NHL closer to a deal than they think

Toronto — The Globe and Mail

NHL commissioner Gary Bettman (Mary Altaffer/AP)

It is all in the numbers.

As ridiculous and unnecessary as the NHL lockout seems even at a casual glance, the closer and harder you look at the numbers involved, the less this costly stalemate makes sense.

Here we have two parties that made a combined four proposals last week and moved some $600-million or so closer together over the next five or six years.

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And yet still we're told there's been no progress, no upcoming talks scheduled and, essentially, nothing to talk about.

Which is baloney.

Noted hockey stats man Tyler Dellow spun some numbers on the proposals over the weekend along these lines and ultimately determined that "we’re talking about an awfully small difference on the team level" that amounts to as little as $2.7-million a season.

Part of the issue in my opinion is the two sides simply aren't speaking the exact same language. The NHLPA's proposals, as we've analyzed in this space at length, are based on future growth and handing the league concessions as hockey-related revenues rise.

The league's proposals, meanwhile, offer a much more straightforward split of revenues, one that finally came up to 50-50 (with a make whole provision that puts it just under that) last week.

Even so, what the union has put on the table here isn't unreasonable. In fact, you can argue it's exactly the type of slide down to a 50 per cent players' share that so many fans and media have been advocating as a solution for weeks.

Let's illustrate this a bit to show what we're talking about.

All of the latest proposals from the NHLPA last week relied on a 5 per cent growth rate over the next five years. This graph outlines what the players' share would look like under those three scenarios compared to what the NHL is proposing:

So with 5 per cent growth, they're basically even by about Year 4, when we're talking about a $50-million or so separation in a league that will presumably have $4.2-billion in revenues by that point.

Now, one of the main contentions I've seen from critics on these proposals is that growth rate, which strikes me as odd. The NHL has grown at an average of 7.2 per cent a season under the previous collective agreement, something that allowed them to go from roughly $2.1-billion in revenues to $3.3-billion in just seven years.

(And keep in mind that the rise of the Canadian dollar made up only 0.8 to 1.5 per cent of that growth per season, depending on which side you ask. I'll let you guess which is using which.)

Projecting forward over the next five years at 5 per cent, assuming they played a full season this year, hardly seems onerous.

In fact, the growth rate was an incredible 10.2 and 9.6 per cent the last two seasons.

Proof that it's not that unreasonable? Even the league itself isn't contesting the fact it's likely to grow at that rate – aside from any impact from missing 2012-13 games due to a lockout.

"I'm not sure there ever was a real concern about projecting 5 per cent growth," NHL deputy commissioner Bill Daly said via e-mail. "But I think it's safe to say the equation has changed now pretty dramatically with where we find ourselves."

He's right, of course. If games are missed, 5 per cent becomes harder to reach and Year 1 of the PA's proposal would have to be altered to accommodate those changes.

But as it stood last week, proposed in a situation where 82 games were on the table, it was sufficient enough to take both sides to 50 per cent in relatively short order and in almost all plausible growth situations.

That said, it's worth looking at the other possibilities here.

Let's say, for instance, that growth continues at its previous torrid pace as the NHL heads for another seven prosperous years where it experiences 7.2 per cent growth a season.

Or how about if revenues stagnate, dropping to just 3 per cent a season over the five years?

As you can see in the first example, the two deals are remarkably similar. That's because if the NHL grows quickly, everyone wins. Player salaries shoot up and teams reap the benefits of having to pay them a smaller share from a bigger pie.

If it was certain this was going to happen, they'd already be on the same page.

In the second chart there, however, we get the biggest separation you'll see between these proposals. That's because what the NHLPA has asked for in an agreement to take them to 50-50 is (a) to protect existing contracts and (b) to shelter them from a sharp drop if the league fails to grow.

From the players' perspective, these are small asks, as they're coming in exchange for eventually getting to 50-50, the league's number.

From the league's perspective, such "fail safes" only serve to complicate a deal they would like to see drop in their favour immediately.

("Unnecessarily complicated and for no apparent reason" was how Daly put it.)

Here's the thing though: In order to guarantee the players' existing contracts, which is the main issue they are standing firm on, the league has no choice but to pay out 53 to 56 per cent of revenues in Year 1 and closer to 52 to 54 per cent in Year 2.

From there you could theoretically shift more directly to 50-50 quite easily.

That kind of compromise is the difference of only about $300-million to $400-million from where we are now, or not far off what the NHL could add in one more 10 per cent growth season.

What it's not is enough to do is cancel a season over, no matter what growth rate or proposal you're looking at.

Aside from the other contractual issues that are left unsettled, however, that's the slim margin we're talking about here, one that could and should have been made up for in negotiations this week.

That it hasn't is a sad commentary on the sorry state of relations between these two sides. There's so much distrust that it appears they don't even know when they're not far away from what they're both asking for.

It's sad, and it's silly. And they're running out of time before games are killed off, projected revenues drop and the gap widens again.