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NHL Lockout in 2012? A Look at the Issues.

The items that must be resolved if we are to avoid an NHL lockout in 2012.

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PITTSBURGH - OCTOBER 07: New logos are etched into the ice prior to the game between the Pittsburgh Penguins and the Philadelphia Flyers at the Consol Energy Center on October 7, 2010 in Pittsburgh, Pennsylvania.
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NHL Lockout Updates: Check here for the latest on negotiations between the NHL and NHL Players' Association..

July 12, 2012

The current NHL collective agreement expires on September 15, 2012.

The circumstances behind current negotiations are little changed from past years: Depending on who you believe, as many as ten NHL teams are serious money losers, while ten or more do no better than break even. The bulk of league revenues are generated by eight-to-ten highly successful franchises.

Having established a salary cap to end the 2005 NHL lockout, the league will likely emerge from its next round of negotiations with a cap system still in place.

Barring a major overhaul of that system, here are five items that have to be resolved in collective bargaining if the NHL is to avoid a strike or lockout in 2012.

  1. The Players' Share

    What is it? The salary cap and floor are calculated to ensure the players receive an agreed percentage of NHL revenues. The players' share began at 54 per cent in 2005. It climbed as league revenues increased, and was near 57 per cent in 2010-11.

    What's the problem? The players' share is too high for the NHL's liking.
    Trends in other sports would appear to favor the NHL's position. In its recently signed deal, the NFL reduced the players' share to about 46-48 per cent, while the new NBA CBA splits revenue approximately 50-50 between players and owners.
    The players will counter that each league defines its revenues differently, and when those differences are accounted for, the NHL players' share under the current CBA is on a par with the NBA and NFL.
    This is the core issue that drives all the others. Once a revenue split is agreed to, all that's left to decide is how each side will divide its share.

  2. The Salary Cap "Floor"

    What is it? The minimum season payroll of an NHL team. A formula in the 2005 NHL collective agreement sets the annual floor at about $16 million below the salary cap.

    What's the problem? Money-losing teams would prefer the option to carry much lower payrolls. Spending to the floor means they lose even more cash. The league will likely seek to lower the salary floor in relation to the cap, or eliminate the floor altogether.
    The players will fight this. A salary floor helps distribute earning potential on all thirty teams, rather than having too much salary tied up with a few wealthy franchises.

  3. The Guaranteed Contract

    What is it? Under the current NHL CBA, a player is guaranteed to earn every dollar of a signed contract, unless the team buys him out. Buyouts are expensive: a team pays two-thirds of the remaining contract value and absorbs a long-term salary cap hit, while the player is free to sign and play elsewhere.

    What's the problem? As in 2005, the NHL is seeking ways to save team owners from themselves. It's not unusual to see star players signed to contracts running 10, 12, or 15 years, with enormous price tags and salary cap burdens. The NFL's widespread use of non-guaranteed contracts, allowing teams to cut players with little financial penalty, surely looks attractive to owners. The league will also likely seek a term limit of 10 years or less.
    This will be a big fight for the players, as the guaranteed contract is about the only guarantee a player has in a game where many careers are short.

  4. The Escrow Payment

    What is it? To ensure the correct revenue split between teams and players, a percentage of player salaries is placed in escrow during the season. (In 2010-11, the withheld share was 12.5 per cent.) When exact NHL revenues are determined at the end of the season, the escrow account is divided among players and owners to ensure that the targeted split has been met.

    What's the problem? Players are concerned that a small number of troubled franchises - most notably the Phoenix Coyotes, operated by the league as it searches for a new owner - drag down overall revenues and suck up much of the escrow money. Effectively, their pockets are being picked to prop up lame-duck teams.
    That opens the larger issue of franchise stability and profitability, which the NHL and team owners consider to be their business, not the players.

  5. Revenue Sharing

    What is it? To even the financial playing field, high-revenue teams distribute money to low-revenue franchises every season.

    What's the problem? This could be a point of contention between have and have-not teams. The current revenue sharing system is not considered especially generous. But the rich teams are surely reluctant to give away more cash.
    The players will surely suggest increased revenue sharing as a solution for the game's weakest markets. The argument will likely go something like this: Overall NHL revenues have increased substantially since 2005, so the NHL makes plenty of money. If the wealthy franchises share more generously with the money-losers, all teams can be financially sound and competitive.

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