2012 CBA Negotiations Thread

[Kin]

If indeed 44% of combined team profit went to revenue sharing, well, that's a pretty significant number no matter which teams contributed more or less.  What percentage would you suggest is more fair?

I don't think teams should share any revenue but that's entirely beside the point. Revenue sharing isn't a question of profits. It's a simple matter of what percentage of a team's revenue is shared. That's what I'm referring to when I say it's not a significant amount. When the Leafs sell me their ticket with it's average cost of 120 bucks how much of that money goes to the Leafs and how much is pooled and shared with the league? When they sell their TV rights, how much do they keep and how much is pooled and shared?

Again, it's revenue sharing. Not profit sharing. 

 

[Frank E]

If indeed 44% of combined team profit went to revenue sharing, well, that's a pretty significant number no matter which teams contributed more or less.  What percentage would you suggest is more fair?

I don't think teams should share any revenue but that's entirely beside the point. Revenue sharing isn't a question of profits. It's a simple matter of how much of a team's revenue is shared. That's what I'm referring to. When the Leafs sell me their ticket with it's average cost of 120 bucks how much of that money goes to the Leafs and how much is pooled and shared with the league? When they sell their TV rights, how much do they keep and how much is pooled and shared?

Again, it's revenue sharing. Not profit sharing.

I don't need to tell you that profit is derived of revenue minus the expense.

You'd really get a better idea of the magnitude of dollar amount currenlty shared if you discussed it as a percentage of profit rather than just revenue dollars. 

Profitability, league profitability, is really what this whole thing is about.  Limiting the conversation to just revenue really just ignores the cost per revenue dollar of operating a team. 

 

[Kin]

I don't need to tell you that profit is derived of revenue minus the expense.

You'd really get a better idea of the magnitude of dollar amount currenlty shared if you discussed it as a percentage of profit rather than just revenue dollars. 

Profitability, league profitability, is really what this whole thing is about.  Limiting the conversation to just revenue really just ignores the cost per revenue dollar of operating a team.

But you're talking about an entirely separate issue at that point. I'm talking about the inherent folly of linking what the Phoenix Coyotes have to pay in salary to the revenues generated by the other teams without sharing a significant percentage of those revenues. That the Philadelphia Flyers or some other similar club raise a ton of revenues but also have a ton of expenses doesn't fundamentally alter the negative impact those high revenues have on the Coyotes bottom line if the Coyotes don't see any of that money.

 

[cw]

I don't see contributing 44% of a league profits toward revenue sharing as "so minimal as to barely register as meaningful"

You're a smart guy cw. I know me presuming that you know anything strikes you as terribly presumptuous but I think you can get a handle on the fundamental difference between revenue sharing and profit sharing.

Don't get me wrong, I have no personal problem with you obfuscating as much as you possibly can in the service of whatever weird problem you have with players negotiating with all of the rights of everyone else in society but I know enough about sports to know that when the term revenue sharing is discussed it means one very simple and straightforward thing, namely the amount of revenues a team takes in that is then shared with the other teams in the league rather than kept by the team that sells the ticket or the jersey or whatever. Your claim about  the league's profits being what they are and Montreal and Toronto's being what they are is the perfect evidence of what I'm saying. Neither team shares a significant percentage of their revenue with the rest of the league and it creates the massive imbalance in terms of profitability.

In 2006, the top 10 revenue teams contribute $55 mil (33%) of the $167.5 mil they profited to 15 smaller market teams (IF Forbes provided after revenue sharing numbers - and they may not have).

2006            % of team profits given to revenue sharing
Toronto        19.4% ($10 mil of 51.5 mil profit before revenue sharing)
NYR              33.7% ($9 mil of 26.7 mil profit before revenue sharing)
Detroit          58.0%
Dallas          41.2%
Philadelphia  87.0%
Boston          51.0%
Montreal        18.6% ($4 mil of 17.5 mil profit before revenue sharing)
Colorado        33.7%
LA                22.0%
Vancouver      47.6%

Those percentages of the respective team's profits are NOT "so minimal as to barely register as meaningful" - even for the Leafs.

The top three most profitable NHL teams (again IF Forbes provided after revenue sharing numbers - and they may not have).:
Toronto gave $10 mil of $51.5 mil gross profit before revenue sharing to net $41.5 mil EBITDA
NYR gave $9 mil of $26.7 mil gross profit before revenue sharing to net $17.7 mil EBITDA
Montreal gave $4 mil of $17.5 mil gross profit before revenue sharing to net $13.5 mil EBITDA (because their revenues post lockout were not great)

The rest of the top 10 revenue teams netted less with only Dallas barely in double digits at $10 mil net. In other words, after the top 4 profitable teams, you're scraping for revenue sharing from teams making single digit profits - they don't have much left to give.

