Courtesy of NHL. com
NHL'S PROPOSAL TO NHLPA TO SAVE THE 82-GAME 2012/13 SEASON
We have reached a critical point in our collective bargaining
negotiations. In an attempt to save an 82-game 2012/13 season
(including the usual schedule of Playoff Games), the NHL is making a
substantially revised proposal to the NHLPA regarding the critical
issues on which the parties have been separated and which are essential
to an agreement with the NHLPA on a new CBA moving forward. We believe
that the proposal set forth below is fair to the Players and the teams,
and good for the game and our fans.
This proposal is based on what we believe is a fair sharing of revenues as between the Players and the Clubs.
This proposal does not require any roll-back in the salaries of
Players, and attempts to recognize and protect prior contractual
commitments.
This proposal provides for increased revenue sharing, targeted to those teams that are most in need.
This proposal is our best attempt to save an 82-game 2012/13 season, and is, in fact, the best we can responsibly do.
Our negotiations with the NHLPA have failed to progress on the most
critical economic and system-related issues. After considerable
deliberation, we have decided to make this proposal because time is of
the essence. Specifically, in order to save the full 82-game season,
the Regular Season schedule will have to commence no later than November
2, with 7-day Club Training Camps that must open by October 26. As a
practical matter, this means we must conclude a new written CBA by
October 25. We believe the parties can achieve this and that by working
together, we can jointly preserve an 82-game season for our Players,
our Clubs, and most importantly, for our fans.
Delay (beyond October 25) will necessarily leave us with an
abbreviated season and will require the cancellation of signature NHL
events. Failure to reach a prompt agreement will also have other
significant and detrimental impacts on our fans, the game, our Clubs,
our business and the communities in which we play. All of this will
obviously necessitate changes to this offer in the event we are
unsuccessful in saving a full season.
Here are the elements of our proposal and a brief explanation:
Term
The term of the CBA proposed by the League -- 6 years, plus a mutual
option for a 7th year -- is consistent with the term of the expired CBA.
It will allow for our fans, the Players and the Clubs to enjoy a
reasonable and extended period of labor peace thereby enhancing the
short to medium term business planning of the parties. During this
time, the League and the Players can work together to continue to build
on the momentum the NHL has experienced over the course of the past 7
years, both on and off the ice.
HRR Accounting
We agree to retain the CBA's current HRR definitions. Further, we
propose to formalize the various agreements the NHLPA and the NHL have
reached, and lived under, during the course of the expired CBA, and to
clarify mutually identified ambiguities in the CBA. Importantly, we do
not believe any of our proposed clarifications should have any impact
either on the amount of the Players' Share or the amount that any
individual Player is entitled to receive. None of these clarifications
for instance, would have had a material impact on the 2011/12 Actual HRR
number. This proposal is all about certainty, clarity and speeding up
our complex, end-of-year accounting process.
Applicable Players' Share
We believe a 50-50 sharing of Actual HRR is a fair allocation and a
reasonable compromise as between Players and Clubs. The simple fact of
the matter is that it costs Clubs more money now to operate and to
generate revenues than it used to. These increased costs include
amounts dedicated to the health, safety and enhanced comfort of NHL
Players, the increased costs associated with generating ticket and
gameday revenues, and the significant capital investments that are
regularly being made around the League to enhance the fan experience and
to create new revenue streams. The proposed 50-50 sharing arrangement,
comparable to the sharing arrangements in the NFL and the NBA, will
enable the NHL to protect and promote the long-term future of the game,
the financial health and stability of the Clubs and the long-term
earning capacity of the Players.
Payroll Range
We propose to set the 2012/13 Payroll Range on the basis of last
season's Actual HRR, using the same methodology as used in the recently
expired CBA. While this will result in a reduced Upper Limit for
2012/13, we have also proposed to permit the Clubs to exceed the Payroll
Range this year, to a maximum of $70.2 million – which was the Cap
established prior to this past summer. This will allow a Club that
chooses to do so to maintain or enhance its current roster during a
full-year transition period.
Cap Accounting
We are proposing that a Club's Lower Limit obligation be satisfied
without reference to (or inclusion of) performance bonuses. This will
effectively increase the minimum commitment of actual compensation paid
by the "Lower Limit Clubs" to Players. The proposal acknowledges the
League's agreement to a request made by the NHLPA earlier in our
negotiations.
We are proposing that all years of existing long-term contracts in
excess of five (5) years be counted against a Club's Cap regardless of
whether or where a Player is playing. While such contracts (and Cap
charges) can be traded during their terms, in the event a Player
subsequently retires or ceases to play, the effective Cap charge would
revert to the Club that originally entered into the contract. This
proposal is consistent with our other proposals intended to address the
harmful effects of long-term, front-loaded, "back-diving" contracts.
