Lockout Lesson Learned: Too Many Teams

This article originally appeared on AllPuck.com.

First Niagara Center

Photo by Dan Hickling

A high-profile sports agent1 once told me that the job of every commissioner is to keep the owners of his eight poorest teams happy.

It makes sense. Think of an NHL owners’ meeting like an annual family get-together. Your annual family get-together, perhaps. Every year, a couple of siblings can’t stop talking about how miserable their lives are while their brothers and sisters can’t stand to be in the same room, appalled that they’re somehow related to these idiots. New York and Toronto have better things to do than listen to Florida and Nashville whine and complain. The same can surely be said of every league — for the NFL, just substitute Dallas for New York and Jacksonville for Nashville. In the NBA, substitute the Lakers for the Leafs and the Bucks for the Panthers.

From the outside, it doesn’t make sense. Psh, billionaire problems, we moan. We wonder, if the Leafs are so rich, why aren’t they more influential? Meanwhile, inside the room, you can just imagine them shaking their heads, sighing, saying “my family is so … ugh.”

Sound familiar?

But is there a more dysfunctional family than the group of 29 NHL owners? I’ll stop short of complete sympathy with Gary Bettman, but you’ve got to admit that trying to keep these men on the same page — let alone the same 300 pages — sucks.

To be fair, having three lockouts in 18 years isn’t a simple case of cause and effect. The players’ union is a stubborn body too, and the owners’ dysfunction didn’t simply cause each work stoppage. But it didn’t help either, and this time around it was particularly harmful. Take the issue of contract lengths, for example. For the handful of NHL players fortunate enough to expect an eight, nine, or 10-year deal in their lifetime, swallowing a six- or seven-year limit on contract lengths wasn’t easy. But that bridge was crossed in a matter of weeks. It took the league nearly three months to move its proposed revenue split from approximately 57-43 in the owners’ favor to 50-50.

In case you missed it, the lockout mercifully ended after 113 days Sunday morning. For anyone trying to make sense of it all, each day was a little more frustrating than the last. There’s only one way it makes sense — trying to reconcile the divergent needs of a billion-dollar franchise like the Toronto Maple Leafs and a misplaced team bleeding millions each year like the Phoenix Coyotes. From an economic standpoint, the gap might not seem impossible to bridge until you consider how little NHL teams share their spoils compared to teams in the NFL, NBA and Major League Baseball2. Because the richest NHL owners are so unwilling to share with the poorest, insisting that players do so on their behalf, revenue sharing became the driving force behind an unnecessary lockout.

The Coyotes and their bottom-eight brethren will actually get a bigger share of the pie in the new Collective Bargaining Agreement. Teams will share $200 million in revenue, up from less than $150 million in the previous CBA, and possibly more if league revenues climb. The players proposed $240 million back in October, but even that should be considered a drop in the bucket compared to what is needed to keep a major sports league happy and healthy.

By comparison NFL teams are sharing more than a billion dollars annually by pooling national television revenues, sponsorship dollars and gate receipts (only 60 percent of the gate receipts at each game goes directly to the home team). The NHL doesn’t make enough off its national television contracts to share that kind of money. It relies on gate receipts3 more than any other league. Yet under the previous CBA, gate receipts weren’t shared at all. The NHL is the only league in which the home team keeps 100 percent of its gate.

The more a league shares its revenues, the less the “bottom eight” owners complain. It’s a proven formula. But the NHL doesn’t solve its family disputes by sharing, and the latest lockout is just another example. Joe Haggerty of CSN New England concluded: “It appears the NHL’s strategy was to grind out the players until January, throw the non-traditional NHL markets a bone by cutting off their three least profitable months of the season, and then cut a deal before throwing itself off the NHL fiscal cliff.”

Is there a better solution than another work stoppage? Always.

Forbes.com, in its annual valuation of the NHL’s 30 franchises, suggested that some teams need to relocate:

Drew Dorweiler, managing partner of Dartmouth Partners in Montreal … thinks Quebec, where ground has already been broken for a new arena, will eventually get an NHL team, and he also thinks Portland, where minor league hockey is popular, and Seattle, where the city has approved a new arena, would be better cities to house teams than Arizona, North Carolina and Florida, where NHL teams are losing money.

Fans of teams in the NHL’s original six markets have been saying this for years. Without having a single piece of data, they can tell you having NHL franchises in America’s so-called “Sun Belt” doesn’t make sense. What few realize is that the more a league shares its revenues, the less we wonder why cities like Glendale and Raleigh (or Green Bay and Oklahoma City) have major franchises.

But the logic of relocating merely amounts to an educated guess. Could Quebec City sell 13,000 season-tickets in less than half an hour? Would a natural rivalry with Vancouver be enough for Seattle to overcome its lack of hockey roots? Is Portland, a city roughly the size of Milwaukee or Oklahoma City, really a two-team market?

A veteran NHL player recently4 told me that contracting teams wasn’t discussed during its negotiations with the league. But why not? The owners have every incentive to keep the Coyotes in Glendale so long as local taxpayers are willing to chip in $25 million a year. It helps keep player salaries low through an owner-friendly loophole. Yet by removing the franchise from the league altogether, there are fewer players to pay. The Coyotes’ owner wouldn’t stand in the way; technically the team is still owned by the league itself. Eliminate one more franchise (Columbus is a strong possibility) and you’ve kicked the two biggest complainers out of the family. Keeping the owners of the “bottom eight” teams is instantly easier, the amount of revenue sharing needed to keep the league afloat instantly drops, and labor peace instantly becomes more manageable.

Hold a dispersion draft. Move an under-performing American Hockey League team to Phoenix, and put geographical rivals in established minor-league hockey markets like Las Vegas and Ontario, California.

It’s that easy.


One postscript.

Joe Kasel is a co-owner of the Eagle Street Grille in Saint Paul, Minnesota, a pub across the street from the Xcel Energy Center. He woke up at 5:45 today and was joined in bed by his 2-year old daughter when he read online that the lockout had ended. “I’m sitting there, Googling this NHL stuff,” he said. “It popped on the screen, so I’m screaming. She started screaming. She looked at me like ‘Why’s dad screaming?’ Then she started laughing.”

Kasel said he had to lay off 32 of his 48 employees because of the lockout. When we spoke on the phone tonight, he and his remaining staff were having a party.

“I’ve never had happier employees in my life,” he said.

Here’s hoping it’s the last lockout his daughter has to suffer through.


1. If I dropped his name, even your mother would recognize it.
2. There is no salary cap in MLB, but teams like the New York Yankees and Boston Red Sox have been deterred from incurring the league’s so-called “competitive balance tax” in recent years, and have reaped the consequences of overpaying for middle-aged players. Baseball also has meaningful mechanisms for compensating its lower-revenue teams through the draft; none exist in the NHL.
3. According to “The Business of Sports” by Scott Rosner and Kenneth Shropshire, the NHL made more money from gate receipts in 2011 than the NFL and NBA. Only MLB teams made more.
4. That was in November. I’m not going out on a limb by writing that the league didn’t seriously consider contraction over the last two months.

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