(Sept. 11, 2003) 

   Recent public comments from Commissioner Gary Bettman indicate a desire to start working on the new Collective Bargaining Agreement as soon as possible.  The Commissioner has declared that there must be some form of cost certainty.  The sooner there is a dialogue regarding exactly what plan to employ, the better.

   Generally cost certainty involves some form of salary cap or luxury tax.  There is another form of cost certainty: length of contract.  The longer the contract runs the greater the risk for the team, the less the risk for the players.  If the union truly advocates a free market perhaps a means of implementing a mutual workable free market is to limit contract terms.

   Consider this radical proposal:  Excepting those persons already under contract anyone age 28 is a free agent.  Any team can sign them.  But the contract term may only be for one year. 

   This proposal accomplishes at least two things:  First it ensures an ample supply of free agents.  The age cut-off is drastically reduced creating a whole host of free agents.  Since contracts are limited to one year these persons will be free agents in the succeeding years.  Since the supply of available players has increased dramatically the salaries for those players will be much less than under the present free agent mechanism, simple supply and demand. 

   As an example consider the case of Magnus Arvedson.  Arguably he should have received a pay raise once he was eligible for the free market.  But since there were a lot of free agents available to sign (and dollars were limited due in part to long term commitments to others) Arvedson took a pay cut to play with Vancouver.  One can make a case that salaries have declined over the course of this summer and that is the free market at work.  More supply, less demand.

   A second aspect of this proposal is a team is not saddled with a liability.  If after a year the teams finances shrink, or the player has injury issues, or his play deteriorates, the team can walk away.  The contract is for only one year.  Most of us could easily name several superstars that would be playing for other teams at reduced salaries but for their long term contracts.

   A further advantage of this proposal is that it is comparatively simple.  The CBAs various free agency rules are already so complicated that the ordinary fan cannot, or does not want to, understand them.  A salary cap or luxury tax will involve yet another set of rules that will likely rival the Internal Revenue Code in complexity.  More free agents on one year contracts creates a self regulating mechanism. 

   There will remain the issue of small market versus big market teams.  The answer is revenue sharing.  Thats a separate issue.  One must acknowledge practical reality, however.  Examine baseball.  How many championships have been won by teams in New York City?  A whole bunch.  You cannot change the fact that there will always be big market and small market teams.  You can ameliorate these differences through revenue sharing; but, you will never eliminate them.

   Finally this proposal may put the union on the defensive.  Presently the players have the best of both worlds.  A limited number of free agents are available to sign.  The prized free agents are offered long term contracts.  This further limits the number of free agents available in future years (driving up market price), and saddles teams with financial burdens when the long term contract proves to be a bad investment.  If the union rejects the one year limitation arguing that the players need some degree of certainty then the Leagues response is a resounding You See!.  If  you, the players, want certainty then so do we. 

   Realistically I know this proposal will not fly.  But its worth bringing up.  The point is both sides likely wish a degree of certainty.  If the players receive some certainty the teams are entitled to some certainty as well. 

   Commissioner Bettmans comments illustrate a desire to break the ice in terms of addressing cost certainty.  A radical proposal like this one might be a mechanism to accomplish a dialogue on this most fundamental issue.

(August 14, 2003)

   cheap hotel in YorkSome commentators suggest that the restraint exercised by hockey teams so far this season illustrates that a salary cap is not necessary.  This view is flawed.  The economic incentives remain out of balance and must be corrected.  If a salary cap is not employed some comparable mechanism must insure financial stability for the mutual benefit of the teams and the players.

   Any restraint shown by the teams this season derives not from new found wisdom but from new found red ink.   Ask Alan Greenspan: the economy as a whole is in a deflationary cycle disguised only by the most dramatic drop in interest rates in recent memory.   Whereas in the past teams threw away money, now there is less money to throw away.  Plain and simple: the fewer the dollars in circulation the fewer the dollars that can be spent.  

   In the past teams have gone overboard:  $11M for Jagr, $10M for Tkachuk, etc.  Bournemouth B&B alojamientoThere are only two players in this seasons signings that compare to Jagr or Tkachuk:  Federov and Hasek.  Federov arguably settled for $8M where in a normal market he would have received $10M.  Arguably prices have dropped 20%.  Haseks $8M option is hardly a price drop, however, considering that in addition to the $8M Detroit may well have to subsidize a portion of Josephs salary in order to move him (either directly or through taking a salary in exchange). 

   Some have pointed to shorter contracts lengths and indeed there are a few.  Nonetheless second tier players such as Marchant, Prospal and others have received contracts of three years or more.  Indeed, terms are not as generous as in the past.  In addition to general economic pressures, the uncertainty regarding the 2004 season encourages teams to limit contract length.  This year is an anomaly in that respect.  

   Although the faltering U.S. economy has disguised its symptoms, the spend whatever you can on a good available player virus remains virulent.  The virus will erupt in full force as soon as the supply of dollars once again exceeds the supply of available impact players.

   The current free agent system does not represent truly free enterprise and its the players, not the teams, that benefit.  Only selected players are free agents; the rest are not.  In one sense the teams might benefit if everyone was a free agent.

   This may sound strange but heres the logic:  Demand for good players is more or less constant and unrestrained.  The supply of good players is restrained.  There is free competition among the buyers (the teams); but a restraint of trade among the sellers (the players).   When the number of free agents is limited, the pool of available dollars chases a few select individuals.  The result is contracts in the $10M range for the elite free agents.  If every player were a free agent panic buying would be reduced.  Teams would have a wide variety of players to choose from.  And even elite players selling their services would have to compete against a host of other elite players.   

