Great article in TIME magazine Business Section

[Krysmo]

Except for the KHL part, this is about 100% right as far as I'm concerned.

http://business.time.com/2012/12/19/...e-nhl-lockout/

[Pengwin7]

I disagree that it's 100% correct.

Actually, blaming the owners for their lack of revenue sharing is very unfair and (to use the word properly) ignorant.

1. The NHL, like all business models, has a pre-formed structure. That structure includes current guidelines on revenue sharing. So... while the writer could suggest that more revenue sharing is required - that may be very different from what the current guidelines are set up as. You can't just tell somebody to share their money. Yes, I realize this is the 0.1% of the world and the other 99.9% of people like to say "Share your money". But last I checked the top NHL players are making $10m with the bottom players getting $550k... so where's the "sharing"?

I'd love to see somebody tell this writer to share his salary with the interns at his company that are trying to make it and contribute to his success.

{shaking head}


2. In football, the reason Green Bay can compete on a level with the major markets is because the NFL has a salary cap ($120m). Guess what - it turns out that is a good concept for overall competition and parity of the league. Does the writer mention this? No. The only other sports league with a hard cap is... hockey.. ($60m). And football is loved in both cold & warm climates. The game is fully grown. It's not still in a growth stage, like hockey. So, one can't compare football with hockey. They are at different levels in their history (established vs. growing). Oh... and guess what players... in the NHL your contracts are GUARANTEED. You get your money if you suck. Do you know what happens in the NFL if a player sucks??? Do you know? Look into that players!

3. In baseball, there is no cap. Teams can spend as much as they want. And the trade off is that the teams that spend more can feel that they'll do better, draw more fans, and can therefore make more revenue... and yes, they can share this... and that's why THEY share more.

4. In basketball, there is a luxury tax on spending past the cap. Again, this is straight revenue sharing. Similar to baseball, the teams that spend more typically do better. When they do better, they make more. When they make more, they can afford to share more.



Hockey is not like any of these other sports except that hockey is called a major "sports league". But the cap structure of the NHL only rivals the NFL... a fully established sport that doesn't have any problem raking a massive haul from a national TV contract, which is the main gravy (and a very shareable gravy) towards revenue sharing.

I think the writer here has decided to skirt the actual numbers & business models of these other leagues for the sake of blaming the owners.

People who straight-out suggest that problems can be fixed with revenue-sharing are on one-side of a very clear fence.
It's a fence where their cohabitants (their target audience) also believes the world should be giving them some more money.

This lockout is on the players, IMO.
They make too much. Period.
(and don't get me wrong... the owners need some tweaks too... but they aren't the main root of the problem.)

[27Blue]

thanks for the article. i agree with the author...

[Maaaasquito]

Originally Posted by Pengwin7

I disagree that it's 100% correct.

Actually, blaming the owners for their lack of revenue sharing is very unfair and (to use the word properly) ignorant.

1. The NHL, like all business models, has a pre-formed structure. That structure includes current guidelines on revenue sharing. So... while the writer could suggest that more revenue sharing is required - that may be very different from what the current guidelines are set up as. You can't just tell somebody to share their money. Yes, I realize this is the 0.1% of the world and the other 99.9% of people like to say "Share your money". But last I checked the top NHL players are making $10m with the bottom players getting $550k... so where's the "sharing"?

I'd love to see somebody tell this writer to share his salary with the interns at his company that are trying to make it and contribute to his success.

{shaking head}


2. In football, the reason Green Bay can compete on a level with the major markets is because the NFL has a salary cap ($120m). Guess what - it turns out that is a good concept for overall competition and parity of the league. Does the writer mention this? No. The only other sports league with a hard cap is... hockey.. ($60m). And football is loved in both cold & warm climates. The game is fully grown. It's not still in a growth stage, like hockey. So, one can't compare football with hockey. They are at different levels in their history (established vs. growing). Oh... and guess what players... in the NHL your contracts are GUARANTEED. You get your money if you suck. Do you know what happens in the NFL if a player sucks??? Do you know? Look into that players!

3. In baseball, there is no cap. Teams can spend as much as they want. And the trade off is that the teams that spend more can feel that they'll do better, draw more fans, and can therefore make more revenue... and yes, they can share this... and that's why THEY share more.

