Revenue disparities are still a major problem

[Fugu]

Firstly - Revenue sharing in and of itself is an internal matter of the league and it's teams - it is not a limit placed on player salaries.

In theory a league could agree to additional revenue sharing and, as long as it otherwise abided by the terms of it's CBA and the PA could not argue that it was deflationary on salaries, it would not have to be agreed to by the PA.

In practice, given the current beast of a CBA, some buy in of the NHLPA would be necessary because there would need to be some amendments to define the treatment of any transfered revenues under Articles 49 (Revenue Sharing) and 50 (Salary Cap).

Interesting qualifier.

In a sense, the point is moot since this CBA does include revenue sharing, perhaps due to the fact that player funds are included in what is potentially shared or transferred?

Yet my sense would still be that a players' union could argue the deflationary aspect. Absent a cap (and revenue sharing and caps are separate principles), the case could be made that money transferred from one team to another limits what a top salary could potentially be. I see where the counterargument would be that perhaps - in total - the same amount of money gets spent, however that would need to be proved then, that indeed the money does go to players. One can then see why linkages and caps all got rolled into this monster of a CBA. I'd like to hear more along this line of thinking...

 

[taunting canadian]

Antitrust. The NHL as a collective has to have NHLPA approval on any limits placed on player salaries. Otherwise it is collusion. Revenue sharing, agreed to solely by owners, could be used as an excuse by teams as to why limits are necessary.

There already is a limit on player salaries in place, as a result of salary cap/revenue linkage. While the PA may be within their rights to reject changes to the revenue sharing, why would they care as long as their percentage of revenue remains the same? If this was the only issue to be resolved in a new CBA, I really don't see why the PA would want to endure a lockout on a matter of principle that wouldn't affect their bottom line at all.

 

[taunting canadian]

Yet my sense would still be that a players' union could argue the deflationary aspect. Absent a cap (and revenue sharing and caps are separate principles), the case could be made that money transferred from one team to another limits what a top salary could potentially be. I see where the counterargument would be that perhaps - in total - the same amount of money gets spent, however that would need to be proved then, that indeed the money does go to players. One can then see why linkages and caps all got rolled into this monster of a CBA. I'd like to hear more along this line of thinking...

Since revenue linkage is built into the current CBA, and money was taken from the players' escrow fund this past season, I'm guessing that the PA's accountants are satisfied that the correct % of revenue has gone to the players.

In the environment of the current CBA, there is no room for salary inflation/deflation outside of revenue inflation/deflation.

 

[kdb209]

Secondly - There are no mechanisms in the current league rules concerning revenue transfers, but those rules can be changed by a vote of the BOG. If there is no prohibition in the franchise agreement between a team and the league and in that agreement the team agrees to be bound by league rules, then if a majority (or supermajority) agrees to rules that specify the sharing of revenues, a team could be forced to contribute whether it agreed or not.

I would find this quite difficult to believe. The absence of specific clauses alone does not mean property rights can be suspended or subrogated. I guess I'll extend this to say, just because a rule doesn't exist defining certain relationship doesn't mean that things can be made up just because a majority wants to change something. In all matters of law (and I guess I mean the society in which we live) a balance must be found between protecting individual rights and collective rights.

This is a moot point (since the CBA was ratified 30-0) but even if a club had voted against the CBA, they still would have been bound by its terms - so if they were a high revenue team or a playoff team, they would have had to contribute to revenue sharing, whether they agreed or not.

 

[Crazy_Ike]

There are actually quite a number of laws that allow an agreement that was reached by a certain majority of a collective to apply to the entire collective whether it was unanimous or not, whether they like it or not. That much is nothing unusual at all.

A number of players voted against the current CBA (presumably the dumbest of the dumb), but their salaries remain under the cap system nonetheless.

 

[Fugu]

This is a moot point (since the CBA was ratified 30-0) but even if a club had voted against the CBA, they still would have been bound by its terms - so if they were a high revenue team or a playoff team, they would have had to contribute to revenue sharing, whether they agreed or not.

Great, you offer the hypothetical, concede what the current CBA indeed does provide, and then back that up by pointing out that all 30 teams voted to actually accept the CBA. Am I the only one that sees how one thing has nothing to do with the other?

