Pro Hockey Hopes Lockout Made it Recession-Proof
NHL Commissioner Cites Salary Cap and Revenue Sharing as Strengths
By staying dark for an entire season five years ago, National Hockey League owners won labor concessions and imposed cost controls that they hope have made them and their game recession-resistant among pro sports in the current U.S. economy.
“We had some fundamental problems which were well chronicled, and we dealt with them,” NHL Commissioner Gary Bettman told CNBC on May 5, during a meeting of the minds in New York among the commissioners of all four major U.S. sports – Bettman, David Stern of the National Basketball Association, Roger Goodell of the National Football League and Bud Selig of Major League Baseball.
Salaries Capped, Attendance Rises
Bettman explained that changes were made “both in terms of the product on the ice with the playing rules, in conjunction with an economic system that has a salary cap and a salary range, with revenue sharing so that all our teams can afford to be competitive.”
Both professional football and basketball operate with salary caps, while major league baseball uses a luxury tax on teams spending over an annually adjusted limit. In the NHL, attendance has risen in each of the four seasons since the league resumed play with a revamped economic structure. Hockey’s resurgence in Chicago was a significant factor, with a 42 percent increase in the Blackhawks’ attendance this season.
“We have a great game,” Bettman said, “we have great fans, and they were ready to reconnect and forgive us for taking a year off, for which we are grateful – once they were fully clear that we had fixed the problem.”
First Pro Sports Season Canceled
No major professional sport had ever canceled an entire season over a labor dispute until the NHL locked out its players for the 2004-2005 season. Bettman put it all on the line to obtain a salary cap, limiting expenditures on player salaries. NHL Players’ Association president Bob Goodenow had an equal stake in resisting a salary cap, while offering several other cost-control measures such as revenue sharing, a “luxury tax” on the highest-spending teams, and a one-time rollback of player salaries.
Under the new Collective Bargaining Agreement, team salary caps were increased each year, reaching $56.7 million for 2008-2009. The minimum team payroll was set at $40.7 million for 2008-2009. Salaries are currently pegged at approximately 55 percent of NHL revenue.
Losses Claimed And Disputed
Before the lockout, a report commissioned by the NHL claimed the league was spending 76 percent of revenue on player salaries, a higher percentage than other sports. The NBA’s official ratio is 57 percent of league revenues; the NFL, 59 percent; MLB, about 55 percent (MLB has no salary cap). The report also claimed the league had lost a combined $273 million in 2002-2003, with attendance declining and some teams considering bankruptcy. The lockout began in September 2004 when the collective bargaining agreement expired. In November 2004, Forbes Magazine estimated the league had actually lost less than half what it claimed.
The 2004-2005 season was officially scratched by Bettman in February 2005, with negotiations at an impasse. The confrontation nearly threatened a second season until a settlement was reached in July 2005. The final agreement, ratified unanimously by owners and by 87 percent of the players, placed a $39 million salary cap on each team for the 2005-2006 season. Player salaries were linked to league revenue, and all existing salaries were rolled back 24 percent. Goodenow resigned as NHLPA president within days after the agreement was ratified.
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