Does This Shed Any Light on the NHL's Revenue Sharing Plans?

Discussion in 'Fugu's Business of Hockey Forum' started by GabbyDugan, Jan 3, 2005.

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  1. GabbyDugan

    GabbyDugan Registered User

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    In it's lengthy proposal to the NHL about a month ago, the NHLPA laid out a very detailed revenue sharing plan. As I recall, part of the NHLPA proposal was that Canadian teams on aggregate would end up contributing about $17 million more dollars than they would be taking out of the plan.

    In its response, the NHL agreed that revenue sharing would be implemented in the future, and declared that the league had more than 30 revenue sharing proposals of its own. However, the NHL did not provide any details in its public response to the union's proposal.

    Now, my personal opinion is that revenue sharing is a bit of a red herring in this CBA. I know many of my fellow Oiler fans have high hopes of revenues generated in the big markets coming back to Edmonton along with suddenly affordable but still very useful UFA players, but I'm pretty doubtful that a new CBA is going to lead to either of these developments.

    Now, I'm not sure why Larry Brooks' most recent column didn't grab everyone's attention in this section of the boards already, but his January 2 article in the NY Post makes some pretty shocking claims about the NHL's plans for revenue sharing.

    First of all, he claims the pool will be between $ 80-95 million. I'm not sure exactly where the money that goes into the pool is coming from, and Mr. Brooks does not elaborate on this. I don't even know if we can assume that this is in addition to the 9% of revenues already shared (national TV revenues in Canada and the USA, licensed products, etc.).

    At any rate, Mr. Brooks provides some details on the restrictions that will be placed on teams before they can access these shared revenues. Again, I have not seen any of these details anywhere else, so I don't know if Mr. Brooks is giving us solid information or just providing more grist for the overactive NHL rumour mill. However, if teams in television Designated Market Areas of 2.5 million households are permanently locked out of the plan, that would mean teams like Anaheim (as mentioned by Brooks) and several others would never be able to collect from revenue sharing. Kind of makes it useless in Chicago, where Bill Wirtz refuses to reach out to viewers in his local Designated Market Area.

    The stipulation that teams must play to at least 80% capacity to receive shared revenues makes sense, but that bumps a lot of the bottom 10 revenue teams out of the plan, leaving Atlanta and Florida as the only recipients had the formula been applied to last season.

    Once again, I'll emphasize that my personal opinion is that revenue sharing is a bogus issue in the ongoing CBA battle, but I know many people , including some Canadian NHL fans, expect revenue sharing to benefit Canadian teams. Frankly, I think there is no hope of that whatsoever. Already the money Canadian networks like the CBC and TSN pay for NHL rights is flowing 80.0% into US -based NHL teams, and the new American TV deals provide little revenue that flows back to Canadian teams. If what Brooks says is even partially true, any new shared revenue plans that the NHL has in store will take even more money and put it in the hands of teams like Florida and Atlanta....

    Long term, Canada' NHL franchises are going to pump money into US teams to prop them up in a 30 team NHL. Frankly, I'd just as soon see NHL money that is generated in Canada stay in Canada instead of being put in the pockets of billionaires in Atlanta and Miami. If Edmonton has to give up money once it reaches the playoffs, I'd just as soon see an NHL team back in Winnipeg propped up by the "surplus" Canadian NHL dollars. Why should I want my CBC dollars and playoff ticket dollars go to Atlanta when I never even get to see Kovalchuk or Heatley play on HNIC anyways?



    http://nypost.com/sports/37600.htm

    "NHL PLAN FULL OF MYTH PRINTS"
     
    Last edited: Jan 3, 2005
  2. Tom_Benjamin

    Tom_Benjamin Registered User

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    At least some of it is accurate. The NHLPA proposal indicates the 80% number was part of the owner's plan. For their revenue sharing plan, they assume all teams will make the number.

    (They probably will. The only good news in the plan is that low revenue teams will be slashing prices to get above 80%. That's not good news for the players though, because if we assume these teams are now pricing to maximise revenue, the result will these teams will make less money from ticket sales. The result will work to reduce league revenues! Teams that are in the middle third may also have an incentive to under-report revenues.)

    There is a lot of information in the NHLPA report including the fact that the regular season gap between the richest team (the Leafs) and the poorest team (Nashville) is $76 million US. If Brooks is right about the Nashville number, Toronto has regular season revenues of $118 million. How profitable will they be under a $38 million cap?

    I don't think it is fair to call revenue sharing a bogus issue. It is critical. The gap between rich and poor grows every year and is the source of any real problems that do exist. What on earth do you do in a league where the gap is that much and players get free agency at some point in their career?

    The NHL solution is to peg salaries to the lowest common denominator, provide pretend revenue sharing and expect the players to work for what the poorest team can afford to pay. Naturally, they resist.