 

[Fugu]

There are actually quite a number of laws that allow an agreement that was reached by a certain majority of a collective to apply to the entire collective whether it was unanimous or not, whether they like it or not. That much is nothing unusual at all.

A number of players voted against the current CBA (presumably the dumbest of the dumb), but their salaries remain under the cap system nonetheless.

True enough, yet this proves nothing as far as the NHL by-laws (we're all guessing) and in many of our cases, aren't really qualified to comment on property rights. I'll submit that the NHL indeed cannot just make up rules that a majority of them finds preferable or suitable.

 

[Crazy_Ike]

I'll submit that the NHL indeed cannot just make up rules that a majority of them finds preferable or suitable.

You are probably right that they can't make up ANY old rule they want, but I betcha they could make ones that deal with revenue sharing... or the leagues that have it would be mired in lawsuits right now.

 

[Fugu]

Since revenue linkage is built into the current CBA, and money was taken from the players' escrow fund this past season, I'm guessing that the PA's accountants are satisfied that the correct % of revenue has gone to the players.

In the environment of the current CBA, there is no room for salary inflation/deflation outside of revenue inflation/deflation.

You are correct, but you are missing the point.

The point was whether or not NHL owners (who are bound by US antitrust laws, Canadian ones as well I'd presume) can agree on revenue sharing without discussion/approval by the NHLPA. What the current agreement indeed has in place is beside the point to the overarching question. Start from scratch, pretend the current CBA does not exist. Could owners agree to revenue sharing and implement without NHLPA approval?

To go back further, the first poster who raised the question suggested that the NHL could just tell teams how much revenue to share. I submitted that antitrust would be an issue.... kdb furthered the discussion by pointing out where in the current CBA the topic is covered by the existing CBA, but we meandered off into the hypothetical... so here we are.

 

[Ted Hoffman]

I would find this quite difficult to believe. The absence of specific clauses alone does not mean property rights can be suspended or subrogated. I guess I'll extend this to say, just because a rule doesn't exist defining certain relationship doesn't mean that things can be made up just because a majority wants to change something. In all matters of law (and I guess I mean the society in which we live) a balance must be found between protecting individual rights and collective rights.

I think the point raised is this: as a member Club of the League, all teams agree to abide by the terms of the CBA - whether to their betterment or detriment. The CBA recognizes the difference between Club generated revenues and League generated revenues and the Clubs recognize that some of their revenues must be shared in some way. The nature of this sharing is defined by the CBA and enforced by the applicable League By-Laws, so no Club can suddenly decide they don't want to share their revenues and opt out of the agreement.

In a sense, it's similar to rulings the Supreme Court has handed down over the years comparing states rights vs. the rights of the federal government; as long as Congress passes a law that's constitutional, nothing allows a state or states to pass laws overriding the federal law. The same principle applies here - the NHL sets a list of rules and provisions that each Club must follow, and none of them can decide, "meh - not for us, we're not going along with it!" and ignore it.

Perhaps you should help with an example of what you're trying to describe, though ... because I'm not picturing it.

 

[Fugu]

You are probably right that they can't make up ANY old rule they want, but I betcha they could make ones that deal with revenue sharing... or the leagues that have it would be mired in lawsuits right now.

No, you see, the majority of "NHL" revenue is not revenue generated by the league itself. Thirty teams generate revenue, which they have to report as revenue for taxation purposes, in addition to whatever ownership rules the corporation or group that owns said team would have to abide by. They have different debt structures, leases, agreements, etc. with outside parties in order to run their business under the NHL brand. I liked the term GC applied to them, a loose JV/Consortium. The consortium does not have the right to apportion the individual business's revenue as it would like. I seriously doubt that even if they met as a group, any of them would agree to ever give the others the right to grab their money. Who'd be crazy enough to do that? At the same time, the current agreement does indicate what their concerns were, thus the exclusion from any revenue sharing (the current plan to redistribute revenue) of certain markets altogether, while leaving the exact amount that is available still an option after the minimum is met.

