By now you will have heard that the NHL owners made a new proposal to us today. The purpose of this message is to give you the essence of that proposal, and an indication of where we go from this point forward. I have already discussed these matters on a long conference call with the Executive Board, Negotiating Committee and other players (more than 100 players were on the call).
As you read through this, it may make sense for you to keep something in mind. Simply put, the owners’ new proposal, while not as quite as draconian as their previous proposals, still represents enormous reductions in player salaries and individual contracting rules. As you will see, at the 5% industry growth rate the owners predict, the salary reduction over 6 years exceeds $1.6 Billion. What do the owners offer in return?
Steve and I met with Gary Bettman and Bill Daly today for about 45 minutes at our offices in Toronto. As the meeting began, Gary said that they had a new proposal. The proposal does represent movement from their last negotiating position, but still represents very large, immediate and continuing concessions by players to owners, in salary and benefits (the Players’ Share) and in individual player contracting rules.
Gary first turned to timing of the talks. He said that there can still be a full 82 game season if opening day is Friday, 2 November, and we end the last week in June. This means, he said, that training camps have to open by 26 October, and that means we need to have a deal done by Thursday, 25 October. If we don’t, he said he has a concern that we might lose the season.
He then asked Bill Daly to review the terms of the offer. He gave us two documents, the first a “bullet point” summary, and the second more of an essay about what they are doing and why.
The proposal covers the players’ share, cap accounting, and player contracting rules, as well as a couple of other items. Below is a quick summary.
• The proposed term is a 6 year CBA, plus mutual options for year 7.
• They want to “clarify” HRR definitions and rules. It is not immediately clear what this means, but so far all of their ideas in this regard have had the effect of reducing HRR, and thereby lowering salaries.
• The Players’ share is reduced to 50% from 57% immediately – this season. This is a reduction in the share of 12.3%. On last year’s revenue numbers, this would mean that players’ salaries would be cut by about $231 Million.
• Over 6 years, this would save the owners an enormous amount of money, the precise amount depending on how fast revenue grows. For example, if revenue grows at 5%, which the owners predict, they save $1.651 Billion that would otherwise be paid to players. If revenue grows at 7.1%, the average rate over the last agreement, the Players’ Share is cut by $1.776 Billion. (If revenue never grows, the owners pay players $1.387 Billion less over 6 years.)
• What about the individual team salary cap? Under this proposal, the 2012-13 cap numbers, compared to current, are $10.3 Million lower with some sort of unspecified “transition rules” to take into account that many teams are already over the new cap numbers:
o Floor 54.2 reduced to 43.9
o Midpoint 62.2 reduced to 51.9
o Ceiling 70.2 reduced to 59.9
• The proposal includes a “Make Whole” provision, to compensate players for the anticipated reduction in absolute dollars from last year (2011-12), to this year and next year. However, it would work like this. The Players share in subsequent years would be reduced so that this “Make Whole” payment would be made. It is players paying players, not owners paying players. That is, players are “made whole” for reduced salaries in one year by reducing their salaries in later years.
• They made several proposals in the areas of cap accounting and player contracting rules. These include:
o Entry level contracts would be for two full seasons (plus any initial partial season)
o Salary arbitration eligibility would require 5 years professional experience rather than 4 years
o The team can elect salary arbitration in any year a player can so elect, meaning that any RFA with meaningful bargaining power could expect that the team would elect arbitration
o Group 3 Unrestricted Free Agency would require either 8 seasons in the NHL or age 28
o Salaries in a multi-year contract could not vary more than 5% in any year from the initial year
o The salary cap floor would have to be met without consideration of performance bonuses
o A special rule be developed for existing long term (longer than 5 years) contracts that would take up more salary cap space than the current rules provide
o All salary paid to a player on an NHL contract in the minors or in Europe above $105,000 a year would count against the teams NHL salary cap, thereby reducing cap space on any such team (and if we so agree re-entry waivers would be eliminated)
o Some flexibility to trade dollars with players
o 4 year draft rights for European players, after which they can be free agents
• The owners also made revenue sharing proposals. We have few details yet, but: (1) the amount shared would be $200/M at current revenue levels, at least half of which would come from the 10 highest revenue teams; (2) distribution to be determined by a committee on which we have representation, but no other details were provided; (3) current recipients would be protected for 2 years; and (4) they would eliminate the existing disqualifications and claw backs
• Finally, they also proposed that players could appeal supplemental or commissioner discipline to a neutral arbitration, on a “clearly erroneous” standard, which, as a practical matter, makes it very unlikely that any decision would be overturned.
So, what happens next? We will spend tonight and tomorrow going through this proposal, making sure we understand it, and evaluating how it would affect players. We will then turn to formulating a response to this proposal, with the goal of presenting on Thursday.
We do not yet know whether this proposal is a serious attempt to negotiate an agreement, or just another step down the road. The next several days will be, in large part, an effort to discover the answer to that question.
Bear in mind the approach that Players have taken to these negotiations. It is:
• Given the enormous concessions players made in the last round, plus 7 years of record revenue reaching $3.3 Billion last season, there is no reason for a reduction in the amount players receive.
• Players are willing to take a reduced share going forward so that the NHL can grow out of whatever problems some franchises face
• The player contracting rights secured in the last negotiation should, at a minimum, be maintained
• Revenue sharing needs to be enhanced and structured so as to encourage revenue growth by the receiving teams
• The overall agreement has to be fair and equitable for both parties. Bargaining is both give and take
Finally, please remember that all players are invited to attend negotiating meetings.