4. In basketball, there is a luxury tax on spending past the cap. Again, this is straight revenue sharing. Similar to baseball, the teams that spend more typically do better. When they do better, they make more. When they make more, they can afford to share more.



Hockey is not like any of these other sports except that hockey is called a major "sports league". But the cap structure of the NHL only rivals the NFL... a fully established sport that doesn't have any problem raking a massive haul from a national TV contract, which is the main gravy (and a very shareable gravy) towards revenue sharing.

I think the writer here has decided to skirt the actual numbers & business models of these other leagues for the sake of blaming the owners.

People who straight-out suggest that problems can be fixed with revenue-sharing are on one-side of a very clear fence.
It's a fence where their cohabitants (their target audience) also believes the world should be giving them some more money.

This lockout is on the players, IMO.
They make too much. Period.
(and don't get me wrong... the owners need some tweaks too... but they aren't the main root of the problem.)

It's both sides fault really... I thought the author made very valid arguments about revenue sharing. The fact of the matter is all of the other leagues have a much higher proportion of revenue sharing amongst the owners than the NHL. NFL and NBA share 50 and 60% while the NHL shares 4.5... I mean that's gotta change? You could argue that they get much more revenue through tv deals and corporate sponsorships, but at the end of the day, 4.5 is pretty ridiculous.

I understand your argument that forcing someone to have to share money is a bit over the top, but that much actually help alleviate the divide amongst the players and owners. Every lockout the owners have gone after the player's chunk of the pie, without ever looking for a solution amongst themselves. Perhaps if they found a dual prong approach of increasing revenue sharing to 30-40%, and having a smaller rollback in player salaries, while giving them a few concessions, then they might actually create a longer term "merrier" solution to the overall problem, rather than the iron fist we're your bosses we can do whatever we want type of approach that happens every 7 years...

The lockout isn't only on the players... They signed contracts, and the owners are now trying to collectively void them. I mean imagine in your job, that you've secured a contract, then boom your company is making record profits and they want to lower your salary because the "system" isn't working, when they've been flying the "we made record revenue last year" flag in your face...

I don't buy the they make too much money argument. At the end of the day, they're still being paid at a market based price. We the fans are the ones that are willing to fork out $100 bucks a ticket, and get the jerseys, and play the fantasy games to help fuel their salaries. The salary that they earn is completely a creation of what we are willing to pay. Look at it in Europe, the hockey players there make a "normal" everyday salary as us regular folks, and they play the same game as they do in the NHL. So yes I do agree with you that they are overpaid compared to everyone else in the grand scheme of things, but they're paid due to our creation, and if we want them to come back down to "regular joe" levels then there needs to be a mass cull of hockey fans, which will never happen.

So I don't think it's purely the owners fault, nor is it purely the player's fault. It's both sides and until they can see the bigger picture of putting the egos aside, we'll continue to be lockouted with no solution in sight.

[Pengwin7]

Originally Posted by Maaaasquito

It's both sides fault really... I thought the author made very valid arguments about revenue sharing. The fact of the matter is all of the other leagues have a much higher proportion of revenue sharing amongst the owners than the NHL. NFL and NBA share 50 and 60% while the NHL shares 4.5... I mean that's gotta change? You could argue that they get much more revenue through tv deals and corporate sponsorships, but at the end of the day, 4.5 is pretty ridiculous.

I understand your argument that forcing someone to have to share money is a bit over the top, but that much actually help alleviate the divide amongst the players and owners. Every lockout the owners have gone after the player's chunk of the pie, without ever looking for a solution amongst themselves. Perhaps if they found a dual prong approach of increasing revenue sharing to 30-40%, and having a smaller rollback in player salaries, while giving them a few concessions, then they might actually create a longer term "merrier" solution to the overall problem, rather than the iron fist we're your bosses we can do whatever we want type of approach that happens every 7 years...

The lockout isn't only on the players... They signed contracts, and the owners are now trying to collectively void them. I mean imagine in your job, that you've secured a contract, then boom your company is making record profits and they want to lower your salary because the "system" isn't working, when they've been flying the "we made record revenue last year" flag in your face...

