Organizational and Financial Problems of the NHL National Hockey League

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The NHL has gone through rough periods in the last 20 years which were characterized by lockouts and strikes. On 1^st April 1992, NHL voted for a strike and the outcome was overwhelming. Five hundred voters supported the strike while only 4 voters opposed the move (Strang, 2013). This was a clear indication of the general feeling amongst the players. The bone of contention was who between the NHL and the NHLPA had the power to control the players’ marketing rights. Players demanded to have the right to control their marketing rights which were being controlled by the NHL.

This included controlling how their pictures are used in posters, trading cards among other media channels (Strang, 2012). The players also raised their concerns with regard to payoff revenues. They lamented that they were not receiving their fair share and they demanded an increase from $ 3.2 million to $ 7.5 million. Among their demands was the increase of the number of games in the regular season from 80 to 84 (Lebrun, 2012). Fortunately, all of these demands were met and the players were back in the field on 11^th April the same year.

In September 2004, a lockout that lasted for 310 days ensued after the NHL owners proposed a luxury tax to be imposed on the teams that exceeded the average payroll. The move was unanimously condemned by the union and it was termed as a salary cap. The NHLPA proposed that the lesser teams should be given financial support through the tax charged on the wealthy teams without reviewing the payroll (Dater, 2012).

Other problems that influenced the lockout include disagreements on age restriction set for players to become free agents, distribution of playoff revenues, roster sizes, and salary arbitration. Both parties came to a consensus when they settled on a plan to have a salary cap that would be adjusted after every financial year (Deitsch, 2012). The NHL adjusted the age requirements for unrestricted free agency to 27 years by 2009 (Deitsch, 2012).

On 15^th September 2012, the NHL experienced yet another lockout that was, like the previous ones, influenced by issues related to the sharing of revenue. The NHL was demanding a superior share of the league’s revenue as well as demanding the adjustment of the Players Contracting Limit (Sportsbusinessdaily.com, 2013). During the 2012 lockout, NHL and NHLPA came to a compromise to split the total revenue by a 50/50 policy which was acceptable to both parties. Nonetheless, the looming lockdowns as outlined were expected with the increased level of corruption in the NHL.

Nonetheless, the situation could have been avoided if the commission had listened to the players and addressed their concerns in time. The NHL was not justified to impose taxes on the players in the guise that the money would be used to assist weaker teams. The commission illustrated greed by making major decisions without involving the players.

In a nutshell, the commission, in light of the events that were happing during these strikes and lockouts, was a negative influence. Every time a disagreement ensued the commission was involved in one way or another. The commission was an obstacle to the collective bargaining agreement which the players had agreed on and were willing to continue utilizing (Sportsbusinessdaily.com, 2013). Nonetheless, the commission decided to terminate the agreement. The NHLPA had indicated that the players were comfortable with the CBA and that it was not going to fight the salary cap (Sportsbusinessdaily.com, 2013).

The NHL has a great future and the new Collective Bargaining Agreement that was signed at the beginning of this year is expected to bear fruits. It is true that the CBA will entice the NHL players to get back to work but that is not all. There are other factors surrounding the CBA that have not been critically examined to determine how far they can impact the NHL. Economists warn that CBAs alone cannot solve NHL’s problems (Dater, 2012). As it has been observed, most of the problems faced by the NHL are of intellectual and leadership nature as opposed to financial and economic aspects. The solution as economists are insisting will be to try and make more sensible economic decisions such as the division of markets (Fitzpatrick, 2013).

For the middle class in the NHL league, the teams that have the deeper deficit will always lose money even with the newly created CBA (Campbell, 2013). The only difference is that they will be losing less than before but still a loss will be incurred. The slashed revenue allocations may have two impacts on the players’ salary caps. The salary cap may either rise or in the worst-case dropdown. This can be caused by the drop in the revenue allocated to players after the 50/50 share policy between the NHL and the NHLPA. Nonetheless, the drop is not automatic because even though the sharing percentage has dropped, the revenues collected have gone significantly higher.

In my candid opinion, the NHL is headed on the right track because with the equal share of revenues, the NHLPA can now manage its own activities. It is also clear that the salary conflicts are going to be settled once and for all. The ways in which the previous disputes were settled were good attempts but looking at the results and the rate at which they occurred one can tell there was poor leadership in the NHL. Controlling players’ marketing rights for instance is unimaginable and very derogatory.

In terms of future developments, the NHL must consider employing other markets and dividing its market share to other regions like Europe. I think if other sports were to copy from the NHL, the results would not be so good. With the possibility of a drop in the floor drops, teams will have difficulties in trading away players. The new CBA presents a range of uncertainties to the NHL but it is only a matter of time before we see the results.

This report has elaborated widely on the factors that led to the subsequent strikes and lockouts for the last 20 years. The issues that resulted in the disputes have been identified and classified subsequently to the most recent event. The paper also has discussed the economic impacts that are anticipated with the establishment of the new Collective Bargaining Agreement. An analysis of the viability of this agreement has also been made.

As the report notes, the events that befell the NHL are not desirable and there is little or nothing to admire from the gross mismanagement of resources seen in the subsequent years. In the report also I have given my own opinion with regard to the direction the NHL has taken and as noted in the report the owners have an opportunity to redeem its tainted economic situation as well as image.

References

Campbell, M. (2013). NHL Lockout: Experts doubt new CBA can bridge gap between the NHL’s rich and poor. Web.

Dater, A. (2012). NHL lockout timeline: comparing 2004-05 to 2012-13. Web.

Deitsch, R. (2012). KHL on ESPN a mixed bag of dull and surreal. Web.

Fitzpatrick, J. (2013). NHL Lockouts and Strikes: A brief look at NHL lockouts and strikes and how they were resolved. Web.

Lebrun, T. (2012). NHLpresents ‘comprehensive’ offer. Web.

Sportsbusinessdaily.com. (2013). NHL Open For Business: Schedule To Be Released This Week, Jan. 19 Likely Start Date. Web.

Strang, K. (2013). Board ratifies NHL agreement. Web.

Strang, K, (2012). Sources: Sides exchange proposals. Web.

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Organizational and Financial Problems of the NHL National Hockey League

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