FanPost

What Should The PA Counter-Offer Look Like?

Today the NHL presented the NHLPA with a new Collective Bargaining Agreement proposal. It seems to have a lot of people optimistic about the prospect of having an NHL season start sooner rather than later. At the moment we only have partial information about the offer and the details that we have seem to be changing every few minutes. Give that, it could be kind of tough to analyse the deal. Nevertheless, I'm going to try to do that using the best information available at the moment, knowing full well that by the time you read this different or conflicting information may be available.

I don't think there's a chance in Hell that the NHLPA will accept the proposal as it is currently written. I do think it presents a point to actually start negotiations from, so I'm going to take a bit of a look at what the NHL has offered and what kind of counter-proposal I think the NHLPA could put forward in response. I'm not going to put together a specific PA proposal, though, so much as I'm going to go through a number of the elements of the currently proposed deal and discuss what I think they mean and, if they PA should try to modify them, how they should go about doing so.

First off, what do we currently know (or believe) about the NHL's proposal? Here is info that seems to be pretty solid:
  • Entry Level Contracts will be reduced to 2 years (previously 3)
  • 5 year limit on contract length (previously none)
  • UFA status achieved at 28 years old or 8 years of service (previously 27 and 7)
  • Salary variance limited to 5% per year (previously more complex "100% rule")
  • Players not eligible for salary arbitration until their 5th year in the league (previously 4th)
  • HRR split reduced to 50/50 immediately (currently 57% for the players)

Other information is less clear:

  • Initial information suggested that the NHL was willing to continue using the current CBA's definition of Hockey Related Revenue but it's since been suggested that they want to change it
  • Players who lose money to escrow in the first year of the new CBA would then be paid that money back over the course of their contract, but it's not clear exactly how this would work
  • NHL is likely willing to agree to 3rd party arbitration of supplementary discipline
  • There may be some limited ability for teams to agree to take on part of the cap hit of players they're trading (ex. Leafs could agree to keep $2 million of Komisarek's cap hit so someone else can have him for $2.5 million)
  • Some % of 1-way contracts placed in the AHL will count against the salary cap, possibly 100% of them

That's where we appear to be sitting as far as the proposal goes. Before getting into specifics, I want to point out something here that's very important - aside from potentially agreeing to 3rd party arbitration, the NHL is not making any concessions in this deal. Everything outlined here requires the players to give up something (including the 2 year ELC, which I'll get to in a minute). The NHL is asking for fewer concessions from the players than they were previously, but they are not themselves giving up anything. This proposal still involves the NHL asking the players to give up a lot and not being willing to give up anything in return. The concessions all run one way. That being said, I think there's a lot here for the NHLPA to work off of.

50/50 HRR SPLIT

There's some confusion over whether or not the NHL is willing to keep using the existing definition of HRR. If they aren't then I think those whole thing is basically a ruse and we haven't really gotten anywhere. If the NHL has put forward a proposal in which the players get, for example, the equivalent of 47% of HRR under the current definition, then they've not really moved on this issue at all and I think we should expect the lockout to continue for some time. For the sake of optimism (and to give me something to write about), let's assume that the league is willing to use the existing definition of HRR (and if not, the PA's counter proposal should use the current definition anyway).

If I'm in the PA, the NHL's offer to "pay back" money lost through escrow over several years isn't a very good offer on its own, but it does represent an acknowledgement from the NHL of one of the biggest issues for the players - that they get the money they're currently signed for. I think the position that the NHL has held up until now, that they will not resume paying the players until the players agree to take drastically less money than they signed for, is patently unethical and the players are absolutely right to protest it. I think one of the major driving forces behind the players' resolve right now is the feeling that they were repeatedly lied to over the course of the summer when NHL GMs signed contracts they had no intention of abiding by. That's bad faith bargaining, and if these negotiations are going to go anywhere the NHL needs to abandon that stance.

