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Steve Aschburner

American Airlines Center, which houses an NBA and NHL team in Dallas, lied dormant to hockey in 2004-05.
Juan Ocampo/NBAE via Getty Images

Owners, players must gauge cost of a long, NHL-type lockout

Posted Jul 14 2011 11:51PM - Updated Aug 3 2011 9:27AM

What remains unthinkable for a lot of NBA fans, a month-plus into the sport's labor-strife shutdown, once was very much thinkable -- and miserable -- for their friends who favor pro hockey. In 2004, the National Hockey League imposed a lockout that lasted 301 days, stretched from September into the following July and wiped out the entire 2004-05 season.

If the two sides in the NBA showdown don't start to move closer to an agreement sometime soon, the league might be facing something similar, a worst-case scenario that could make it the second North American sports league to lose an entire year to an acrimomious struggle over profits and salaries.

Some in the NBA know exactly what they face. A group of NBA owners who also own NHL franchises -- in Washington, Toronto, New York and Denver (and, until recently, in Atlanta and Philadelphia) -- endured the hockey lockout in 2004-05. They soon may be reminded just how helpful or costly that canceled season was.

Well? Was it worth it?

"Obviously they're very difference scenarios," said veteran hockey writer Michael Russo of the Minneapolis Star Tribune. "I look back and I understand why [the NHL] did it at the time, but now everything's back to where it was financially, with some major issues.

"So whereas before, I couldn't see how the league could afford to ever lock out again, now I don't see how they're not going to lock out again."

Wait, what?

"Another lockout. Oh yeah," columnist Damien Cox of the Toronto Star wrote in May. "Unthinkable? They'd never do it again? Think again. ... The league didn't get its 'idiot-proof' CBA; therefore, it must try again."

Whoa, whoa, whoa. The lockout to end all lockouts was supposed to do just that -- improve the financial health of the NHL's 30 franchises enough that everyone, from owners to players to fans, would benefit in a system that would last for years. By that, most people thought years, not just the six seasons to this point and a seventh to be played in the currently cash-crazed conditions of 2011-12.

You did notice, didn't you, what happened when the bell rang to start NHL free agency on July 1? More than $400 million was shoveled to 58 players in just the first two days, The Hockey News reported, with many teams bulking up their payrolls just to reach the CBA's mandated "floor" for 2011-12 of $48.3 million. The Florida Panthers led the way, adding literally overnight more than $20 million in salaries for next season (and more than $60 million long-term) by signing seven players and acquiring another in trade.

No one quite anticipated that at the beginning. The deal that came at such a high price for the NHL -- losing a lot of hockey fans' awareness for almost a year -- started out as a pretty good one for the owners. Outlasting the NHLPA, waiting for the splits within the union's ranks, NHL commissioner Gary Bettman and the owners got more by the end than what they had been seeking when the collective-bargaining talks began.

The players had vowed they never would accept a salary cap (the NHL at the time operated without even the "soft" cap long used by the NBA) or linkage between their compensation and overall league revenues. Well, they wound up with both: A cap of approximately $39 million per team for 2005-06, based on a 54 percent share of hockey-related income. Certain escrow, amnesty and arbitration provisions were included.

"I think the biggest thing I learned is that I probably shouldn't use the word 'never' as much as I did," Nashville winger Scott Walker told the Tennessean back then. "Ultimately we have a cap and guys like me said we never would have one, so maybe we're eating our words in some sense."

The Detroit Red Wings -- one year after spending more than $77 million on player salaries -- could cut that almost in half while generating nearly the same revenues, the Calgary Herald reported. Revenue-sharing was bumped up, with the NHL's top 10 teams in earnings sending more money to its bottom 10, but not so much -- especially with hockey's relatively modest television-rights fees -- to damage the big markets.

Oh, and did we mention that the NHL players accepted an immediate 24 percent rollback in salaries? Compare that to the NBA's situation, in which the union -- in a recent offer to the owners -- went only as far as a 4.7 pay cut when proposing their reduced slice of BRI from 57 percent to 54.3 percent.

There also was the not-so-minor detail of approximately $1 billion forsaken by hockey's players in salaries for that unplayed 2004-05 schedule.

"I think the deal is not great for the players. It is definitely an owner-friendly deal," veteran NHL center Jeremy Roenick said upon the settlement six years ago this week. "For the last 10 years, the players have made a lot of money and now we are in a position where everybody is going to make money. Unfortunately, it had to take a whole year to get to a point where we could have been last year."

By the third year of the agreement, estimated that the 30 NHL teams had increased an average of 23 percent in value and the league overall had gone from an operating loss of $96 million to a profit of $96 million. (Keep in mind that works off estimates, a practice that recently led to some controversy in the NBA about overly rosy financial reports, the league maintains.)

Now fast-forward to the summer of 2011. Heading into the final year of the NHL's CBA, the cap has ballooned to $64.3 million for 2011-12, with a lower limit of $48.3 million. That's right -- in seven years, the floor for each team's payroll is $9 million more than what the ceiling was when this deal began.

The NBA's cap system also has a minimum salary, set at 75 percent of the season's cap figure -- or about $43.5 million in 2010-11. And late last season, Sacramento had to make roster adjustments to ensure it would spend that much. But the NHL had a number of teams operating before the floor even in the CBA's first season. Suddenly they had to spend for spending's sake.

"[The lockout] was worth it to get a structure in place," said Lou Nanne, longtime NHL player, coach, GM and broadcaster, mostly in Minnesota. "It gave the league a better opportunity to get parity. But now you've got teams having to spend so much money just to get to the floor. The [Minnesota] Wild, at $24 million [in payroll in 2003-04], they were able to make money. But not at $48 million."

