NHL Lockout2004-2005 final GLee 1

2004-2005 NHL Lockout and Settlement: 

2004-2005 NHL Lockout and Settlement Gary Lee December 14, 2011

Background: 

Background Founded 1917; early era Six Teams 1942 expansions began 1967; network TV arrival Modern Era 1992-Present

Introduction: 

Introduction First labor dispute 1992; 10 day strike Lockout 1994; 34 games lost 2 nd Action in 2004 set up by unresolved issues Main disagreements-salary cap & player costs

Main Cast in Drama: 

Main Cast in Drama NHL Commisioner-Gary Bettman NHLPA President-Bob Goodenow Players & Team Owners Fans and Parties Affected

Key Issues: 

Key Issues Reasonable salary cost control Small market vs large market economic disparities Owners-salary cap and system tied to league revenues Players union-luxury tax and revenue sharing only

Barriers to Progress: 

Barriers to Progress Players unrealistic about NHL’s revenue strength against other pro sports Opposed NFL-style salary cap; knew it would put a limit to salary growth Superstars created main fan interest, yet average player gained big contracts TV ratings not strong outside major markets; ticket revenue main source

Key Negotiation Differences: 

Key Negotiation Differences Union preferred status quo-free market bargaining w/minimal cost containment Essentially a distributive strategy favoring players-adversarial view Rewards “NY Yankee” thinking Unrealistic-gate doesn’t match other sports

Season Cancellation: 

Season Cancellation Lockout began Sept 15, 2004 Multiple bargaining sessions held through early 2005 without success Concessions by both parties collaboratively on some areas Main problem was salary cap linked to revenues Union accepted cap concept without link but NHL insisted Commissioner announced season cancellation Feb 16, 2005

Negotiation Rewind: 

Negotiation Rewind Public sentiment clearly was on side of owners, who were still criticized for overspending and high ticket prices Power struggle on the part of the union head against the NHL owners and commissioner Goodenow dug himself into untenable position-when the union retreated finally, he knew his tenure was over Many players went overseas to play in Europe Minor league hockey became popular

Toward a New Contract Settlement: 

Toward a New Contract Settlement Fear of losing another season and more fans compelled sides to restart bargaining in June 2005 Marathon talks toward contract July 4-13 Economic reality hit home for the union as their players were losing both time and money The owners lost hundreds of millions and the fans were all angry New agreement finally reached July 13 and ratified by both parties a week later

New Terms Highlights: 

New Terms Highlights Concept of salary cost containment linked to league revenues accepted Salary cap set at 54% of total revenues Guarantees of player contracts New revenue sharing pool from top 10 grossing teams distributed to bottom 15 Support for small market teams helped troubled franchises & saved jobs

Aftermath of the Lockout: 

Aftermath of the Lockout Most fans blamed the players Owners still seen as greedy to fans Principals vilified by public, especially Bob Goodenow, who resigned Don Fehr-like imitator? No Stanley Cup for 2005 ESPN drops TV contract

Analysis: 

Analysis Unlike normal businesses, sports franchises are built to compete on field, not against each other financially. Free agency with little checks and balances lead to teams spending each other out of business. Hockey more limited market in US; changing gradually with new teams in warm weather states Second set of sessions after season was lost forced players & owners to become more collaborative and partnerlike in creating viable solutions for the game.

Further Insights: 

Further Insights Many teams had poor financial oversight; GMs former players not fiscally trained TV in Canada was more extensive but total revenues lower than from US markets Pressure to increase revenues led to overexpansion Rivalry and eventual merger with WHA also fueled problem Similar problem in NBA during recent lockout

Future For the League: 

Future For the League New Players Union head-Donald Fehr Current CBA expires after 2011-2012 season Union became more collaborative as business partner after lockout; will that change with new union leadership? Realignment announced in accord w/union Sign of better labor relations?

References: 

References http://sports.espn.go.com/nhl/news/story?id=1992793 http://sports.espn.go.com/nhl/news/story?id=1992793 http://proicehockey.about.com/od/collectivebargainingfaq/f/greedy_players.htm http://en.wikipedia.org/wiki/National_Hockey_League http://en.wikipedia.org/wiki/1994%E2%80%9395_NHL_lockout http://en.wikipedia.org/wiki/National_Hockey_League_Players_Association http://en.wikipedia.org/wiki/Cleveland_Barons_(NHL) http://proicehockey.about.com/od/thelatestonthelockout/a/cba_agreement.htm http://proicehockey.about.com/cs/businessofhockey/a/levitt_report.htm http://sports.espn.go.com/nhl/columns/story?id=1993851