NHL should take a page from MLB

The NHL missed its first day of regular season games on Thursday, among those canceled due to the owner’s lockout of the players; the Blues opener in Colorado and three other scheduled contests.

NHL players are locked out despite unprecedented success for the sport. The action on the ice is better than it’s ever been, the TV ratings are higher than they’ve ever been, and revenues…$3.3 billion last year…are higher than they’ve ever been.

Yet owners see fit to extract a salary cut from the players, from 57% of league revenues to 47%. This would be a reasonable request if the league was suffering, but clearly it’s not. That $3.3 billion was the seventh consecutive year of record revenues for the league. The owners are making more than they ever have, and so are the players. So why do the owners want a rollback?

The answer is simple. Some teams can’t make it even though, as a whole, the league is doing well. Based on last year’s revenues, this year’s salary cap was scheduled to be just north of $70 million. The salary FLOOR would be $54,200,000. Forbes estimates that the Blues, for example, generated $78 million in revenue for the 2010-2011 season. The top fifteen revenue teams in the league shared $150 million in revenue with the bottom fifteen teams. So if that $150 million were split equally among the bottom fifteen teams, the Blues would have had $88 million to spend on payroll, coaches, front office employees, debt, building upkeep, travel, minor league teams, scouting, development, insurance and utilities.

On the other end of the spectrum, Forbes estimates that thirteen teams generated more than $100 million, led by Toronto at $189 million, the Rangers at $169 million, Montreal at $165 million, Vancouver at $146 million and Detroit at $127 million.

So if the Red Wings pay in $10 million, and the Blues get $10 million, the Red Wings still have nearly $30 million more to spend than the Blues. The Wings would have $47 million to spend after getting to the cap. The Blues would have $18 million over the cap, or $34 over the salary floor. That’s the reason that I say this is an owner-owner problem, rather than an owner-player issue. If revenues are at record highs, and the richest owners are making more than ever, why should players take a pay cut?

Baseball has done it right. They share all national revenue. Then each team contributes 34% of its net local income into a pool, and that money is split evenly among the 30 teams. So, in theory, if the Maple leafs made $200 million, they’d pay $68 million into the pool. If the Blues made $100 million, they’d pay $34 million in. For our purposes (because the math is easier), if the top fifteen teams paid in $68 million, and the bottom fifteen paid in $34 million, everyone would get $51 million back. That levels the playing field just a bit, bringing the high revenue teams closer to the middle, and lifting the low revenue teams closer to the middle.

By the way, the way the current baseball agreement is written, the top fifteen teams in market size will forfeit 25% of their return next year, 50% in 2014, 75% in 2015 and 100% in 2016 until the end of the deal. So the bigger markets, in noting that they need good teams to play against, have agreed to share 34% of their net local revenue with bottom half of market sizes. That’s “league think” on the part of baseball owners.

It makes no sense for the players to have a $70 million cap when Toronto would have $119 million left when they reach it, and the Blues would have $8 million left. Until owners agree among themselves to share some of the incredible revenue they’re generating, the players shouldn’t bother to make a deal. Every other sport has a revenue sharing mechanism in place. If baseball has done it without a salary cap, hockey should be ashamed not to.