would help the NHL in 2K5; However, there are no market instruments in the players’ proposal to avoid the inevitable, and artificial inflation of player valuations over the long term. Many players would continue to play for a rich [and 100% guaranteed] contract, and then continue their careers as overpaid, under producing shells of their former selves. Many stupid front offices would make bad decisions and overpay for players. [As Detroit has for Ordonez, NYM for Benson, and FLA for Delgado.] The net result of the players' greed AND management's stupidity is a recipe for a league in disrepair.

Do you actually believe this? The big NHL franchises becoming one of the most valuable franchises in American sports? Dave, there is NO WAY hockey will become popular enough to even approximate what the rich NBA and MLB clubs have achieved, let alone what the NFL have achieved; There simply isn't a large enough market for their product. Hockey, and Soccer have a "niche" product desired by few consumers. It is because of this that the niche sports must have a break on expenses.

Here’s where you’re wrong, Dave: Athletes, and their agents speak of “market value.” As we all recall from our economics courses in school, when speaking of truly “open markets,” valuations of commodities can either increase or decrease, depending on conditions. In professional sports, there IS no open market in terms of players: Salaries continue to accelerate. Valuations continue to increase. There are no market instruments to correct player valuations. Once a player is given a contract, there is no means to “correct” his salary downward, as there would be in any true open market. It is PRECISELY this problem that has caused the NHL its problems.

This is your best point. Ownership has done little to help the league. No revenue-sharing, no adjustment in monetary valuations, no discipline in their expansions. No recognition of their niche in the sporting/entertainment marketplace. No realization that teams compete in the league, but not against each other within their own localities.

 

http://sportsillustrated.cnn.com/2005/scorecard/02/15/truth.rumors/index.html

"The No. 1 issue that has plagued the NHL lockout went out the window Monday night when the NHLPA offered a deal that included a $52-million US salary cap. But the deal was rejected by the NHL. The surprising move was made by NHLPA senior director Ted Saskin during his secret meeting with NHL executive vice-president Bill Daly in Niagara Falls, N.Y. Daly began the process Monday by offering a $40-million salary cap without "linkage" -- a fixed link between player costs and league revenues, which has long been the centerpiece of the NHL's bid for cost certainty. The union counter-offered with the $52-million team-by-team salary cap. The players' proposal also featured more aggressive payroll tax thresholds and tax rates on team payrolls and the 24 percent salary rollback on all existing contracts.
-- Canadian Press"

So looks like the Players have made a pretty good offer, yet now the owners do not want that? They want more. Gotta have some compromise and it appears that the owners don't want that, their way right away NHL owners today.

 

the announcement is due tomorrow...so there is still a chance for the NHL to save their season?

 

How much more leverage do you need when you make 5-6 million a year playing Hockey?? WHat more do you want???

When is enough money too much money??? They make way above the standard of inflation.

What more can a guy possibly want when he makes 5 million a year playing a sport he supposedly loves???

Greedy pigs. These guys arent suffering under the strife of slave labor!!!
This isnt some southern slave labour plantation.

get a grip. The players lost out here and I dont feel bad for them at all.

They got what they asked for.

Good job morons

Frankie

 

How much more do you want than the privilege of owning a professional sports team (which you decide to do because of it stokes your ego and because it will make you money when you sell the franchise)? You get to run a team in a sport that you (supposedly) love.

I don't feel bad about the owners' losing the season at all-- greedy pigs.

(See? Look it's easy to talk in hyperbole.)

 

Well it must be hard, because the average credit card debt is like $6,000 per household.

 

Disney are going to sell the Mighty Ducks of Anaheim. Apparently, the NHL are going to buy franchises if the high offer is below what they deem "market value" so as to not hurt the other franchises' market value.

Look at the Southeast division:

Bye bye Atlanta Thrashers.

Bye bye Florida Panthers.

Tampa Bay I'll give benefit of the doubt just cause they seemed really into it when they won the Stanley Cup.

Washington will be fine I guess.

I live not far from Raleigh, and the Hurricanes have the least-filled arena (by seat percentage) in the league. The owner Karmanos is a sleaze who'll jump at the first sight of money.

 

Are you talking about baseball? If so, then no, the players have a perfect sense of their value in the marketplace, because the market determines their value. Now, if you're making some kind of "but schoolteachers only make $40,000" type statement, that's not about the marketplace, that's about our warped societal values.

If you're talking about hockey...well, this time around, I believe that the owners are in bad shape. Not as bad as they say, but pretty bad. Which is why the players offered a pretty massive paycut. If your argument is that a 37% or 47% or 57% cut would be more in line with the revenues hockey brings in...I'd be interested to see your source for that.

