*Official* CBA Negotiations and Lockout Thread

[Red Light Racicot]

The problem with you all is that you are addicted to the game. After the 2004 lock-out, you rewarded the owners and PA with 3.3 Billion smackeroos. As an appreciation, they slapped you with another work stoppage a few years after.

Now' there is outrage. Another season is lost. Everyone says that they will walk away from the game. A few say they will get even.

Let me tell you what will happen, after the Replacement players are gone and the regular players are back, you will all go and fill up the arena and buy tons of jerseys. Yes, you will give them another 6 billion in profit.

Six years from now, the NHL and PA will lock it out again and decide how to divide the loot, and round and round we go........because you are all addicted to the game.

[Hobble]

at Bill Clinton mediating the negotiations!

[oldnews]

from:

Help us Ed Snider, you’re our only NHL lockout hope

"When it comes to labor negotiations, league rules require a a vote of 75 percent of governors to oppose the commissioner's recommendation. That means Bettman has absolute power, so long as he has eight out of 30 owners to block any hostile movement against him. Bettman actually needs only seven owners to support him, since the league owns the Phoenix franchise

There have been many educated guesses over the last few weeks as to which franchises are a part of this "hardline" bargaining group of Bettman's staunchest allies, but my list first included Boston, Minnesota, Calgary, Washington, Dallas, Philadelphia and Anaheim, in addition to Phoenix."

Unbelievable if in fact true - Minnesota one of the hardline 7? They are the club that made the biggest joke of the process in free agent frenzy, just before this lockout. Dropped about 200 million over a quarter century on two UFAs and then play hardline?

[oldnews]

If the article is the full story and all NHL teams are really making undisclosed profits then my question would be 'why do acknowledged, profitable teams, contribute to a stabilization fund'? Why don't they tell Florida to suck rocks when they ask for support? When both sides talk about the key points of disagreement, verification of HRR is not one of them. Undisclosed revenue would divide the owners quicker than anything the NHLPA could do. If the quoted article is the full story then I would think it is the key point that should be pursued by the NHLPA. Doesn't the NHLPA have any pull with the Ontario Teacher's Pension Fund? After all they owned the TO Laffers, they should know the inside story. Brother to brother they should spill the beans.

Most on here will agree that the NHL is not a conventional business or combination of businesses. Successfull franchises need competition to fill their venues and the Florida's provide that. I think the season is toast but no matter when a new agreement is signed the NHLPA and NHL had better have a verifiable method of identifying legit expenses and revenue or this dispute will be repeated.

[gizmo2337]

Anyone else feeling the vibe, that maybe we might be okay with this dragging on a little longer, as long as Bettman gets tossed out? I always despised the guy, but I think this time he might have truly dug his own grave and the timing is right for a new commish. I honestly think that Daly would do much better. I'm hoping the owners think so as well.

[The Bookie]

Just Go Away, Gary

News broke last night that embattled NHL commissioner Gary Bettman suggested a two-week moratorium from lockout negotiations with the NHLPA. The reason? Things had just become too heated. I guess that's what happens when you cancel six weeks of games and Thanksgiving is looming — maybe there's a little more urgency, you say some things you regret, people take those things personally, and suddenly you're threatening each other in monotone Canadian accents. Why don't you go to hell, eh? But canceling another two weeks just so everyone can cool off? Who does this? And you wonder why hockey fans were regarding Bettman's lockout leadership the same way you'd act if you were watching a baby play with a chainsaw.

Oh God … wait, is that on … OH GOD!!!!!!!!!!!!!!!!!!!!!!!!!!!

This is a guy who recently earned the following e-mail from a Minneapolis reader named Peter Gilbertson: "How does one impeach a sports commissioner? How can a commissioner on the verge of losing two NHL seasons in one decade, with four work stoppages during his tenure, continue to keep his job? He is a failure. For the fans, the players, and the game this needs to be done — Bettman should be impeached."

First of all, how much fun would it be to impeach Gary Bettman? Can't you see him sweating and stammering through the hearings as various politicians rehashed an endless list of mistakes over the years? "So you allowed John Spano to buy the Islanders without any money because … why?" That would be the best courtroom TV since the O.J. trial. But if we voted for sports commissioners (with fans, players and owners each splitting one-third of the overall vote) or put term limits on their tenures (10 years max), then we wouldn't have to ask questions like "How does one impeach a sports commissioner?"

