A Level Playing Field, Or Corporate Welfare


A war of words is close to starting between the NHL and the Players Association representing the players, and early indications are that this will get nasty.  The salary cap implemented with the previous CBA has risen and grown each season representing a solid financial footing for the league as a whole, but there are a couple of issues which raise the question as to how successful it has been.  Today I will try to seperate fact from fiction in terms of the previous negotiations, and how the next round of bargaining may go.

The work stoppage that took place in 2004/2005 was sold to the fans by the league in a variety of ways, playing on the emotions of the paying customers.  Listing instability in the market place as the largest reason, the NHL claimed concern for the poor small market franchises that were struggling to keep up with escalating salaries.  Cost certainty was the name of the game, and in the end the NHL got what it wanted.  Fast forward 6 years and what has happened, the field is far from level.  The large market teams that could absorb huge losses in salary still can, and now the small market teams the NHL was out to protect are forced into writing checks that make those that they were complaining about look microscopic.

The theory of leveling the playing field was wrong from the outset, as too many outside factors influence the market place.  Team owners will argue that teams such as the Toronto Maple Leafs and the New York Rangers can outspend all of their rivals, giving little hope for the little guy to compete.  This theory could have been debunked easily as the two teams combined have 1 championship title over the past 45 years.  This represents 90 years where the smaller markets prevailed, not too much of an unfair advantage.  Players make decisions based on a variety of reasons, money only being one.  If that is the case, a player could take a 20% pay cut by signing in a market such as Florida or Tampa Bay, and it would look more like a 2% or 3% pay cut due to the fact that Florida has no income tax rate.  This means that in 2012 that a player in Toronto would be required to pay 29% federal income tax and 11.16% provincial income tax, while the Florida player would only pay a 35% tax rate.

The money aspect only represents one portion of the argument, as players often have other reasons in mind.  If you had the choice between relative anonymity or a constant barrage of media attention, which would you prefer?  This is yet another condition that markets have little if any control over, yet the financial incentive that previously existed for the inconvenience of all this attention is no longer available.  The smaller markets only real disadvantage is the fact that they can’t draw the crowds or get the media contracts that larger markets can.  Leveling the players salaries did not and will not do anything to correct this.

Today an interesting development occurred in Glendale, Arizona.  The Mayor of the city launched a pre-emptive strike against the NHL by publicly defacing the way the sale of the Coyotes was handled.  Eileen Scruggs did what many others before her have, and judging by the way it ended for them it may be safe to say that the Coyotes address will change over the summer.  To quote Scruggs directly;

“They have been in control of this process for the entire time. They have led us to this terrible point we’re at today, it’s their problem, they misled us and they can’t do this to our city.” – courtesy azcentral.com

None of this is really surprising to anybody that has been following this story from the begining.  Scruggs blaming the NHL is not totally accurate, as even casual observers knew that this was fools gold from the begining.  This is the case of a politician that had an awful financial decision contribute to her demise, and deflecting the blame is the easiest thing to do.  If anybody deserves sympathy in this mess, it is the taxpayers of Glendale Arizona that after the playoffs will own a large unoccupied building, and be out $50 million for the trouble.  But to get back to the original subject matter, this proves the current collective bargaining agreement fatally flawed.

The NHL claimed it was looking to protect it’s weakest business partners, but the success of it’s best franchises has actually put them in more peril.  It must feel great for MLSE to write a revenue sharing check to the Phoenix Coyotes while they have limited control over the amount they can pay their own employees.  Same goes for the New York Rangers, who truly have a salary cap spending amount closer to $80 million this season.  The NHL has simply created another problem as the Phoenix situation is far from the only area of concern.  The New Jersey Devils are reportedly close to bankruptcy, and the Mayor of Newark made some very unsavory comments about current owner Jeff Vanderbeek.

This is not a gripe about salary spending, rather an acknowlegement from a fan point of view.  The NHL claimed ticket prices would level off and benefit the fans in the new age of cost certainty.  If you are a fan of the Florida Panthers or Carolina Hurricanes, tickets are inexpensive and accessible.  The opposite end is the fans of the Canadiens, Rangers, and the Toronto Maple Leafs that earn three to four times as much on average per ducat.  In turn, fans of these organizations get to see their team handcuffed as a reward for being successful.

Earlier in the week Ken Campbell alluded to awful management as the sole reason for the demise of the Canadien clubs.  This is true on many levels, but the theory does not reflect the competitive disadvantages the larger markets are now saddled with.  Morning radio host’s have railed on about how upset MLSE should be about the amount of money players are earning by not playing for the Leafs, but in truth this is probably a moot point.  The organization was spending close to $70 million prior to the cap being implemented, they are paying close to that now.  The question is will the NHLPA have the leverage to get the cap relaxed, they most certainly have the right guy in charge to do so.  Only time will tell.