We are proposing that the salaries of minor league Players on NHL
contracts (above a threshold of $105,000) be counted against a Club's
Cap. This provision is intended to prevent Clubs from "stashing" or
assigning players to the minors (or any other professional league) for
"Cap management" purposes. We are not proposing that any salary paid to
minor league Players on NHL contracts be counted against the Players'
Share.
Finally, we propose that to facilitate more trades and create
increased flexibility in managing Cap Room, Clubs be allowed to allocate
portions of a contract's Cap charge (and related salary obligations) in
the context of a Player Trade. This will facilitate additional Player
movement and trades between teams as they manage their respective Caps
and Payroll Range obligations.
System Changes
We also propose making certain modest modifications to existing elements of the current system,
none of which will affect the total dollars to which the Players are entitled;
they will address instead the allocation of those dollars as among
various categories of Players, and we believe should ensure and improve
the competitive balance and quality of play around the League as a
result.
In our opinion, and as we have expressed in prior bargaining
sessions, certain elements of the current system have produced a dynamic
that has led to a misallocation of Players' Share dollars in favor of
those Players coming out of the Entry Level System at the expense of
other, more proven and established Players. We are therefore proposing
the following to hopefully address this dynamic:
(1) We have withdrawn our initial proposal that would have provided
Clubs with an option to extend the terms of Entry Level contracts, and
instead are proposing to reduce the duration of the Entry Level System
from three years to two years, thereby allowing entering NHL Players an
earlier opportunity to become Restricted Free Agents. This will free up
more money currently committed to Entry Level Players in their third
years who are no longer legitimate NHL prospects and will also allow
talented NHL prospects an opportunity to negotiate non-ELS contracts
earlier in their careers.
(2) We have withdrawn our initial proposal to eliminate Salary
Arbitration. We are instead proposing to maintain the Salary
Arbitration mechanism, and are further proposing that the rights of
Players and Clubs to elect Salary Arbitration be made mutual. Moreover,
we are proposing to revise the eligibility criteria for Salary
Arbitration to five years of professional experience (instead of the
current four years), the same criteria as existed under the 1994-2004
CBA.
(3) We have withdrawn our initial proposal to revise the eligibility
requirements for Unrestricted Free Agency to 10 Accrued Seasons, and are
instead proposing a modest single year adjustment to 28 years of age or
8 Accrued Seasons. This proposal still allows for the possibility of
early UFA status for Players -- as early as age 26.
All three of these system proposals are designed to shift the current
allocation of Players' Share dollars away from "second contracts" and
toward "third and subsequent contracts" to ensure what we believe to be a
more equitable and effective allocation of Players' Share dollars to
more proven, established Players who are playing in the prime of their
NHL careers.
We are also proposing two additional system modifications that are
intended to address the recent phenomenon of long-term, front-loaded,
"back-diving" Player contracts that we believe has proven harmful to the
interests of our Clubs and has clearly had the purpose and effect of
circumventing the letter and spirit of our existing system. In
addition, these contracts have increased the Escrow obligation and
reduced the effective salaries of Players playing under "normal"
contracts. In order to mitigate the consequences of these contracts, we
have proposed 5-year term limits for SPCs and tighter restrictions on
the year-over-year salary variability of contracts.
Due to our proposed change in the Cap treatment of minor league
Players on NHL SPCs, we are proposing the elimination of the Re-Entry
Waivers provision. The elimination of this provision, coupled with the
ability to allocate Cap charges and salary in trades, should lend
themselves to fewer NHL-caliber Players being relegated to minor league
service for prolonged periods of time.
Finally, in order to help preserve the vibrancy and stability of
European professional leagues as a continued source of NHL talent, we
are proposing to convert the typical four-year period of exclusive
negotiating rights that attach to European Players from the current
"two-plus-two" model (with each Player being subject to having to
re-enter the Draft) to a straight "four-year" model (with no obligation
to re-enter the Draft).
Revenue Sharing
The NHL has proposed to increase the Revenue Sharing pool for 2012/13 to
$200 million (assuming League-wide revenues of $3.303 Billion),
representing an approximately 33% increase over the amount that will be
distributed on account of 2011/12. This enhanced amount is at least
comparable to the levels of revenue sharing in the NBA and MLB, and will
be adjusted proportionately upward or downward based on Actual HRR
results in future seasons.
At least 50% of the Revenue Sharing pool will be funded by the Top 10
Revenue Grossing teams. The remainder of the Revenue Sharing pool will
be funded from League- and Playoff-generated revenues.
