Holding the Stick

(Flickr/Tim Shahan)

The San Jose Sharks face the Washington Capitals, October 2009.

It seems like lockouts are as ubiquitous in professional sports as the thumping chords of “Seven Nation Army.” Labor disputes led to lockouts in basketball last year, football last year and this year (players and officials), and now the National Hockey League is experimenting with the strong-arm tactic. Owners locked out players on September 16, one day after the collective-bargaining agreement expired. So far, with the season canceled through October 24, 82 games are lost.

The cancellation of the preseason and the regular season’s first two weeks translates into a loss of at least $240 million for the NHL. But don’t think it’s inevitable that the season will swiftly come back to life: this is the fourth NHL lockout since 1991, and the third lockout presided over by the league’s current commissioner, Gary Bettman. Half the 1994 season was lost. The entire 2004-05 season, including the playoffs, was swallowed whole by labor discord, marking the first time a major North American professional sports team lost a full season because of a labor impasse.

That year, owners argued that the league’s economic system was broken, and a salary cap was needed to limit star-player salaries and promote competitive balance among the league’s teams. The league released an audit showing it had lost $232 million the season before. Players resisted, owners persisted, and in the end, players signed a tough contract that accepted the cap, as well as an immediate 24 percent loss on their existing salaries, and shrunk their percentage of hockey-related revenue from 74 percent to 57 percent.

The union argues that this year’s dispute is very different, not the least because the league’s profits have risen by an average of 7.1 percent a year since hockey got back on the ice for the 2005-06 season. (The NHL, though, says 18 teams are losing money.) The problems began in July, when owners made an offer that would lower the percentage of players’ revenue in the existing contract from hockey-related sales of items like food concessions and premium seating from 57 percent, the current level, to 43 percent. The offer also reduced the salary cap for each team from $70 million to $52.5 million (lower than the budget spent by 21 of the league’s 30 teams last season).

The low-balling appalled the National Hockey League Players’ Association and made it difficult to find traction in the bargaining room. The league has since raised its offer to about 47 percent of hockey-related revenue in a six-year deal. The players’ union is asking for an agreement that will give them small, fixed increases over five years that, the union says, will nonetheless total nearly $900 million in player concessions, given the league’s rate of growth. The players’ union also proposes that owners not just pull revenue from players, but also increase revenue sharing among the teams, with much of it targeted to support clubs in lower-revenue expansion cities like Phoenix and Miami.

Negotiations continue: the players’ union and owners resumed talks yesterday, and the league made its later offer public; it would split hockey revenue in equal shares between owners and players.  The offer also ups the salary cap to a floor of $43.9 million, a midpoint of $51.9 million, an upper limit of $59.9 million. Still, 16 of the 30 teams are currently above that limit. According to the Associated Press, owners are “adamant” that players accept significantly lower than 57 percent of revenue, while players “don't want what they consider more massive cuts at a time when the overall revenue pot reached record numbers ($3.3 billion) last year.” (The union's response to the latest offer has been cautious.)

In “a message to our fans,” the NHL stated that the contract that just expired helped create “the most meaningful regular season in pro sports,” with a different team winning the Stanley Cup championship every year for the past seven years. But, it adds, “necessary adjustments” need to be made for “a fairer and more sustainable division of revenues.” A later statement indicated that the league’s proposed contract is “essential for the long-term health and stability of the league and the game.” Bettman said he has the unanimous support of team owners for the lockout. Owners themselves aren’t voicing that support out loud: they face a $1 million fine if they publicly speak about the labor dispute.

For all the psychodrama of the NHL negotiations, hockey is not alone in taking labor disputes to the brink. Somehow, lockouts shifted from a last resort to a bargaining tactic. As Gabe Feldman describes at Grantland, there was a combined total of seven work stoppages in the NHL, NBA, and NFL between 1968 and 1994, and all of them were initiated by player strikes. Since then, there have been eight work stoppages in the NHL, NBA, and NFL; all were lockouts.