Given that the owners have shown a willingness to compromise on that in order to get to a 50/50 split on HRR, here's what I would propose if I were the PA:

The salary cap for next season will remain at whatever level is necessary to ensure that all current contracts maintain their value within, say, 5%. This continues to be the case in all subsequent seasons under the CBA. Beyond that point, the NHL can keep all growth in HRR until such time as the split hits 53/47, at which point that share of revenue is maintained and the cap rises in accordance with revenue again. The players may not be able to get 53% of HRR in the end, but it would be foolish to immediately commit to 50/50. In fact, given the owners willingness to offer 50/50 now, I think the players can probably get another 1-2% out of the deal. My impression is that the owners don't want to miss a full season and that they're under pressure from sponsors to get a deal done, and the PA should take advantage of that.

Before moving on to the next point, I want to make a brief aside about the HRR split. I think the NHL owners are morally obligated to pay out the value of contracts they negotiated with players under the old CBA. Beyond that, there is no such thing as a correct share of HRR. 50/50 gets thrown around a lot because it sounds nice, but it's basically meaningless. There is no good reason why the share should be such a simple number like that. I know some people like to say it represents an equal share or a partnership, but there are two things I would say in response to that. One is that the two sides do not bring equal value to the equation: the players might make less money without the NHL, but the NHL wouldn't make any money if they were stuck with replacement players.

The other point that I would make is that the players take their cut before many other expenses are taken out. A true "50/50" split would see the players make significantly less than 50% of HRR as currently defined. The discussion over HRR isn't to determine what % the players get and what % the owners get, it's to determine what % the players get and what % the rest of the team's operation gets (with a few exceptions). For teams that lose money the owner's share is actually below zero.

The point I'm trying to get at is that there is no "right" or "fair" cut of HRR. I can't make a good argument that the players "deserve" to make less but I can't make an argument that they really deserve more either. They're obviously very well compensated for what they do. That said, the players provide virtually all of the value that exists in the NHL so I think they do deserve a very large portion of the revenues. What it is though I don't know. If I were in the PA I would be perfectly happy to take share a bit over 50% as long as I didn't lose money off the top.

THE SECOND CONTRACT PROBLEM

A couple of the NHL's proposed changes are about fixing the mythical "second contract problem". Mythical? Yes. Here's the thing: player scoring peaks at age 25, and a player's best years are from roughly 23-27. NHL players do more than just score points, but their value seems to peak in the mid-20s. These are the years that second contracts tend to cover. Those years should be the years when players make the most money if any sense of logic is applied. No rational person would describe it as a problem that a player's best years are the years where they make the most money. With that out of the way, let's talk about what the NHL has proposed.

The NHL's proposal is for entry level contracts to be shortened to 2 years with a 5 year limit on contracts thereafter. Free agency would be pushed back to 28 years of age or 8 years of service, meaning that teams would have at minimum two chances to negotiate with players while they were still Restricted Free Agents. The idea here is that by making it impossible for teams to "buy" UFA years during 2nd contracts, prices on RFAs will go down. Pushing arbitration ability out an additional year likely helps that cause.

If I were in the PA, I would counter-propose the following: ELCs remain at 3 years. UFA status stays at 27 but the "or 7 years of service" aspect is dropped; if a player enters the league at 18 or 19, he does not reach UFA status any sooner. This helps give teams who draft players like Steven Stamkos or Drew Doughty more years with those players, whereas under the current system they're eligible to become Unrestricted Free Agents at age 25. That's really where the crux of the "second contract problem" comes from, is guys who enter the league earlier hitting UFA at age 25 or 26. A very small number of players would be affected by this change, so it shouldn't be too tough a pill for the PA to swallow. Plus it avoids pushing UFA age out to 28.

I also think the PA should refuse to allow arbitration to be pushed out any further. In fact, given that the PA seems to be asking for relatively few concessions from the league, I would request that players be eligible for arbitration immediately upon their ELC expiring which would be one year earlier than it currently is. Because of the "unwritten rule" that teams agree to not sign offer-sheets for RFAs, arbitration is the only real leverage that mid-tier players have to pressure teams to give them raises after their ELC expires (star players can force a deal by threatening to sit out, as Drew Doughty did last fall).

