Article

July 2013

The hockey lockout of 2012–2013

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Although there is no universal solution to the inherent structural differences in markets and teams, one helpful measure is revenue sharing. However, big-market owners—similarly to their counterparts in other sports—are disinclined to share revenues with the have-nots. But the viability of the league depends on sharing, so that teams in disadvantaged markets can thrive and be competitive.

According to Forbes, Toronto has the most valuable franchise, at $1 billion, and St. Louis has the least valuable, at $130 million.20 The market model, however, does not work well with a marked rich–poor disparity. The NFL has the most revenue sharing of the major team sports, which is perhaps the chief reason for its success. One of the NHLPA’s objectives in the 2012–2013 negotiations was to get clubs to share more revenue. Absent significant revenue sharing, money-losing clubs may go bankrupt, as the Phoenix Coyotes did in 2009. Another dire possibility is a contraction of teams, as contemplated by MLB in 2002, before it adopted greater revenue sharing.

Key bargaining issues

The most important issue in the hockey negotiations of 2012–2013 was how the economic pie would be divided. Under the old agreement, the players’ share of hockey-related revenue had climbed to 57 percent. The league’s initial offer in July 2012 was to drastically cut the players’ share to 43 percent. The union expressed a willingness to move down from 57 percent, but wanted the new percentage linked to an increase in revenue sharing among teams and insisted that all existing player contracts be honored in full. (A reduction in the percentage of revenue going to players also was the main issue in the NFL and NBA negotiations in 2011.)

Another key issue was eligibility for free agency. Under the old agreement, players could become unrestricted free agents at age 27 or after 7 years of NHL service. The league initially wanted to raise the free-agency threshold to age 30 and 10 years of NHL service, whereas the union wanted to maintain the status quo. Other demands in the league’s opening proposal called for eliminating salary arbitration, changing the way the salary cap is calculated, adopting a 10-year collective bargaining agreement, and limiting player contracts to 5 years with equal money paid in each year and no signing bonuses.21 Unlike the negotiations of 2004–2005, in which discussions focused on the issue of whether to have a salary cap, the 2012–2013 negotiations centered on the division of revenue between owners and players.

Negotiations

Pitting Fehr and Bettman as adversaries in 2012–2013 was quite a contrast from the earlier era when Eagleson and league president John Ziegler placidly went about their business at the bargaining table. The law firm Proskauer Rose, which acted on behalf of the NHL, also represented the NFL, MLB, and the NBA in negotiations. Bettman, as well as NBA commissioner Stern, worked for Proskauer Rose in the 1970s. Therefore, the circumstances surrounding negotiations—circumstances created by the 2011 lockouts in the NFL and NBA and the adversarial relationship between Bettman and Fehr—contributed to the lockout.

The circumstances surrounding negotiations—circumstances created by the 2011 lockouts in the NFL and NBA and the adversarial relationship between Bettman and Fehr—contributed to the lockout.

The owners’ proposals to take a large share of money from the players were ill timed, as they coincided with a dramatic example of owner largesse. Nine days before the league made its opening proposals in mid-July 2012, the Minnesota Wild signed free agents Zach Parise and Ryan Sutter to matching front-loaded $98 million contracts.22 Moreover, the contracts were for 13 years, making the league’s proposal for 5-year limits on player contracts look oddly inconsistent.

Notes

20 Mike Ozanian, “NHL team values 2012: Toronto Maple Leafs are first hockey team worth $1 billion,” Forbes.com, November 28, 2012. Ironically, Toronto has not won the Stanley Cup since 1967.

21 “Labor talks hit crucial fork in the road,” Contra Costa Times, August 17, 2012, p. C6.

22 Michael Farber, “Warning shots,” Sports Illustrated, July 23, 2012, p. 24.

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About the Author

Paul D. Staudohar

Paul D. Staudohar is professor emeritus of business administration at California State University, East Bay, in Hayward, California, and a member of the National Academy of Arbitrators.