There is no sleeping aid in the world for insomniacs to compare with a reading of the National Hockey League’s collective bargaining agreement.
It’s about as dull and as dry as it gets, dead certain to make your eyelids heavy within seconds.
There is, however, no denying that it is a finely-crafted document that should guarantee the game financial stability into the foreseeable future.
Players doing fine
Of course, it could never have been put into place without the acquiescence of the players association but, please, no crying on that one. The players are making out just fine, thank you. If revenues hit projections this year, they’ll average about $1.8 million US a man, not far off pre-lockout levels.
So, what kind of economic sleight of hand is at work here?
How could all those teams in marginal markets afford to make such dramatic salary increases to bump up against the salary cap of $44 million?
These are teams that were, two years ago, in danger of extinction, unable to afford even those previous modest payroll levels.
Chicago Blackhawks, playing to 64% capacity at the United Center, have increased payroll by $17.5 million since the end of 2003-04. Minnesota Wild is up by $17.8 million. Pittsburgh Penguins, with all their financial problems, is up $14.6 million. Florida Panthers, up $16.2 million. Atlanta Thrashers, up $12.6 million. Nashville Predators, up $11.4 million. And so it goes.
At least 15 teams have increased their payrolls from the end of 2003-04 and the average increase is more than $10 million per team.
In the end, even taking into account the dramatic payroll reductions in Detroit, Philadelphia, Toronto and other cities, the league-wide total amount of money committed to salaries — about $1.25 billion — is not very much different from where it was three years ago. So, how did the league go from being financially unstable to relative cost certainty without affecting total salary levels?
There are two things. One is a revenue-sharing plan whereby money is transferred from the top 10 revenue-earners to the bottom 10.
The second, is ingenious. Written into the CBA is a plan where 10% of player salaries are withheld in escrow until total league revenues have been calculated (and agreed to by both players and owners). Player salaries can not exceed 54% of total revenues. If there is a shortfall in revenues, it is paid out to the owners from the escrow fund. If revenues come in higher than expected, the players get their 10% back, plus interest, plus whatever money they’re owed to get the payout up to 54%.
This is not news. The escrow account was always a unique part of the CBA but now that we’re seeing it in practice, its role and its value is in much sharper focus.
In essence, the players have become partners with their bosses, sharing in wins and losses off the ice as well as on it; sharing also in the thrust to grow the game. In good years, players will share the wealth. In bad times, they will give money back to keep struggling teams in the game.
In 2005-06, the NHL did its calculations based on total revenues of $1.9 billion.
They exceeded that figure by enough that the players got the entire escrow fund back, plus interest, plus a bonus.
This season, revenues were guesstimated at about $2.3 billion. If revenues are less than that, (and it seems that might be the case) the shortfall will come out of the escrow fund.
The players might not be thrilled about it but what’s wrong with them accepting some of the liability when they are being rewarded so handsomely? If there is risk in the enterprise, then why shouldn’t the players accept a small portion of that risk?
Some of the rich clubs may not be happy because it means sharing their profits and it keeps them from buying championships.
On the other hand, most of those rich clubs are spending far less on salaries now and can afford to share. More to the point, NHL teams have once again begun to appreciate in value.
The end result is a league with some financial stability and a sense that the competitive playing field is all about how smart and resourceful teams are, not how much money they have.
For 40 years, the National Football League has recognized that the key to its success has been a system that keeps all its franchises in robust financial health. It’s why the Green Bay Packers can compete on an equal footing with the New York Giants.
And now it’s why the Thrashers can compete with the Detroit Red Wings.