The Cost Of Peace: Going forward with the new CBA by Usvaldo de Leon
After 113 days, the lockout is finally over. The new CBA is for 10 years with an opt out after 8. Both sides are ready to get back to hockey. However, a larger question remains open: did this fight solve the problem? Or will we be here again in 8 years?
This seems like a deal both sides can live with: a great deal for owners, most of whom should now be able to maintain profitability (and thus theoretically stay in their communities) and an acceptable deal for players, whose average salary will stay roughly the same for the length of the CBA and could even grow modestly. What’s not to like?
That hinges on two factors. First, revenues among the strong market franchises like the Red Wings, Maple Leafs and Rangers eclipse those of the weak market franchises like the Blue Jackets, Coyotes and Panthers. Worse, revenue growth at the top is much healthier than at the bottom. Is the new CBA going to make any impact on this disparity? Second, will the new CBA improve salaries for the average player, or will all available funds simply flow to the top players?
For teams, revenue growth since the 2004 lockout has been phenomenal, growing at 42% in that period. If that trend continued, revenues would increase by $1.4 billion while salaries only increased by $475 million, an increase in profit of over $900 million. It would be time to light cigars with $100 bills.
However, in that scenario, the money would continue to flow unequally. The Maple Leafs revenues would be more than the Coyotes, Blue Jackets and Lightning – combined. While the combination of higher revenues and increased revenue sharing would pull all clubs into profitability, a dozen teams would be all but nailed to the salary floor, or close to it to maintain their tenuous profitability.
This raises a related point: if strong teams have huge amounts of money to burn, it makes sense they will attempt to game the system and start scooping up star players when their contracts expire. Even with the new CBA, and even with strong growth rates, GM Steve Yzerman will have a difficult time figuring out a way to keep Steven Stamkos in Tampa Bay. Put another way, what is the point of being able to offer 8 year contracts to your homegrown stars when your team cannot offer more than minimum wage?
Average players are in a similar boat with the weaker clubs: a decrease in the salary cap is going to put significant pressure on their wages. Note Eric Fehr, recently resigned to the Caps. In 2010, when Fehr looked like a budding 2nd line winger, he signed a 2 year, $4.4 million deal. But after some nagging injuries limited his production, he has re-signed with the Caps for 1 year at $600,000, a 73% decrease. This will increasingly become the rule.
Further, with the new guidelines on contract variance it will be difficult to soften the cap hit of premium free agents, forcing others to take a cut. In 2011, the average NHL salary was $2.4 million. The median salary that year, exactly halfway between the highest and the lowest figures, was $1.7 million. After 8 years of the CBA those figures will diverge, with the average salary growing and the median salary shrinking. This is what has happened in the NFL, where the average salary is $1.9 million, but the median is only $837,000.
The CBA has created peace. It has enabled the season to begin, finally. And, finally, the league can again focus on growing the sport. But the cost of the peace appears to be a joining of interests: star players and strong teams have their fortunes aligned at the expense of average players and weak teams. The new CBA appears to be putting a band-aid on a wound that is still bleeding. In 8 years we will very likely be here again for another go round.
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