    The NHLPA proposes a revenue sharing plan that has the rich teams give money to the poorest teams instead of to the players. The NHL figure that won't change much on the salary front because what the rich teams cut, the poor teams will spend. Naturally, they resist.

    The NHLPA wants to solve any problems that spring from revenue disparities with revenue sharing. The NHL wants to solve any problems with salary cuts.

    Me, I don't think there is a competitive balance problem as long as the spending power is limited by late free agency and I would ignore both the revenue and payroll disparities. I think there are two teams - Toronto and New York - that can afford to spend, win or lose. Everyone else can afford to spend if they win, and can't if they don't. The spending power generated by market size doesn't mean much if you can't buy a winner. As a result, the playoff pool goes a long way to reducing the disparities between large and small markets.

    I think you are absolutely right about the Canadian factor. Under this system, only Ottawa would have received money last year. Montreal, Toronto, Vancouver and Calgary would have paid out money. Edmonton is a wash, but more likely to pay than receive if Cal Nichols is telling the truth about Oiler revenues. They will pay when they make the playoffs and break even when they don't.

    The idea that this is a plan for Canadian hockey fans is a tribute to the NHL marketing machine. It means that Canadian fans will be providing even more of a subsidy to weak American franchises. If we have to subsidise franchises somewhere, I think we would all prefer that they be weak Canadian franchises.

    I don't expect anyone else to pick up on the Brooks comment. I wish there was a lot more discussion in the media on the NHL plan and the kind of league it will create. I think the owners would lose a lot of their support.

    Tom
     
  3. txomisc

    txomisc Registered User

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    can anyone explain to me how legally its any of the NHLPA's business how the league shares money amongst its teams?
     
  4. Wetcoaster

    Wetcoaster Guest

    Because it is subject of CBA negotiation as it is in the NFL, NBA and MLB.
     
  5. Wetcoaster

    Wetcoaster Guest

    The National Hockey League continues to be vague about its plans for revenue sharing if it gets its way in CBA negotiations with the players. But the league's vision of a "revenue sharing pool that will be funded primarily by a portion of revenues generated in the Stanley Cup playoffs" may be one of the key reasons the big spending, high revenue teams have bought into Commissioner Gary Bettman's cost certainty mantra.

    Bettman has mentioned on several ocassions that he envisions only play-off revenues being shared. Bill Daly mentioned the same thing recently when he said:

    "[W]e believe enhanced revenue-sharing will be an important adjunct to a new Collective Bargaining Agreement, and can serve to reduce disparities among high- and low-revenue teams. The pool of revenue that can be used for enhanced revenue sharing can be derived from a variety of sources, including, in particular, revenues generated in the Stanley Cup Playoffs; it doesn't necessarily have to be sourced exclusively from high-revenue teams."

    The league confirmed it was still on that path in that recently leaked memo, in which Daly wrote: "we envision a revenue sharing pool that will be funded primarily by a portion of revenues generated in the Stanley Cup playoffs."

    High revenue teams would be adamantly opposed to sharing revenues generally as is done in other sports. Bettman would be fired if he tried to impose that. By putting forward play-off revenue sharing it is the only way to sell it to the owners and keep his job.

    Here's how Vartan Kupelian and Mike O'Hara of the Detroit News once explained how the Red Wings might view sharing their money:

    "You don’t want revenue sharing because you don’t want to send money down to Nashville, Florida or Carolina. Why would you? You’ve done your business well, hired the right people at the right times and put them in the right positions. But those teams — Nashville, Florida, Carolina and others — are going to the NHL and Ilitch with hats in hand."

    Under the NHLPA's revenue sharing proposal, the Red Wings ($7.9 million), Toronto ($10.9 million), Dallas ($9.9 million), Colorado ($8.9 million), Philadelphia ($6.9 million) and the New York Rangers ($6.0) million would combine to send $50.5 million to lower revenue teams. There is no way that Bettman can sell that and keep his job.

    But in the NHL's revenue sharing plan, Bettman appeases high revenue teams with the plan to use money from the Stanley Cup Playoffs as the primary source of funding for a revenue sharing pool and leave local and regular revenues alone. Under this plan Vancouver, Edmonton and Calgary could be sending money to Chicago.
     
  6. txomisc

    txomisc Registered User

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    that doesnt really help but thanks for the answer
    revenue sharing is between owners and owners and neither helps nor hurts players. Is it simply because theyve decided it something to include in cbas or does anyone know if the league wants to revenue share they are legally bound to declare that in their agreement with the players association.
     
  7. Tom_Benjamin

    Tom_Benjamin Registered User

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    Somebody else is better qualified to answer that then I am. I don't know if revenue sharing by itself would constitute an antitrust violation.

