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  CBA: Bettman and revenue sharing

Sunday, September 26, 2004

When NHL Commissioner Gary Bettman talks about the CBA, the term revenue comes up often. He talks about how much of the revenue pie the players should get. He talks about how the growth in player salaries has dramatically outpaced the growth in revenues over the past decade.

In fact, during his recent appearance on CBC to take viewer questions about the CBA and lockout, he mentioned revenues eight times. But he seldom mentions how revenue might be shared among the 30 teams in the league. That's because it may be one of the most divisive issue among owners.

Bettman has usually said that discussing revenue sharing among the teams is a moot point until the league's economic system is fixed.

"We believe that revenue sharing under the type of system that we envision is something that will be necessary and appropriate and I believe the governors will be fully supportive of that," Bettman once said. "I don't believe that revenue sharing, without a relationship between revenues and expenses, is anything but inflationary. It just moves losses around. It doesn't fundamentally fix the problem. But under the type of system we envision, there will be revenue sharing."

And there was this from Bettman almost two years ago.

"Revenue sharing without cost certainty doesn't work," he said in an interview with The Hockey News. "Spreading around losses and feeding into an already inflationary system would only make the problem worse. We could do revenue sharing tomorrow if we wanted to. We don't need the players' association for that."

But there are some who doubt the owners could "do revenue sharing tomorrow" if they wanted to. A report on the NHL by by investment banker Moag & Company this past summer summed up the league's stand on revenue sharing this way:

"There is currently no plan emanating from the Commissioner’s office to tie a salary cap to revenue sharing. Previously, the players’ union has said that it would only consider limiting salaries in the context of significant revenue sharing. That said, the league has suggested in the past that revenue sharing does not require NHLPA approval. If nothing else, this rhetoric suggests that the owners have been unable to agree even amongst themselves as it relates to revenue sharing."

A consultant who works for the NHL was more blunt, telling the New York Post recently, "Hockey owners won't do this; they'll fight to the end not to share their revenues, since most of them get their revenue locally. The real trouble is that the conflict isn't going to just a labor issue of players versus owners — it's going to be owners against owners."

It's an issue that splits big market teams against smaller market teams. Teams like Detroit that can generate big time revenues against teams at the bottom of the revenue food chain.

It's a major sticking point for the NHL because most of the league's revenues are locally generated. Unlike the NFL, NBA and MLB, there is no big TV contract that can be split up among the teams.

That's why the NHL shares so little of its revenues. One study put it at about nine percent compared to 64 percent for the NFL and around 35 percent each for the NBA and Major League Baseball.

NHL owners aren't talking about the issue because Bettman has imposed a gag order on the CBA and related issues, but others aren't afraid to do it for the owners.

Here's a comment from Vartan Kupelian and Mike O'Hara of the Detroit News on what Red Wings owner Mike Ilitch might be thinking about revenue sharing.

"The Red Wings and Joe Louis Arena during hockey season are cash cows for Ilitch. The Red Wings have been a power for more than a decade and have won the Stanley Cup three times.

"Now you’re being told the landscape must change and that you must help the weaker franchises survive. But you don’t want a salary cap or other measures that would restrict your ability to put together the best team.

"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."

Ilitch probably isn't alone. Toronto, Philadelphia, and the New York Rangers could join the chorus as well. They all produce big revenues as well and might have a problem sending it to teams that don't do a good job of marketing their teams and producing revenue.

Former Ottawa Senators owner Rod Bryden sees it differently. He believes a new day could be dawning in the NHL.

"I am confident that any settlement that brings cost certainty to the NHL will also include a significant and different kind of revenue sharing among the teams. It is the only way that cost certainty can work," he told the Ottawa Citizen.

Bryden believes there may be differences of opions among the teams, but that the rich teams won't prevail this time around.

"The days when there was a sort of reverence for the older teams are over," Bryden told. "I don't believe that the NHL (Board of Governors) will vote for a settlement that does not include some of the smaller-market teams. The smaller teams will just not vote for it."

But there are indications that Bettman is playing a balancing act when it comes to the revenue sharing issue among the teams. Consider this comment from NHLPA chief Bob Goodenow in reaction to the league announcing the lockout on September 15.

"The Players are prepared to modify their revenue-sharing plan in order to distribute money from high-revenue clubs to low-revenue clubs in the amounts suggested by the league. Under this plan, low-revenue clubs would receive $80 million to $100 million per year," Goodenow said in a statement.

According to Larry Brooks of the New York Post, the NHLPA's original offer had revenue sharing figures at around $215 million dollars. Bettman apparently found the union's revenue sharing pool $115 million too high and the union adjusted its plan to get it down to around $100 million.

That's not much when you consider the league generates $2 billion in revenues. Some believe that without substantial revenue sharing Bettman will fail to achieve one of his prime objectives even if he gets cost certainty in the next CBA. That would be competitive balance.

"In the NFL, it's revenue-sharing, rather than salary caps, that is creating an even playing field and what drives parity. A salary cap can put a drag on salaries, but what it doesn't do is stop the big-market teams from not spending more than the small-market teams," University of Regina sports economist Shaun Augustin told the Ottawa Citizen.

"They want to pay out less money and they want to have a system where they can't shoot themselves in the foot, and they think a salary cap will do that. And it may stop them from spending more money, but if they're claiming that it's in the interest of competitive balance, that's a lie. It's in the interests of profitability."

But some believe that profitability could come with costs in other areas. A look at that issue in our next report.

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