In July, the NHL and the National Hockey League Players’ Association agreed to a six -year extension of their collective bargaining agreement. In these incredibly perilous times, this was great news for hockey fans since this meant labor peace until 2026.
Well, not so fast. Despite having signed the CBA just five months ago, the NHL has requested further concessions from the players to weather the Covid-19 storm. Initially, the players agreed to a 20% escrow and a 10% deferral of salary. Put another way, the players agreed to be paid 72% of their salaries this season with the understanding that the 20% dropped into escrow was as good as gone. As far as the 72% figure, remember that the 10% deferral comes off the top followed by the escrow deduction.
Unhappy with the current deal, the NHL is asking the NHLPA to agree to one of two proposals according to The Score. The first proposal would see the escrow figure increase to 25% while players deferred 20% of their salaries. Alternatively, the league is asking the players to defer 26% of their salaries next season while keeping the escrow figure flat at 20% for the 2020-21 season. There are additional details, but the bottom line is that these proposals would see the players go from taking home 72% of their salaries this season to an average of 63%.
The league has been criticized for backpedaling on the ratified CBA. That initial reaction is understandable. That being said, while perhaps ill-timed, the NHL’s request for further concessions isn’t crazy; there is some merit to it.
Requesting amendments to a ratified agreement is a big deal, and the NHL knows that. So to approach the players’ union for further concessions means the league is seeing something new and material that requires urgent attention. Indeed, the NHL believes that its financial assumptions have so dramatically changed that this coming season is no longer financially viable within the four corners of the existing framework.
So what has changed for the league? Its fans—or, more precisely, no fans. The NHL didn’t anticipate that it wouldn’t have fans in arenas this season. Most were expecting some return to normalcy this fall. That expectation has now been pushed to sometime next year at the earliest. So there was a belief that fans would be back; they will not.
That substantially alters the financial outlook for the league. Under the existing framework, players will take home $1.6 billion in salaries. As per the Hockey News, with league revenue hovering around $1.8 to $2 billion without fans in attendance, players would account for 80% of league revenue. That’s a far cry from the typical arrangement of a 50-50 split of league revenue.
The NHLPA, however, is banking on an additional $1 billion injection of revenue by way of some fans attending some of the games this according to a well-placed source within the Union. If that is indeed the case, then the players would take home closer to 53% of league revenue, which presumably would be far more palatable for both sides. At this point, however, having fans in the stands for this upcoming season does not seem too likely.
In addition, the NHLPA understandably believes that nothing should change since the sides already have a deal. The NHL should have been more aggressive in its forecasting for the upcoming season, the NHLPA would reason, and if the league is now unhappy with the existing deal, well, too bad.
But the league’s position is not outrageous by any means. While the timing isn’t ideal, the substantive nature of the proposals is sound. If there are no fans in the buildings, then the NHL’s position makes sense. NHL owners understand they will lose money this season; they are, however, asking the NHLPA to help minimize the extent of those losses in these exceptional times.