The Revenue Sharing pool will be redistributed to those Clubs who are
in the most need in order to enable those teams to have sufficient
resources on hand to compete for and compensate Players within the
Payroll Range, and otherwise to provide a basis for their continued
financial stability. In this regard, we are proposing to commit for the
next two years revenue sharing payments to recipient Clubs that are
equivalent to or greater than what those Clubs will receive on account
of the 2011/12 season. The effect should be to continue -- and even
improve -- the historic and unprecedented quality of play and level of
competitive balance we have jointly been able to achieve during the
period of the recently expired CBA.
All Clubs in the NHL except the top 10 Revenue Grossing Clubs will
now be eligible for Revenue Sharing, including Clubs in large media
markets who were previously ineligible (such as Anaheim, New Jersey and
the
New York Islanders,
among others). Further, our proposal eliminates some of the current
"business performance" thresholds that had the effect of materially
reducing the amounts a Club might otherwise qualify to receive in
revenue sharing. Instead, under-performing Clubs will be expected to
enhance their business planning capabilities, will be provided on-site
assistance to meet enhanced business objectives and will be provided
with much greater counseling as to "best practices" in business
operations.
In addition, we have proposed the formation of a functioning and
active Revenue Sharing Committee, on which the NHLPA will have
representation and will have an opportunity to provide input, to
determine the best and most effective distribution of revenue sharing
funds.
Supplemental and Commissioner Discipline
We are proposing to amend current Player discipline provisions to
introduce additional procedural safeguards to protect Player interests,
including an ultimate appeal right to a "neutral" third-party arbitrator
with a "clearly erroneous" standard of review
No Rollback; Players' Share "Make Whole" Provision
The NHL is
not proposing that current SPCs be reduced, re-written
or rolled back. Instead, the NHL's proposal retains all current
Players' SPCs at their current face value for the duration of their
terms, subject to the operation of the escrow mechanism in the same
manner as it has worked under the expired CBA. (In other words, under
the expired CBA, the compensation a Player received each year was either
higher or lower than the face value of his contract depending upon
Club-Player contracting levels and the level and growth rate of HRR.)
Under the expired CBA, in two of the seven years Players were paid in
excess of the face values of their SPCs and in five of those years they
received less than their face values. That process would remain intact
under the new CBA.
Under our "make whole" proposal, which is premised upon a 5%
anticipated growth of HRR both this year and in future years, every
Player will be paid compensation based on the full value of the Players'
Share under which his current SPC was signed.
In order to effectively transition from a Players' Share of 57
percent to 50 percent, including importantly to protect Players' current
SPCs against an absolute reduction in Players' Share dollars, the new
Agreement contemplates, in its initial years, a "make whole" mechanism
that will effectively pay each Player currently under contract the
difference between 50% of Actual HRR in 2012/13 and 57% of HRR in
2011/12 -- which was $1.883 Billion.
Again, premised upon an assumed 5% growth rate between 2011/12 and
2012/13, the "make whole" amount is calculated to be a maximum of $149
million for the 2012/13 season ($1.883 Billion minus $1.734 Billion (57%
multiplied by $3.303 Billion minus 50% multiplied by $3.468 Billion).
Similarly, utilizing that formula and our 5% growth projections, the
"make whole" amount is calculated to be a maximum of $62 million for the
2013/14 season.
To accomplish the "make whole," each Players' pro-rata "make whole"
will be determined for the first two years of the Agreement and will be
paid to each Player as a Deferred Compensation benefit over the life of
the Player's existing SPC. For those Players whose contracts expire
after the 2012/13 season, the benefit will be paid when final HRR is
determined for this season (in October/November 2013). Player "make
whole" payments will be accrued and paid for by the League, and will be
chargeable against Players' Share amounts in future years as Preliminary
Benefits.
The "make whole" obligation will be operational only through the
2013/14 season because, beginning in Year 3, the projected growth in
League-wide revenues should have resulted in an increase in absolute
Players' Share dollars (in excess of the Players' Share of $1.883
Billion in 2011/12). This will effectively restore "full value" to all
existing SPCs without any continuing need for a "make whole."
We note in regard to this proposal, that while the NHLPA's August 14
proposal was premised upon a 7% annual growth rate in HRR, we instead
used the more conservative growth rate of 5%, consistent with our prior
proposals. If the NHLPA's estimate of revenue growth is more accurate,
then the amount of money needed to effectuate a "make whole" would
actually be less.
* * *
The parties have already reached agreement on many of the
non-critical but necessary items needed to complete a new CBA. We hope
the NHLPA and the Players will view this proposal in the manner in which
it is intended -- an invitation to complete an Agreement in the
necessary timeframe so that a full 82-game 2012/13 season can be saved.