The blunt accounting fact is that there simply isn't enough profit to go around to significantly increase revenue sharing. The Leafs and Habs and maybe one or two others to a lesser degree might kick in a little more but after that, it's very, very slim pickings.

And this is in a league where more than half the individual players are making more money than the teams they play for. Think about that. But somehow we're supposed to accept your position that the players are getting their fair share and the teams need to give more than 44% of the league's overall profits to revenue sharing because you read Karl Marx on the internet and got hooked? It's an absurd position and the players will be promptly locked out for another year if they're stupid enough to take it. The accounting math is just too darn straightforward to defend that position.

Shuffling the chairs on the Titanic didn't stop it from sinking. And that's effectively what you're advocating here with the effective claim that 44% of league profits for revenue sharing is "so minimal as to barely register as meaningful". I suggest "so minimal as to barely register as meaningful" probably better describes the amount of thought you gave your position.

 

[Kin]

Those percentages of the respective team's profits are NOT "so minimal as to barely register as meaningful" - even for the Leafs.

Yeah, again, I'm civil service on this one, not party politics. You're free to continually try and pretend that I said anything whatsoever about the percentage of profits shared but it's an absolute flat-out lie. The Leafs or any other team in the NHL do not share a significant percentage of their REVENUES and if you can't address that directly and honestly then it's kind of a dead end.

 

[cw]

If indeed 44% of combined team profit went to revenue sharing, well, that's a pretty significant number no matter which teams contributed more or less.  What percentage would you suggest is more fair?

I don't think teams should share any revenue but that's entirely beside the point. Revenue sharing isn't a question of profits. It's a simple matter of how much of a team's revenue is shared. That's what I'm referring to. When the Leafs sell me their ticket with it's average cost of 120 bucks how much of that money goes to the Leafs and how much is pooled and shared with the league? When they sell their TV rights, how much do they keep and how much is pooled and shared?

Again, it's revenue sharing. Not profit sharing.

I don't need to tell you that profit is derived of revenue minus the expense.

You'd really get a better idea of the magnitude of dollar amount currenlty shared if you discussed it as a percentage of profit rather than just revenue dollars. 

Profitability, league profitability, is really what this whole thing is about.  Limiting the conversation to just revenue really just ignores the cost per revenue dollar of operating a team.

Exactly. Unfortunately, Nik is getting caught up in a particular literal meaning of the term and ignoring the business  practicality. If a top revenue team isn't making much money or losing money, giving some of their revenue to another team doesn't solve the problem.

Once an organization like the NHL is passing 44% of their profits to smaller market teams, there are limits to how much more they can do with revenue sharing before they've attained a charity arrangement - where teams bring in nine figures in revenues would be getting a tiny fraction or nothing in profits.

When you reach that point, and the league is pretty close, then the franchises lose value because they can't make money and the league loses getting any prospective new owners or buildings or they get nailed with expensive financing because nobody would buy into a non profit situation. And it's all downhill from there unless something else changes.

As much as hockey players are my favorite team athlete, I have trouble justifying why they should be paid 7-9% more than the NBA and NFL players when they bring in nothing close to the sorts of revenues those other leagues do. I don't see anything on the expense side of the ledger where their operations would be that much cheaper proportionally to justify it. In fact, the other NHL expenses are probably more expensive per revenue dollar because their revenues are so much smaller to absorb fixed costs per revenue dollar.

Nik might not get it. But I'd bet pretty heavily Donald Fehr does and I'd bet very heavily the NHLPA will agree to a substantial reduction from their 57% of revenues number. Because if they don't, they'll be taking another year off. The accounting numbers are no longer debatable this time around because of third party audits.. The business argument for the owners is pretty clear and not an unreasonable position. In fact, it's something they must do for their survival and the health of the league.

 

[Kin]

Exactly. Unfortunately, Nik is getting caught up in a particular literal meaning of the term and ignoring the business  practicality. If a top revenue team isn't making much money or losing money, giving some of their revenue to another team doesn't solve the problem.

Oh that Nik. What with the way he insists on actually dealing with what words actually mean.

 

[Kin]

And this is in a league where more than half the individual players are making more money than the teams they play for. Think about that. But somehow we're supposed to accept your position that the players are getting their fair share and the teams need to give more than 44% of the league's overall profits to revenue sharing because you read Karl Marx on the internet and got hooked? It's an absurd position and the players will be promptly locked out for another year if they're stupid enough to take it. The accounting math is just too darn straightforward to defend that position.

The fact that you can even try and represent my position on the matter as such when what I said was:

But really, the problem there is the way you phrased it. I don't think the NHL players should be entitled to one red penny. I think they should have the freedom to negotiate the best deal for themselves they can individually. I'm not in favour of any artificially imposed cap or floor on player salaries outside of minimum wage laws. 

