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Saturday, December 8, 2012

Who's Conceding What: CBA Negotiations Recap

Bettman and Fehr fight
Two days of unbridled optimism followed by catastrophe.

Just as it looked like the NHL and the NHLPA were making major traction, to the point that people were eagerly anticipating puck drop, everything went to hell, coincidentally when the players wanted to bring Donald Fehr back to close the deal. Now everything's off the table and Gary Bettman is fuming.

"What you're witnessing is very tough bargaining," Bettman said in a press conference after Thursday night's talks. "We kept giving and giving and giving. We made five different proposals. We did something completely unorthodox—we kept negotiating against ourselves."

If Bettman is upset that the owners are negotiating against themselves, he has no one to blame but himself. The fact that the NHL tabled such a ridiculous proposal in the summer gave them no choice. The owners were going to have to give up plenty of the outlandish terms they initially wanted in order to get the terms they realistically could expect (e.g., a 50-50 split of HRR).

But that isn't the usual give-and-take that happens in negotiations. Usually, you give the other side something important in order to get something important for yourself.

In the last round of CBA negotiations, the ones that ultimately cost the 2004-05 season, the players were forced to take on a salary cap and were generally hammered by the owners. All was not bad, however. During negotiations they won in other areas, such as liberalized free agency. Give-and-take.

During these negotiations there has been less give-and-take. It's more like give, give, give. But despite what Bettman claims, it isn't the owners that are giving.

HRR Share

The two sides have agreed to a 50-50 split of HRR. This is the biggest win for the owners as the players have agreed to reduce their share from 57 percent to 50 percent. It doesn't matter that the owners initially wanted a 57 percent share themselves (although Bettman admitted this was a move to eventually end at 50-50), dropping that demand to 50 percent does not constitute a concession.

The owners are not conceding anything here. They are gaining money and the players are losing money.

Concession: Players

Make Whole

The owners have increased their last offer of $211 million up to $300 million, $50 million of which goes to player pension. While this is movement off their initial proposal, it does not constitute a concession either.

First, by agreeing on $300 million, the NHLPA actually moved further from their initial demand. The players originally wanted $393 million in Make Whole, so they are moving $93 million compared to the owners' $89 million.

More importantly, Make Whole, in essence, is salary rollback. It would be much more transparent to call Make Whole "The Craig Leipold Tax". It is the amount of money the players would lose when their share of HRR drops from 57 percent to 50 percent. So, although the owners are increasing the amount, this was already the player's money.

Saying the owners are making a big concession here is like saying you are conceding by paying someone $40 instead of $25 even though you originally agreed to pay them $50. Sure, you're paying them more than you want, but you are still paying them less than what you initially agreed upon.

Concession: Players

Contract Limits

Ah, five-year contact limits. The hill the NHL is willing to die on. Ostensibly because they don't trust GMs not to sign everyone to a Rick DiPietro deal.

It doesn't matter that the NHL initially tabled five-year contract limits on all contracts, but are now willing to allow seven-year deals for teams signing their own free agents. That isn't a concession.

Notice a pattern?

The players are conceding because there were no contract limits in the last CBA. So by agreeing to any (the union is willing to go with eight-year limits on all contracts) they are losing some of the power they had in the last CBA. The union argues this will create an NBA style system where the stars get paid big and there are crumbs left over for the middle-class.

The fact that the NHL doesn't want any variance larger than 5 percent year to year also represents an attack on player contracting rights (albeit a justified one to close the loophole allowing back-diving contracts). The NHLPA has countered with a rule limiting the variance to 25 percent over the term of the contract, but only for contracts longer than seven years.

Again, this is a concession by the players as agreeing to any restriction limits their freedom to sign contracts.

Concession: Players

Contract Rights (i.e., free agency, arbitration, entry-level contracts)

There will be no change to contract rights. Free agency, arbitration, and entry-level contracts will still exist and operate just like the past seven years.

Concession: No one (unless you consider not clawing back anything the players won in the last CBA a concession, if so, this is a "concession" for the owners)

Compliance Issues

There are two main issues:

1) Non compliance buyouts: contract buyouts that don't count against the salary cap during the transitional period before the new CBA is in place. Basically, a one-time amnesty clause like the NBA instituted after its lockout.

One existed in the last CBA, giving teams a one-time opportunity to buy out players penalty free before the start of the 2005-06 season. (Note: penalty free in terms of the cap, teams were still required to pay a player the money associated with the buyout).

The union wants these buyouts while the owners do not.

2) Escrow limits: player contributions increase or decrease depending on whether the league hits or misses estimated revenue each season.

The union wants escrow limits and the owners do not. There was not an escrow limit in the last CBA, so its inclusion would be a concession by the owners.

Concession: Unknown

Revenue Sharing

In the owners' offer to save the 82-game season they increased revenue sharing to $200 million (up from $150 million in 2011-12), although not as much as the NHLPA wanted ($260 million).

Although this is the owners' concession (Gary Bettman once called it a non-issue and a distraction), it's actually a positive for the league as a whole—both players and owners. More revenue sharing means healthier teams, not just the ones like Toronto, Montreal and New York which can print money. And healthier teams means more teams that can afford to spend money on players. 

Although it's a concession by the owners, it's a win-win issue. (Use one of your free Globe and Mail reads to check out James Mirtle's excellent summary of revenue sharing and why it's important).

Concession: Owners

CBA Term

The NHL now wants a 10-year CBA term with a mutual opt out after eight years. The players offered eight years and an opt out after six.

Both sides have already changed their demands on this issue. The NHL first proposed five years, whereas the union initially wanted three years plus an optional fourth (absurd). Then, according to the NHLPA, once the union moved up to a five-year agreement the NHL upped their target to six years, plus a mutual option for a seventh year (a term consistent with the last CBA).

Both sides are going to make a concession in regards to the length of the CBA, and the obvious term is directly in between the two offers, so I'm unsure why this is such an issue. Nine-year term with an opt out after seven.

Concession: Likely both

In sum, almost everything the NHL has wanted movement on, the NHL has received. Painting Fehr as stubborn and unwilling to negotiate is a farce. The union has made major movement on all of the important issues, including HRR split, Make Whole and contract limits. The owners have countered with not attacking player contracting rights and a willingness to support struggling franchises with revenue sharing—something the MLB, NBA, and NFL do to a far greater extent.

But despite the doom and gloom, CBA negotiations have not become a smouldering pile of ash. The two sides are close and there is a deal to be made, the NHLPA will just have to make a few more concessions and the NHL will have to start.

2 comments:

Anonymous said...

Players loosing money when HRR is splitted 50-50? That is simply wrong. Even without being "made whole" they don't loose money in the long run. Their piece of the cake is growing more and more from 2015 on.
They always argue about young players here and there but they don't negotiate for rookies, they only negotiate for themselves. That PA should've been prohibited a long time ago.

Matt Horner said...

Compared to what they were making, they will lose money. So from their point of view, if they are willing to sacrifice money going forward to make the share 50-50, why should they give up others things (e.g., contract rights)

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