When will next season start? Return to Play Negotiations

[iggy_oi]

Originally Posted by Bingo

I for one am not assigning blame at all.

But we are where we are.

The league can't possibly be healthy and manage the contract load of a salary cap based on $5B as an industry.

Which was exactly what the league and PA were addressing with this MOU.

So the players can say forget it, you signed a deal and you need to stick to it, and there's nothing wrong with that.

But 72% of salaries won't go well when I see the league heading for something like 36% of revenue.

Naturally 60% of salaries is a much more preferable number to the owners compared to 72%, the rough math of the actual cost savings for a cap team would be approximately $10M, less for any team not spending up to the cap. While that isn’t chump change by any stretch of the imagination it also seems like too big of a gap for the league’s negotiators to have been that far off in their original projections only a few months ago, that’s just my opinion though.

Regardless if that is the only material difference I still have a hard time believing this would be too big of a hardship for the league to endure. Team profits on average have increased each year under the previous CBA to the point where the average profit for every team in 2018 was $25M/season, with only 2 teams not making a profit. ( https://www.google.ca/amp/s/www.cbc.ca/amp/1.4935474 )

That’s doesn’t even take into acount the extra almost $40M that teams made in expansion fees in the past few years.(which for anyone still trying to push the “partnership” narrative, wasn’t shared with the players at all)

That can certainly be the owner's issue to manage until escrow pushes the issue to the players, but they do risk two things with that stance.

1) the owners saying we're not going to have a season then.
2) teams folding and jobs lost.

It's not as simple as holding to an agreement, or who's fault it is.

You’re right it isn’t that simple. Ask yourself this question, if the league knows it is likely to lose money this season one way or another, do they still stand to gain something by saying they need this change even if they realistically could handle the additional losses? The answer is absolutely yes.

This league has a long history of claiming deals that are structured under their previous demanded framework are no longer viable, and in this case the league is essentially saying their negotiating team dropped the ball, have put the season in jeopardy and have damaged relations with the PA, yet they are using the same negotiating team to make these current projections and we are expected to take their word that everything will work out fine this time around. That doesn’t make a lot of sense.

I understand as fans we want to see hockey, but I think that desire can cloud our judgement at times when discussing the business side of the game. This last minute change to me really seems like a PR stunt to try and improve a deal for the owners by putting the players in a spot where they will look bad to the fans for not giving more to the league if they decide to not move forward with the season. Very similar to when the league tried to negotiate an extension by guaranteeing Olympic participation a few years back.

[iggy_oi]

Originally Posted by DoubleK

The players are entitled to 50% of HRR nothing more and nothing less.

They are entitled to what they bargain for. While I think the league’s intentions are to get back to that model, salaries are no longer directly linked to revenues under this deal, the cap and escrow are both set regardless of revenues so this could result in the players receving more or less than 50% of HRR.

[Bingo]

Originally Posted by iggy_oi

Which was exactly what the league and PA were addressing with this MOU.



Naturally 60% of salaries is a much more preferable number to the owners compared to 72%, the rough math of the actual cost savings for a cap team would be approximately $10M, less for any team not spending up to the cap. While that isn’t chump change by any stretch of the imagination it also seems like too big of a gap for the league’s negotiators to have been that far off in their original projections only a few months ago, that’s just my opinion though.

Regardless if that is the only material difference I still have a hard time believing this would be too big of a hardship for the league to endure. Team profits on average have increased each year under the previous CBA to the point where the average profit for every team in 2018 was $25M/season, with only 2 teams not making a profit. ( https://www.google.ca/amp/s/www.cbc.ca/amp/1.4935474 )

That’s doesn’t even take into acount the extra almost $40M that teams made in expansion fees in the past few years.(which for anyone still trying to push the “partnership” narrative, wasn’t shared with the players at all)



You’re right it isn’t that simple. Ask yourself this question, if the league knows it is likely to lose money this season one way or another, do they still stand to gain something by saying they need this change even if they realistically could handle the additional losses? The answer is absolutely yes.