Gary Bettman should have lost his job years and years ago. He kept it for the same reason David Stern plans to hang around for three decades, Bud Selig will still be running baseball when he's 80, and Roger Goodell will probably get a contract extension even after he handled the Saints debacle so badly that he had to bring back his old boss to fix the situation for him. (Yes, we covered these commissioners in this space last month.) But Bettman's supernatural ability to keep ruining hockey is almost unparalleled — after I joked recently for the umpteenth time about Bettman's former boss, David Stern, planting him in the NHL to ruin hockey, a few readers e-mailed me wondering if that could be legitimately true. What other explanation could there be? How could someone be this bad for this long?

The case against Bettman in one sentence: The NHL sacrificed an entire season so they could reimagine their entire salary structure … and only seven years later, that "reimagining" went so poorly that they might have to sacrifice a second season because they need a mulligan.

That's all you need to know. I didn't even need to bring up the league's botched television deals, overexpansion, poorly picked markets, belated acknowledgement of the concussion epidemic, or more incredibly, how they stupidly forgot to limit the length of contracts. This is a commissioner who fought like hell to create a hard cap, and after it finally got approved, was too dense to remember to include a rule that contracts couldn't last longer than five or six years (like what the NBA does). That led to team after team circumventing that cap by giving out guaranteed deals lasting as long as 15 YEARS. Really, didn't see that loophole getting exploited, Gary? Never came up as you were hashing things out?

Imagine your neighbor knocking down his house, then rebuilding it from scratch as his family lived in a hotel. You had to listen to the construction guys hammering, sawing and banging for a solid year. Finally the house goes up, the family moves back in … and seven years later, suddenly they're knocking the house down again. You ask the neighbor what happened and he says, "Yeah, sorry about that — we screwed up when we rebuilt the house, had too many flaws, we needed to do it over again."

Naturally, you say, "Why didn't you figure out all that stuff before you rebuilt the house the first time?"

He says, "Because I'm an idiot, that's why."

And then, there's an awkward silence before he walks away, as you don't know whether he's kidding or not.

That's Gary Bettman.

We should mention that, in a vacuum, he's correct about this particular lockout: The league's financial model (already a mess because we have too many NHL teams, which is 100 percent Bettman's fault, but whatever) can't be sustained with such meager television revenue. Hockey depends on its attendance and the unwavering devotion of its zealous fan base. From a television standpoint, the league will always be handicapped by its lack of marketable stars (the biggest reason it can't command anything close to the NBA's television deal), a glaring problem that I noticed during my first year owning Kings season tickets, when I realized that it didn't really matter who the Kings played from night to night. Sure, you always enjoy seeing the Malkins and Ovechkins, but it's a much different mind-set from, say, LeBron playing the Clippers. Anyone who went to Wednesday's Heat-Clippers game was thinking I'm going to see LeBron!, because they knew he was playing 90 percent of the game. In hockey, you don't say "I'm going to see Ovechkin!," because he might play one-third of the game if you're lucky (and might not make a single meaningful play).

It's the ultimate team sport, and really, that's the best thing about hockey — there's a guaranteed level of entertainment night after night after night that transcends star power. Everyone skates hard, everyone throws their bodies around, everyone plays well together, everyone gives a crap. It's a blue-collar game that happens to be tailor-made for the ADD generation. That's why kids love going to hockey games so much, and that's why my daughter is so bitter right now (fast-forward to the last minute of this podcast). Throw in what hockey means to Canada (where they love hockey like we love football, basketball and baseball combined), some of the NHL's American hotbeds (Boston, Chicago, Detroit, Philly, Los Angeles, etc.) and the underrated fact that hockey players are the least entitled professional athletes on the planet … and it's almost impossible to screw this up, right?

So how do we end up with a salary system that allows Minnesota to spend $196 million on Ryan Suter and Zach Parise? And that's not to pick on those guys — you could build a decent playoff team around them as long as your goalie didn't stink. Just know that nobody is saying the words, "Suter and Parise are coming to town tonight!" It's just not that kind of league. You go to hockey games to see quality teams, not quality players. There's a fixed level of entertainment. Suter and Parise shouldn't make that much money because hockey players shouldn't make that much money. It has nothing to do with them.