    I think it is more important as to whether we think fans have a right to know. Is it okay if the money I give my team for playoff tickets goes to the Nashville Predators rather than being re-invested in the team I pay to watch?

    Is it too much to expect that the NHL would adopt a common sense approach? Like, say, splitting the gate at every game? If they did that, they probably would not need any system of salary restraint.

    Tom
     
  8. Sammy*

    Sammy* Guest

    Isnt the problem as to what revenues get shared & what is the real value of those revenues?. Gate receips is the easiest to peg but my understanding other revenue streams are much more difficult .
     
  9. SENSible1*

    SENSible1* Guest

    Minimum cap

    By placing a high minimum cap and keeping the gap between maximum and minimum caps small, the owners have made the issue of revenue sharing entirely their business and not a CBA concern.

    The NHLPA has been garaunteed that a fixed % of total league revenues will be spent on them. It is up to the owners in the small revenue markets to get access to profits in the big markets or grow their own revenue streams.

    Why should the PA care if the Preds lose money by being forced to spend 35M as long as they get their pay?
     
  10. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    Id say the PA cares because they see a way for the league's bigger markets to help share the burden of helping the smaller markets instead of soley relying on the players to cap their salaries.

    dr
     
  11. Wetcoaster

    Wetcoaster Guest

    No it would not.
     
  12. me2

    me2 Calling out the crap

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    The PA doesn't care about the smaller clubs at all. They want to make sure there is

    a) money to pay their players
    b) keep the lesser clubs finances high enough they use most of their caps to keep wages up
    c) keep players employed.
     
  13. mudcrutch79

    mudcrutch79 Registered User

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    Source?
     
  14. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    well the players didnt put the issues on the table either. its the owners who are making an issue here and the players are trying to include them in the solution, instead of being expected to carry the entire burden.

    dr
     
  15. Tom_Benjamin

    Tom_Benjamin Registered User

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    That's not the question. Who cares what the PA thinks? This is about the fan. Why should Canadian fans have to pay to keep the Predators in the league? If we are going to be forced to pay, why don't they do it fairly by splitting the gate receipts between the teams? That at least can be rationalized. If I buy a ticket to see the Canucks play the Predators, I'm paying to see Nashville, too.

    If you really do care to know why the player's association would care, it is jobs. The only possible enticement to a cap system to the players is if it makes all teams healthy and protects all the teams.

    This revenue sharing plan does nothing to protect franchises. If Nashville was about to go broke before the CBA, this deal would make it far worse for them. They don't get revenue sharing unless they cut prices and revenue. They lose any playoff revenues they earn and they have to add several expensive players.

    How does this assure their future? How does it assure the future of the clubs that are truly threatened? We are talking about teams with revenues that are reported to be $25 million below average, and $75 million behind the leader.

    Tom
     
  16. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    very well said ..

    so .. i look forward to hearing some replies.

    dr
     
  17. Sp5618

    Sp5618 Registered User

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    Creating something totally new would require rocket science, a genuine negotiating effort aimed at fixing all the problems, and some flexibility. Since none of this is evident....we are left with the league and the NHLPA looking around for models from other sports. What Tom said here is key. The owners, who mostly are not in the position of the Leafs or Rangers, realize they have to win to make money. It certainly would be painful to sign on to a CBA that guarantees they send their hard earned dollars elsewhere so that a competitor can pay a high priced star.

    The players, of course, prefer a revenue sharing model because it does not matter if the Leafs pay them, or the Preds pay them. Either way, they get the money.

    Too many people have relied on the NFL as the model of choice since it has both features, a cap and revenue sharing. The fact that NFL teams play in 70,000 seat stadiums, in far fewer games, have a greater number of players who play for 10% or 30% or...wow...maybe 50% of the game, under a rich $2 billion TV contract should convince most that this is not the right model for the NHL. Having $2 billion to share sure can even things up quickly, getting rid of the NHL's greatest albatross, the gap between the richest and poorest. Of course NHL owners do not like this idea. It could be that they cannot like it in the absence of a lucrative TV contract.

    Of course, they then are left with the only acceptable scenario- peg player salaries to the lowest common denominator. However, the plan they proposed would have teams that are in financial difficulty needing to increase spending, if there is a salary floor. As discussed here, teams that could benefit from a capped NHL may end up sending money out if there is some semblance of revenue sharing. This is where the logic fails me. Who in the NHL is supporting this? Why would Edmonton be in favor of a system that leaves them where they are right now relative to the other teams? Why would Canadian owners back a CBA that has them sending money to the US, despite their currency handicap?

    The rich teams simply get to keep even more money, and accept as one penalty, for all the strife, the sharing of playoff monies. However they do risk losing a lot of talent that will, over time, erode their ability to keep their stadiums filled. The Canadian teams are not really better off, they simply have a shot at attracting a top star or two (or keeping some of them), but risk having to send money to the States!

