Thursday, September 20, 2012
The NHL and NHLPA can reach an amicable 50/50 split in two years
I have no qualms with the two parties concerning the NHL lockout. They're doing what they do. Why they do it is another story, but that's how they're playing it.
Originally, this was to be about taking sides. Let's forget about the last lockout and look towards the present and future (if you must know, I'm on the players side, if only because I hate bullying tactics.)
The most important thing to think about right now is that the NHL is (was) on a serious roll (see the value of NHL franchises below.)
And nothing will kill it like an extended lockout.
If we cut through all the B.S., it would seem that the best way to keep things going now--while maintaining the health of the league in the future--would be for the owners and players to be at roughly a 50/50 split in revenues. And there's a way to hit that within two years.
Former NHLPA rep Paul Kelly was on WGR this morning and he had a workable solution, keep the total take by the players at the present $1.87B in year one of the contract. He deduces that if the current growth rate of the NHL continues, the league will bring in about $3.5B in revenue which effectively cuts the percentage of players salaries down to 55%.
That makes for sound reasoning. In terms of the owners, they're getting a bigger piece of the pie. In terms of the players, they're not effectively giving up anything that they don't already have. But he deviates from that original idea by saying that the players give back 1% until they reach that 50/50 mark.
Is there any reason why the owners and players could not continue his original line of thinking by extending it one more year?
Kelly presumes an approximate 6% growth rate in revenues year over year. Staying with his original premise, total NHL revenues would go up from $3.5B to $3.71B in year two. By keeping the players salaries at $1.87B, it would mean that players end up with roughly 50.4% of the pie.
That 50.4% should be a target throughout the remainder of the contract.
Locking in the $1.87B for the players is a give to the owners. And there's no reason that the owners can get their collective arses together to help the weaker franchises land on solid ground. In that scenario, the NHL would have a projected $400M windfall if the league grows at the projected rate (let Gary Bettman and the owners battle it out as to how they disperse it.)
As of right now the players would be taking a hit, but only in future salaries over the first two years. In essence they're giving back 7% (maybe more) over those two seasons, but they're not giving back anything right now. They're maintaining their present quality of life.
In year three and beyond, if revenues are higher, the players will see their salaries go up relative to their 50.4% take. If they are below, $1.87B remains the status quo until that ratio is reached.
In this scenario, the impetus would be on both parties to grow the sport as much as possible in the first two seasons.
For the owners the more top-line revenue they bring in, the bigger the bottom line. As for the players, the more the sport grows, the more they'll get heading into year three.
If projections continue at the 6% year over year revenue increase, the players take of $3.94B in year three would be $1.98B. A modest 5% increase, but a sound increase none the less.
Kelly's base idea is simple, yet sound, and would make for a strong jumping off point.
Nice work by the following website concerning NHL franchise worth.
DaveManuel.com has a breakdown from the year before the '04 lockout up until last season and the percentage increase via Forbes.com (link included.) Here's the list:
Pittsburgh Penguins, $264 Million, 161.4%
Montreal Canadiens, $445 Million, 128.2%
Edmonton Oilers, $212 Million, 103.8%
Vancouver Canucks, $300 Million, 102.7%
Washington Capitals, $225 Million, 95.7%
Calgary Flames, $220 Million, 89.7%
Toronto Maple Leafs, $521 Million, 86.1%
New York Rangers, $507 Million, 79.8%
Chicago Blackhawks, $306 Million, 71.9%
Carolina Hurricanes, $169 Million, 69.0%
Buffalo Sabres, $173 Million, 68.0%
Anaheim Ducks, $181 Million, 67.6%
Ottawa Senators, $201 Million, 60.8%
Atlanta Thrashers, $164 Million, 54.7%
Nashville Predators, $163 Million, 46.8%
New Jersey Devils, $181 Million, 46.0%
San Jose Sharks, $211 Million, 41.6%
Boston Bruins, $325 Million, 37.7%
Detroit Red Wings, $336 Million, 35.5%
Florida Panthers, $162 Million, 33.9%
Minnesota Wild, $213 Million, 30.7%
Los Angeles Kings, $232 Million, 20.2%
Tampa Bay Lightning, $174 Million, 16.0%
St. Louis Blues, $157 Million, 12.1%
Philadelphia Flyers, $290 Million, 9.8%
Columbus Blue Jackets, $152 Million, 9.4%
Phoenix Coyotes, $134 Million, -1.5%
New York Islanders, $149 Million, -6.9%
Dallas Stars, $230 Million, -11.2%
Colorado Avalanche, $198 Million, -19.5%
Source: Forbes.com - The Business of Hockey: Team Values Hit All-Time High