If you think of the cable television model, it makes more sense — channels like AMC, FX and Showtime realized that the quality of their shows matter a thousand times more than the "star power" of the actors on those shows. Yeah, AMC could have spent an extra $15 million per season on Keanu Reeves to play Rick in The Walking Dead, but why would they? People watch that show because they want to see people kill zombies. So they went the other way — cheaper actors, cheaper locations, more money on extras and special effects. Same for Showtime's hit Homeland,which features only one star (Claire Danes, who certainly isn't making Parise/Suter money) surrounded by well-casted actors, including a few good ones whom you'd recognize from other shows (including Mandy Patinkin, a fairly famous name in his own right) and certainly weren't expensive. You might recognize that same blueprint from Breaking Bad, Dexter, Californication,Shameless, Game of Thrones, Sons of Anarchy and about 10 other cable shows. And by the way, did you know ANYONE on Mad Men when that show launched other than Ashton Kutcher's old girlfriend with the weird first name?

On cable television, the showrunner and the writing matter more than anything else. In hockey, the sport and the fans matter more than anything else. It doesn't matter who Minnesota's third-best player is any more or less than it matters who plays Mike on Homeland. Fans are coming, regardless. So why overpay players, jack up ticket prices and price out those fans when you don't have to? Wasn't that what the last lockout was about? Wasn't the league supposed to be regaining control of its broken salary structure? How are we back here seven years later battling the exact same problem?

For that and that alone, Gary Bettman needs to step down. No, we can't impeach him. Yes, we can continue to excoriate him. He's the worst commissioner in sports history, and really, it's going to remain that way unless Roger Goodell extends the NFL's season to 20 games, adds Wednesday- and Friday-night football to the schedule, pays a hitman to murder Jonathan Vilma, and gets outed for having a heated affair with his biographer, Peter King … and even then, I'd probably still give the edge to Bettman.

If you want to talk about moratoriums, Gary, here's a better idea — step down and give us a lifetime moratorium. From you.

[gizmo2337]

If you want to talk about moratoriums, Gary, here's a better idea — step down and give us a lifetime moratorium. From you.

[poetica]

Thanks for posting that article, The Bookie. Made me actually laugh out loud repeatedly!

[Navyblue]

says the guy who's current status update on CDC is

[The Bookie]

Thanks for posting that article, The Bookie. Made me actually laugh out loud repeatedly!

[The Bookie]

An interesting followup to the Edmonton Journal piece I posted yesterday about the accounting going on in Florida, this time by way of Dallas (I know right?):

Creative Business Structure, Profitability, The NHL And The Florida Panthers

One of the main arguments the NHL has put forth during the ongoing lockout is that in order for all 30 franchises to be financially healthy, expenses have to be capped at an even lower level than they are right now.

After all, several franchises appear to be struggling on the business side of the equation. While these names have changed over the decades, ranging from teams like Detroit Red Wings in the 1980s, the Edmonton Oilers in the late 1990s, the Pittsburgh Penguins and Boston Bruins in the early 2000s and the Florida Panthers and your Dallas Stars recently, the point the NHL wants to make is the same. They want 30 healthy franchises, and they can't do that without much more cost control because the lower revenue-generating teams, whoever those might be, need financial protection.

But how do we know which teams are actually struggling?

Most of the NHL teams are completely private business entities, which means no one has access to their financial books other than the auditors approved in the last round of CBA Armageddon. Forbes puts together annual estimations of net profit and losson its website, but those are far from official. And as is illustrated by the Florida Panthers, those numbers do not account for the profits of the umbrella business that often own the NHL teams.

Jonathan Willis, who blogs over at The Cult of Hockey blog hosted by the Edmonton Journal, did some great legwork on the business structure and possible profitability of the corporation that owns the Florida Panthers, one of the teams that has been used as a constant example of a franchise that is in dire financial straits and desperately needs a new CBA to survive.

Willis pulled together several documents from Broward County, which owns BankAtlantic Center, Forbes and the South Florida Sun-Sentinal to show how while the Panthers might be losing money each year (based on the Forbes estimations), they are almost certainly driving the overall profitability of their parent company.

Here are his key points.

Interestingly, the picture that

Forbes

paints is at odds with that presented by Broward County. Broward County was primarily responsible for the construction of the Panthers’ arena, and as a result gets to look at the books of the organization. According to the county auditor, the organization made $117.4 million in profit between 1998 and 2012

How does a team losing $7.5 million per season rack up profits in excess of $100 million? There are a few reasons, and to find them we need to dig a little.

Now, I want to make one thing clear - the organization that made $117.4 million in profit between 1998 and 2012 is neither the Florida Panthers nor their parent company, Sunrise Sports & Entertainment. The organization that made those profits is the aptly named Arena Operating Company, which is contracted by the city to run the BankAtlantic Center.

Because AOC contracts with a public entity, they have to open their books to government auditors. The most recent audit apparently happened by Broward County in 2010 and is found here.