If we're just accepting that nonsense as a given then we've already thrown the should of the matter out the window. Then it's just about whatever they can bargain for themselves. There is no right or wrong in that equation.

Leads me to conclude one of two things. Either:

A) Your entire working knowledge of who Karl Marx is comes from Fox News or
B) Whatever weird agenda you have on this position has led you to such a state of intellectual dishonesty that you would actually try and misrepresent a position that thinks that what is good and fair should be entirely dictated by a free market as Marxism.

And for what it's worth I read my Karl Marx the exact same way any other left-leaning type does, very noticeably, in a coffee shop, trying to pick up U of T students but only after I've already finished my issue of Jughead.

 

[Frank E]

Exactly. Unfortunately, Nik is getting caught up in a particular literal meaning of the term and ignoring the business  practicality. If a top revenue team isn't making much money or losing money, giving some of their revenue to another team doesn't solve the problem.

Oh that Nik. What with the way he insists on actually dealing with what words actually mean.

It's because your distinction of % of revenue vs. % of profit isn't really that relevant.

You can spend a lot more in extra expense to pick up that extra 1 dollar in revenue.  So the fact that some teams spend a lot more to achieve that extra dollar in revenue is a reasonable risk to take.  As long as they are surpassing their variable and fixed costs on that spend, it can be worth the risk and worth the investment.

So your example of Philly having more revenue, but also more expense than Phoenix makes sense.  Where your example goes wrong is assuming that they'd realize the same revenue with the same expense as Phoenix.  Hell, even their rent alone given the differences in real estate costs could be drastically different. 

That's why it's better to discuss profitability rather than revenue generation, if we're talking about distributing the wealth to help even out profitability.   

 

[Kin]

So your example of Philly having more revenue, but also more expense than Phoenix makes sense.  Where your example goes wrong is assuming that they'd realize the same revenue with the same expense as Phoenix.  Hell, even their rent alone given the differences in real estate costs could be drastically different. 

But I'm not making that assumption. I'm making a very specific and narrow point about tying Phoenix's expenses to Toronto or Philadelphia's revenues and the imbalance that creates without sharing a greater percentage of those revenues.

 

[Rebel_1812]

Factually, that isn't what they did. The top revenue teams contribute to the bottom revenue teams. The Leafs contribute the most to revenue sharing. So there is a variable scale. As well, there is a cap floor which allows smaller market teams to spend less. Therefore, the percentages vary with each team.

You and I both know that the revenue sharing in the NHL is so minimal as to barely register as meaningful.

In 2006, revenue sharing was 44% of overall league profits.

Do you have a source for that figure?  Since it is the crux of the ensuing paragraph I would like to check that figure. 

 

[Frank E]

So your example of Philly having more revenue, but also more expense than Phoenix makes sense.  Where your example goes wrong is assuming that they'd realize the same revenue with the same expense as Phoenix.  Hell, even their rent alone given the differences in real estate costs could be drastically different. 

But I'm not making that assumption. I'm making a very specific and narrow point about tying Phoenix's expenses to Toronto or Philadelphia's revenues and the imbalance that creates without sharing a greater percentage of those revenues.

I thought you were making the point that revenue sharing in the NHL was minimal?

I don't think you're explaining it very well.  How does tying a low revenue club's expenses to a high revenue club's expenses make any sense given the different market conditions?  Unless your suggestion is that higher revenue clubs would expense more to get out of paying more into revenue sharing?

 

[Kin]

I thought you were making the point that revenue sharing in the NHL was minimal?

Well, no, that I'm just stating as a fact.

I don't think you're explaining it very well.  How does tying a low revenue club's expenses to a high revenue club's expenses make any sense given the different market conditions?

I don't think the problem here is on my side of things. I'm saying that it doesn't make sense to link ?hoenix's payroll to Toronto's revenues if Toronto isn't sharing a significant portion of those revenues. I don't know how to make that any simpler.

 

[Frank E]

I thought you were making the point that revenue sharing in the NHL was minimal?

Well, no, that I'm just stating as a fact.

I don't think you're explaining it very well.  How does tying a low revenue club's expenses to a high revenue club's expenses make any sense given the different market conditions?

I don't think the problem here is on my side of things. I'm saying that it doesn't make sense to link ?hoenix's payroll to Toronto's revenues if Toronto isn't sharing a significant portion of those revenues. I don't know how to make that any simpler.

Now I understand, you're talking the linking of the payroll expense.

I think we're in agreement there. 

I'm really not familiar with any of the other big leagues' CBA's.  Are there better options there with respect to how their caps work?

 

[Kin]

I'm really not familiar with any of the other big leagues' CBA's.  Are there better options there with respect to how their caps work?

