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Monday, August 16, 2004
Divergent views

By Darren Rovell
ESPN.com

It's less than one month until the expiration of the National Hockey League's Collective Bargaining Agreement and even the most optimistic optimists would tell you that things don't look so good.

Those involved in league and team business have been made aware of the contingencies associated with their employment should the lights go out in arenas. League executives say that a new agreement must have salaries tied to revenues. Representatives of the NHL Players Association, who question the method by which those revenues are calculated, are weary of a salary-cap type system that would essentially force the owners to control their spending.

Bill Daly
Bill Daly
Ted Saskin
Ted Saskin
Those issues, as well as a host of others, were brought up in interviews with Bill Daly, the NHL's executive vice president and chief legal officer, and Ted Saskin, senior vice president of business affairs for the NHL Players Association. Here are their responses to questions from ESPN.com sports business reporter Darren Rovell:


Q: The NHL has developed a comprehensive Web site, NHLCBANews.com, to inform fans about every step of the labor negotiations. Why has the league spent so much time educating the public on the issues?
Daly: I think this negotiation is clearly a matter of public interest and we come at this at this process from the vantage point that there's absolutely nothing to hide and everything should be as transparent as possible. Now obviously there are things that you do in negotiations where you don't want to be accused of negotiating through the media or through the public and we're sensitive to that, but by the same token, we want to be as open with our fans as possible.
Saskin: I don't think they are trying to inform the public, they are trying to sway the public with their own propaganda. I don't go on their Web site because I took a quick look when it was first put up and it was obvious that it was just a very partisan effort to try to get their view of the world out there. I wish they spent as much time trying to negotiate or solve the issues as they do on the public relations front. But I think it's all part of their strategy to lock out the players and they are focused on managing the PR around their planned lockout.

Q: In presenting the issues to fans, the league has tied competitive balance to the current negotiations. But we've seen many teams that have been in the bottom half of league payrolls make the playoffs and, most recently with the Tampa Bay Lightning, even winning the Stanley Cup.
Daly: It could be a lot more competitive than the product that we have currently. I'm not suggesting competitive balance is our biggest problem, but ask Calgary and Tampa Bay whether they would be able to compete on the same level given the financial constraints that they have and the financial obligations that the current system puts on them to keep those teams together so that they can be competitive in the future.
Saskin: The league has been out there trying to suggest that there could be more competitive balance and that's ludicrous. They should be out there very proud of the record the NHL has on competitive balance. There's no other sport that has had 12 different teams competing in the semifinals in the last three years and there is no other sport that has that large of a number of different teams competing for the playoffs over the same period of time. We're in a terrific situation. If they try to make an issue of it and the more fans hear about it the more people are going to wonder, do we have a problem there?

Q: Does the definition of competitive balance suggest that each team should have the right not only to compete, but to also earn a profit?
Daly: Both of those are fundamentally important to the league, so we want every club to have the ability to be competitive for championships. But more importantly, from an economic standpoint, we want to create a system where all clubs have a chance to be profitable and viable in the future.
Saskin: In terms of trying to even out the profitability between teams, the way one does that is through revenue sharing. There's no doubt that with the great growth in revenues over the last 10 years, the distribution of those revenues has been very unequal. Certain teams have had much larger revenue gains than others. But that is not all that surprising given that hockey has the least amount of revenue sharing among the major sports leagues.

Q: NHL officials have told fans that this negotiation matters in terms of ticket prices -- that the majority of clubs have not raised their prices for next year. If there were a new system, how would ticket prices be tied to that system so that fans are guaranteed that there is a direct relationship between a new system and ticket prices?
Daly: I think our clubs are committed to making sure that the ticket prices are reflective of the new economic system. I think we're in a position now where our clubs are already realizing, even within our current system, that they can't simply continue to raise ticket prices in an effort to chase salaries and that realization I think will translate into a commitment to correct the ticket price in a favorable way for the fans when a new economic system is achieved.
Saskin: Ticket pricing has always been a function of supply-and-demand and it has nothing to do with the economic system that is in place. It really relates to how an owner decides to price his house to the extent that there is strong demand. It's a completely unrelated issue that they proffer as an attempt to get fans on their side -- that high ticket prices are because players are receiving a certain amount of salary.

