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McKenzie: Jeopardy! The NHL Labour Strife Edition

Bob McKenzie
10/12/2012 4:19:13 PM
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When it comes to the NHL lockout, I'm not even sure where to begin.
 
I have so many conflicting thoughts and, for the life of me, I don't understand how this season could possibly be in peril, but the dynamics of this dispute strike me as bad, really bad, and may only get worse.
 
Of course, when it comes to labor disputes, with a nod and wink to Andy Sutton, I'm no expert. If I were playing Jeopardy, NHL Labor Strife Edition, 2012, I'd be the guy on the far right, a minus amount on my screen, looking down at my buzzer like "why won't this thing work" while the other two contestants, Gary and Don, are off to the races. If I did manage to buzz in first, it would be "Alex, I'll take What The %@!* Are They Talking About, for $2 billion." NHL commissioner Gary Bettman (three lockouts) and NHLPA Executive Director Don Fehr (a fistful of strikes/lockouts in Major League Baseball), meanwhile, would be the Ken Jennings of Jeopardy! NHL Labor Strife Edition, 2012. Which is to say, and Andy Sutton take note, they are experts.
 
So rather than try to make sense of something that doesn't seem to make any sense, I'm just going to throw out some random thoughts, observations, opinions and questions, take it all for what it's worth, which may not be much.
 
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It strikes me there are two fundamental obstacles right now to getting a deal done.
 
The first is that Bettman and the owners want too much too quickly, a significant and immediate reduction in the players' share of Hockey Related Revenue that would result in a first-year pay cut of no less than 12 per cent, and perhaps more than that. Many (outside of the NHLPA anyway) don't dispute the notion that the NHL and NHLPA are destined, eventually, to go from the old 43-57 share arrangement to around 50-50, but the NHL seems hell-bent on getting there immediately with no consideration of transitioning to soften the blow to the players. For me, the ultimate issue is not going to 50-50 as much as it is how you get there. It took seven years for the old CBA to swing in the players' favor, why does it have to ruthlessly and awkwardly snap back the owners' way in one fell swoop?
 
The second roadblock is Fehr and the NHLPA clinging steadfastly to the notion that -- upon expiry of a CBA that has been very good to them and faced with the old lockout-gun-to-the-head approach -- they're going to escape this conflict without any tangible reduction in the dollars they earn. As righteous as they believe their cause to be, and as empathetic as many have been to that cause, I still find it beyond incredulous that the lockout is on, the players are losing salary as we speak and there has yet to be any acknowledgement in the form of an NHLPA proposal that contemplates the players taking an actual dollar less than they've been getting. I know why Fehr doesn't think they should have to; I also know there'll be no meaningful negotiations until the players move into that universe.
 
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Another reason why I think we're grid-locked is because each side thinks the other side will ultimately cave.
 
The owners are convinced that after a month or two of missed pay cheques, or faced with the prospect of losing the season, the players will break ranks. The players keep talking about owners who don't really want this lockout and won't allow it to continue. Maybe one side will cave, but I'm not holding my breath, to be honest. They both hung tough to kill the 2004-05 season, it's not a reach to think they'll do it again.
 
Besides, there's no easy path to follow for any dissidents on either side.
 
Bettman laid out his plan to the owners, they know where he wants to go and how he wants to get there and on the outside chance that some of them believe there's a better route to take, it would require 23 of the 30 owners to turn the bus in another direction. I just don't see it happening.
 
The rank and file of the NHLPA speak glowingly of Fehr's communication skills and like the broad base of democracy he's implemented while rebuilding an Association that was in tatters. Fehr constantly says he serves the players and takes his lead from them but if there were strong dissenting views from some players, is there any individual player with the confidence or cache of, say, Trevor Linden to stand up and really rock the boat? The truth is, most of the players, like some owners, are along for the ride.
 
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I was never particularly strong in math, but I don't like the numbers on the players' side of the ledger.
 
