CBA Related Facts Every Fan Needs to Know!
Entry posted by poetica
2,901 views
There seems to be a lot of misinformation floating around about the CBA negotiation and related terms. I'm not an expert by any stretch nor do I intend to represent myself as such. However, I do absolutely believe that it is in our best interest as fans to be properly informed if we have even the slimmest of chance of someone listening to our opinion. So below you will hopefully find some useful information to help inform your opinion.
To the best of my knowledge, all of this information is correct. But please feel free to not take my word for anything and do some research yourself. Only by educating ourselves can we possibly hope to have an intelligent voice!
FACT: The NHL does NOT own the Stanley Cup.
It was given to Canada as a gift from Lord Stanley, a former Governor General of Canada. It remains the property of Canada but under the control of a pair of appointed Trustees. They signed an agreement to make it exclusively available to the NHL (despite the fact that doing so actually contradicted the reason for the Cup to begin with, which was to be awarded to the best amateur hockey team) in 1947. However, a lawsuit during the 2005 lockout resulted in a settlement that said the Trustees overstepped their bounds making such an arrangement and that if the NHL does not operate for a year the Cup may be awarded to another league. While they have said that the 2006 settlement does not obligate them to offer it to another league and they are unlikely to do so even during a lockout, any extended NHL lockout could result in another lawsuit that could easily result in the Cup being offered to another league.
Resources: http://en.wikipedia....iki/Stanley_Cup
http://fullcomment.n...ong-to-the-nhl/
FACT: HRR is NOT "all hockey related revenue."
HRR is a legal term, not a common sense one. "Hockey related revenue" sounds like it means any revenue relating to hockey but in reality it was limited to certain types of revenue (such as game tickets, TV deals, rink advertising, merchandising, etc.) minus certain types of deductions (such as concessions, parking, advertising, arena upkeep, etc.) The exact types of revenue to be included and the exact types of deductions (as well as limits on those deductions) were defined in the last CBA and agreed to by both sides.
It is fair to note that the allowed deductions did not cover all of the costs, particularly as costs continued to grow, although what percentage of actual costs they represented we don't know.
FACT: Teams self reported HRR and were NOT audited.
At the end of a season each team was required to fill out a HRR Reporting Package. It was not anything like an audit but rather more like filling out simple tax forms. It included boxes for HRR-included revenue and allowed deductions. These forms were given to an independent accountant (paid for equally by the NHL and NHLPA) by a set date. (Teams that were late turning in these forms could be fined.) The accountant added them together, took off a few more agreed upon deductions at the league level (but did not add any additional revenue, as NHL revenue, such as from franchise expansion or relocation fees, was not included in HRR) and from that came up with what is known as "final HRR." That is the final amount of league wide included revenue minus the allowed deductions. The players' share percentage was determined from the final HRR number.
FACT: Players did NOT get 57% of all revenue.
As agreed to by both sides in the last CBA, the players' share increased as revenue increased. In the first year (2005) of the last CBA, players' share was 54% of HRR and escalated to 57% in the final year.
As stated above, not all revenue is included in HRR and then some deductions are taken off before the players' share was determined from the final HRR number. So, in reality players got a percentage of a portion of revenue.
Additionally, it is fair to note that teams were only required to spend to the salary cap floor. The cap floor was intended to ensure a certain amount of revenue was spent on players' salaries in accordance with their HRR share percentage. The cap ceiling was intended to limit how much the players could get. It was entirely up to the individual teams to decide how much they spent within the cap limit.
FACT: Escrow payments are delayed salary, NOT additional payments.
As agreed in the last CBA, the cap for a season was determined based on a projection based on the revenue from the previous season. However, sometimes the reality was different from what was projected. In recognition of that fact, a portion of every player's salary was held back in an escrow account. (The actual percentage held back was the result of a complicated equation I do not even hope to understand.) At the end of each season an independent account determined the final HRR number and from that number determined what the players' actual share for that season should have been. It was then determined, given what was actually paid when compared to what the players' actual share was that year, who was owed money from the escrow accounts and in what amount.
In the event that owners had paid under the players' share of final HRR, all money in the escrow accounts was released to the players.
In the event that the owners had paid over the players' share of final HRR, a portion (up to all) of the money in the escrow accounts was refunded to the owners in the amount that they overpaid league wide and the rest (if any) was released to the players. So, for example, if the owners collectively spent 58% of final HRR on salaries in the final year of the last CBA, 1% of all the escrow accounts was returned to the owners and the rest of the money was released to the players.
FACT: Players are NOT simply employees.
Players are employees of their individual team, but they are also the team's product. If hockey were the product, minor league games would cost as much as NHL games.
The reality is players generate revenue not just through playing hockey but also by their names and faces being used in merchandising. A significant portion of every team's revenue comes from merchandise. Yes, teams make big bucks by overcharging for jerseys, but they make even more by charging huge markups for $2 worth of lettering to get a player's name and number on the back.
FACT: Players can NOT be easily replaced.