OK, but again, nobody forces owners to offer guaranteed contracts. The thing is, an owner would have to pay a "premium" in order to get a player to sign a non-guaranteed contract, and they don't want to do that. Anyway, to me, this is a side issue. The key issue is, how much can owners pay the players and make money (including the increase in franchise valuation.) How they divvy up salaries is a different question.

Baseball NEVER HAD a labor problem. I cite as evidence the steady increase in franchise value. So obviously, the teams either made/make money or came close enough. Nobody, for a very long time, has lost money owning a baseball team when you include what they make on the sale.

Again, nobody put a gun to the Mets' heads. Why are people such socialists on these issues? Let the Mets succeed or fail on their merits.

"Are rewarded" is passive voice, which means that the thing doing the action is not the subject of the sentence. Which is another way of saying, it's the teams at fault here.

How did Aaron Boone play last year? And, btw, the Yankees DO have the authority in the contract to void it, based on his grand jury testimony. They've chosen not to exercise the language in the contract. (That's from an article I read over the weekend.) The Yankees are sticking by Giambi, but according to the article, that's their choice.

That's a problem of revenue sharing between teams. That's not a labor issue.

Here's the critical difference. Payroll size is far less important in hockey than in baseball. And even in baseball, the Marlins have 2 titles. The A's and Twins keep making the playoffs. How big was the Angels' payroll when they won it?

1. A luxury tax DOES work like that, because it makes the marginal cost of a player to high-payroll teams greater than it otherwise would be. The tax has been a factor in the downsizing of the Braves.
2. If the teams agree to pay, then what the f*** is "artificial" about player value? What would be artificial is a salary cap. I'm not sure you know what the word "artificial" means. Think about it.

So it's your position that the players should save the owners from themselves? Morally, that's ludicrous. Economically, it's unsound. And historically, it's ignorant.

If they set the cap at a level that even the bottomfeeders, revenue wise, can stay in business, then yes, because the big market teams would have massive, GUARANTEED profits. Imagine if they set an EPL salary cap at a level that allowed Blackburn to keep up. Given ManU's revenues, how much would ManU make in a year? How much, under a scheme geared toward keeping the Oilers in business, would the Rangers and Red Wings make a year? I'm guessing $40-50M...and WITH COST CERTAINTY!! Such franchises would be worth a billion dollars as businesses, then throw in the "oooh, I own a sports team" premium, and the highest revenue hockey team would be the most valuable franchise in all of sports.

Leaguewide, that's true, because leaguewide, revenues continue to accelerate. But individual teams have cut player salaries.

By definition of the word "contract" you're wrong. If owners want that, they can adopt the NFL system...non-guaranteed contracts, but with massive "signing bonuses" up front to compensate players for the instability. They have chosen not to do that.

In retrospect, I buried the lede. I should have made this point earlier. You have cited guaranteed contracts many times, but there's a simple remedy...owners have the option of following the NFL model and offering an "instability premium" in the form of big signing bonuses, and in exchange, they wouldn't have to guarantee contracts. To my knowledge, no NHL owner has moved in that direction.

 

What an odd statistic!!! You're basically penalizing the Canes because they're playing in an arena whose size was determined by State's pathological need to have a bigger gym than UNC.

I repeat, the NHL's figures show the Canes to be 20th in revenues.

 

No it's not. It's down to a couple things. First, there are many people who can teach to a minimum standard, there are few who can play hockey at a high level. Second, hockey players negotiate contracts individually (well, their agents do, but that is besides the point), teachers don't. There is no system to determine on a constant basis that one teacher or group of teachers out performs another, while this is done in hockey on a nightly basis (when they're not locked out anyway). Thus elite teachers are worth less to a school district than an elite hockey player is worth to a team.

 

Nobody is saying that. What disturbs me about this type of attitude (giving the extremely wealthy carte blanche and demonizing those that are less wealthy, is that it is an attitude that is quite pervasive in society in general.

Why must we always pathologize the poor and exalt the wealthy? Why do we bend over backwards to jail blacks and Latinos for distributing drugs instead of pursuing those that create the demand? Why do we pass and enact legislation that targets the working poor immigrants instead of the wealthy factory owners who employ them?

No. NHL players aren't empoverished immigrants or inner-city inhabitants. But why give billionaire owners the benefit of the doubt? Especially b/c these franchises WERE made off the labor of a disenfranchised middle/lower class. The owners made BANK and repeatedly demonized the players for having the audacity of wanting a piece of the pie.