   If such a fantasy were real overall payrolls might actually come down.  Due in part to arbitration, most of the seasoned elite players command salaries close to the inflated free agent figures already.  If the supply of free agents were opened up, player salaries would decline.  Indeed part of the restraint that some see being exercised this year may be due in part to the sheer number of players who are free agents.

   hotels MalagaI am not suggesting that all players become free agents.  The point is that the current free agent system does not truly balance supply and demand.  It is not a free market.  Its a restricted market that favors the players.  The natural economic incentive is to overpay and absent a contrary incentive free agent salaries will take off shortly after the economy rebounds.  

   The only way to balance unrestricted demand with restricted supply is to impose a salary cap.  In that fashion the supply of free agents is restricted, and the supply of dollars is also restricted.  The task facing those negotiating the new contract will be to create mechanisms so that a salary cap can be employed in a manner that is fair and equitable to both the teams and the players. 

(July 15, 2003)

   The need to reach a new collective bargaining agreement should be viewed as an opportunity rather than a crisis.  The new CBA permits some very bright minds to exhibit their creativity.  The NHL can set an example and put together a model plan that benefits players, owners, and most importantly fans.

hotels Sofia   The engine that will drive the new CBA will be economics.  Perhaps it would be wise to remind ourselves of some basic principles of both economics and human nature:  (1) The bigger the pie, the less people fight over the size of their slice.  (2) The more jobs (teams) the more secure the worker.  (3)  People are more willing to bear their "share" of the load if everyone else is doing the same.

   Ownership will be demanding some form of salary cap.  If a salary cap is to be achieved ownership must offer the players a meaningful reward in exchange.  Three rewards should be examined, if not eventually implemented.

   Revenue sharing among teams:  The fundamental concern of the worker is the security of his job.  If say two teams go out of business that means the loss of approximately 50 to 55 NHL roster positions (factoring in injuries).  That means 50 to 55 players must now play in the minors or retire; and those who survive the cut are under greater pressure.  Some form of assistance to small market teams must be provided to insure that the league does not contract.   This permits some players to play longer, and effectively earn more income in their career. 

   Revenue sharing among teams will tend to increase balance within the league, and thus competitiveness.  Greater balance increases fan interest and ticket sales.  Greater revenue increases the size of the pie. 

   Balance also increases opportunity for the players.  Although a salary cap may limit the size of contracts, the smaller market teams receiving subsidies will have greater financial resources.  Free agents have greater choice as to where to go as there are more potential "buyers" for their services. 

   Revenue sharing with players:  More controversial is the suggestion for players to share in ticket revenue.  Although an owner's instinctive reaction will be negative, sharing ticket revenue should result in a win-win situation.  An owner can part with revenue if as a consequence the owner limits costs; and the players can come out potentially just as well, or better.

   Players will resist a salary cap due in part to human nature:  What if economics improve?  If I agree to a cap all I have done is benefit the owners who may profit in the future.  Revenue sharing with players defuses this concern: if revenue increases the players will share in that revenue.  There is much more incentive for the players to agree to a salary cap.  In exchange for the players taking on the burden of limiting their total salaries; the owners have taken on the burden of giving them a share in any prosperity.  The benefit of achieving a salary cap without disruption to the 2004-2005 season far outweighs the cost of offering the players a share in the upside.  In addition, although hockey players are traditionally the most cooperative anyway, the players have an incentive to promote the entertainment value of their teams.

   Limit player movement:  There was a time when players played for the same team for a considerable period of time.  Not anymore.  Today's fan lives in dread that the next morning their favorite player will be gone.  We've all had the experience of opening the sports page to read that Igor Larionov has been traded to Detroit [fill in your own worst memory].  Fans start to view players as their "foster children".  On the one hand you want to love them.  On the other hand you are afraid to -- the "agency" may call today and say they are going "home".   Fans want to identify with their players.  They can't do so if half the guys on the roster were not on the team two years earlier.

ERROR MSG   Reducing player movement will also benefit players (and arguably management).  The joke is a hockey player should never buy a house -- doing so guarantees that within a month or two he'll be traded.   Sometimes we forget that players are human beings with families and school children.  Humans naturally desire some regularity.

   Problems:  Each of these options carries some problems.  Revenue sharing requires richer franchises to share.  The richer franchises may consider that sharing with lesser teams deflates the value of their team without compensation.  The counterargument is that if the league is healthy and prosperous the net value will increase.

   Sharing ticket revenues with players begs the question:  On what basis?  Ticket revenues have been selected as a basis of "profit" sharing as arguably they are easiest to compute.  The degree of revenue sharing with players could be tied to the severity of the salary cap; the lower the cap, the greater the revenue sharing.  Also a threshold might be established; the players would share only when the threshold is exceeded.

   Minimizing player movement is more complicated.  Free agency requires some player movement.  If a key player leaves a team must often trade to fill the void.  Player movement may be more of an issue to fans than to owners or players.  This option is least important of the three.  Nonetheless, it may well be worth experimenting with a "trade" cap.  Only so many players, per season, can be traded to another organization absent free agency or waivers.  The goal is to eliminate deals that sometimes seem to occur because management wants to appear like they are doing something.  As part of this cap, the league should consider moving the trade deadline earlier into the season to minimize teams "renting" players for the playoff drive.

   Undoubtedly the folks at the bargaining table have even better ideas.  Let's hope they are well received.