This league has a long history of claiming deals that are structured under their previous demanded framework are no longer viable, and in this case the league is essentially saying their negotiating team dropped the ball, have put the season in jeopardy and have damaged relations with the PA, yet they are using the same negotiating team to make these current projections and we are expected to take their word that everything will work out fine this time around. That doesn’t make a lot of sense.

I understand as fans we want to see hockey, but I think that desire can cloud our judgement at times when discussing the business side of the game. This last minute change to me really seems like a PR stunt to try and improve a deal for the owners by putting the players in a spot where they will look bad to the fans for not giving more to the league if they decide to not move forward with the season. Very similar to when the league tried to negotiate an extension by guaranteeing Olympic participation a few years back.

Any changes made will end up in escrow and even up. Neither side is going to be able to win permanently in any decision. So why are you so against shortening up the sharing mechanism to make it more fair to both sides?

Guys like Elliott Friedman have said he's hearing "many" owners don't want to play this year given the losses.

Neither you nor I can determine if that's a bluff or not, but given the calculations it sure doesn't seem like it.

As I said ... 36% of the $5B is where the industry would be in a 60 game season. Losing 64% of your income vs only 28% of your biggest cost would easily destroy the profit you are claiming (Your link had it at $25M/team for $775M)

[powderjunkie]

Do we know exactly what the owners'/league position even is? Are they seeking more than pro-ration of the MOU compensation relative to season length (per article 16 of the CBA)?

It seems pretty simple to me; they've agreed to a framework that mitigates the immediate burden for the players, so long as they end up close to 50/50 by the end.

The players have far more incentive to play this upcoming season than the owners do, but cancelling the season is in neither parties' interest. The league holds the hammer on whether a schedule is created, or not.

[iggy_oi]

Originally Posted by Bingo

Any changes made will end up in escrow and even up. Neither side is going to be able to win permanently in any decision. So why are you so against shortening up the sharing mechanism to make it more fair to both sides?

Where are you reading this? This MOU is structured under the assumption that the players will likely make more than 50% of HRR in at least the first season and could also do so for a few seasons. If things rebound quicker than expected the league could end up keeping more than 50% of HRR under this agreement, I have read nothing in this MOU stating otherwise but if it is in there please provide a link to a citation.

The escrow and payment deferrals under this MOU have absolutely nothing to do with ensuring a 50/50 split in HRR, their purpose is to mitigate the losses for the league. The deal has a clause that extends the deal by 1 year if the league made between $125M-$250M less than 50% of the HRR over the term but even that doesn’t assure the owners a 50/50 split, and once that final year is done any remaining losses would be left to the owners.

Guys like Elliott Friedman have said he's hearing "many" owners don't want to play this year given the losses.

I’d be willing to bet there would be owners who still don’t want to take the loss from playing this year even under the league’s new proposal so the comment doesn’t carry much weight with me to be honest.

Neither you nor I can determine if that's a bluff or not, but given the calculations it sure doesn't seem like it.

The league knew they would lose money this season, so they agreed to a system to mitigate their losses that they projected they could live with, now they are claiming their projections were wrong but their new ones are going to work. This league has a long history of negotiating this way but in this case you really have to ask yourself why, if the league’s representatives did such a poor job the first go around, what credibility does the league have when they have done nothing to deal with the people who put them in this spot other than say go try and negotiate some more? Most businesses would hold people who sign that bad of a deal accountable. I don’t but the “a lot has changed” argument since the league predicted this exact outcome and still agreed to the deal without any other safeguards included in it, which to me strongly suggests they were ok with it.

As I said ... 36% of the $5B is where the industry would be in a 60 game season. Losing 64% of your income vs only 28% of your biggest cost would easily destroy the profit you are claiming (Your link had it at $25M/team for $775M)

I get where you are coming from but you’re ignoring the fact that there will almost certainly be significant operational cost savings outside of the player salaries this season. The question we need to be asking is whether the difference the owners are saying they need(an extra $10M or less in losses this season) is really their breaking point or if they are just trying to see if they can force the PA into accepting these amendments which reduce their losses at the players’ expense.