As for contract limits, I think the PA should offer to cap them at 6 years rather than the NHL's offer of 5. Very few contracts actually go beyond 6 years, so this is a change that would affect a very small portion of players. There is some advantage to the long-term deals in that they protect players against loss of income in case of serious injury and they also provide some protection in the event that revenues suddenly start falling, but on the whole I'm not convinced they're very beneficial unless you're Marc Savard.

Think of it this way: Jordan Staal just signed a ten year deal that takes him from his age 25 to his age 30 seasons. He makes $6 million per year, so that's $60 million guaranteed. However, I think Jordan Staal would almost certainly make more money signing for 4-5 years at $6 million and then signing for an even bigger contract at age 30 when the salary cap will likely have risen by quite a bit. Staal is essentially giving up money for a fairly small amount of security: barring a career-threatening injury, Staal stands to lose money from signing such a long-term deal. So agreeing to a term-limit on contracts is actually not a bad move for the PA. (Indeed, if I were a highly skilled player I would want to sign deals in the 3 year range as often as possible so as to maximise my earning potential as the salary cap rises.)

That being said, the argument thrown out by Darren Dreger (among others), that the term limit is designed to prevent the long-tail retirement contracts, is likely very wrong. The reason that the NHL wants a short term limit on contracts is because they don't like guaranteed deals. As I said back in August:

Teams like the Bruins and Flyers would love to get out from under deals like Marc Savard's or Chris Pronger's but can't under the current CBA. A 5 year contract limit would significantly reduce the potential for teams to be on the hook if players receive career threatening injuries [ADDENDUM: or suffer major declines in their skill]. The term limit may look like it's designed to go after "retirement" contracts, but it's really designed to go after guaranteed contracts.

As a bit of an aside, I think it's also worth revisiting what I said in August about why the NHL wants to make these changes to player contracts:

While the new rules proposed by the NHL may provide some modicum of increased competitive balance for the small market teams, they're primarily intended to eliminate the union's power and put the players at the mercy of the club which drafts them. These proposals don't fix the underlying economic issues of the small markets in any way, but they do give team management as a whole an increased toolkit to control players' careers.

This is a key point to keep in mind: the NHL's proposed changes are intended to give them control over players, not to help with cost problems. As one of my favourite novels says:

We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power.

THIS IS A LOT OF WORDS SO FAR

Those are the major points in my mind. I could offer some smaller thoughts on the other aspects of the NHL's offer, but this piece is getting pretty lengthy so I think I'll cap it there. To sum up, I think the players should:

  • offer a gradual slide of HRR to 53% with no rollback of salaries either up front or through escrow, but allow the owners to keep all revenue growth beyond that point until the appropriate HRR split is reached
  • offer to cap contracts at 6 years
  • leave UFA status at 27 years old but eliminate the "or 7 years of service" provision so star players don't become Unrestricted Free Agents at 25 or 26
  • request that arbitration eligibility be reduced from 4 years of service to 3 years

Those points should be able to form the basis of a deal. Beyond that there should be only minor details to work out. As long as the NHL is willing to pull back on the idea of large up front pay cuts, I don't see any reason they could make a deal around what I've just proposed.

[And I also think it's worth noting that the new NHL proposal still does nothing to address the systematic problems that cause the smaller market teams to lose money. They'll lose money under this CBA too. I think some form of luxury tax is likely the answer to that, but the NHL so far has been completely unwilling to discuss it and it's a more complicated issue than I want to get into in this post.]

PensionPlanPuppets.com is a fan community that allows members to post their own thoughts and opinions on the Toronto Maple Leafs and hockey in general. These views and thoughts may not be shared by the editor of PensionPlanPuppets.com.

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