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Wrestling for Revenue: An Look Inside the NHL Lockout

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Tick…Tick…Tick. The seconds tick away, but not in a conventional sense. Instead of the familiar buzzer at the end of yet another pressure packed NHL period, hockey fans are watching the 2012-2013 NHL season slowly slip away with each passing day.

Unfortunately the work stoppage has no visible end in sight, and as of December 30, the regular season cancelled games tally will rest at 526 and counting. The lockout has resulted in a financial loss for everyone involved from the NHL (losing roughly $20 million a day), to the players association (losing $8-10 million a day in wages), and the league office (employee pay has been cut by 20%).

Money has been lost, and the season is on the brink of collapse. As with any story, there’s always (at least) two sides, but are either of them valid?

The Owners Perspective

From an owners point of view, there is a massive financial discrepancy between the successful and the struggling teams of the NHL. According to Forbes magazine, over half the franchises in the NHL posted a negative operating income last season and only five teams were able to generate a revenue of over $10 million. Since the last collective bargaining agreement, which ended the 2005 lockout, owners have watched their million dollar investments fail to yield positive financial results. They seek to cut expenses and are looking squarely at the players’ revenue share to recover their losses.

With the NHL’s salary cap and floor linked directly to it’s overall revenue, the owners have proposed a players cut from 57% to 49%, much to the chagrin of the NHL Players Association. With over $3.3 billion in revenue last season, the owners have argued that the 49% share puts the NHLPA on par with NBAPA which received 51.2% last season and the MLBPA which received 51% percent of all revenue.

To further quarrel with the players, the owners have proposed a series of agreements to eliminate some of the financial entanglements that have proven detrimental to less successful franchises in regards to players contracts.

They are as follows:

  • Set a maximum term of five years on all new players’ contracts.
  • Eliminate signing bonuses and set a uniform salary for each year of a contract, thus eliminating front-loading of contracts.
  • Extend entry level contracts for players entering the league from three years to five.
  • Extend qualification for unrestricted free agency from seven years in the league to ten.

In layman’s terms, this is a way for teams to exhibit greater financial control over their roster and avoid tying up too much money in guaranteed contracts to their respective players. The players of course, will have none of this and have rebelled against the proposals.

The Players Perspective

From the players perspective, they are the victims of a war between the large and small market teams of the National Hockey League. In a physical sport where careers are often cut short, the owners are trying to force the multi-year, multi-million dollar deal into extinction to save themselves from financial hardship. The players union has requested that the salary cap no longer be tied to the messy issue of revenue. They seek to make a deal that guarantees them the $1.8 billion in salary they were rewarded last year, as well as further compensation to account for inflation. They have also proposed that the NHL adopt revenue sharing, a practice that has aided Major League Baseball and created a greater amount of parity. The league however insists that the revenue sharing come at the expense of the players salaries – in turn the players have rejected this notion and propose the money comes directly from the wealthiest and most successful clubs.

The arguments have only escalated in the period since the collective bargaining agreement expired on September 15th, 2012. The NHL’s best and brightest stars such as Alex Ovechkin and Joe Thornton, have taken their talents overseas to play in leagues in Russia and Switzerland. In their place, player representative  Donald Fehr has been left to reach an accord with NHL commissioner Gary Bettman and the NHL owners. So far their efforts have proved fruitless, and hockey fans have been left with the prospect of enduring a long, cold winter without the thrill of the NHL.