The NHL In Trouble? Overview  by: Matt Witting      10 February, 2003

"I have never been more embarrassed to work in the NHL as I was on July 1st and 2nd [2001]. I know we can't support the salaries. I know that some of the teams who have spent that money are doing it without the financial capability to pay the money. I'm running my business like a business. I'm going head-to-head with people who are crazy, as far as I'm concerned."
-Vancouver Canucks GM Brian Burke, July 2001

"If [the owners] want to pay us, they must be making money, it's not up to us to say: 'No, don't give us that much money.' "
-Sharks Center Vincent Damphousse, July 2001

"The challenge for the future is making sure that we have an economic system that enables all of our clubs to be economically viable, stable and competitive where they're currently located. All of our fans need to know at the start of the season that their team has as good a chance of winning the Stanley Cup as any other team. It can't be based solely on how much teams spend on payroll."
-NHL Commissioner Gary Bettman, February 1st, 2002

"Obviously, [Bettman]'s making an assumption here. He seems to be convinced that all the owners are capable of creating a competitive team. There never has been the slightest bit of evidence that this is the case. There are some owners who know what they're doing and others who are totally inept. If Bettman doesn't know which of his governors is which, a list can be provided on request."
- Al Strachan, Toronto Sun

In today's National Hockey League, economics is intruding on the ice and threatening the viability of the game. Ticket prices seem to go up every year as does the basic staple of the hockey fan: arena beer. According to owners, prices go to cover the "$10 million, $15 million, $20 million [a lot of teams lose] every year."(Pittsburgh Penguins Player/Owner Mario Lemieux, July 2001). Some franchises are playing in brand new, state of the art facilities while others toil in buildings that are hopelessly out of touch with today's sports landscape (missing the luxury boxes and club seats vital to fiscal solvency). Team owners are demanding that local and federal taxpayers vote them subsidies or face losing the team to another market that will shell out the bucks. Canadian teams can't afford to spend anywhere near as much as their American opponents due to their smaller population base and the weakness of the Canadian dollar relative to the US dollar. Teams in smaller cities and with smaller fan bases often can't spend commensurately with their older, more popular foes due to a lack of TV and radio revenues. To top it all off, the Collective Bargaining Agreement (CBA) between the NHL Players' Association and the League will expire prior to the beginning of the 2004-05 season and many fans and analysts see a long, bitter labor war developing. The NHL seems to be in trouble, but what is the solution? How can these problems be addressed in a manner that will satisfy the NHL, the NHLPA and, perhaps most importantly, the fans?

Major League Baseball is in a situation similar to the NHL in many ways. Neither league has significant restrictions on player or team salaries and neither has strong revenue sharing agreements. Perhaps the most chilling similarity, however, is that MLB narrowly averted a strike/lockout during the 2002 season while the NHL looks to be headed towards the same in 2004. Both leagues have shortened seasons in the last 10 years in response to labor/management disputes and obviously did not resolve their differences even when play resumed. Conventional wisdom says that one more work stoppage will effectively kill Major League Baseball as we know it, and the same may hold true for hockey.

The chorus of complaints from all sides is the same for both leagues. Every group involved with the NHL has its own concerns. Management blames the players for being mercenaries, always out for as much as they can get regardless of the welfare of their team or the league. The small market owners decry the spending habits of the few very wealthy teams, claiming that they hurt the league as a whole. These small market owners feel that the rapidly rising costs of owning a hockey team may force teams out of business unless new revenue streams appear. Wealthier owners insinuate that the problems of lesser spenders have more to do with mis-management and tight purse strings than with a lack of revenue. The players argue that salaries are rising because the owners are offering higher salaries, not because the players are demanding them. As the ones that provide the product on the ice, the players union (NHLPA) fights to ensure that its members receive their share of the profits from the teams. Fans, the overlooked but ultimately decisive group in these battles, are pinched by the rising cost of tickets, merchandise and concessions at games, costs that often go up to fund the new buildings that owners covet.

Players and owners have been at each other's throats since the beginning of organized professional sports. There are records of gladiators refusing to fight until they got better living conditions in ancient Rome, baseball players quitting to form their own league in response to the reserve clause in the late 19th century, and, of course, the glut of work stoppages over the last 25 years in the NFL, NHL and MLB. The primary effect of labor disputes seems to be to drive fans away from the sports they love. There are a myriad of choices for consumers to choose from with their discretionary entertainment dollars and even the threat of a strike will cause some season ticket holders to abandon the seats and take a cruise instead. Labor disputes generally hurt both the owners and players as much as if not more than simply living with the current system.

Given the complaints of the owners, players and fans, what solutions are out there? Most fans, spurred by media reports and the pleas of league officials, agree with the general stance of the smaller market owners and call for some combination of salary caps, luxury taxes and/or revenue sharing. . Recent corporate scandals outside and inside the sporting world have exacerbated the sense that the powerful feed their greed off the little guy, in this case, the fans. Richer owners and players are understandably wary of such suggestions, but they have been enacted in two of the four professional leagues with some success Proponents of such measures say that they will do some or most of the following: keep overall payrolls down; keep individual salaries at manageable levels; keep ticket prices from increasing as quickly; reduce the disparity between the "haves" and "have-nots" of the NHL; and increase competition on ice league-wide. Other less known (or popular) options are available as well: reducing the number of teams in the league; league "ownership" of player contracts; or just letting things go as they are.

Despite the popular acclaim for a salary cap and/or revenue sharing, few fans really have a thorough understanding of what these measures entail. None of the proposed solutions are cut and dried; indeed they are some of the more convoluted labor agreements known to mankind (just ask an NFL "capologist" or anyone trying to make a trade in the NBA). There are a variety of caps, revenue plans, taxes and such, all with their own benefits and drawbacks. In the following pages we'll try to explain the basics of concepts normally better left to lawyers, accountants and agents.

Part I: Overview
Part II : Salary Caps 101
Part III: The Real World
Part IV: Conclusions

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