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The Collective Bargaining Agreement between the National Hockey League and its Players' Association is set to expire on September 15, 2004. Financial struggles and ballooning salaries have prompted changes to be demanded by the NHL. The big change that the management wants is a salary cap. With a lockout planned to last as long as 2 seasons if a new agreement isn't signed, the future of professional North American hockey relies on the NHL's current financial status, negotiations between the two sides, and finding a solution to the problem.

Money is issue number one when it comes to the Collective Bargaining Agreement. The league and its teams have been losing it while the players have been gaining it. The NHL teams reported that, as a whole, they lost a staggering $300 million last season. Money brought into the league went up last year by a sum of $30 million, but the value of each team still dropped an average of 3 percent. To compare revenues to other leagues, one should look at the NFL television deal. Their deal is worth $17 billion while the NHL's is only worth $600 million, or about $6.8 million per franchise. Most of that money comes from ESPN, who has cut 30 percent of its hockey games from their lineup. To make up for the shortcomings, the NHL raises its ticket prices. The end result of the money troubles on the teams was bankruptcy protection for two, and a "for sale" sign for seven. All the losses by the league seem to be attributed to not only the poor ratings, but also the ballooning player salaries.

Seventy-six percent of the NHL teams' revenues are going to player salaries, which are at an average $1.79 million. That's a 300 percent increase from the average salary of $468,000 in 1992, when only 57 percent of revenues were used to pay players (the NFL has had its salaries increase by only 71 percent in the same time period). Of the 720 players in the league, 400 make $1 million or more. Of those 400, 20 make more than $7 million. Why are the salaries skyrocketing?

It's because of the Collective Bargaining Agreement. The CBA states that if a team wants to keep a restricted free agent, which is a player that is at the end of their contract and is also younger than 31, he must be offered a 10 percent raise by their team if he's making less than the average salary. If that restricted free agent is offered more than the average, he must be offered at least his previous season's salary. The team also has the option to match an offer by a competing team to keep their player from leaving.

A player who is in his first season cannot be paid more than $1.24 million. Contract bonuses for performance are used to circumvent that number and entice hot prospects. Bonuses are awarded when a player reaches a certain number of goals, assists, or ice time. The Joe Thorton model, named after the Boston Bruins player, is also used. When Thorton signed with Boston, his contract stated that he would receive large balloon payments when he qualified for 3 of the bonuses on his contract. Many, if not all, rookies now look for these payments in their contracts.

The owners feel that a salary cap will help stop the hurting that all the teams are feeling. Their proposed number is a spending limit of $31 million, far lower than teams like the Detroit Red Wings or the New York Rangers. The salary cap that is being proposed is called a "hard" salary cap, which means that no team can exceed the maximum salary number for any reason. A salary cap system is currently in effect in the NBA and the NFL. A luxury tax system is in place in the MLB, where teams who spend over a certain amount on salaries must pay 17 percent of the amount they go over (the New York Yankees is currently the only team who pays the luxury tax).

Another thing that the NHL wants to fix is the salary arbitration process. The current process says that only a player can call for their salaries to be debated. When the player chooses arbitration, he makes an offer and the team makes an offer. A hearing is held, and decisions are made by an independent moderator on what a fair salary is. Numbers in the middle of both offers are usually chosen, which causes salaries to go up. Ideas for changing the arbitration process include letting the team choose when to go to arbitration, and also making the arbitrator pick one offer or the other instead of somewhere in the middle, which would make both sides come up with more realistic numbers.

The players have stated that they will not agree to a salary cap. Their argument is that the league needs to have a free market system like the one currently in place. NHLPA executive director Bob Goodenow says that

"Player values are set by the owners. In our system, they always have been. The owners have control. Owners have the ability to determine the player values and decide what they're going to compensate the players for."

What is actually happening, however, is the teams that can afford it are paying players more each year to build the perfect team, while the smaller market teams have a hard time keeping up. For example, the New York Rangers are paying Bobby Holik $9 million this year for being a defenseman that doesn't even play with the top stars of the team.

Not every player feels that salaries should stay so high, however. Paul Kariya and Teemu Selanne, friends and former teammates, took huge pay cuts to play together for the Stanley Cup while wearing Colorado Avalanche jerseys. Brett Hull, who plays for the fat-walleted Detroit Red Wings, said that 75 percent of the players were overpaid and a salary cap was needed for the NHL to survive. The NHLPA has also offered to cut the salaries of all its players by 5 percent, but the NHL doesn't think that it will be enough to stop the bleeding.

The fans are growing impatient with the players and their stubbornness. After TSN.ca posted a story on their website concerning the CBA, numerous fans showed support for the owners' idea of a salary cap. The NHL Fans Association found that 81 percent of the fans that responded to a recent poll supported a salary cap. Jim Boone, one of the founders of the Fans Association said that the fans are probably most upset over the high ticket prices. He also stated

"A fan whose seat went from $50 per game to $100 over the last six years knows what's going on. He can easily tie the ticket prices to the salaries."

According to what everyone has said and what's been in place in other leagues, the salary cap looks to be the best choice for the future. With even a soft salary cap, one where teams could go over in certain circumstances, salaries would become much more manageable. One thing that should also be discussed is more cost sharing among the teams because of what Ted Saskin, the senior director of the NHLPA, has called "a discrepancy between teams' individual revenues that has grown rather dramatically." The NHLPA has brought it up before, and feels it is a must in the new agreement.

The league has threatened to shut down operations next season if an agreement is not reached in time. This will be devastating to many of the smaller market teams. The commissioner of the NHL is prepared to shut down the league for as long as it takes to reach an agreement. Without games for one or two years, teams like Calgary could fold or be moved before play resumes again.

The NHL set up a website for updates on the CBA talks at http://www.nhlcbanews.com (which now links to a FAQ page explaining the current CBA).

Further reading on the subject of the NHL and its players can be found here:
National Hockey League Players Association
Gary Bettman's remarks on the NHL labor situation

UPDATE 12/31/2005 artman2003 has a more timeless node on this subject, while mine tends to capture the feelings before the lockout and the new CBA. You can read that node here.

Allen, Kevin. "Lockout Has Both Sides on Edge" USA Today 16 Sept 2003

Allen, Kevin. "Big Faceoff This Season Comes Off the Ice" USA Today 8 Oct 2003

Ozanian, Michael K. "Cracks In The Ice" Forbes 8 Dec 2003

Gills, Charles. "Game Over?" Maclean's 3 Nov 2003

Yorio, Kara. "The War of Words" Sporting News 15 Dec 2003

"They Said It" http://www.savehockey.com/quotes.htm

"Telling Statistics" http://www.savehockey.com/stats.htm 29 Jan 2004

Brehm, Mike and Kevin Allen. "Players Concerned About Labor Situation" USA Today 3 Feb 2003

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