For NHL players, the lockout payoff

September 19. 2012 8:00AM - Last modified: September 19. 2012 9:00AM

Bill Sayer

On the side of the Stanley Cup, where champions' names are engraved, there's one very empty, sad inscription: “2004-05 Season Not Played.” That year, the NHL became the first pro sports league in the U.S. to lose an entire season to a labor dispute.

Photo/Wikicommons

They look in line to lose at least a big portion of this year's season, thanks to both sides. Last Saturday night at midnight, the NHL joined the NBA and NFL to be the third major pro sports league in the last 18 months to lock out its players.

There's a wide gap between both sides, with the team owners wanting severe changes to the way the league has done business lately. Similar to the NBA lockout, the key issue is the share of revenue paid to the players. The owners want an effective cut of the players' share of revenue, from 57 percent to 43 percent. With the players facing an effective 24 percent cut in pay, they have a lot to hold out for.

Owners also want to limit contract lengths that allow for enormous contracts that sidestep the salary cap. One of the dirty little tricks to keep under a salary cap is what's called a "front-loaded" contract.

Take the recent example of Zach Parise. This summer, Parise signed a 13-year contract with the Minnesota Wild worth a total of $98 million. So why would a team award a 13-year contract to a 28-year-old player? Because the amount charged toward the Wild's salary cap is the total value divided by the number of years. For every year the contract gets longer, the less impact under the Wild's salary cap, and the more they can spend.

Parise's agent, doing his part, knows that the team has no intention of keeping him for all 13 years, probably more like seven to 10 years. The agent structures the contract so that Parise is paid most of the value in just the first five years. Everybody wins, but the owners have to pay out big time, competing with each other for huge upfront cash deals.

The owners have been handing out these contracts regularly, and now they're saying the rules need to be changed to keep them from hurting themselves further.

The players aren't innocent here, either. They've actively sought out these deals, knowing that the owners were going to use it against them at the negotiating table. More than 15 players have signed contracts at least 10 years long. Ilya Kovalchuk was offered a whopping 17-year contract at age 27, but it was barred by the league.

The biggest fault on the players, though, is their lack of organization.

NHL stars are already signing contracts to play overseas in well-established leagues, making enough to not care about the lockout. The players have 8 percent of their salaries from last year in escrow, ready to be paid out Oct. 11. That's worth around $200,000 to most players. With cash flow coming in, there's less motivation, and after the last lockout didn't kill the league, the players don't have much leverage with the owners.

The key here will be the annual Winter Classic. That single game is worth so much to the league in ratings, tickets, merchandise and sponsorships that it's enough to move the needle at a critical point in the year. Unfortunately, that means we're probably looking at a couple of months with no games and no negotiations.


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