I don't buy the they make too much money argument. At the end of the day, they're still being paid at a market based price. We the fans are the ones that are willing to fork out $100 bucks a ticket, and get the jerseys, and play the fantasy games to help fuel their salaries. The salary that they earn is completely a creation of what we are willing to pay. Look at it in Europe, the hockey players there make a "normal" everyday salary as us regular folks, and they play the same game as they do in the NHL. So yes I do agree with you that they are overpaid compared to everyone else in the grand scheme of things, but they're paid due to our creation, and if we want them to come back down to "regular joe" levels then there needs to be a mass cull of hockey fans, which will never happen.

So I don't think it's purely the owners fault, nor is it purely the player's fault. It's both sides and until they can see the bigger picture of putting the egos aside, we'll continue to be lockouted with no solution in sight.

The % comparison of revenue sharing has to be considered with the overall magnitude of revenue generated.
I'd compare it to "donating" relative to one's salary.

Let's say PersonA makes $100,000 through their job.
If they donate 10% of their income, they still have $90k in cash.

Let's say PersonB makes $50,000 though their job.
If they donate 10% of their income, they now have $45k in cash.

But let's say that any person (in this given "world") needs $50k simply to live a bare-minimum life.

Somebody could say "PersonA is donating 10%... shouldn't person B be able to donate at least 2%". The answer is NO, they can't afford it. And it really wasn't fair for anybody to make that accusation. The NHL simply makes WAY less league-wide revenue through things like their TV contract. And the TV contract is an ENORMOUS factor with regard to revenue-sharing. Talking about increasing "revenue sharing" when the TV contract is so small is ridiculous. Anybody that goes into "oh, change the NHL revenue sharing" is losing track of the relative magnitudes of popularity of each league. And as much as people POO-POO southern expansion and geographical growth of the game, it's that US TV contract that brings in some form of revenue sharing.

So you can't just compare the NHL's 4.5% to another league's 40%.
It's not the same revenue, especially with regard to league-whole revenue like the TV contract.


As for what the player's "market salary" is... and my own contracts (at my own job)... I discussed that.
I've had my salary rolled back on me for previously - and I dealt with it.
And the NFL teams can just cut a player and not pay them.
Hockey players have it good.

The owners are like 30 departments within one company. The departments compete so that they can pay their own employees and steal them from each other. At the end of periods though, they have to collectively sit down and re-set their bargaining rules so they don't do that to each other and that so ALL departments (teams) can make money.

I think somebody could argue:
1) That the salary cap be disregarded... then the league would go like the MLB, biggest cities with biggest payrolls winning year after year.
2) That there could be a luxury cap... then the league would go like the NBA, with a better revenue sharing (and, this is the BEST of the bunch, IMO)
3) That teams could just cut a player and NOT pay them if they choose. This happens in the NFL. What do you think the players would say about THAT as a new CBA rule!? Ha!

The NFL TV/radio contract is approx. $7 billion per year.
7 BILLION.
And they collectively divvy that up... that's like $200m per team.
The NFL salary cap is $120m per team.

In other words, the NFL TV contract alone covers each teams salary.
And THAT is part of "revenue sharing". A HUGE, HUGE, HUGE chunk.

So how does any league pull that off...
The grow the game until it's so popular that the TV rights generate that much.


(MLB gets about $700m/year from TV. That's maybe $23m per team, still a good contribution to most teams working on about $80m payroll.)

(NBA's next deal, per Forbes, will be about $1.2b/year from TV. That's $40m per team... with most teams working on a $90m payroll.)

The NHL's current record-breaking deal (which Bettman made happen!) pays the league $200m/year. But for 30 NHL teams, that's just $7m each.
In previous years... the contract was only $80m/year. And that's just $2.7m/team. (80/30)

Previous TV contract across Canada was about $65m/year for CBC...
So it's good to put it in perspective the presence of the game in the United States.
$200m from the US contract... that probably exceeds the Canadian contract... which, when due... is going to be another big KICK-up for this "revenue sharing percentage".

[post edit: So, if the league "revenue sharing", which is mostly TV contract, was 4.5% with a TV contract of $80m/year... and now the league will be getting $200m/year from TV contract... well, this means that there is 2.5x MORE REVENUE to be shared... i.e. revenue sharing will actually be about 13.5% in future years (if it is assumed that bulk of revenue sharing is from TV]

Again, let's summarize:
NFL: $200m/year per team, from TV contract. $120m team payrolls. i.e. TV revenue covers full players salary.
NBA: $40m/year per team, from TV contract. $80m payrolls, say. i.e. TV revenue covers about half players salary.
MLB: $23m/year per team, from TV contract. $80m payrolls, say. i.e. TV revenue covers about 30% players salary. [MLB probably has biggest ticket gate pull of 4 sports]
NHL: $2.7m/year per team, from US-TV contract. $60m payrolls, say. i.e. TV revenue covers just over 4.5% of players salary.

