As we’ve all come to know over the past couple of weeks, solving the impasse that has led to NHL Lockout, Part III isn’t exactly as easy as people would like to believe. On the one side you have owners who have undermined their own objectives time and again, but still have the right to try to fix it this time. On the other side you have the players, who are simply asking that the full value of the contracts they signed in good faith be honored.
Not that anybody is asking, since he was kicked to the curb by his own dysfunctional constituents three years ago, but former NHL Players’ Association executive director Paul Kelly has some thoughts on what might ease the logjam. And it has to do with expansion, specifically to suburban Toronto (Markham) and Quebec City. As Kelly sees it, making expansion a part of the conversation when it comes to the new collective bargaining agreement could bring both sides closer to realizing their goals.
“If the NHLPA hasn’t raised it as a potential part of the solution, then it ought to,” Kelly said. “Maybe they’ve tried and had the door slammed in their face from what we’re seeing, but it really makes a great deal of sense.”
The only problem, as we all know, is that expansion revenues were not considered a part of hockey related revenue (HRR) in the last CBA, and the league’s last proposal suggested keeping the definition of HRR intact. But the way Kelly sees it – and it’s hard to argue – the NHL is in clawback mode, but will need to make a concession on some things for this to get worked out. So why not split the pie equally when it comes to expansion fees? Two expansion franchises in such fertile territory would bring in at the very least $600 million in expansion money. Working on the 50-50 revenue split, putting that amount in the pot would more than make up for the gap between the players’ and owners’ positions. Not only that, those two franchises would be revenue producers, which would enhance the health of the bottom line and give both sides access to more money.
Perhaps it’s too simplistic, but maybe a little simplicity and common sense is what is needed now. The two Eastern teams could easily be accommodated by moving the Winnipeg Jets to the Western Conference, giving the league two 16-team conferences. And as far as the detrimental effect a second team in Toronto would have on the Maple Leafs, well, the league pretty much declared that moot last week when it blessed the New York Islanders decision to move to the Barclays Center, which is six miles from Madison Square Garden.
Depending upon whose perspective you’re relying, the two sides are anywhere from close to an agreement or miles apart. But this much is true. The players have come to the realization that revenues are going to be split 50-50 at some point in this agreement and the owners, by virtue of their “make whole” proposition, are willing to move at least some on the players’ demand they receive full value for their contracts.
More importantly, according to Kelly, it makes sense to put franchises in such lucrative venues as soon as possible. The fact that it has the potential to bring the two sides together in the lockout makes it even more sensible.
“Especially with the Canadian television deal coming up in 2015,” Kelly said. “I really think it’s time the owners and the players start talking about, ‘OK, how do we build our business?’ The lockout is going to get resolved at some point, and in my view, a $3.3 billion business could easily approach being a $5 billion business within a year or two if they add two certain revenue-generating teams and get out of this cycle of work stoppages and lockouts and labor interruptions.”
What the league also needs, he said, is a long-term period of stability and growth, which it would get with a nine-year deal with an option for a 10th, rather than the six- or seven-year deal that is currently being discussed. Kelly sees no reason why, if the league and NHLPA are going to be partners, that a 50-50 split shouldn’t be part of the solution. But instead of demanding it be 50-50 right away, which forces the players to give back some of their salaries, why not have an average of 50 percent throughout the deal, with it going higher than 50 at the beginning and dipping below 50 as some of the long-term contracts reach their conclusions.
“If you had a 10-year deal and it took you 53 or 54 percent of revenues in the first three years to meet those existing obligations, then you make up for it somewhere in the middle of the deal,” Kelly said. “Maybe you go 53 percent for a couple of years, then you bring it to 50, then maybe you swing it to 48 percent for a couple of years and players and general managers know they have four or five years to plan for that and then you bring it back up to the 50 percent level by the end of the term. With expanding revenues, even at 48 or 50 percent in those years, players are going to do fine.”
Kelly is worried about the lockout doing irreparable harm to the business and it remains to be seen whether that will indeed be the case. Perhaps his sense of give and take would be different if he were still running the NHLPA, but we’ll never know now. It might have been nice to find out, though.
Ken Campbell is the senior writer for The Hockey News and a regular contributor to THN.com with his column. To read more from Ken and THN's other stable of experts, subscribe to The Hockey News magazine.