Sunday, July 29, 2012

What's The Point of This CBA Exactly?

Labour uncertainty is the topic of the day for fans of the NHL with the threat of a lockout hanging over our heads once again.  It wasn't so long ago that we were forced to sit through a winter without hockey and now we're forced to ask, "for what?"

At the time, I was more or less on board with a lot of what the owners were saying.  Stability for existing franchises and competitive balance through a salary cap were things that I could get behind.

We've now played 7 seasons of hockey under the current CBA and there are some things that certainly seem broken to the casual eye.  The NHL has presented its initial offer to the NHLPA and after taking some time for sober refection, I find myself wondering if the first lockout accomplished anything at all.

As fans, we were consistently subjected to the words "cost certainty" and "parity" by Gary Bettman as the league sought to implement a salary cap while the players resisted -- this, we were told, was the reason there was no hockey.

Ultimately, the owners dug their heels in more deeply than the players and got more or less what they wanted while the players saw a 24% rollback in their salaries.  The salary cap was initially set at $39M and its year-over-year growth was tied to league revenues.

Since then, the cap has risen to over $70M with a salary floor over $54M and we find ourselves more or less at square one.

Keeping in mind that the stated purpose of the initial lockout was "cost certainty" and "parity" the first proposal by the owners is a puzzling one.

Firstly, the owners want to scale back the players' share of Hockey-related Revenue (HRR) from 57% to 46%.  Nothing surprising here as cutting costs in one way to ensure "cost certainty".  It doesn't seem terribly equitable that that "certainty" should come on the backs of the players but then these negotiations aren't really about what's fair, are they?

The owners' proposal also includes a 5-year contract limit.  This is clearly a response to the kinds of longterm deals with declining values that have been thumbing their nose at the salary cap in recent years.  It's too complex to use a system other than Average Annual Value (AAV) to calculate a player's cap hit so the simplest solution is to institute a term limit. 

The part that I find most puzzling is the combination of the 10 years to UFA eligibility and the 5-year Entry Level Contract.  These things are easier to sell to current players because the players most affected are not members of the Player's Association yet.  In the interest of parity, however, they don't make a whole lot of sense unless you change the current draft system.

A lot of people strongly dislike the way today's Entry Draft incentivizes futility.  While there's some recognition that bad teams should be given an advantage in pulling themselves out of the ashes, I would argue that the current system is at minimum too heavily weighted to favour the incredibly inept.  If you think that today's system is perverse, can you imagine the value in finishing 30th if you were likely to draft a franchise calibre player who would be forced to sign a 5-year ELC and wouldn't be restricted for a further 5-seasons beyond that?  Try to imagine the Oilers being able to keep their current core of players together for the next decade at ELC and RFA costs, and then try to sell me on the idea that the owners are fighting for parity and not simply trying to keep as much of the league revenue as possible.

From the owners' perspective, the issues around the CBA are extremely challenging.  The problem, principally, is that "parity" and "franchise stability" are often conflicting concepts.  Parity requires an even playing field, which means roughly even spending between franchises, but the NHL is a league where individual teams' revenues are highly varied. 

The way Bettman has chosen to address this conflict between parity and stability, unsurprisingly, is to drive all prices down.  Parity is maintained by holding fast on the salary floor and the cost of stability is borne by the players.  The players will likely advocate maintaining the salary ceiling closer to its present level and instead reducing the floor thereby allowing the market to decide, to a greater extent, what prices it can bear.  The result is less good for parity but probably even better for stability than the owners' proposal, and certainly represents a more equitable distribution of the cost of stability between the owners and the players.

The tragedy of the entire situation is that the size of the pie has grown significantly and yet the same problems exist.  The CBA that has governed the league over the past 7 seasons was implemented at a significant cost to the players and yet we're still talking about franchise stability as a reason why the players need to make further concessions to the league.  The talking points of "competitive balance" and "cost certainty" are as ubiquitous today as they were 8 years ago.  

For all the momentum the NHL has gained since the first lockout and all the ground that they've covered in gaining a wider mainstream acceptance, the league is still very much a nascent one in large swaths of the United States.  A second protracted lockout this decade would certainly leave a sour taste in the mouths of fans of the game and this would likely be most keenly felt in the markets where the league has most recently gained some traction.  What it all boils down to is that there comes a point where fans get sick of hearing the talking points and just want to drop the puck.

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