Let's remember those numbers... 200/40/23/7*. (7m/team represents the new NHL US-TV contract @ $200m/year.)
The NFL's TV contract is 28x bigger than the NHL.
The NBA's TV contract will be 6x bigger than the NHL.
The MLB's TV contract will be 4x bigger than the NHL.

And yet... by top contracts:
NFL's top players get about $20m/year.
NBA's top players get about $20m/year. (Kobe excluded)
MLB's top players get about $23m/year. (A-Rod excluded)
NHL's top players get about $10m/year.


So... when you talk about "market worth"... don't just talk to me about $100 tickets.
$100 tickets is representative of what EACH team gates at THEIR HOUSE.
That's THEIR MONEY.
Not sharing THEIR MONEY, in combination with a really unpopular sport with minimal TV revenue, is WHY the revenue sharing percentage is so low.
(and this isn't explained in the article, which makes it... poor, IMO)

Depending on a sports popularity, the TV contract is an enormous player in the game.

By TV contract (the real "revenue sharing")
NFL $200m/team vs. NHL $7m/team.
There's your 50% vs. 4.5%.

If the players want more money... tell them to grow the game.
They ARE the game.

Make the people watch... and the money will come.

[arctic_rogue]

Originally Posted by Pengwin7

So how does any league pull that off...
The grow the game until it's so popular that the TV rights generate that much.

This is the part of the lockout that drives me up the wall frustrated. It's in NO ONE's best interest for there to be a lockout right now. All they league and PA are doing is losing fans cutting into revenue. If they destroy (or shrink) the revenue base, then all of a sudden the 50% is not enough for teams to keep afloat (turn enough profit?). Revenue sharing does help alleviate this concern for some teams.

Either way, by cutting into revenue, how can the NHL or the NHLPA argue that it is helping the game? The only argument is that they know the fans will come back in droves. In that case, this whole joke is on us.

[Pengwin7]

A little extra expansion about the concept of "revenue sharing".

In most cases, the revenue sharing (as I understand it) is through the league's TV contract.

I think part of that problem (among us "fans") is that we hear "revenue sharing" and we just assume that it means a successful owner (say, the Leafs) is going to take some of their haul from gate receipts and transfer that to the NHL.

The accounting alone makes this a nightmare.

I have to assume that all leagues find it easier to just say "keep your gate receipts"... we don't want any part of your accounting there.

So, then you look at NHL vs. NBA.
They draw roughly the same amount of fans.
Probably similar gate receipts.
In 2010-2011, the avg NBA team made about $825k per game in gate receipts. That's $34m for a 41-game season. Approx. $1020m for the entire league in gate receipts.
In 2011-2012, NHL teams ranged mostly between $30m-$50m in gate receipts. At about a $40m/team gate (higher than NBA) that's $1200m for the entire league.


So... the NHL's previous $80m/year TV contract divided by $1200m gate receipts = 80/1200 = 6.6% of gate+TV revenue is TV contract. (And league has 4.5% "revenue sharing")

Whereas the NBA would have $1b/year TV contract and $1b gate receipts = 50% of gate+TV revenue is TV contract.


So anyways... that's pretty much where the "revenue sharing percentage" comes from.
It is a function of the sources of revenue (with "gate" and "TV" normally being the major players, sponsorship also works in... but probably at similar rate as the TV contract>>advertising):
1) Gate receipts (NHL $1.2b, NBA $1b)
2) TV contract (NHL $0.08m, NBA $1b)

NBA: 1b gate + 1b TV / 2b total = 50% "revenue sharing"
NHL: 1.2b gate + 0.08b TV / 1.28 b total = 6% "revenue sharing" (though apparently, the actual number is 4.5%)

Asking the NHL owner's to share more revenue is a completely different case than the NBA. NBA owners aren't forking over their gate receipts to the league. It's just the TV contract coupled with the luxury tax for overspending on players.