[powderjunkie]

^In what scenario would the league end up with more than 50%HRR?

[FlamesAddiction]

Originally Posted by Bingo

Any changes made will end up in escrow and even up. Neither side is going to be able to win permanently in any decision. So why are you so against shortening up the sharing mechanism to make it more fair to both sides?

Guys like Elliott Friedman have said he's hearing "many" owners don't want to play this year given the losses.

Neither you nor I can determine if that's a bluff or not, but given the calculations it sure doesn't seem like it.

Personally, I don’t think it’s a bluff. I think most teams are going to lose more money if they do play. If the season is lost, it could hurt the brand, which is a difficult thing to put an exact cost on, but there will come a point that the risk of that is less than the real-money they will lose if a season goes ahead without gate revenues.

I suspect the players will eventually give in. It will be an easy decision to cancel the season if the players don’t want to cooperate.

[iggy_oi]

Originally Posted by powderjunkie

^In what scenario would the league end up with more than 50%HRR?

The salary cap is fixed at $81.5M the next few seasons based on a 32 team league the most player salaries can be is $2.6B, so if in any of those seasons revenues are over $5.2B they would end up with more than 50%. It is my understanding that the MOU does not include any provisions which would force the league to share any of that excess with the players, but if you or anyone else has seen anything to confirm otherwise please share that here.

[Beatle17]

Originally Posted by iggy_oi

The salary cap is fixed at $81.5M the next few seasons based on a 32 team league the most player salaries can be is $2.6B, so if in any of those seasons revenues are over $5.2B they would end up with more than 50%. It is my understanding that the MOU does not include any provisions which would force the league to share any of that excess with the players, but if you or anyone else has seen anything to confirm otherwise please share that here.

You understand that $81.5 is the high end of the salary RANGE correct? The mid point is approximately $65M so 50% of HRR would be $2.08B. If the players receive more than that then the escrow kicks in. HRR has been approximately $4.2B per year and that is why the players have to pay back the money. Maybe the NHLPA and their agents should explain the math to the players.

The more teams spend to the salary cap, to meet player demands, the higher the escrow amount and the players have used the 5% raise many years. The league owners understand it doesn't matter if they all spend to the cap because they will be getting their money back.

[Bingo]

They agreed to a schedule to be off the 50/50 for three seasons (I think) but an adjustment going forward that trues it up to 50/50.

Friedman said the same on 960 today.

So yeah 50/50.

There are mechanisms to give the players more in the meantime, and I think that is what they want to adjust. I think they may have assumed a full season, or perhaps 50% crowds ... don't know.

But 60% isn't bad if the league is going to pull in 35%.

[DoubleK]

As we kick the HRR related financial picture around ad nauseum, I keep finding myself thinking back to the health of the businesses of the parent company at the individual team level. Are these outfits financially solid enough to absorb/last another season or part of a season without game day revenue?

This would be exacerbated if the team counts on revenue from operating the facility, depending on their arrangement. Might be a situation where not having the liability of the arena would be a benefit.

[iggy_oi]

Originally Posted by Beatle17

You understand that $81.5 is the high end of the salary RANGE correct? The mid point is approximately $65M so 50% of HRR would be $2.08B. If the players receive more than that then the escrow kicks in. HRR has been approximately $4.2B per year and that is why the players have to pay back the money. Maybe the NHLPA and their agents should explain the math to the players.

Powderjunkie asked for an example of a scenario so I gave an example, there are a number of other scenarios where it could happen as well. Use any number for player salaries, if combined they add up to less than 50% of HRR, I have not seen anything in this MOU that would require the league to split the difference with the players as they previously would have been required to do.

The more teams spend to the salary cap, to meet player demands, the higher the escrow amount and the players have used the 5% raise many years. The league owners understand it doesn't matter if they all spend to the cap because they will be getting their money back.