AOC is a sister company to the Panthers, and both are owned by SSE, which is illustrated on a pretty little graphic on page 3. Cliff Viner, the Panthers owner, is the chairman and CEO of SSE. The executives of AOC are unclear.

[Editor's note: The article originally mistakenly referred to Michael Yormark, the Panthers president, as team owner. Yormark is the president and COO of SSE as well as Panthers president.]

When Willis is referring to a team making $117.4 million in profit over 15 years, he's referring to AOC, which receives revenue from hockey and non-hockey events including suite sales, sponsorship agreements, parking, concessions and so-forth. On the expenses side of the ledger, the company is responsible for the operating expenses of the arena itself during events.

How much of that revenue is driven by the Panthers? That's a good question. Any number of concerts, shows and other events use the modern multi-purpose arenas when their main tenants are idle or on the road.

But the audit also gives us a clue as to how important the Panthers are to AOC's profitability. I'll let Willis explain with a small alteration to his original wording:

I expected to see that the Panthers were making good money on their arena deal; I was surprised to find that what was far and away

[AOC's]

worst fiscal year coincided with the NHL lockout. If the Panthers were losing money but the arena business was profitable, we would not expect to see a major drop in

[AOC]

revenue in 2005; instead we saw a significant dip.

(Note: judging by the email commentary I’ve received, this point is being missed by many readers. If the Panthers were acting as a drag on revenue, the 2005 lockout year should have been quite profitable for SSE; instead it was easily their worst fiscal year of the decade – JW.)

According to the audit, AOC made a profit of $6.5 million in 2003-04. That number dropped to $1 million in 2004-05 as the lockout wiped out the entire season then jumped back to $11.7 million when hockey returned in 2005-06. Some of those dips and spikes could be related to concerts or other large, one-year events, but the drastic drop in the only year that the NHL didn't play in that date range is fairly convincing.

So what does that mean for SSE's (and Viner's) profitability? That's hard to say. There are no exact numbers out there on the actual finances of the Panthers, be that HRR (which wouldn't necessarily reflect the money on the Panthers side of the business ledger) or open books. There are also no numbers for revenue or losses from the parent company of SSE itself.

But lets use the best numbers we have - the Forbes estimation of Panthers losses combined with the audited reports of AOC's profitability.

The numbers start to line up in 2008, where AOC had an $8.25 million profit and Forbes estimated the Panthers had a $9.4 million loss. That would mean an overall loss for SSE of $1.25 million that year which again, assumes there's no complicating numbers from the SSE part of the ledger and that the Forbes numbers are accurate.

In 2007, Forbes estimated the Panthers lost $7.1 million while AOC reported a profit of $9.5 million. That would mean, with the assumptions above, a $2.4 million profit for SSE. In 2006, Forbes estimated a $1.9 million loss while AOC had huge profits of $11.7 million. That's $9.8 million in pure profit for SSE in a year the Panthers themselves reported a loss.

So what does this all mean in the big picture? Essentially, that you can't trust the numbers the NHL (or the PA, for that matter) feeds you about team finances. The business that own and operate NHL teams are huge financial conglomerates with complicated accounting and organizational structure that are designed to maximize profits, tax breaks and long-term investment growth. And that's before we get to the point that the huge money to be made in professional sports is not in the year-to-year operating profit but in the exponential growth of the sale price a decade or two down the road.

The business structure of the Panthers is not unique. When the Stars were owned by Tom Hicks, for example, they were actually owned but Southwest Sports Group. The Boston Bruins are owned by Delaware North Companies. The St. Louis Blues are owned by SLB Acquisition Holdings LLC

This article is not to say that there are no teams losing money - that's impossible to prove and almost certainly false. But whenever you start talking about the finances of these hockey teams, remember that it's not as easy as Craig Leipold (chairman of Minnesota Sports & Entertainment which owns the Minnesota Wild) telling you how much money he lost or the San Jose Sharks, owned by San Jose Sports & Entertainment Enterprises, saying despite record crowds, they're still in the red.

I'm usually not a conspiracy theorist, but talking about team and league finances is the perfect time to live by that old X-Files axiom:

Trust no one.

[Boudrias]

Well they have lost big money, to the point now where there is no owner, and the NHL just keep pouring money into every year that they will never make back in that market.

The timing is critical like you said, but I think the timing is now and has been since they lost there owner.

If the Jameison thing can come through and he can own the team then great, they can stay in PHX (even though personally I think they should have been moved already)

But if it doesn't, then they should move. PHX only got 4 games on NBC, nowhere near what other major market NHL teams got that actually have good fan bases.