NHL owners aren't doing anything much different from NBA owners... it's just that the NHL has a shitty TV contract (coupled with decent attendance) that makes the revenue sharing percentage look bad.

In fact, with the new NHL TV contract kicking in... the NHL gets $200m/year (previously $80m).
So right there, if you do the new division:

$1.2b gate + $0.2b TV / $1.4b total = 14.2%
[The NHL actually rakes almost $3b in total revenue... but I haven't included playoff gate receipts, sponsorships, merchandising, which is also offset by Canadian TV contracts. Way too many numbers to cover completely.]

So there... the NHL may have already upped it's revenue sharing above 10%... there just hasn't been a season to put it on paper.

[rob2kx]

Originally Posted by Pengwin7

A little extra expansion about the concept of "revenue sharing".

In most cases, the revenue sharing (as I understand it) is through the league's TV contract.

I think part of that problem (among us "fans") is that we hear "revenue sharing" and we just assume that it means a successful owner (say, the Leafs) is going to take some of their haul from gate receipts and transfer that to the NHL.

The accounting alone makes this a nightmare.

I have to assume that all leagues find it easier to just say "keep your gate receipts"... we don't want any part of your accounting there.

So, then you look at NHL vs. NBA.
They draw roughly the same amount of fans.
Probably similar gate receipts.
In 2010-2011, the avg NBA team made about $825k per game in gate receipts. That's $34m for a 41-game season. Approx. $1020m for the entire league in gate receipts.
In 2011-2012, NHL teams ranged mostly between $30m-$50m in gate receipts. At about a $40m/team gate (higher than NBA) that's $1200m for the entire league.


So... the NHL's previous $80m/year TV contract divided by $1200m gate receipts = 80/1200 = 6.6% of gate+TV revenue is TV contract. (And league has 4.5% "revenue sharing")

Whereas the NBA would have $1b/year TV contract and $1b gate receipts = 50% of gate+TV revenue is TV contract.


So anyways... that's pretty much where the "revenue sharing percentage" comes from.
It is a function of the sources of revenue (with "gate" and "TV" normally being the major players, sponsorship also works in... but probably at similar rate as the TV contract>>advertising):
1) Gate receipts (NHL $1.2b, NBA $1b)
2) TV contract (NHL $0.08m, NBA $1b)

NBA: 1b gate + 1b TV / 2b total = 50% "revenue sharing"
NHL: 1.2b gate + 0.08b TV / 1.28 b total = 6% "revenue sharing" (though apparently, the actual number is 4.5%)

Asking the NHL owner's to share more revenue is a completely different case than the NBA. NBA owners aren't forking over their gate receipts to the league. It's just the TV contract coupled with the luxury tax for overspending on players.

NHL owners aren't doing anything much different from NBA owners... it's just that the NHL has a shitty TV contract (coupled with decent attendance) that makes the revenue sharing percentage look bad.

In fact, with the new NHL TV contract kicking in... the NHL gets $200m/year (previously $80m).
So right there, if you do the new division:

$1.2b gate + $0.2b TV / $1.4b total = 14.2%
[The NHL actually rakes almost $3b in total revenue... but I haven't included playoff gate receipts, sponsorships, merchandising, which is also offset by Canadian TV contracts. Way too many numbers to cover completely.]

So there... the NHL may have already upped it's revenue sharing above 10%... there just hasn't been a season to put it on paper.

I think the issue is that the TV contracts aren't national (there have been some national ones: Vs, NBC during playoffs, but they are paltry). Since they are local there is no forced revenue sharing so the owners aren't.

You made a number of points above about people sharing income and how they shouldn't have to, etc. Problem there is that rich Team A's revenue relies on poor Team B. Without Team B, Team A is just having a practice...

[Loch]

Incidentally, the NFL revenue sharing is NOT just TV related:

When the teams play, there is a "gate," the money people pay for seats. This is in the neighborhood of about $2.5M per game. This money is split 60-40, with the visiting team getting 40% of the gate. Because of this teams like Jacksonville and Arizona just love it when the Packers or Cowboys come to play.

So yeah, that would be a meaningful change in the NHL (that would also require some re-alignment and schedule balancing)... TV revenue be damned.

[MolsonX]

I think this article is pretty spot on, less the KHL piece as the OP pointed out.


Cheers.