Here we go again with another sad day for hockey fans. The 2012 NHL lockout has sure been unfortunate for players and fans alike with limited information as to if or when the season will start. It’s been 8 years since the last 2004-05 NHL lockouts that canceled all of the games for the season and forced the NHL All Star game to be played in non-Winter Olympic years. Other recent lockouts happened during the 1992 NHL strike postponing 30 games and the 1994-95 NHL lockout with canceled a lot of the games shortening the season to 48 games without inter-conference games.
Why is this happening? Well, the short answer is of course money. With many of the teams in the NHL lacking in finances and many others just breaking even, a majority of the revenues comes from the top ten franchises. The collective bargaining of five items that need resolution before the season starts are: Player’s Share, Salary cap “Floor”, Guaranteed Contract, Escrow Payment, and Revenue Sharing.
During the 2005 NHL lockout negotiations a salary cap was established ensuring a salary cap floor. A percentage of the NHL revenues were agreed upon and the player’s share began at 54% in 2005. As leagues revenues increased over the years the percentage has now reached an all time high for the 2010-11 season at 57%. The NHL feels that player’s share is too high and compared to other professional sporting franchises the percentage is high.
The Salary Cap “Floor” is the minimum season payroll for any NHL team, $16 million below the salary cap. Teams that are not making a profit would like an option of lower payrolls so they don’t lose even more money. The league might lower the salary floor in relation to the cap or get rid of the floor.
The NHL Collective Bargaining Agreement established in 2005, a player is guaranteed every dollar of a signed contract unless his team buys him out. Buyouts can be pricey as a team is required to pay two-thirds of the remaining contract value and takes on a long-term salary cap hit. Player contracts can be as long as 15 years with huge price tags as well as salary cap issues. The league might push for non-guaranteed contracts or term limits of 10 years or less.
The Escrow payment ensures every team and player receives the correct amount at the end of the season. During the 2010-11 season the NHL withheld 12.5% of a player’s salary in an escrow account and was paid at the end of the season with the rest of the revenues earned throughout the season. The problem is that players are concerned that league operated teams such as the Phoenix Coyotes drags down the overall revenues leaving less escrow money. Players don’t like the idea of losing revenue to teams that can’t support themselves.
Revenue sharing in the NHL is designed to level out every team financially. Money earned by high revenue franchises is distributed to low revenue franchises ensuring an even financial playing field. The current system is not considered to be overly generous but the high revenue teams are reluctant to give away more money to the teams in need. Since NHL revenues have increased substantially does it make sense that wealthy franchises share with teams that are losing money during the season? Players will most likely suggest increased revenue sharing as a sound solution but we will have to wait and see.
Either way the owners and the players need to come to an agreement and stop this nonsense because we all suffer in the end.