Q: What is your definition of "salary cap"?
Daly: The only cap that I've ever seen in professional sports would be a maximum payroll that's the same on every team and while that's the scenario we're certainly willing to accept that's the not the scenario we've suggested we need. What we need is, from a league-wide perspective, a certainty as to what our player costs are and a more rational balance between our player costs and revenues. Once we have that we can design a system and come up with what that means in terms of payroll from club to club or salary from player to player. We are more than open to discussing this with the players association. In fact, it should share a common interest in making sure that that money is allocated in a most sufficient and fair way.
Saskin: The definition of a salary cap is when you limit salaries to a defined percentage of the revenues that you negotiate that represents the business. You have a negotiation over what revenues you have to include in your definition of the business, and arbitrarily negotiate a percentage of those revenues and and you can't pass that percentage.

Q: It seems that both sides don't quite agree on the financial state of the league since the players association seems to dispute the value of the numbers most recently put forth in the league-commissioned Levitt report (that the league's teams lost $273 million during the 2002-03 season). Why wasn't the Levitt supported by both the league and the union?
Daly: We did approach the players association more than five years ago and offered them the right to have an independent auditor audit the books of our clubs. That was something they chose not to do. We did go through an economic study group process and, suffice it to say, they came up with very contrived results, which were fundamentally flawed in a number of respects essentially to get to a result. The Levitt process was something separate and apart. It was really a process that they really had no meaningful role to play in because we hired Arthur Levitt as an independent auditor just as a company would hire an independent auditor to audit its books.
Saskin: We were doing an economic study review since 1999 and debating the very issue on how one defines the hockey business because that's subject to a lot of different interpretations. At the very time that we're carrying out this joint economic study committee with them, they obviously undertook on a surreptitious basis the Levitt report and they gave Arthur Levitt the basis on which how he should define the hockey business. They're private companies. They have the right to maintain their finances privately. But it's a little troublesome when they say that there's all this financial distress, but they won't provide any numbers on a team-by-team basis to support that. And I think the reason why they would not disclose it is pretty plain -- the public would not believe some of the teams they suggest are losing money. At the end of the day, we don't think it really matters in a marketplace, because we think owners are smart and rational and they are going to have the best understanding of what their financial picture is and they should set the values in their negotiations for players.

Q: Last October, the NHL Players Association put forth a proposal that would involve teams with high payrolls paying a luxury tax. Will a luxury tax without so called "cost certainty" work?
Daly: I don't think so. A luxury tax system by its very nature doesn't provide certainty and we're in a situation now where our financial challenges and problems are very, very apparent and need to be addressed in a way that's meaningful. The bottom line is that we don't have any room for error anymore, and a luxury tax by definition leaves room for error.
Saskin: We've seen in Major League Baseball, especially in the last year, that it could work and baseball salaries for the first time in a long time actually declined. Nobody wants to pay tax, and teams will make spending decisions on players in a way to reduce the tax. It obviously has additional drag and restraints on what teams will spend on players and it's not something the players association wants to have, but it's a compromise when you're faced with ownership that is looking for different ways to put restraint on player costs.

Q: What have the terms of player signings this offseason indicated about the marketplace, either under the current Collective Bargaining Agreement or under the expectation of a new one?
Daly: I certainly don't think the signings suggest that there has been any meaningful correction in the marketplace. I know that the Players Association was certainly hoping that there would be one, so that they could say that one occurred. If you look at signings over the last two weeks that the salary arbitration process has produced, I would be surprised if there is a 5 percent decline in salaries (from last year's average). To the extent that there is any adjustment to the marketplace this summer, I would suggest that has absolutely nothing to do with the system, per se, as it has to do with the fact that we're in the last year of a CBA which expires on Sept. 15 and a lot of clubs and a lot of players and a lot of agents really don't know where they'll be under a new CBA. Any moderation at all is then an artificial moderation.
Saskin: We think that there has been a marked change in the market and that player salaries have moderated a significant amount. We don't know the full impact of it yet, and although we still believe the framework we put forth in October of last year [which proposed that all players take a 5 percent pay cut] still makes sense, it may not be necessary to have as much as a 5 percent fall back on salaries because the market may have rolled back significantly already.

