1/8/2013 11:35:00 PM Column: Chalk up a win for the players in settled NHL lockout
Chris Johnston, The Canadian Press/AP In this image from video, NHL commissioner Gary Bettman, left, talks to the media as Donald Fehr, executive director of the NHL Players' Association, stands next to him, in New York early Sunday. A tentative deal to end the 113-day NHL lockout was reached early Sunday morning following a marathon 16-hour negotiating session.
The NHL is back and while both the owners and players will declare victory, you can chalk this one up as a big win for the players.
You wouldn't expect the owners to admit they "lost" after essentially giving away almost half a season at the cost of $8-10 million per day. But this is all on the owners. They're the ones who instituted the 113-day lockout. And for what? Everyone knew going into these negotiations that the 57 percent take of league revenues the players had enjoyed under the old CBA would end up being a 50-50 split. And that's how the final deal ended up.
But the long and tortious road that led to this point was totally unnecessary. For no apparent reason other than to unite the players against them, the owners opened the negotiations with an offer of 43 percent of revenues. The owners should have known that with Don Fehr at the helm the players would not be pushed around until they knuckled under as they had done so many times in the past. The owners had only to look at Fehr's record in MLB for guidance on that issue. But arrogance and stubbornness ruled the day and the owners refused to allow themselves to believe the players would stand united.
While the players agreed to the 50-50 arrangement, they held out long enough to extract some major concessions from the owners. Revenue sharing, while not as expansive as it is in other sports, will rise to $200 million per year, up from $150 million.
After sacrificing an entire season to obtain a salary cap during the last round of negotiations, the owners proceeded to circumvent the cap by signing players to long-term contracts with absurd terms. For example, last summer the Minnesota Wild doled out identical 13-year $98 million contracts to Zach Parise and Ryan Sutter. The players will be paid $24 million in years one and two and $1 million in each of the last two years.
In an effort to protect themselves from each other, owners wanted to limit contracts to five years with a maximum salary variance of 5 percent per year. In the end, the players agreed to a maximum contract length of seven years (eight if a team re-signs its own player) and a salary variance of 35 percent year-over-year and no year less than 50 percent of the highest year's salary. That's another win for the players.
The owners wanted a 10-year agreement. Although Fehr believed a shorter term would allow future players to have a say in the contract that governed them, the players ultimately caved. The new agreement will run for 10 years with an opt-out option for both parties after eight years.
Owners also agreed to a salary cap of $64.3 million for the next two seasons with this season's cap being prorated based on the previously agreed cap of $70.2 million. That amounts to a pretty impressive victory for the players. Owners wanted a $60 million cap, which could have saved the league approximately $130 million next year. In order to help teams comply with the 2013-14 and 2014-15 caps, the players agreed to allow teams two contract buyouts each, which would not count against the cap.
Perhaps the biggest win for the players came in the form of a new pension plan. It will be a defined benefit plan, rather than the previous defined contribution plan. The switch is almost unheard of in today's economy. While specifics of the plan, along with other details of the CBA, will take weeks if not months to work out, this is clearly a win for the players on an issue that will end up costing the owners tens-of-millions of dollars of the revenue they "saved."
Despite the big win, the players did not escape unscathed from this labor debacle. Based on this year's salary cap figure, they will collectively lose approximately $640 million in salary. But the hope here is that henceforth the owners will treat the players as partners rather than try to bully them as they have so often done in the past.
If the owners engage in their fourth straight lockout when the current agreement expires in 2020, we'll know that nothing was learned from these negotiations.
Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is a Professor and Chair of the Sport Management Department at SUNY Cortland and is a contributing author to the Business of Sports Network. Jordan can be reached at firstname.lastname@example.org