The Most Disgraceful Act Ever Committed By The NHL
- Posted by Leigh Drogen
- on July 15th, 2012
This week, the NHL didn’t send a shot over the bow of the NHLPA in this summer’s CBA negotiations, they launched a squadron of bombers all armed with nuclear weapons, opened the bay doors, and dropped them. The bombs can be disarmed remotely before they hit the ground, but if the owners’ strategy in 2004 during the last labor negotiations is any indication of their stance this time around, you might as well start counting bodies now.
Here are the details of the NHL’s proposal to the NHLPA:
- Players’ share of gross revenue goes from 57% to 46%
- The definition of revenue which goes into the pool will be augmented to exclude revenue currently counted
- 22% rollback in current player contract values
- 5 year entry level contracts
- Players must be in the league 10 years to qualify for free agency
- 5 year max contracts
- No salary arbitration
- No signing bonuses
- Cap hits for each year of a contract must be equal
Just to put things in perspective a bit, this is the owners’ offer after the NHL has grown revenues 50% since 2005, while total player salaries have risen only 15%.
There is an important aspect of negotiation called anchoring. It’s an important aspect of behavioral economics which teaches negotiators that in order to gain the upper hand in a negotiation, you should put forward the first proposal well above the minimum value you’re willing to accept. Setting the first anchor can give you a huge advantage, unless the anchor you’re attempting to set is so outrageous that the chain snaps from pure ridiculousness. On the other side, behavioral economists recommend that when such an outrageous offer is put on the table, the best strategy is to storm off in a volley of curse words and vitriol in order to sever the chain in your adversary’s mind that they are able to set the anchor for further negotiations at that level.
Of course, being able to walk away from the table and wait for a saner offer takes guts, and fortitude. For that strategy to work you need to be willing to say nothing until the other side comes back to you and says, “ok, here’s the real offer, let’s discuss.”
In the case of the NHL versus the NHLPA, I’m sad to say that it doesn’t look good. The owner’s have shown that they don’t respect the game enough to negotiate from a respectable anchor. Likewise, the players have shown they are weak, or at least were the last time around, which unfortunately sets an anchor in the owners’ minds that they can be broken, a conclusion that I believe this time around is false.
All of this is setting up for a long summer, fall, winter, spring, and who knows how much longer without hockey. The NHL could have come to the table with a decent negotiating anchor off which a deal could be made, but they chose to commit what could go down as the most disgraceful act in NHL history resulting in a multi year lockout.
Here’s what the owners should have proposed:
- Players’ share of gross revenue from 57% to 50%
- No change in revenue definition
- 10% rollback in current contracts
- 3 year entry level contracts
- Free agency after 8 years in the league regardless of age
- Salary arbitration for restricted free agency stays, but if a player holds out for even one day after the arbitration ruling they are banned from playing in the league, forever
- 7 year max contracts
- No signing bonuses
- Cap hits are equal
This would be a salient starting point for negotiations, one that didn’t make the NHLPA have to walk away from the table screaming. Some of those numbers would most likely have to move in the players’ direction, and other parts of it may stick entirely.
This isn’t my idea of a “fair” deal, because we all know “fair” is a useless word when it comes to negotiations. There’s no such thing in life when money is involved. This is the starting point for a deal that could produce an “acceptable” deal for both sides, one that let’s everyone get back to playing hockey next year, instead of heading off to the KHL, or sitting at home.
If there’s no hockey next year there will only be fingers pointing in one direction, towards the owners. Shame on them, shame.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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