    I hate to say it, but the league should be placing a different bet. They should be betting on a league that has successful teams in the largest markets that can support NHL teams. This is the only way to win in the entertainment industry, an industry where the TV god is almighty. If the protection of the Canadian heritage is important, then add something in that helps the Canadian teams, like a currency equalizer that has a bite.

    We perhaps will get through this crisis, but the NHL that comes out of fixing what was a flawed vision to begin with won't help the game where it needs help. In five years, the NHL will rank lower than bass fishing in TV ratings, Chicago will be completely ruined as a hockey market, and we won't have the players to blame next time for the league's woes.
     
  18. Tom_Benjamin

    Tom_Benjamin Registered User

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    Funny how this comes up with revenue sharing, but is pooh-poohed when we are talking about linking player salaries with revenues. Didn't Arthur Levitt solve this problem? Or do you think maybe Jeremy Jacobs has known Bill Wirtz long enough to believe that everything he reports as revenue is written on toilet paper?

    They wouldn't hide revenue from each other just to save millions of dollars, would they? They will open up their books to their competitors, won't they? If they can't trust Arthur Levitt, who can they trust? I agree, though. The hardest number to finagle is gate receipts. That's half the revenue, though, and a very big source of the disparity. Split all ticket revenues 50-50.

    Tom
     
  19. Motown Beatdown

    Motown Beatdown Need a slump buster

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    If the owners are so hard up for an NFL style hard cap, the players should make them share money like the NFL. Total TV and Radio revenue, in the NHL it would have to be local, instead of National deal because thats where the money is. And share 80% of all gate receipts. That would divide the owners.
     
  20. SENSible1*

    SENSible1* Guest

    It's really Nashville's business how they meet the committments their owner FREELY enters into. Perhaps the owners have privately agreed to revenue sharing that is not included in the CBA. They are free to do so at any time, without discussing the matter with the PA.

    I'm really not sure, but if the small market owners are worried, why should I be?

    I do like the idea of sharing gate reciepts, but would rather see a 60-40 split that favours the home team to reward teams for strong attendance and revenue.

    The basic problem is that revenue sharing is NOT a CBA issue. Sure it can be included in an agreement, but how the owners get the money to pay the players is really irrelevant to the PA, as long as they get their share. The high cap minimum ensures that the PA gets their fair share.
     
  21. JohnnyReb

    JohnnyReb Registered User

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    Its VERY relevant to the CBA, how can you say otherwise?? The whole point of this blasted lockout is to come up with a CBA that will save the NHL, that in the words of Gary Bettman, will ensure the long term survival of ALL 30 teams. That's why there is no hockey this year.

    Yet according to this (and it was echoed in the Hockey News), the CBA proposed by the NHL, the one that is supposed to "save" the small market teams, will do the exact opposite. It will in fact kill a good number of them. IF the whole goal of this lockout is to kill 10 teams, how can anyone side with the owners?? Conversely, as a player, I would be VERY concerned - they're looking at over 200 jobs being forced out of the league because of this new CBA.

    In a perverse way, the players are the ones who are trying to save all 30 teams and the league as we know it. If this proposed revenue sharing scheme is really what the owners, or at least the 8 hardliners controlling Bettman, really want, then maybe we should thank the players for not caving in...
     
  22. hockeytown9321

    hockeytown9321 Registered User

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    I don't think its a matter of the PA forcing them to, I think they have to force themselves. A hard cap cannot work with such huge revenue disparities.
     
  23. hockeytown9321

    hockeytown9321 Registered User

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    100% correct. The league needs marquis teams for TV. Its not football, where the sport is the draw. A salary cap prevents marquis teams.
     
  24. SENSible1*

    SENSible1* Guest

    I can say otherwise for the simple LEGAL fact that the owners can determine/change the level of revenue sharing ANYTIME they want with zero input from the PA. It is NOT an essential part of the CBA process.


    The owners don't need the players to do anything but set their salaries at a reasonable % of overall league revenue. Once the PA has done that, it is up to the owners to make the system work by growing the revenue in small markets or re-distributing the money through revenue sharing.

    8 hardliners are not controlling the agenda. The vast majority of owners are behind the leagues stance and feel they can grow revenues enough over the long term to make the system they proposed work.

    The PA couldn't give two craps about the small markets, they just want to ensure the profits from the big markets end up in their pockets. The NHL took the wind out of their sails by setting a high minimum cap and forcing the players to argue for a higher % of overall revenues instead of hiding behind an issue (revenue sharing) which is none of their business and is really just a cash grab.
     
  25. Motown Beatdown

    Motown Beatdown Need a slump buster

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    But we know thats something the owners or shall i say the owners who big in large revenue don't want to do.
     
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