 

[Fugu]

I think the point raised is this: as a member Club of the League, all teams agree to abide by the terms of the CBA - whether to their betterment or detriment. The CBA recognizes the difference between Club generated revenues and League generated revenues and the Clubs recognize that some of their revenues must be shared in some way. The nature of this sharing is defined by the CBA and enforced by the applicable League By-Laws, so no Club can suddenly decide they don't want to share their revenues and opt out of the agreement.

In a sense, it's similar to rulings the Supreme Court has handed down over the years comparing states rights vs. the rights of the federal government; as long as Congress passes a law that's constitutional, nothing allows a state or states to pass laws overriding the federal law. The same principle applies here - the NHL sets a list of rules and provisions that each Club must follow, and none of them can decide, "meh - not for us, we're not going along with it!" and ignore it.

Perhaps you should help with an example of what you're trying to describe, though ... because I'm not picturing it.

The question was whether or not teams could decide to share revenue that is not defined within the CBA. If you have a CBA, that means you have the two parties who agreed to it: the NHL and NHLPA. Ergo-- you have to have NHLPA approval.

kdb suggested that owners could agree to revenue sharing outside a CBA and absent any union approval (all qualifiers noted). In this sense, revenue sharing alone (if it isn't already defined in the CBA) is something that teams could agree to do amongst themselves. This was in response to my post that pointed out why revenue sharing might have been built into the CBA at all (antitrust). That was in response to the first post in this train wreck that suggested the NHL could simply - in effect - tell teams to share more revenue.

 

[GSC2k2*]

Actually, you guys have come across an issue that I recall was an actual bone of contention in the previous negotiations - whether the issue of revenue sharing is a matter that is properly even the subject of collective bargaining.

As you can see from the CBA, you can see that the players prevailed in this negotiation on that point. Given that it is a matter that has now been the subject of collective bargaining between the parties, i would think that (here comes the legal jargon) the league would be estopped from arguing that changes to that which has already been collectively bargained shouyld not also be subject to collective bargaining.

Fugu, the antitrust point is a red herring for this reason.

Regarding the point of making changes that affect the teams collectively, the documents that sets forth the contractual relationship between the teams (and there is one, rest assured; they are a hybrid JV/consortium) are the NHL constitution and the NHL by-laws (their "constating documents"). Short answers are as follows:

1. If the constating documents allow changes regarding the relationship to be made based on a certain number of votes, then that is all it takes, and the teams that vote against any such change have no recourse. Keep in mind that all teams agree to abide by the constating documents. It is for this reason that, in most JV's or consortiums, there are certain things which require a majority vote, and other things (the most fundamental things) which require a unanimous vote.

2. There are certain items which the NHL could argue are not subject to the CBA and thus could be adjusted which might have an impact on revenue, such as the method of sharing licensing or TV revenue.

 

[Fugu]

Actually, you guys have come across an issue that I recall was an actual bone of contention in the previous negotiations - whether the issue of revenue sharing is a matter that is properly even the subject of collective bargaining.

As you can see from the CBA, you can see that the players prevailed in this negotiation on that point. Given that it is a matter that has now been the subject of collective bargaining between the parties, i would think that (here comes the legal jargon) the league would be estopped from arguing that changes to that which has already been collectively bargained shouyld not also be subject to collective bargaining.

Fugu, the antitrust point is a red herring for this reason.

Regarding the point of making changes that affect the teams collectively, the documents that sets forth the contractual relationship between the teams (and there is one, rest assured; they are a hybrid JV/consortium) are the NHL constitution and the NHL by-laws (their "constating documents"). Short answers are as follows:

1. If the constating documents allow changes regarding the relationship to be made based on a certain number of votes, then that is all it takes, and the teams that vote against any such change have no recourse. Keep in mind that all teams agree to abide by the constating documents. It is for this reason that, in most JV's or consortiums, there are certain things which require a majority vote, and other things (the most fundamental things) which require a unanimous vote.

2. There are certain items which the NHL could argue are not subject to the CBA and thus could be adjusted which might have an impact on revenue, such as the method of sharing licensing or TV revenue.

I knew there was at least one good reason to keep lawyers around the site. Thanks, as always, for your legal opinion.