Well, the thing that jumps out at me about the NHL is that they want a system with a hard cap like the NFL but they want a revenue sharing structure similar to that of MLB.  The NFL's hard cap makes a certain amount of sense because of the massive amounts of revenue(including the entirety of a massive TV deal that constitutes a significant percentage of total league wide revenues) that are shared so a team like the Bills, while not as profitable as the Giants or Redskins, aren't in a massive hole to start the season because they aren't obligated to spend to a cap floor that in no way reflects their economic reality.

On the flip side, MLB doesn't have a cap but instead has a luxury tax. That raises revenues for smaller market teams while still letting those teams set a payroll that makes sense for their revenue levels. That's why small market teams like the Pirates or Marlins can still be very profitable.

If the issue is just profitability then both approaches have pros and cons.

 

[Frank E]

I'm really not familiar with any of the other big leagues' CBA's.  Are there better options there with respect to how their caps work?

Well, the thing that jumps out at me about the NHL is that they want a system with a hard cap like the NFL but they want a revenue sharing structure similar to that of MLB.  The NFL's hard cap makes a certain amount of sense because of the massive amounts of revenue(including the entirety of a massive TV deal that constitutes a significant percentage of total league wide revenues) that are shared so a team like the Bills, while not as profitable as the Giants or Redskins, aren't in a massive hole to start the season because they aren't obligated to spend to a cap floor that in no way reflects their economic reality.

On the flip side, MLB doesn't have a cap but instead has a luxury tax. That raises revenues for smaller market teams while still letting those teams set a payroll that makes sense for their revenue levels. That's why small market teams like the Pirates or Marlins can still be very profitable.

If the issue is just profitability then both approaches have pros and cons.

I'd argue that given the NHL doesn't have a hugely significant TV deal like the NFL, you're really then just chasing gate receipts from one team to the other.

I'd rather see a more voluntary system the the tax in MLB...make it incremental, and let the Philly's of the league spend to whatever point makes sense to them.  But then, I'm not familiar with this system's practical drawbacks.

 

[princedpw]

Those percentages of the respective team's profits are NOT "so minimal as to barely register as meaningful" - even for the Leafs.

Yeah, again, I'm civil service on this one, not party politics. You're free to continually try and pretend that I said anything whatsoever about the percentage of profits shared but it's an absolute flat-out lie. The Leafs or any other team in the NHL do not share a significant percentage of their REVENUES and if you can't address that directly and honestly then it's kind of a dead end.

Well, having read most of this conversation, it seems likely you both understand eachother full well, but instead of trying to have a fun time on this site discussing and informing one another about league economic structures in a cooperative way, the discussion has turned combative --- we are now trying to score debating points and/or "win" the argument.  Unfortunately, that seems to happen relatively often when Nik starts discussing something in earnest.

Anyway, CW is saying that the percentage of revenues is significant because it is a significant percentage of the profits (and he claims that is a reasonable way to assess the significance of revenue sharing). 

Obviously, though, further debate about what constitutes a "significant percentage of revenues" isn't going to go anywhere.

 

[Kin]

I'd argue that given the NHL doesn't have a hugely significant TV deal like the NFL, you're really then just chasing gate receipts from one team to the other.

Well, sure. If you're splitting revenues you're splitting the revenues at your disposal. Whether it comes from a TV deal or the gate is largely immaterial.

I'd rather see a more voluntary system the the tax in MLB...make it incremental, and let the Philly's of the league spend to whatever point makes sense to them.  But then, I'm not familiar with this system's practical drawbacks.

I agree for what it's worth. I think MLB has the fairest of all the various systems.

 

[Kin]

Anyway, CW is saying that the percentage of revenues is significant because it is a significant percentage of the profits (and he claims that is a reasonable way to assess the significance of revenue sharing). 

Yeah, I got that. But, you know, feel free to keep chipping in on whether or not we're sufficiently entertaining you. I do a tumbling act in the second half.

 

[Frank E]

I'd argue that given the NHL doesn't have a hugely significant TV deal like the NFL, you're really then just chasing gate receipts from one team to the other.

Well, sure. If you're splitting revenues you're splitting the revenues at your disposal. Whether it comes from a TV deal or the gate is largely immaterial.

I'd rather see a more voluntary system the the tax in MLB...make it incremental, and let the Philly's of the league spend to whatever point makes sense to them.  But then, I'm not familiar with this system's practical drawbacks.

I agree for what it's worth. I think MLB has the fairest of all the various systems.

I guess it would seem to me that the gate would be more of a revenue that is specifically generated by that team's succesful marketing.  I guess I'd have an issue if the dopes running a lousy team are chasing my gate receipts.

On the other hand, a TV deal seems like more of a greater area/national audience, and therefore not necessarily as proprietary.