Five years from now, iPods may be considered as outdated as the Walk Man. (If you don't know what that is, ask your mom or dad. Or grandma.) Today however, iPods create a significant amount of revenue for Apple. NHL players are similar. Over time, players will be replaced as age or injury ends their career, but the big name players of today are what is generating the most revenue for their teams today. New players are peppered into the league a few at a time to allow them to develop into big name stars, replacing the former big name players as they retire, while the current big name stars are still generating big revenues for their teams. This provides a relatively constant (or even improving) level of talent in the league and ensures a relatively constant (or increasing) amount of revenue generation.
FACT: Owners can NOT be easily replaced.
Owning a NHL franchise is hardly a quick path to riches and owners certainly know that going in. Many would argue it's a terrible investment outside of a couple of teams that regularly make big profits despite dismal performance. Obviously, owners must buy into franchises for other reasons (i.e. love of the sport, being able to say they own the local sports team, etc.)
We have no way of knowing how many people have the ability and desire to buy a NHL franchise. We do know no one seems to want Phoenix, so there can't be that many billionaires beating down the NHL's door. (Although to be fair, what smart business owner does want an ice hockey team in the desert?)
FACT: The NHL is NOT losing money on the whole.
- Prior to the 2004-05 lockout, the average NHL franchise was worth $163.3 million.
- According to Forbes, the average NHL franchise is valued at $239.83 million, based on the numbers generated from the 2010-2011 season. This means that the average NHL franchise has increased nearly 47% in seven years. This appreciation has easily outpaced the rate of inflation ($1 of 2003 dollars is worth about $1.20 now).
- Prior to the 2004-05 lockout taking place, the average NHL team was bringing in $74.6 million/year in revenues, for a total of $2.24 billion.
- In the 2010-11 season, the average NHL team took in $103.5 million in revenues, for a total of $3.1 billion.
- According to Forbes, the average NHL team posted a net operating income (earnings before interest, taxes, depreciation and amortization) of -$3.2 million during the 2003-04 season. According to Forbes, NHL teams lost a total of $96 million during the 2003-04 season.
- According to Forbes, the average NHL team made $4.29 million last year, for a total of $128.8 million in total net operating income.
Source: http://www.davemanue...05-lockout-135/
FACT: Increased team revenue sharing will make most franchises profitable.
Team revenue sharing is standard in professional sports. It is used successfully in every other major sports league in North America in recognition of the fact that franchises need other franchises for their team to play against in order to generate revenue.
Team revenue sharing was introduced in the NHL during the last CBA. Under the last CBA, "Revenue sharing will see the top ten money-making teams contribute to a pool to be distributed among the bottom 15 teams. Teams in markets with more than 2.5 million television households cannot qualify for revenue sharing. That excludes the Rangers, Islanders, Devils, Flyers, Blackhawks, Mighty Ducks and Kings." (Source: http://proicehockey...._cap_expl_2.htm)
Under the NHL's proposed expansion (assuming it doesn't change from their last proposal), as before 6% of actual HRR revenue (for a projected 200 M in the first year) would be shared among the lower teams, with 50% of that revenue coming from the top 10 revenue generating teams. However, limitations relating to market size and percentage of tickets sold would be removed. (It is important to note that after taking over the Phoenix franchise, the NHL allowed that franchise alone to get the "full share" revenue share check despite not meeting the eligibility requirements other teams were forced to meet. That was not popular among some owners and may be the main reason for the change in the NHL's stance this time.)
Lowered restrictions mean teams that reported a 2011 loss but weren't eligible for the revenue sharing, like Anaheim (-8.4 M), Dallas (-1.1 M), Los Angeles (-2 M), New Jersey (-6.1 M), NY Islanders (-8.1 M), and San Jose (-7.8 M) to name a few, will be eligible and likely get more than enough to make them profitable.
In previous years, a "full share" was $10 M. According to Forbes, 17 teams reported a loss last year. Of those, only 2 reported a loss of more than $10 M. If the projected 200 M (at 6% actual HRR) was shared equally among all 17 teams that reported losing money in 2011, each team would receive $11.76 M. That should make all but 2 teams profitable.
In fairness, I don't know if the Forbes numbers include any offset of loss for teams that were eligible and received the team revenue sharing subsidy because the NHL is not very forthright in sharing their financial information. Even if that is the case, however, the fact that so many teams were ineligible before but would be under the proposed agreement still indicates that most franchises would be made profitable by the expanded team revenue sharing even without any additional cost cutting measures.
FACT: The NHL and NHLPA are fighting over money we have not yet given them.
This may be the most important fact of all for fans. The money we've already given them, their actual earned revenue, is already spent and gone. It's already been split according to the last CBA. What they are fighting about now is how to divide up the money we have yet to give them based on what they project and expect to get.
The reality of what they will actually get remains up to us.
Only by using our collective power as their source of revenue can we hope to remind both the NHL and players that without us there would be no money to fight over, so they should keep fans in mind the next time they are contemplating a work stoppage of any kind.
-
5
6 Comments
Recommended Comments
Please sign in to comment
You will be able to leave a comment after signing in
Sign In Now