I did not want the idea that - without seeing the by-laws and constitution - it could easily be assumed what the governing principles were regarding individual team revenues, and what it would take to change them. Your point #2 involves NHL revenues, not revenues generated by the Leafs, Wings, Rangers, etc. That is the gray area for me. Can the NHL and BOG with simply a majority vote say that all gate receipts must be shared, for example? Why not the local media contracts too? It is an honest question. Why wouldn't the majority then vote to a greater share of the Leafs' (and other large markets') revenues since several teams are losing a lot money? That certainly would level the playing field to a greater extent.


If antitrust is a red herring, why do you believe the NHLPA prevailed in the last negotiations on the revenue sharing point?

 

[Fourier]

As long as the solution is both feasible and optimal, I'm pretty much happy. The problem is that most people tend to forget the first part.

Dr. No,
You might appreciate this one. I took an elective class on linear optimization taught by a management science prof who had a hard time coming to grips with the fact that a linear functional need not be bounded on a noncompact convex set. Frustrating as all get go.

 

[GSC2k2*]

Can the NHL and BOG with simply a majority vote say that all gate receipts must be shared, for example? Why not the local media contracts too? It is an honest question. Why wouldn't the majority then vote to a greater share of the Leafs' (and other large markets') revenues since several teams are losing a lot money?

If the constitution so provides, I see no reason why they could not. That being said, as i mentioned above any halfway sensible puts changes on certain fundamental things to the unanimous agreement threshold. It would surprise me if this were not one of them.

If antitrust is a red herring, why do you believe the NHLPA prevailed in the last negotiations on the revenue sharing point?

Heck, they had to prevail on SOMETHING!

In all seriousness, i suspect that they prevailed because:

1. It is the more sensible argument in this type of CBA. It does not work without revenue sharing. Obviousaly a reduction in revenue sharing would fundamentally affect the players' interests, so it needs to be part of the equation.

2. Unlike others, I feel that throughout the negotiations the NHL actually walked their talk and conducted themselves like someone looking for a partner (at least a partner in certain key financial respects). [Incidentally, being a partner does not always mean being a partner in everything. Most partnerships in big business do not involve the partners sharing in everything. The oil companies partner up all the time on certain developments, for example, but that does not mean they do not keep other stuff separate from the partnership.] Having the revenue sharing mechanism be part of the CBA was another part of walking that talk.

 

[Fugu]

Yes, that and the UFA age!

 

[nye]

No, you see, the majority of "NHL" revenue is not revenue generated by the league itself. Thirty teams generate revenue, which they have to report as revenue for taxation purposes, in addition to whatever ownership rules the corporation or group that owns said team would have to abide by. They have different debt structures, leases, agreements, etc. with outside parties in order to run their business under the NHL brand. I liked the term GC applied to them, a loose JV/Consortium. The consortium does not have the right to apportion the individual business's revenue as it would like. I seriously doubt that even if they met as a group, any of them would agree to ever give the others the right to grab their money. Who'd be crazy enough to do that? At the same time, the current agreement does indicate what their concerns were, thus the exclusion from any revenue sharing (the current plan to redistribute revenue) of certain markets altogether, while leaving the exact amount that is available still an option after the minimum is met.

Say that half of all arena and local broadcast revenue is the visitors and is paid into the league to be paid out in accord with BOG guidelines.

 

[Fugu]

Say that half of all arena and local broadcast revenue is the visitors and is paid into the league to be paid out in accord with BOG guidelines.

Do you believe this group of governors would actually agree to give up half of their revenues?

Furthermore, not having a copy of the NHL constitution and by laws, but I do think it is reasonable that this type of change would require unanimous approval. The thing is... once changed, it probably would require unanimous approval to change it back. Who would want to risk that?

 

[nye]

Do you believe this group of governors would actually agree to give up half of their revenues?

Furthermore, not having a copy of the NHL constitution and by laws, but I do think it is reasonable that this type of change would require unanimous approval. The thing is... once changed, it probably would require unanimous approval to change it back. Who would want to risk that?

If you wanted a truely healthy NHL, that's what you'd do as a first step.

The Rangers and Red Wings gain would be franchise value in a league that would rock.

Forget the TV deal for today. Create a better league, ice a better product, get more people into the game. Most of the newer US markets will pay off in the long run. The TV contracts will look after themselves tomorrow.