What does any of this have to do with the MOU that takes all of those factors out of the equation? Escrow is now set at a fixed rate and there is no more escalator as the cap is also set at a fixed rate.

[DoubleK]

Originally Posted by iggy_oi

What does any of this have to do with the MOU that takes all of those factors out of the equation? Escrow is now set at a fixed rate and there is no more escalator as the cap is also set at a fixed rate.

I read the MOU again today and still don't see where it permanently decouples the salary cap from HRR. Do you?

[iggy_oi]

Originally Posted by Bingo

They agreed to a schedule to be off the 50/50 for three seasons (I think) but an adjustment going forward that trues it up to 50/50.

Friedman said the same on 960 today.

So yeah 50/50.

I didn’t hear the interview but if Friedman thinks there is a mechanism within this MOU that guarantees the players and owners will have a 50/50 split during the life of this CBA extension he’s mistaken. The MOU itself even has a clause to add an additional season if the players have made between $125M and $250M more than what the 50/50 split would have been throughout this extension.

In other words if the league has made at least within $125M of or over $250M away from 50% of HRR by the end of the second to last season of this agreement, they will have one last season with escrow capped at 6% in which to recoup any outstanding losses. If they don’t, the CBA will expire and the league will be stuck with those losses. While I’m sure it would be a major discussion item in the next round of negotiations the players would not by any means be obligated to pay for those losses.

There are mechanisms to give the players more in the meantime, and I think that is what they want to adjust. I think they may have assumed a full season, or perhaps 50% crowds ... don't know.

But 60% isn't bad if the league is going to pull in 35%.

Whether people agree or not, how much the players make matters more to them than ensuring a 50/50 revenue split with the owners. Otherwise they would have just agreed to extend the previous CBA and let escrow take care of it.

The more the league lowers the value of playing, the more I can see players opting to sit out and wait for things to normalize rather than risk injury playing for close to half of what they would otherwise be making. Career risks aside, given in to the league’s demands here would also set a horrible precedent in their bargaining relationship with the league. I think that is something a lot of people are missing in all of this, the league has basically put the players in a spot where even if they want to consider doing this because they believe the league isn’t bluffing, they basically can’t because it would signal to the league that anytime they want to renegotiate something midway through a CBA’s term all they would have to do is threaten to cancel the upcoming season.

[iggy_oi]

Originally Posted by DoubleK

I read the MOU again today and still don't see where it permanently decouples the salary cap from HRR. Do you?

There is nothing permanently delinking the two, but there is also no concrete timeline for when the cap will once again be linked to HRR. The plan as I have read is to keep the cap set at $81.5M until HRR gets back to almost what it was(however the league and PA agreed to define that), the first year where it is linked again will be after they’ve had 2 consecutive seasons of “normal” HRR and will calculate the cap based on the average HRR for those two seasons, or at least that’s my understanding of what I read about it.

The CBA has an expiration date and does guarantee that the split will be 50/50 by the end of it’s term. That isn’t to say 50/50 can’t or won’t happen and I’m sure that’s the league’s hope, but it’s not guaranteed even with the changes the league is proposing. Under the previous CBA it was guaranteed because they didn’t have a cap on escrow. The new deal is structured in a manner that it will likely end up being very close to a 50/50 split, but it does not guarantee one.

[DoubleK]

We will have to agree to disagree. Escrow has one function in this arrangement; to keep the owners whole.

[iggy_oi]

Originally Posted by DoubleK

We will have to agree to disagree. Escrow has one function in this arrangement; to keep the owners whole.

Capping it restricts its ability to do so. Otherwise the league wouldn’t be trying to amend the agreement to have it increased and we wouldn’t be having this conversation.

[DoubleK]

Originally Posted by iggy_oi

Capping it restricts its ability to do so. Otherwise the league wouldn’t be trying to amend the agreement to have it increased and we wouldn’t be having this conversation.

I don't believe you have read the MOU. The escrow cap in any given year does nothing with respect to the players obligation to not take more than their half of HRR over the term of the CBA.

