NHL revenue-sharing at core of CBA talks
Tue, 21 Aug 2012 01:00:26 GMT —
Talks continued between National Hockey League owners and the player's union to settle a new Collective Bargaining Agreement to avoid the league's second lockout in a decade.
The current CBA expires September 15, a day before the start of training camp. If an agreement cannot be reached the threat of a labor lockout is likely.
The outcome of the CBA dispute that wiped out the 2004-05 season was a "hard cap" that established limits on the amount teams could spend on player contracts. The Upper Limit of the Payroll Range (ceiling) is determined by the NHL's total revenue each season. To put in perspective the league's revenue growth, the 2005-06 cap was set at $39 million and now stands at $70.2 million for the 2012-13 season. The Lower Limit of the Payroll Range (floor) is $16 million less than the cap ceiling, and represents the minimum amount teams are required to spend on player contracts. Thus, the 2012-13 floor sits at $54.2 million. This CBA structure intends to keep high-revenue teams from gaining an unfair advantage with lucrative contract deals that other teams cannot match.
Despite the surge in NHL revenue, owners argue that player salaries and costs are unequally cutting into profitability. Under the current CBA, player's receive 57% of league revenue. The original July 13 proposal from NHL owners aims to decrease that number to 46% along with limiting contract terms to five years. Owners argue expanded revenue sharing will help maintain a competitive balance and financial stability for the league's lesser-grossing teams.
"Climbing player costs are eroding the sport's profitability," said Mike Ozanina of Forbes, which lists current
NHL team valuations
. The Columbus Blue Jackets were the third least valuated team on Forbes' list heading into 2012-13. The Blue Jackets brought in $80 million in revenue last season with an operating income of -$13.7 million. Comparatively, the Detroit Red Wings, also in the mid-west, were ranked fourth most profitable, bringing in $127 million with a $16.3 million operating income. The departure of star forward Rick Nash only compounds the financial difficulties a team such as Columbus faces. A lockout would also jeopardize the All-Star game hosted this year by Columbus, which could help bring in revenue and strengthen the fanbase.
League owners and NHL Commissioner Gary B. Bettman rejected an alternative proposal that NHLPA Executive Director Don Fehr presented August 14 in Toronto. Bettman said of the player's union "we are not on the same page." Fehr did not release specific details but did say the
NHLPA three year proposal
includes a "significantly expanded and simplified revenue sharing system specifically designed to help clubs in need of assistance." The proposal also suggests a reduction in player revenue compensation that could total $800 million, and a system that would give GMs increased flexibility with assembling a team.
Bargaining is expected to continue August 22 in Toronto.