The players' immediate 24 percent pay cut set them back about $300 million in 2005-06. But last season, the Ottawa Citizen reported, the players' take was estimated to have grown to about $220 million more than what they were paid prior to the lockout. Unrestricted free agency, previously attainable at age 31, now is reachable at age 27. Restricted free agents have cleaned up, too, in spite of their limited leverage, thanks to club vs. club bidding and some loopholes found by agents in the restrictions.

Within all that spending -- based now on 57 percent of HRI, the same percentage to the players as in the NBA's just-expired contract -- there has been a stratification of salaries, with stars getting the biggest bucks (the NHL's individual maximum salary is set at 20 percent of the team's payroll) and rosters being filled out with $525,000 minimum-salary players. The so-called "middle class" guys who make $1 million to $1.5 million have been getting squeezed.

Also, borrowing from the NFL's cap and compensation system, NHL teams recently have structured some front-loaded contracts off fat signing bonuses, scaling base salaries back to lower-than-market rates in the deals' later years.

"These deals ... in my opinion, are designed to circumvent the salary cap," Toronto Maple Leafs GM Brian Burke told reporters after his team's six-year, $42 million offer to Dallas free agent Brad Richards fell short. Richards signed a nine-year, $60 million deal with the New York Rangers that will pay him $12 million in the first season via the bonus system. "I won't do them. I never have. I'm not going to."

A sign of parity?
Since the NHL agreed to a new labor deal before the 2005-06 season, 10 different teams have appeared in the Stanley Cup Final.
Year East champion West champion Stanley Cup winner
2006 Carolina Hurricanes Edmonton Oilers Carolina Hurricanes
2007 Ottawa Senators Anaheim Ducks Anaheim Ducks
2008 Pittsburgh Penguins Detroit Red Wings Detroit Red Wings
2009 Pittsburgh Penguins Detroit Red Wings Pittsburgh Penguins
2010 Chicago Blackhawks Philadelphia Flyers Chicago Blackhawks
2011 Boston Bruins Vancouver Canucks Boston Bruins

Six different franchises (Carolina, Anaheim, Detroit, Pittsburgh, Chicago and Boston) have won the Stanley Cup since the lockout, with 10 different franchises holding the 12 possible berths in the Finals (familiar powers Detroit and Pittsburgh met in both 2008 and 2009, swapping titles). But parity is another way of saying one-and-done, depriving the NHL of marketable dynasties and reliable rivalries. The Chicago Blackhawks, for instance, dismantled their Cup-winning team just weeks after celebrating in order to conform to the cap.

And for a league craving a greater TV presence, particularly in the U.S., interchangeable Cup champions and small-market Finals participants -- Carolina-Edmonton in 2006, Anaheim-Ottawa a year later -- aren't the easiest sell. (Game 7 of Boston's Cup-clinching victory over Vancouver last month did earn NBC a 4.8 rating and 8 share, the highest numbers for an NHL game since 1974.)

Certainly, all the extra money being thrown around the NHL these days is the result of increased revenues; the players' share has gone up as the owners' gross has increased. But NHL owners are said to be experiencing some of the same pains as their NBA brethren, with non-player expenses rising more quickly than their 43 percent share of revenues. With the CBA expiring in September 2012, NHL owners will just have to convince the players -- and Donald Fehr, the former baseball union chief who is heading the NHLPA after Bob Goodenow and Paul Kelly were purged -- that their piece of the pie should get smaller. Again.

"But the interesting thing about the dynamics of this battle is it won't even be player vs. owner," columnist Ken Campbell wrote in The Hockey News last month. "In fact, it probably wouldn't make a difference whether a hardliner such as Fehr is running the NHLPA or not. That's because this battle will pit owner vs. owner, with the big-money owners in one corner and those who are losing their shirts in the other. The ones who are losing money are being forced to spend money they don't have and they're sure to take that battle with them into the next CBA."

So let's ask it again: Was the NHL's unprecedented, unthinkable lockout of 2004-05 worth it?

For the owners, the answers over time appear to be: Yes. Then no. And come next September, perhaps, uh oh.

For the players, just slightly different: No. Yes. And uh oh.

"Whether it was worth it is a tough question," Russo said. "The on-ice product has never been better, but they didn't need a lockout for that to happen. It just coincided that, to gain some momentum coming off the lockout, the league made a bunch of rule changes to speed up the game and make it more exciting.

"From a fiscal point of view, there are major problems. Teams out there are losing money. The Blackhawks lost money last year. The Wild have lost money two years in a row." reported in December that 14 of 30 NHL teams saw their values decline.

As for the intangible damages -- bitterness from the players, resentment from fans -- that appears not to be a problem at all, six years later.

"I'm not sure how many of these guys today even remember the lockout," Nanne said. The boost in players' salaries back to and beyond 2003-04 levels probably has helped with that.

Fans? The best measure for a league that remains heavily dependent on ticket revenues is attendance. In 2010-11, half of the league's 30 teams averaged more than 18,000 in home attendance, with Chicago's 21,423 at the top and the New York Islanders' 11,059 at the bottom.

Back in 2005-06, immediately out of the lockout, 11 teams averaged 18,000 or more. In 2003-04, right before the lockout, only 10 teams topped what today is the median.

"Most people were never worried," Nanne said. "Because hockey has the most passionate fans in all of sports. There's not a lot of them but the ones there are, they're passionate."

If the NBA's lockout pushes into the preseason and regular season -- or, worst case, the whole season --the league will be putting pro basketball fans and their passion to a similar test.

Steve Aschburner has written about the NBA for 25 years. You can e-mail him here and follow him on twitter.

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