Don't get me wrong, I get it when Fehr says, and I paraphrase: We're being offered less money and fewer (contractual/system) rights, what possible reason would I recommend the players to take that deal?
 
I understand the righteous indignation and taking the stand, but the easy answer to that question, as posed by Fehr, is that if the players don't take less money and fewer rights, they'll get no money and no rights. I mean, if the lockout goes on all season long, the players will have given up 100 per cent of their income in a failed bid to protect 12 per cent of it. By the end of the October, the players will likely have lost as much money in salary as the NHL wants to take from them in the first year of a new CBA. And if the game goes through a year-long lockout, and the players come back to the same "linked" system CBA, how much more than 12 per cent do you think their contracts will be devalued after the HRR pie shrivels up from a year-long shutdown?
 
I'm not suggesting the owners won't pay a financial price for a shutdown, but because there are only 30 of them and their economics are more complex and convoluted and so wildly varied from franchise to franchise, it's much more difficult to characterize in general terms. But the players, they're losing real money on a finite career. That's money they'll never get back, just ask Bill Guerin.
 
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There are some incredibly ominous overtones to this labor dispute.
 
It's been widely reported that if the NHL cancels the season, Fehr and the NHLPA may counter by putting the salary cap back on the table, which of course would lead to the NHL putting guaranteed contracts on the table and, well, you get the idea, we'd be going into a apocalyptic nightmare that would virtually guarantee we'd be in much the same place a year from now that we currently find ourselves.
 
Anything is possible, I suppose, and I don't discount those dire scenarios, but quite aside from that, I often wonder if there's not a larger issue at play than just trying to cobble together a new CBA to get everyone back on the ice.
 
In just about any interview Fehr has done since taking over the NHLPA, and with noteworthy frequency of late, he has talked about the "cycle" of salary-capped sports (NHL, NBA, NFL), where upon expiry of the CBA the owners come to the players and demand concessions and if they don't get them, they lock them out, and that this cycle repeats itself over and over again. Fehr will often talk about how Major League Baseball has achieved lasting labor peace because the players repeatedly showed the owners that they wouldn't be muscled around. Fehr says that's what it often takes to get long-lasting labor peace.
 
Could we be going down that road in the NHL? Well, as long as the NHL continues to look for massive and immediate reductions in the players' share of HRR and significant system/contract pro-owner adjustments, the league's hard-line approach makes it easy for the players to just say no, but if I were an NHLPA member I'd want to know whether we're prepared to cobble together a deal to get me back on the ice for six years before we do this dance again or whether we're taking a much broader stand for everlasting peace? Because I would imagine if it's the latter, it will require significantly greater sacrifice than even one lost season.

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The more I think about lockouts, the wackier I think they are, especially in hockey.
 
I mean, think about it.
 
Owners, by nature, are ambitious, egocentric, competitive, volatile and irrational. While the lockout is on, that works entirely against the players. As long as the lockout continues, the owners are going to take and take and take some more from the players, including, if need be, 100 per cent of the players' salaries. But the minute the lockout ends and games are being played again, all that ambition, ego, competitiveness, volatility and irrationality works entirely in the players' favor because these owners are going to give and give and give some more to the players.
 
That's how it worked in 2004-05 and the ensuing seven years and as long as the NHLPA maintains some trigger points or system leverages in a new CBA -- be it salary arbitration or unrestricted free agency or whatever -- the owners will proceed to give back a lot of what they took away. It's how the game is played.
 
So when the players say they gave (salary cap) and gave (24 per cent rollback) and gave some more (entry level restrictions etc.) in 2004-05, that's accurate. But the flip side of the equation, which the players don't mention as much, is once they started playing games again, they got and got and got some more.
 
It's a bizarre arrangement, no?
 
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One clarification I think needs to be made is on the use of the word "rollback."
 