And for Seattle the timing seems right too, they have people interested in owning a team, the Arena is built I think (or almost done, im not sure I haven't really been following it closely) so things are ready from there side.

As for the playoff thing, I mean c'mon, its the playoffs, anybody will go in the playoffs. An I'm an example of that with the Lions, I will rarley go to a regular season Lions game (I have only been to 1 in my life) but I am probably going to go to the Western Final tommorow because I really want to see a big playoff game, and because it's just the hot thing right now sportswise. And that's the exact same thing that happened with PHX in the playoffs last season.

They have had good playoff teams, they won the division, and went to the 3rd Round and if they stay in Phoenix they won't sell out a game next year I guarantee it.

And personally I think it would be better for NBC in Seattle aswell, and surely the team would be much more profitable and successful witha good fan base behind them.

Once this CBA is settled that is something the NHL has to make a big priority, I'm not sure how it makes sense bussiness wise to be continuously losing money like that for no good reason.

[Boudrias]

I found it truly bizarre that the NHL/ownership group claimed that the necessity of this lockout was based upon the inability of certain weaker markets to turn a profit - and yet they stepped into these negotiations proposing a significantly smaller revenue sharing pool than the NHLPA/players proposed. The optics of that were way off, to put it mildly.

Yet they claimed to have some sort of unanimity and solid basis of unity in favour of this lockout.

Bettman has proceeded as if he isn't really required to make sense - it's been like one big continuous chest-puffing bluff - and yet it is clear how much money the real power players in the NHL stand to lose, and that that fact really did not give the NHL owners the leverage they needed to make like an uncompromising, long-term lockout strategy made any sense at all.

Bizarre. Shocking really. Would be fascinating to see how this truly materialized, because it looks like a whole room full of billionaires with a remarkably bad strategy from where I sit.

[Shift-4]

An interesting followup to the Edmonton Journal piece I posted yesterday about the accounting going on in Florida, this time by way of Dallas (I know right?):

Creative Business Structure, Profitability, The NHL And The Florida Panthers

[Ghostsof1915]

from:

Help us Ed Snider, you’re our only NHL lockout hope

"When it comes to labor negotiations, league rules require a a vote of 75 percent of governors to oppose the commissioner's recommendation. That means Bettman has absolute power, so long as he has eight out of 30 owners to block any hostile movement against him. Bettman actually needs only seven owners to support him, since the league owns the Phoenix franchise

There have been many educated guesses over the last few weeks as to which franchises are a part of this "hardline" bargaining group of Bettman's staunchest allies, but my list first included Boston, Minnesota, Calgary, Washington, Dallas, Philadelphia and Anaheim, in addition to Phoenix."

Unbelievable if in fact true - Minnesota one of the hardline 7? They are the club that made the biggest joke of the process in free agent frenzy, just before this lockout. Dropped about 200 million over a quarter century on two UFAs and then play hardline?

[Hobble]

Calgary is hard line? That seems kinda random.

[Boudrias]

There is a good chance in which we have a situation of a journalist not being able to understand accounting and financing relationships (it happens often).

I am making an assumption here because I haven't seen the books. However, it seems to me that AOC would have made less money that year simply because they didn't charge rent to their number one tenant - the Panthers.

Then the journalist goes on to combine AOC profits with Panthers losses to get net profits. Yes, the ultimate owner is making money after combining non-hockey operations with the Panthers operation results.

[EvoLu7ioN]

Let the players dog paddle around that life jacket a while longer. Eventually they'll figure it out and grab on. Can't dog paddle in deep water forever.

[elvis15]

There is a good chance in which we have a situation of a journalist not being able to understand accounting and financing relationships (it happens often).

I am making an assumption here because I haven't seen the books. However, it seems to me that AOC would have made less money that year simply because they didn't charge rent to their number one tenant - the Panthers.

Then the journalist goes on to combine AOC profits with Panthers losses to get net profits. Yes, the ultimate owner is making money after combining non-hockey operations with the Panthers operation results.

[poetica]

There is a good chance in which we have a situation of a journalist not being able to understand accounting and financing relationships (it happens often).

I am making an assumption here because I haven't seen the books. However, it seems to me that AOC would have made less money that year simply because they didn't charge rent to their number one tenant - the Panthers.

Then the journalist goes on to combine AOC profits with Panthers losses to get net profits. Yes, the ultimate owner is making money after combining non-hockey operations with the Panthers operation results.