 

[Buffaloed]

Actually, you guys have come across an issue that I recall was an actual bone of contention in the previous negotiations - whether the issue of revenue sharing is a matter that is properly even the subject of collective bargaining.

As you can see from the CBA, you can see that the players prevailed in this negotiation on that point. Given that it is a matter that has now been the subject of collective bargaining between the parties, i would think that (here comes the legal jargon) the league would be estopped from arguing that changes to that which has already been collectively bargained shouyld not also be subject to collective bargaining.

I agree that revenue sharing is definitely now subject to collective bargaining. Since it's included in the CBA the NHL can't change it unilaterally. It's funny that when the NHLPA wanted to extend the old CBA, Goodenow said something to the effect that if revenue sharing is the issue, we don't need a new CBA. The NHL can do revenue sharing without us (NHLPA). I think he was right. The old CBA with a meaningful revenue sharing plan would have saved everyone a lot of grief.

While the NHLPA will have to sign off on any changes to the current revenue sharing plan, it's in their interest to lessen revenue disparities. The NHLPA insisted that the NHL include its revenue sharing plan in the CBA for that reason.

Because according to the Trigger Point Proposal, Goodenow anticipated that about a dozen teams would still lose cash without revenue sharing. And the league's already most-prosperous clubs would enjoy windfall profits at the expense of the have-nots and the players.

During the NHLPA conference call, Saskin said that without a revenue-sharing plan to ensure viability of those weaker clubs, the NHL's salary cap proposals appeared to do nothing more than line the pockets of the wealthiest owners.
http://hockeyrodent.com/R1167.HTM

 

[nye]

As a guard for the established teams that are giving up revenue, make expansion require near unaimous consent.

 

[Bear of Bad News]

Dr. No,
You might appreciate this one. I took an elective class on linear optimization taught by a management science prof who had a hard time coming to grips with the fact that a linear functional need not be bounded on a noncompact convex set. Frustrating as all get go.

Ouch!

I don't know if I can top that, but when I got to my current company the woman in charge of our Cost-Effectiveness area was a Ph.D. from Harvard, and on the face of things seemed to understand the actuarials and what-not.

Except...we were doing a Markov analysis, and she insisted that the problem must have two discount factors.

Because suppose the discount factor is 0.06 ($1.00 today = $0.94 one year from today). Her logic was that you'd still rather have the $1.00 today than the $0.94 one year from today, so you had to have a second discount factor to account for that.

When it was (correctly) pointed out that all you had to do was increase the (single) discount factor, she insisted that it wouldn't work (even when we showed her that v^n * v^m = v^(n+m) ). Good times, good times.


I'll also say that nearly all of my "fun money" in grad school was earned by teaching economics department grad students basic mathematics.

 

[Fourier]

Ouch!

I don't know if I can top that, but when I got to my current company the woman in charge of our Cost-Effectiveness area was a Ph.D. from Harvard, and on the face of things seemed to understand the actuarials and what-not.

Except...we were doing a Markov analysis, and she insisted that the problem must have two discount factors.

Because suppose the discount factor is 0.06 ($1.00 today = $0.94 one year from today). Her logic was that you'd still rather have the $1.00 today than the $0.94 one year from today, so you had to have a second discount factor to account for that.

When it was (correctly) pointed out that all you had to do was increase the (single) discount factor, she insisted that it wouldn't work (even when we showed her that v^n * v^m = v^(n+m) ). Good times, good times.


I'll also say that nearly all of my "fun money" in grad school was earned by teaching economics department grad students basic mathematics.

Oh don't get me started on Economics grad students and math...You are bringing back some nasty memories.

 

[Fourier]

If antitrust is a red herring, why do you believe the NHLPA prevailed in the last negotiations on the revenue sharing point?

Here is my very simplistic take on this.
In the presence of a cap I think revenue sharing is clearly inflationary
so the players would be on side bigtime, (though linkage plays a complicated
role in this). However, unlike other inflationary forces, this one would likely be supported by many of the teams as a mechanism to potentially level the playing field with respect to the half dozen or so chronic big spenders since many teams would
see themselves as either potential recipients or at worst neutral parties. Therefore.
if you want to make nice why not do it with something that most owners would find
quite easy to swallow.