UPDATED: NHL attempts to keep an 82 game season with latest offer

The National Hockey League has finally made the next move in the Collective Bargaining Agreement negotiations to end the lockout of the Players’ Association after 34 days of a stand-still chess match. This latest proposal is certainly the best proposal offered by both sides.

“We didn’t make this offer overnight,” said NHL commissioner Gary Bettman.

Gary Bettman surrounded by reporters. (Courtesy: Flickr)

According to TSN NHL Insider Darren Dreger, the NHL has been working on this latest offer for several days.

Apparently, they were trying to come up with an offer that would shock the hockey world in giving a “fair deal” and they successfully did so.

The NHL proposed to the NHLPA a 50/50 split of revenue, the best offered so far by both sides. However, this offer isn’t on the table long, like the last offer given September 12 by the NHL and their owners. 

Bettman said, “We have about nine or 10 days to get this all signed, sealed and delivered.” He also added that it is a long-term deal that may actually be six years.

Gary Bettman is completely right. The NHLPA has about seven to ten days to accept or deny this latest proposal. If they don’t, the season will end up being pushed back and, or losing games and big-money events like the Winter Classic and All-Star Game.

The new CBA will have to be agreed by October 25, in order to save a 82 game season so the players can start training camp the day after and start the season November 2, according to TSN Hockey Insider Bob McKenzie.

McKenzie also Tweeted out on his Twitter page that the players’ salaries would make $1.95 billion. 

Also, Bettman plans to keep all the players’ salaries for the 2012-13 season to be the same, just to make the transition easier to the start of the season.

Going back to Darren Dreger, he said on his Twitter page that the NHLPA is expected to make a counter proposal within the next 24-48 hours.

So, don’t expect for this to be accepted by the Union, but realistically expect hard negotiations to get the most that they can for both sides. The next several days could determine whether there will be a season or not. If everything goes well, expect the season to continue with the full 82 games. 

UPDATE 

On Wednesday morning, the NHL released to the public what was in their latest CBA offer to the NHLPA, given to them Tuesday afternoon. The following is from NHL.com, but it is simplified. Read the full version here with all the details.

Term
The term of the CBA proposed by the League is 6 years with a mutual option for a 7th year.

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.

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.

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. A team can’t go over the originally set $70.2 million cap.

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.

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.

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.

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.

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.

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.

(3) We have withdrawn our initial proposal to revise the eligibility requirements for Unrestricted Free Agency to 10 Seasons, and are instead proposing a modest single year adjustment to 28 years of age or 8 Seasons.

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.

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. 

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.

All Clubs in the NHL except the top 10 Revenue Grossing Clubs will now be eligible for Revenue Sharing. 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, 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.

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