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SBJ/February 28 - March 6, 2005/Labor Agents
Would delay give NHLPA leverage?
Published February 28, 2005
The NHL is calling for a quick return to the bargaining table with the NHL Players’ Association in hopes of getting a labor agreement in place well ahead of the prime selling season for tickets and sponsorships.
What remains to be seen is whether the NHLPA will use that dynamic to gain leverage, delaying talks until after owners start feeling more financial hurt, or accept an invitation the league says it will make in the next few weeks.
Both sides remain bitter following the failed attempts to revive negotiations days after the season was officially canceled, and were pointing fingers at each other last week regarding who was at fault. Media reports that the sides had reached an agreement in principle and would be restoring a shortened season turned out to be a heartbreaking tease for hockey fans and an embarrassment to legends Wayne Gretzky and Mario Lemieux, who got involved in the talks for the first time in their capacity as team owners.
Now, the reality is setting in that if no deal can be worked out by May or June, the period when teams start unleashing season-ticket renewal campaigns and re-up sponsorships, it could deal a permanent blow to the financial foundation of the league.
About half the league’s 2003-04 revenue, or $1 billion out of $2.1 billion, came from ticket sales, and another $400 million-plus from arena-related activity, including advertising. An offseason without a labor deal could wreak havoc on those revenue streams, especially if the league moves toward using replacement players, an option it has acknowledged considering.
Team owners say they hope to avoid having to sell tickets and corporate deals without a labor agreement in place.
“It will be very difficult,” said Boston Bruins owner Jeremy Jacobs. He said he felt the cancellation has already done great damage to the sport, and that the longer the uncertainty continues the more of an impact there will be. “Quite honestly, in Boston I feel I can’t get the kind of attendance I did before. I think we set ourselves back a few years.”
Trying to stop the bleeding now, both the NHL and team officials will try to convince players that it’s in the best interests of both parties to get back to negotiations quickly.
“The sooner we get this negotiation done, the better it is for the industry and everyone in the industry,” said NHL senior vice president and chief legal officer Bill Daly. “I think they [the players] have an interest in getting a deal done at an early date as well.”
He said the league likely will reach out to the union not long after the NHL board of governors meets in New York on Tuesday.
“I would love to see everybody get right back to the table and get a deal done, so we can let our fans know there’ll be a season,” said Philadelphia Flyers Chairman Ed Snider.
“I don’t want to see us wait,” echoed New Jersey Devils President Lou Lamoriello. “This has to be approached, in my mind, as soon as possible.”
Daly said that at the final last-gasp negotiating session, NHLPA director of business relations Mike Gartner, an NHL hall of famer joining the proceedings for the first time, opened and closed the meeting by calling for both sides to seek a speedy resolution.
“I would have to surmise he was speaking on behalf of the players association,” Daly said.
The union has made no public comment as to when it hopes to resume negotiations.
NHLPA senior director Ted Saskin said last week, via e-mail, “Next week, the NHLPA will be holding meetings with our membership and the certified agents, and at the appropriate time further negotiations with the league will occur.”
The NHLPA meetings in Toronto will kick off today with two days of player meetings followed by an agents meeting on Wednesday.
In the players’ camp, there are some who believe that the leverage has reverted back to their side, because owners will feel the entire financial future of the sport slipping away during the offseason, while players are not paid during that period to begin with. The NHLPA is paying its members stipends of $5,000 some months and $10,000 other months. It’s a far cry from the average player salary of $1.8 million per year. But some still believe owners will feel more pressure in the spring than players.
But few are calling on the union to point that gun at the league’s head when so much seems to be at stake for both sides.
“On the leverage issue, I guess there’s an argument to be made,” said agent Don Baizley, who represents several of the league’s top players, including Peter Forsberg and Paul Kariya. “But the carnage to the game appears to be so serious. It looks like there was a little bit of traction and momentum the few days prior to the cancellation. I’d like to know if it would be possible to recapture any of it.”
In order to push the players association to the negotiating table more quickly, the NHL has a few carrots to hold out.
The league is still dangling one major incentive at players — the possibility of a pay scale not directly linked to league revenue.
The most notable progress in previous negotiations came when the NHL dropped its insistence that player salaries be directly linked to revenue. The NHLPA simultaneously came off its opposition to a team-by-team salary cap. With the philosophical barriers broken, many believed a deal was imminent, only to see the talks break down over the dollar amount for a salary cap.
At the press conference announcing the cancellation of the season, NHL Commissioner Gary Bettman said that sort of “delinked” deal was now off the table, because there was no way to accurately predict future revenue for the sport due to the damage caused by missing an entire season.
But in an interview last week, Daly indicated a deal not directly linked to revenue might be considered by the NHL as long as it is reached quickly.
“I wouldn’t say ‘under no circumstances,’ but by the same token I wouldn’t say it’s still there,” he said, referring to the sort of agreement the sides had been discussing in the final negotiating sessions prior to the season being canceled.
If there is no rapid resolution, Daly said the league has “four or five … business alternatives” it can pursue, each of which will be laid out to the governors this week. A decision regarding which alternative is employed will probably be made by April, he said.
Although he would not detail what any of those alternatives involve, one is the use of non-union replacement players.
In a television interview on MSG Network in New York last week, Bettman said the league will consider using replacement players next season if no new deal is reached. “It’s obviously an option,” he said. “I’m not prepared to suggest that’s the route we’re going to go at this time.”
One thing Bettman has made clear is that the league plans to start a season next fall, one way or the other.
That means that if there is no agreement in place with the union, teams will be faced with having to ask season-ticket holders and sponsors for money with no clear idea of what sort of product they can offer in return.
Many clubs have offered incentives to season-ticket holders to forgo refunds this year and keep their money with the teams, something that will likely make renewing season tickets easier.
The San Jose Sharks, for instance, are offering 7 percent interest to season-ticket holders to keep their money with the club, as long as that money goes toward season-ticket purchases in the future. The interest is reduced to 2 percent if at any time a season-ticket holder asks for his or her money back. Team President Greg Jamison said more than half of the club’s 10,000 season-ticket holders have kept their money with the team. The Florida Panthers said that 82 percent of their season-ticket accounts have chosen a similar option.
In contrast, the Buffalo Sabres never asked season-ticket holders for anything other than a $50 deposit. The Toronto Maple Leafs got full payment from season-ticket holders but have been allocating refunds throughout the season. The team has a 99 percent season-ticket renewal rate, and President Richard Peddie said he thinks most will renew again in order to protect their coveted seats.
But clubs admit the notion of selling high-priced tickets (the NHL average is nearly $45 per seat per game) and sponsorships without major league talent committed to play is something for which no one is really prepared.
Asked if he thinks he can sell season tickets under that scenario, Washington Capitals owner Ted Leonsis said, “I don’t know. I haven’t done it yet. … We’ll get the playbook from the league.”