It’s a trend that parallels the world outside the stadiums. The New York Times reports that while lockouts were once unheard-of, they are an increasingly regular offensive move in non-sports industries. With the number of annual strikes at one-sixth what they were 20 years ago, partly because of weakening unions, lockouts are responsible for more work stoppages. “Last year,” according to the Times, “at least 17 employers imposed lockouts, telling their workers not to show up until they were willing to accept management’s contract offer.” They happened at places ranging from American Crystal Sugar to Sotheby’s, the art auction house.

Why? It seems that lockouts often work. The NHL contract that came out of the 2004-05 lockout was a huge loss to players. And owners of professional sports learn from watching each other. Almost exactly a year ago, in the relatively early days of the basketball lockout that wiped out the first half of the season, Helene Elliott wrote presciently in The Los Angeles Times:

It's easy to picture NHL owners — some of who also have stakes in NBA teams — watching basketball players make concessions and salivating at the thought of asking for similar concessions next year.

The NHL continues to make money during the lockout, decreasing the incentive to reach a swift deal. It has television deals with NBC and Canada’s CBC that will collectively pay the NHL $300 million, whether or not games are played. The NHL won’t have to pay it back until the television contracts expire in 2013 (CBC) and 2020 (NBC). The delay helps keep cash flowing in the absence of ticket sales.

Players—most of whom have very short professional careers—are more vulnerable, which is why many are going overseas to play in international leagues, including the high-paying Kontinental Hockey League in Russia. Several players, signed with KHL less than a day after the NHL contract expired. The players’ union is trying to soften the blow for out-of-work players by covering insurance, and is also wrangling its way through Canadian provincial labor laws that might make it possible for the lockout to be declared illegal for the NHL’s three Canadian teams, thereby restoring salary to those players.

Meanwhile, planning for one of the signature events of the hockey season, the Winter Classic, is on hold. The Classic is an outdoor hockey game played on New Year’s Day by two “original six” hockey teams. This year, the match-up is (supposed to be) between the Detroit Red Wings and the Toronto Maple Leafs in an iced-over rink in the University of Michigan’s football stadium in Ann Arbor. It is (was) expected to draw 115,000 attendees—a world record for hockey. The previous five Classics were the most-watched regular-season hockey games in North America since the 1970s. Thanks to corporate sponsorships, merchandise sales, and tickets, this single game generates a profit in the “substantial seven figures,” according to the NHL’s chief operating officer. With the Classic’s enormous visibility, and obligations to networks and sponsors, owners are pressured to make sure the puck drops by January 1.

But reverberations of the lockout go beyond players and owners. Some teams instituted temporary layoffs of staff, and employees of the league’s administrative office face reduced workweeks and salaries. City Halls lose out on wage taxes for players, as well as sales tax on merchandise sold locally during hockey games. Bars, restaurants, hotels, and parking facilities take a huge hit. In Toronto, a councilmember declared that a long lockout would have a “dramatic impact” on the city’s economy. In St. Paul, where the Minnesota Wild play, a burger joint cut the staff that would’ve worked in a normal hockey season: instead of seven bartenders, two; instead of ten servers, three. Estimates reported in the Philadelphia Inquirer indicate that businesses in Philadelphia and Boston lose between $850,000 and $1 million per canceled game. In Detroit, the city council president pro tem estimated that canceled games cost area businesses $2 million. According to the Detroit News, the councilmember said that during the 2004-05 lockout, the city lost $9.5 million in parking fees alone. Detroit is planning a major winter festival to compliment the Winter Classic in nearby Ann Arbor; should the Classic get canceled, the region could be hit with a $75 million loss.

This lockout, then, isn’t just disappointing fans. It’s hurting their businesses and communities in concrete ways. But this news isn’t new. When the lockout became official, there was a collective public sigh of exasperation from fans—but no one was surprised. Maybe the most disturbing part of this story is how used to it we’re becoming.

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