I talked to a couple of agents who have been in conversation with their players and the agents had to explain that a "rollback" a la 2004 has not been proposed in these negotiations. The 2004-05 rollback was an across-the-board, flat-rate 24 per cent reduction in the value of every year of every existing contract.
 
Now, based on the NHL proposal(s) to the players, reducing the players' share of revenue to below 50 per cent will result in the players having to take a projected "pay cut" of 12 or 15 or 17 per cent -- pick your number -- but that "pay cut" is not the same as a "rollback" to the extent that it wouldn't definitively apply to every year of every contract.
 
Would the first year of a new CBA see the players' contracts devalued? Yes, almost assuredly. In a system where players' salaries are linked to a percentage of revenue, if that percentage is significantly reduced from 57 per cent to 50 or less, there has to be a double-digit pay cut in in that first year. But if the industry continues to be in growth mode, further devaluations are far less likely.
 
And, to a very large degree, for many of the players, that concept of taking less than 100 per cent of their 20102-13 salary is the emotional flashpoint of this entire lockout. That, in my opinion, is the single biggest reason for NHLPA solidarity.
 
The players, especially those who signed big contracts in the summer, think it's immoral that the owners who willingly and eagerly signed these deals could escape by paying less than full value.
 
Although, it must be duly noted, that in the old CBA that linked salaries to revenue, no contract was ever guaranteed for 100 per cent of its value. That value fluctuates from year to year, based on a number of market factors: increases or decreases in revenue; increases or decreases in the players' share of revenue; over spending or under spending on salaries by the owners.
 
That's why three years ago, for example, every player's contract was devalued by 12.88 per cent and six years ago, the value of every player's contract was actually increased by 4.64 per cent.
 
Nevertheless, the notion of, before the season even begins, knowingly taking a double-digit haircut is not something any player is prepared to consider. It's a total non-starter and the biggest reason we're as paralyzed as we are right now.
 
But it's technically not a "rollback" and much more likely to be a factor in the first year of a new CBA than subsequent years, although there are never any ironclad guarantees in a "linkage" system.
 
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The most frightening aspect of this entire mess is how easily it could be solved if both sides were prepared to actually really move off their current marks.
 
I was going to run a bunch of numbers to illustrate that but the last thing we all need right now is to be snowed under with an avalanche of figures.
 
The premise is basic. Ultimately, the NHL and NHLPA will end up with a 50-50 share but in order to get there without enormous pain and suffering by the players, there could be a transitional year or two where the NHL wouldn't get everything it wanted and the players would still have to take a 5 or 6 per cent haircut in the first year and maybe not anything at all after that.
 
But that whole scenario is predicated on the NHL industry continuing to grow as it has over the last seven years and the longer this lockout goes on, the less likely that is to happen. Getting a deal done becomes more difficult with each passing day.
 
And on top of all that, who's kidding who? The NHL has shown zero inclination to phase in anything and the NHLPA won't even contemplate the players taking a dollar less than they've received in the past. Both sides are fearful of showing "signs of weakness" in the negotiations, terrified if they put anything on the table for discussion now it will be pocketed by the other side, never to be seen again.
 
The truth is, these negotiations haven't even started yet. Not really, not in any meaningful way. We've had proposal(s) from both sides but no actual negotiating on the core economic issues. In the meantime, everyone from Wayne Gretzky to Sidney Crosby have proclaimed they don't believe the entire season will be lost to this labor dispute. Well, 99 and Sid either know something we don't, are just expressing wishful thinking or they're simply applying logic that a game and industry that isn't broken like it was in 2004 couldn't possibly be self-destructive enough to lose another season.
 
I mean, it couldn't, could it?
 
I suppose the two sides will eventually sort it out, but how long that takes, who knows?
 
All I know is I don't relish getting to Final Jeopardy.

Bob McKenzie

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TSN 1050: TSN Drive with Dave Naylor: Hour Two- Nov 13

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