Latest NHL Offer: Deal Maker or Mirage?

By
Updated: October 17, 2012
Bettman Daly

News broke this afternoon that the NHL made a significant offer to the NHLPA.  Hockey fans, including myself, are all hoping this is the real deal, and will lead to the end of the NHL Lockout.  Gary Bettman even announced that if the deal can be signed in enough time to have a 1 week training camp and open the season on November 2nd, the league would play a full 82-game season.

What does the offer mean though?  Is this really the end of the lockout?  Will we soon see our stars back on the ice?  The NHLPA is currently going over the offer with a fine-tooth comb (as they should), and is expected to submit a counter offer in the coming days.  In the meantime, let’s analyze what we do know.

Revenue Split

The NHL announced that they were offering a 50/50 split in Hockey Related Revenue (HRR).  This certainly sounds great, however there are a couple of potential pitfalls that the NHLPA must be aware of and could kill the deal.

1) Is the definition of HRR in the NHL’s offer, the same definition as in the previous CBA?  If the answer to this question is “no”, then the 50/50 split is just a PR exercise by the league.  The two sides must be talking the same language.  They must agree upon the definition of HRR or this offer will not lead to progress.

2) Future years – Does the NHLPA split of HRR stay at 50% for the life of the deal, or does it decrease as revenues increase?  If there is a further decrease in the later years of the agreement, this could lead to a rejection and will be seen by the NHLPA as an attack on salaries.  The split must stay for six years.

3) Is there wiggle room for the NHLPA to ask for 51% or 52%?  Given the timing of the offer and the fact that the NHL has not said it’s a “final” offer, I’m not convinced (yet) that 50% will be the final number.  I could see the players being able to get a percentage point or two more and still getting a deal done.  (This is especially true of year 1 of the deal in order to provide a gradual reduction from last year’s 57% share).

Escrow and Rollbacks

Gary Bettman has stated that movement to 50/50 will not lead to rollbacks on the players current contracts.  However, a 50/50 split this season would mean that players would make 12% less salary than they did last season (assumes 0 growth in NHL revenues).  Now obviously the NHL will grow revenues this year, but 7% is an unrealistic expectation.  This problem is further compounded by the fact that teams and players signed big money deals in the summer as GMs worked with a bigger cap.  So what is the answer?  How do the numbers get down to 50/50?  It is likely that there is some increased form of escrow in the offer, and if this is the case, its really no different than a rollback.

This is why the players may need to get the percentage up to 52% or so (at least in year one of the new CBA) in order to minimize the effects of the Escrow.

Contract Terms and Limits

The NHL has dropped a number of their previous requests. Salary Arbitration will remain unchanged under the new offer.  They’ve also moved drastically on Entry Level Contracts making them two years in length, instead of three.  This is a good move by the league and offers some significant give back.

Unrestricted Free Agency will be at age 28 or after eight years of service.  The previous offer was 10 years of service.  This is a significant move and closer to the 27/7, that is currently in place.  This should be a good move by the owners, and will help get a deal done with the NHLPA.

Contract Limits to Five Years Max:  I don’t think that this will work for the players.  The fact is that there are 89 current NHL players with contracts of six years or more.  I think that this is another area the owners can move.  While its true that the 13, 14, or 15-year contracts can not continue (especially with front-loading), I don’t think that five years will work for the Players either.  Expect them to look for something closer to the NBA limit of seven years.  The 5% limit in annual variance of contract value is something that is likely to happen.

Contracts in the minors count against Cap

This appears to be a bone given to smaller market teams.  Big market clubs who have taken advantage of burying big cap hits in the minors will no longer be able to do this.  I don’t think it will be a big issue for the players, and should be something the sides can agree on.

*Edit* From NHL.com: “We are proposing that the salaries of minor league Players on NHL contracts (above a threshold of $105,000) be counted against a Club’s Cap. This provision is intended to prevent Clubs from “stashing” or assigning players to the minors (or any other professional league) for “Cap management” purposes. We are not proposing that any salary paid to minor league Players on NHL contracts be counted against the Players’ Share.”
Since the contracts over 105K are for accounting purposes only and not counted against the players share, this should not be a huge issue for the NHLPA.

Timing

The NHL has made this offer today and there are 9 days before the deadline of October 25th, which would be when the deal would need to be signed in order to get in the necessary training camp and start the season November 2nd.  This indicates that it is not a drop dead final offer.  There is still room for movement and negotiation here.  This is good news, and to me it shows that the league legitimately wants a deal.

Full Season

The other big thing is the ability to get in an 82-game season.  This tells me a few other things:

The league’s sponsors and broadcasters have had some influence in softening the owner’s position, and they want 82 games to be played.

We can also look at the full 82-game season as an indication that many of the big market owners do not want to lose regular season revenues.  They do not want to be forced to refund season ticket holders, local broadcast rights owners, luxury box purchasers and corporate sponsors.  They are not interested in a partial season, they want their 82 games to be played.  This indicates that the offer is serious as I believe that big market owners do not want lose revenues like they did in 2004-05.  The league overall is making too much money today, and is in a much better financial position than it was at that time, and so there just isn’t the same willingness to shut down the league for a year to break the union.

The next nine days will tell the story, however, I do believe the NHL and NHLPA have taken their first steps towards a deal here.  Of course, that’s assuming there is no hidden fine print in the NHL offer, an unexpected clause that would blow the whole thing up.  Lets just hope the league is serious about this deal and it’s not just a PR stunt.  If it is serious, we will see some big negotiations over the next nine days, and then hopefully the opening of NHL training camp.

… and that’s the last word.

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