NHL commissioner Gary Bettman & Detroit Red Wings owner Mike Illitch (center) are among the group of owners that need to spread the wealth in order for NHL wide success. Mandatory Credit: Rick Osentoski-US PRESSWIRE

CBA Issues - Revenue Sharing Among the Teams


Over the next few months I will be looking at different issues surrounding the Labour negotiations between the NHL and the NHLPA.  Not exactly everyone’s favorite topic, but the discussion might clear the air or lift the fog of understanding as to where the sides sit and what concessions must be made by either side in order to come to an agreement.

If you have read my previous posts over the past year, you know that I think the owners will have to get their stuff together amongst themselves before they can step up and take on the players association.  The biggest issue in this area is revenue sharing.

The current (about to expire) CBA does have some revenue sharing, but it is incredibly restrictive and very difficult to qualify for, and in the grand scheme of things is a drop in the bucket. As the salary cap number has raised from the original $39Million in 2005-06 to the projected $70.3M next season, the low revenue teams have been put back into the situation they were in pre-lockout.  Except now, they are forced to spend to a certain level ($52.3 M salary floor) rather than base their budget on what they can afford.

Meanwhile, the high revenue clubs like Toronto, New York Rangers and Philadelphia are laughing all the way to the bank, because their salaries are capped and the amount they have to share with the lower revenue teams is next to nothing.

Some would question why large market teams should share their money with the have-nots?  Well, the last time I checked, there were 30 teams in the league and all of them are required in order to operate.  The big market clubs make money off the backs of the small market teams as much as the other big market teams.  The benefits of ensuring the smaller market teams have equal access to star players are many, but the biggest benefit would be the draw of fans to see them.  Nobody in New York or Toronto will line up to see the Winnipeg Jets or Phoenix Coyotes because of lack of star power.  There is no rivalry and therefore they wouldn’t be a huge draw.

Giving those small market teams a chance to reap the benefits of revenue sharing would help the overall product and the overall revenues, because these teams, that are often in non-traditional hockey markets, would have some breathing room.  Instead of losing money because they have to spend it all on salaries due to the salary floor, they could in turn spend some extra money marketing the product and the players to get more butts in the seats.

I know that there is a risk that some teams could take their revenue share and pocket it, but it would fall upon the owners themselves to police that.  All the salary cap has done is protect the big spenders like Toronto, Detroit and the Rangers from themselves by capping what they can spend.  And even then it is an artificial cap, since they have been able to hide bad decisions in the minors (Wade Redden, Jeff Finger), which is what the cap was intended to avoid.  Also what it has accomplished is to raise the floor from $23M in 2005-06 to $54M heading into next year.  In the eight seasons (counting next season) since the lockout, the salary floor is $15M higher now than the salary CAP was in its inception.  This shows that revenues have obviously increased and the rich, high revenue teams benefit while the lower revenue teams spin their wheels hoping for a long playoff run just to break even.

Until the owners get on the same page in this regard, there will never be equal footing and there will always be teams dragging the rest down.  And despite the league’s wishes to have the players as “equal partners” in the operation of the league, this can never happen while there is such a disparity among the owners themselves.  Ask the NFL, where revenue sharing has evened the playing field and made the league the most successful in North America, if not the world.

 

 

Tags: CBA NHL NHLPA

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  • mackdav

    Frankly, I think revenue sharing has no place in the CBA.  Once the gross revenue split(s) between the players and teams are decided, what the owners decide to do between themselves with whats left in terms of revenue splitting is their business.
     
    Your arguments in terms of revenue don’t really hold up. On the one hand you say “the big teams make revenue off the back of the smaller teams”, but at the same time “nobody lines up to see the smaller teams play”.   You also say that the 30 teams are “required”, but beyond TV contractual nonsense I don’t see how you couldn’t run with 28 teams — or even 32 (which would be a nicer number playoffs-wise) — instead.
     
    The whole point of the cap was to ensure that the smaller teams have better access to big name/big skill players and have a better chance at overall success.  I think the wild-wild-west nature of the playoffs runs, where entry-into or failure-to-make the playoffs happens by hairs of points, plus the fact that there has not been much in terms of a dynastic hockey power, since the CBA marks this as overall a success.
     
    On the other hand, franchises are always going to be unequal.  Not every franchise is going to be blessed with a history-steeped, hockey-mad, population dense area surrounding not only its arena but its city and region.  Frankly if the last thirty years can’t blow MLSE’s profitability out of the water, nothing ever will.  At the same time, Phoenix is putting a winning team on the ice but can’t make it at the box office.  New Jersey made it to the finals, but I read that their owner is having finding the proverbial nickels to rub together — which is a problem with the ownership, not the franchise, but still a problem for those in the front office.  In general, I read that there are potentially ten clubs that will lose less money if hockey is not played than they will if it is.  That’s a third of the league, and there’s no way you can consider that healthy long-term.
     
    With all due respect to the fans of these franchises in trouble — at some point the league is going to have to decide if the costs of carrying weaker owners/markets/franchises is really worth it in the long run.  There are options — new owners, moving franchises to new markets, or outright revoking the franchises — but bleeding the rich to keep tilting at arenas in the f—ing desert is not a long term recipe for success.
     
    In general, revenue sharing only makes sense if you think the league really needs the number of teams that it has, in the locations it currently has.  And I don’t.
     
    But the bottom line is where I started: franchise revenue sharing has no place in the CBA.  What the owners/league decides to do with their share of the revenues should be entirely up to them.

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  • senshot_jared

     @mackdav thanks for the  comments….I used them in a rebuttal.  You should check out the follow-up!