NHL lockout: League, union can't afford to pass the point of diminishing returns

Out of all the rhetoric spewed by the NHL and the NHL Players' Association over the past week, one sentence keeps echoing in my head. It came from George Parros, the mustachioed enforcer who majored in economics at Princeton and serves on the union's negotiating committee.

"Obviously," Parros said, "you don't want to lose half the season for one percent."

To be clear, the owners and players are not one percent apart, far from it. We're talking about where you draw the line in a lockout and how long you hold it.

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Parros wasn't revealing any official cost-benefit calculation. He said the players aren't quantifying it like that. The owners probably aren't quantifying it like that, either. At least not yet.

And when you're fighting over this kind of money, one percent is significant. One percent of $3.3 billion – last year's total of hockey-related revenue – is $33 million. Multiply that by four or five or six, the proposed lengths of the next collective bargaining agreement. Now add to that, maybe a lot to that, to account for potential growth. One percent could mean hundreds of millions of dollars over the course of the deal.

But think about it another way: What's $33 million divided by 30 teams? It's $1.1 million. What's $33 million divided by 700 players? It's $47,142.86. What's one percent if revenue goes down because of damage done by the lockout? It won't be $33 million anymore, won't be $1.1 million per team, won't be $47,142.86 per player.

[Related: NHL unlikely to employ replacement players if lockout drags on]

What's one percent, really, in the end?


Both sides need to seriously consider the point of diminishing returns here, with no formal talks planned four days into the lockout, with the sides only touching base informally and plotting strategy privately. Again, there is still a deal to be made and a chance for compromise, but it is slipping away, day by day.

Everyone knows what the core issue is: the percentage of hockey-related revenue. And like it or not, everyone seems to know what the middle ground is: an eventual split of about 50-50. The players are in the low 50s; the owners are in the high 40s. Despite all their differences, they are close enough where it counts most, and that's why it's so ridiculous and frustrating that they aren't negotiating.

If the owners scuttle half a season to get the players to 51, well, they essentially could have had them at 52 today. If the players sacrifice half a season to get the owners up to 48, well, they could have had 47 today. If they eventually reach a deal that looks like it could have been reached Sept. 15, the fans will be even more upset than they are now. Each of those precious percentage points could be less valuable.

The hope: Cooler heads will prevail. The lockout will last weeks, not months. The sides will meet in the middle, the game will keep growing, and everyone will make more in terms of actual dollars. The benefit of compromising outweighs the cost of not compromising. Obviously you don't want to lose half the season for one percent.


The fear: The longer this goes, the deeper each side digs in. Instead of being pressured by missed gate receipts and missed paychecks, the owners and players decide that they need to make the pain worth it – that they need to win. The cost of not compromising has become so high that there needs to be a benefit. Obviously you don't want to lose half the season for one percent.

[Also: NHL makes lockout-related cutbacks impacting league staffers]

"If they have a plan to wait us out or whatever, I don't know," Parros said. "We're just going to keep showing up, willing to negotiate, willing to talk, willing to get a deal done."

Under the players' latest proposal, their share would translate to 54.3 percent this season, then 52.5, 52.0 and 52.3 assuming the NHL grows at the average rate of the past decade, according to NHL Players' Association executive director Don Fehr. You can dispute the assumptions, as the NHL does. That's not the point. The point is, the players, at least philosophically, are willing to take less than the 57 percent they used to receive – significantly less.


Under the owners' latest proposal, which came off the table when the CBA expired Saturday night, the players' share would start at 49 and decline to 47 over six years, according to NHL commissioner Gary Bettman. You can complain that the owners are asking for huge concessions when they were asking for enormous ones before, as the NHLPA does. That's not the point. The point is, they have inched, at least, toward a realistic range.

Both sides are working within the salary cap system. Both sides are proposing the players take less of a percentage of revenue in the future, scaling down over time. Believe it or not, both sides are proposing increased revenue sharing, too, though the owners' proposal increases it from $140 million to $190 million, while the players' takes it to $240 million and changes the structure.

Strip away the egos and politics and leftover animosity from 2004-05, when the owners canceled the season and forced the players to swallow a salary cap, and this should be about numbers.

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Here is what needs to happen – and soon:


The owners need to back off their demand of an immediate pay cut. They need to pay the contracts they have already signed as they were supposedly intended, in some form or fashion. They need to offer higher percentages of revenue – offering to scale down to, say, 49 percent – and they need to offer to share more revenue among themselves.

They also need to stop attacking contract lengths, arbitration rights and free agency eligibility. It's one thing to tweak the rules so teams can't front-load contracts and circumvent the cap; it's another to strip so many of the players' rights. Those inflate salaries, but if you cap the players' share at the percentage you want, it shouldn't matter. You should be protected. (That was the idea last time, right?)

The players need to stop asking for an immediate raise – 2 percent, 4 percent and 6 percent the next three seasons, compounded. They need to offer to freeze the $1.88 billion in salary they made last season for one more season. They need to protect what they have now in actual dollars, then offer to scale down their percentage of revenue to an even greater degree – to, say, 51 percent.

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They also need to understand that while their revenue-sharing plan makes sense, because this is a league in which revenues vary greatly from market to market, it might not make sense in terms of reaching a deal. It takes 23 votes for the board of governors to approve a CBA. If you take from the rich to help the poor, the poor will vote yes. If you lower salaries enough across the board, everyone will vote yes. The rich get richer (even while paying more into revenue sharing), the middle class get breathing room and the poor get to survive.


Both sides basically know where they need to get to. Both sides generally say they could get there if only the other side would get there. Both sides point out none of that is on the table. Neither side wants to move too far too fast, this being the art of negotiating and all.

Well, somebody has to put something else on the table before any progress can be made. Somebody had better put something else on the table before the stubbornness snowballs. Somebody has to get within one percent of what the other side would reasonably take, to give the other side something to really think about. Neither side has moved far enough fast enough.

What is the end game? How far are you willing to go, and for what? Obviously you don't want to lose half a season for one percent. Obviously you don't want to lose a full season for one percent, either.

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