With winter approaching, many Washingtonians begin to look forward to the start of the Capitals’ upcoming season. Unfortunately for hockey fans everywhere, the wait for the next hockey season may be longer then expected. The National Hockey League Players Association (NHLPA) and the NHL are currently in negotiations to come up with a new collective bargaining agreement (CBA) after the current one expired on September 15. The recent expiration of the CBA sends the NHL into its second lockout in eight years.
The first issue is with the “Players’ Share,” which is how the NHL’s revenues are divided amongst the owners and the players. In 2005, it was agreed that 54 percent of the league’s revenues would go to the players. Over the past seven years, that number has risen to 57 percent, which is too high for the NHL’s liking. Compared to other sports, the NHL players are in a favorable position. Recently, the NFL reduced their players’ share to about 47 percent and the new NBA CBA splits the revenues right down the middle. The NHL wants to bring down their players’ share closer to those of the NFL and NBA.
The next issue deals with the salary cap floor or the minimum season payroll of a NHL team, which is currently at 16 million. The issue is that teams who are losing money would rather employ players that lower their overall payroll than more expensive alternatives. The NHL is trying to lower or eliminate the floor to help owners save money. The players support the idea of a salary cap floor because it would ensure decent salary for all players.
Also in discussion is the guaranteed contract clause. Under the current NHL CBA, a player is guaranteed to earn every dollar in their contract unless the team buys him out, which results in major financial penalties and cap hits that the NHL is looking to avoid. The problem starts when a player gets signed for 10-15 years at a time, which is not uncommon for big-name superstars. With these long term contracts come expensive price tags and big cap burdens. The NHL solution consists of new non-guaranteed contacts that allow owners to cut players with little or no financial penalty. For the players, the non-guaranteed contracts eliminate the financial security players have if their career is cut short.
The next issue concerns the escrow payment, which exists to ensure that all teams and players split the revenue correctly. During the year, a percentage of the players’ salaries are placed in escrow (12.5 percent). When the NHL revenues are determined at the end of a season, the money in escrow is divided amongst owners and players evenly. The issue here is that troubled franchises drag down the overall revenue and as a result receive most of the escrow money. In other words, players on successful teams have to pay for teams that cannot support themselves with their own team’s revenue.
Finally, the issue of revenue sharing has the NHL and NHLPA up in arms. As mentioned previously, high revenue teams give money to low revenue teams on a yearly basis. The issue here is that the rich teams are no longer willing to give away more of their money to support these troubled teams. However, the amount currently given to these troubled teams is not considered generous and collectively, the NHL is making more then they did in 2005. So as part of a new CBA, the NHL has proposed an increase in the revenue sharing for the lower income teams that will make all teams more financially set and competitive.
The two sides have still not made much progress towards an agreement even after the deal expired. As of now, current NHL players are now considered unemployed and are free to sign anywhere else around the world. Some big names that have already signed to European leagues included Ilya Kovalchuk, Alex Ovechkin, Nicklas Backstrom, Semyon Varlamov, Evgeni Malkin, Sergei Gonchar, Ruslan Fedotenko, Rick Nash, Anze Kopitar, and Jaromir Jagr, with more expected to join their ranks each day. Both sides are still open to continue negotiations, but the damage is done. The season will not start on time and players have already begun to sign elsewhere. All we can do now is watch as the life of the 2012-2013 hockey season begins to wither away.
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