On Feb. 16, 2005, the NHL reached a new low in professional sports when it canceled an entire season because of a lockout.In a news conference at a Manhattan hotel, commissioner Gary Bettman related a conversation he had during the 2004 Stanley Cup final with Bob Goodenow, then the executive director of the NHL Players' Association.
"I candidly said to him, 'I've been hearing that players say that this work stoppage will last through a year-and-a-half or two years. Would you please explain to me what you think our world will look like when this is over?' " Bettman told the audience. "Without telling you what he said, what I wound up saying to him is, 'We will be very different. Instead of the players getting 53 or 54 or 55 percent of 2.1 billion [dollars], they may be looking at 53, 54, 55 percent of a billion.' "
Keep that in mind, as the NHL and NHLPA return to the bargaining table Friday in New York, negotiating formally for the first time in 16 days. It didn't quite turn out that way, did it? That explains why both sides, wisely or unwisely, feel they can survive another lockout. It also emphasizes that, for all the short-term angst, a collective bargaining agreement is about the long term.
We all know what happened in the aftermath of 2004-05. The lockout lasted one season, the owners got their salary cap … and the game recovered far better than anyone expected. Though the players accepted a 24-percent salary rollback, their percentage rose from 54 to 57 as hockey-related revenue rose to record levels for seven straight years, shooting all the way up to $3.3 billion in 2011-12.
[Related: NHL cancels entire preseason]
Now Bettman says the deal "actually turned out to be more fair" than it should have been, and the owners are demanding the players take a much smaller percentage of HRR. Again, the owners are using a lockout as leverage. Again, they're warning that the overall pie could shrink. Again, the players are digging in.
"I think people don't think it can go a year," said Red Wings forward Dan Cleary to the Detroit Free Press. "As players, we think it can. Maybe longer."
The current stalemate is about the short term. The owners say they cannot live another season like this because of skyrocketing costs, so they are demanding the players take an immediate cut from the $1.87 billion in salary they made last season. The players say they cannot give in again or the owners will just keep coming back for more, so they are willing only to limit their raises to 2 percent, 4 percent and 6 percent over the next three seasons, compounded. Nobody is budging. The sides are expected to speak only about non-economic issues on Friday.
We have wondered about the point of diminishing returns. When is the fight no longer worth it? When will you have lost more than you hope to gain? Will the fans come back the way they did last time, especially in non-traditional markets? Maybe they will. Maybe they won't, finally fed up with a league that keeps shutting itself down. We'll see how long this goes, and we'll see what happens.
But look at the proposals, look at the long term and you'll see what both sides are thinking. In the owners' last proposal, the players received 49 percent of hockey-related revenue in Year 1, 48 percent in Year 2 and 47 percent afterward. In the players' last proposal, it gets complicated after the first three years, but their share becomes tied to revenue again. Worst-case scenario: If revenues don't grow enough, the owners can extend the agreement two years while freezing player costs. Best-case scenario: If revenues grow to $4.2 billion, the players would receive 50 percent of that – and 57 percent of everything above that.
Why? Why would the owners need the players' percentage to drop to 47 by Year 3, and why would the players be so concerned about tying their share back to revenues by Year 4? Because revenues have the potential to pop in three or four years, and both sides want as much of that money as possible.
The union has projected a 7.1-percent growth rate, the average over the past seven years, despite the last lockout and the economic downturn. The league has been more pessimistic. Bettman has called the union's projection "inflated" and a "very high assumption," pointing out it includes the rise of the Canadian dollar and "one-time special events" such as the new U.S. TV contract with NBC and the Atlanta Thrashers' move to Winnipeg.
It is in the union's interest to be optimistic and the league's interest to be pessimistic about growth in these negotiations, but there are more reasons to be optimistic than Bettman admits. Though Bettman has a point about the Canadian dollar, he is ignoring some one-time special events that will come or could come.
The current Canadian TV contract runs out after two more seasons, and the NHL is expected to make a killing on the new one. And what if the league adds more Canadian teams? There are new arenas in the works in Quebec City and suburban Toronto.
In the big picture, the story behind owner Daryl Katz's trip to Seattle on Monday wasn't his empty threat of moving the Oilers or whether Wayne Gretzky was a witting accomplice. It was the fact that Edmonton will be getting a new arena, when all is said and done, with the Oilers raking in more revenue than they already do. It was the fact that Seattle will be getting a new arena, too, providing another potential spot for expansion or relocation, just not a new home for the Oilers.
If the New York Islanders can't build a new arena on Long Island, they could move to the new one in Brooklyn. Even the Phoenix Coyotes should represent growth. If Phoenix is a viable market and all it needs is stable ownership, as the NHL contends, then a deal with Greg Jamison should make the Coyotes grow. If the deal does not close, then the Coyotes should move. They have nowhere to go but up or elsewhere.
The NHL can generate more revenue in Europe. The list goes on and on.
What do you think our world will look like when this is over?
"Hockey is poised, I think, to really move over the next two or three or four years to a fundamentally different place than it has been before," said NHLPA executive director Don Fehr earlier this month. "The question is whether the disagreement we're now having is going to screw that up. If so, that's bad and it's unfortunate. We ought to be doing what we can to avoid it."
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