To the extent that utilizing the

Maximum Escrow Percentage for a given League Year results in

an Escrow Balance or does not eliminate an Escrow Balance, any

such Escrow Balance shall carry forward into (and be factored

into the setting of the Escrow Percentage for) the following

League Year (with the exception of the 2021/22 League Year).

[powderjunkie]

Originally Posted by iggy_oi

The salary cap is fixed at $81.5M the next few seasons based on a 32 team league the most player salaries can be is $2.6B, so if in any of those seasons revenues are over $5.2B they would end up with more than 50%. It is my understanding that the MOU does not include any provisions which would force the league to share any of that excess with the players, but if you or anyone else has seen anything to confirm otherwise please share that here.

From the MOU:

2020/21:
• Upper Limit = $81.5 Million
• Midpoint = $70.9 Million
• Lower Limit = $60.2 Million
Thereafter (subject to the provisions above regarding the
Extension Year):
• Upper Limit will remain at $81.5 Million until Preliminary
HRR for the just completed League Year surpasses $3.3
Billion.
• For any League Year where Preliminary HRR is between
$3.3 Billion and $4.8 Billion, the Upper Limit for the
following League Year shall be between $81.5 Million and
$82.5 Million on a pro rata basis (e.g., if Preliminary HRR
is $4.05 Billion, the Upper Limit will be $82 Million).
• Once Preliminary HRR for the immediately preceding
League Year surpasses $4.8 Billion, the Upper Limit will
increase by $1 Million per League Year until the Escrow
Balance is paid off.
• The parties can agree to increase the Upper Limit in
excess of $1 Million in order to allow for a smoother
transition into the ‘Lag’ formula.
• The parties agree to discuss the Upper Limit in good faith
in the event projected or Actual HRR decreases on a year
over year basis.
Lag Formula (subject to the provisions above regarding the
Extension Year):
• Parties to discuss and approve detailed mechanics and
implementation of the ‘Lag’ formula subject to the
following general parameters:
o Introduce the ‘Lag’ formula after the Escrow
Balance has been repaid but not earlier than
establishing the Upper Limit for 2023/24 League
Year.
o Apply the current Payroll Range formula except
for the following changes:
Page 3 of 71
(1) Use HRR from the League Year two years prior
(instead of Preliminary HRR from the immediately
preceding League Year) (i.e., using HRR for Year 1
to set the Payroll Range for Year 3).
(2) Remove the Growth Factor (i.e., do not adjust
the resulting Midpoint (based on Final HRR per (1)
above) upward to yield the Adjusted Midpoint as
provided for in Section 50.5(b)(i)).
o Maximum year-over-year increase in the Upper
Limit will be the lesser of 5% and the trailing twoyear average HRR growth percentage (measured
using Final HRR from the League Year four years
prior, Final HRR from the League Year three years
prior, and Preliminary HRR from two years prior
and after taking into account any FX impact
adjustments)
o Except for the 2026-27 League Year, minimum
year-over-year increase in the Upper Limit is the
lesser of 2.5% and the trailing two-year average
HRR growth percentage. (measured using Final
HRR from the League Year four years prior, Final
HRR from the League Year three years prior, and
Preliminary HRR from two years prior and after
taking into account any FX impact adjustments)
o For any immediately upcoming League Year for
which the NHL and NHLPA anticipate a Shortfall
(as defined in Section 50.11(a)(i)) based on
Preliminary or projected HRR, the parties may
(but are not required to) increase the Upper Limit
for that upcoming League Year by up to an
additional 5% (over and above the increases
dictated by the provisions above) so long as both
the NHL and NHLPA agree to do so by the June
15th prior to that start of that League Year.
o The remaining aspects of the Payroll Range (i.e.,
the Lower Limit and Midpoint) shall in all
instances be set in accordance with the terms of
the current CBA.

There's a lot here, but basically, if things rebound quickly, then the cap increases with it (once escrow balance is paid off).

[Locke]

The Thread Title should be changed to "Will Next Season Start?"