Q: In May, the NHL announced that its new network partner would be NBC. In an unprecedented move for a major sports league, the league agreed to split revenues with the network with no up-front rights fee. Many felt this was an indication of the NHL's lack of market power. How would you characterize the urgency of discussions in light of evidence like this that the league is already in a shaky position?
Daly: Our interest in speed is to try to reach a deal as quickly as possible because obviously we think that's good for everyone involved in the sport and it's our objective and goal to reach an agreement as soon as possible. Having said that, we know we have to do the right deal and we're not going to do a deal just to meet a deadline or put a system in place just so that we can have a season. We need a system to work for this league long term.
Saskin: They don't seem to exhibit any interest in speed. Everything I've seen from them for the last few years is that they are planning to get to a lockout and they are trying to obtain a cap through a lockout. I haven't seen anything that suggests their desire to negotiate and come up with a fair compromise. Hockey is not well served by a lockout. Hockey has a much more tenuous footing in the United States and we need to everything possible to promote the sport and the worst way to promote the sport is to shut it down through an owner's lockout.

Q: Why can't both sides just lock themselves in a room and stay there until you get something done? Does the lock on the door only start working in mid-September when the current CBA expires?
Daly: I would hope not. We believe that it's very important that we be meeting and meeting as often and for as long as we possibly can to try to see if headway can be made. Currently the players association does not have that mindset and, as a result, our meetings have not been as frequent as we would have hoped they would have been at this point. But we can't singularly control that process.
Saskin: To date, we have not had a negotiating partner in the NHL. They've approached the CBA discussions with only one solution -- a salary cap -- and they know that that's a non-starter for us. So that's what has made it difficult and, frankly, I don't see that anything is going to change on Sept. 14 either.

Q: How many days of the season needs to be missed in order for a compromise to be reached? Some have suggested it could be a year or even longer.
Daly: I don't think there's any time that's necessary to sit out in order to get this right. I think we need to be on the same page with respect to how to get this right in order to get it right. And right now we don't seem to be on the same page so I don't think it's a factor of time as much as it's a factor of coming to a common ground on approach.
Saskin: I definitely don't believe you need a lockout, but unfortunately the strategy of Gary Bettman to date has been to try to extract a salary cap. He knows he can't negotiate on a fair basis, so he has tried to put economic pressure on the players. If that's his approach to bargaining, it's consistent with his approach back in 1994. On the heels of the New York Rangers winning a Stanley Cup and all the focus on hockey he went and had a 104-day lockout. It's also the way he approached bargaining with the officials. It seems to be his modus operandi in terms of how he does labor negotiations.

Q: Is there any thought of a drop-dead date where a season would be called off -- such as mid-November to get a 70-game slate accomplished or late-December to try to get in a 48-game schedule?
Daly: No. We're not looking at dates or deadlines at all. We're totally focused on negotiating the deal that works and will work for this league for the long term and once we reach that deal we'll make an assessment of where we are in time and space and assess in terms of an operational plan going forward.
Saskin: We've being doing our part to make fair compromises to get to a deal. They are the ones who are determined to start a lockout to try to put economic force on players so that they will accept something that they wouldn't negotiate. I think it's a foolish strategy, I think it takes fan support for granted, it totally misjudges the resolve of the players to get a fair deal and it is not going to achieve the results that they think they might obtain through a lockout. I can't understand the strategy at all. We've made it very clear that we're prepared to address all of their stated concerns and to do so in a non-cap system.

Darren Rovell, who covers sports business for ESPN.com, can be reached at Darren.rovell@espn3.com