RED LINE, BLUE LINE, BOTTOM LINE| REVIEW
| Real value of revenue sharing lost in mudslinging |
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What's Mine Is Mine and What's Yours Is Mine, Too. Bruce Dowbiggin collective bargaining agreement primer is unimportant, secondary, a smokescreen? Welcome to Chapter 3 of Lockout 101: A Layman's Guide to the National Hockey League's Labour Meltdown, where we discuss the agenda, but dare not speak its name: revenue sharing. The public and much of the media have gulped the NHL's Kool-Aid on salary caps and payroll taxes as the only means to level hockey's uneven playing surface. Guided by Gary Bettman, the original architect of salary-cap theory in the 1970s, they want an "idiot-proof" cap as a means of stopping the practice of NHL big fish swallowing NHL small fish (expecting Bettman to recommend something other than a salary cap is a lot like asking Steve Jobs to choose PC over Mac). But there is strong evidence that if NHL owners shared more of their revenues, the economic gap between rich and poor markets would shrink faster than under either a salary cap or a luxury tax (and thus end the wholesale poaching seen the past decade). Before we look at that, let's first see where the two sides sit on the issue of NHL revenue sharing, which -- at middle single digits percentage-wise -- is by far the lowest among the Big Four team sports. Why The NHLPA Loves It: They should love it, but NHLPA director Bob Goodenow is chronically incapable of articulating his best arguments (such as why Bettman still draws his hefty $3 million salary during the lockout while Goodenow and many NHL employees are getting zilch). So it's little surprise he's missed a great chance to demonstrate why the NHLPA shouldn't be the one asked to take a haircut in the new hockey economy. According to several sports economists, if NHL owners (who split just nine per cent of their revenues in 2002) shared anything like the 63 per cent of revenues divvied up by NFL bosses in that same year, much of the economic benefit of poaching stars would disappear and small markets would have a better chance to retain their key players. The NHLPA would avoid all the responsibility for cost savings under revenue sharing, yet no one at the PA wants to talk seriously about it. Why the NHL Hates It: Large-market owners say they pay more for their franchises and have higher overheads and thus are under no obligation to support their brethren in smaller markets. With the vast majority of NHL revenues coming from gate, not TV money, these owners are loath to transfer locally generated money to another city. Likewise, those owners who do a good job of running their businesses are reluctant to prop up those who couldn't sell ice cubes in the desert. Revenue sharing also means very public disclosure of an owner's profitability, and most NHL owners would rather stick their head in a really old equipment bag than give up the truth about their situation. Finally, owners have seen the polls that show up to 80 per cent of the public think overpaid, greedy players are the problem. So why argue with the public and reduce the bottom line? So What's The Skinny? A fine recent book -- Red Line, Blue Line, Bottom Line by former Herald journalist Marc Edge -- makes the point that increased revenue sharing between NHL teams would help remove the bogeyman of the free-spending, maverick owner who disrupts the salary grid. "The more revenue owners share among themselves, the less they end up paying their players," writes Edge. In his revealing argument, Edge shows that the NFL-- which shares TV, gate and other revenues, mostly on a 60/40 basis -- has thelowest league average salary, because with less to gain financially from signing one player, NFL owners don't engage in frenzied bidding-up of players. With a trip to the playoffs not that much more profitable than missing the postseason, one free-agent receiver or running back simply doesn't mean that much to the bottom line. But a hockey owner can reap -- and keep -- a huge financial windfall by adding players to take him to the Stanley Cup final. So individual players have a much higher incremental value on the bottom line -- and thus their value is bid up well past their real value. A mistake made much worse when that contract is guaranteed. Not something that would happen with real revenue sharing in the NHL. Is the NFL exceptional? The NBA, which shared 34 per cent of its revenues in 2002, discovered that "its effect tends to be more profit oriented," writes Edge. In other words, more money goes to owners' pockets than players' wallets under significant revenue sharing. So Who's Right? It's typical of Gary "Wrong-Way" Bettman's regime atop the NHL that the NHL would pass up a genuinely profitable scheme for one that instead lets Bettman blast players for his many mistakes since 1995 and the last CBA. And it's typical of Bob "The Sphinx" Goodenow to leave his best arguments on the bench in favour of a "free-market-is-best" philosophy. Can it be an issue if no one hears about it? Conclusion: Unless the NHLPA makes this into a more high-profile issue, the real value of revenue sharing will be lost in the NHL's noisy PR campaign for a salary cap. And the new CBA will be as flawed as was the last one. dowbboy@shaw.ca |