NHL Chief Legal Officer Bill Daly told the Wall Street Journal that rising employee costs were the main culprit for the soaring operating losses in the 2002-03 season, as he reported that 76 percent of the league’s $1.93 billion in revenue went to cover salaries and benefits to players.
“This is a level at which no business can survive. The league will lose jobs if we can’t fix this,” said Daly.
For comparison, 64 percent of all National Football League revenue goes to its players. In Major League Baseball, that figure is 63 percent. In the National Basketball Association, it’s 58 percent.
The average NHL player salary has climbed from $733,000 in 1994 to $1.79 million last season. In an attempt to corral rising salaries, NHL Commissioner Gary Bettman has called for a “cost certainty,” also known as a salary cap, to be added to the collective bargaining agreement the league has with the National Hockey League Players Association.
The current CBA, which doesn’t have such a clause, expires on Sept. 15, 2004.
But NHLPA Executive Director Bob Goodenow has repeatedly said the union will not agree to any form of salary restriction on its players. He has argued that the league’s owners have driven players’ salaries up and that they need to get out of this situation on their own.
The Detroit Red Wings, whose primary affiliate is the Grand Rapids Griffins, has seen its player payroll rise from $11.7 million in 1993 to $75.4 million for the upcoming season that starts on Oct. 9.
The current payroll can be considered a work in progress as it includes $8 million in salary for Curtis Joseph, a goaltender the team hopes to trade early into the season.
Although the Red Wings remain tight-lipped about the franchise’s financial condition, a report released last year by Forbes magazine pegged the club’s revenue at $114 million for the 2001-02 season, the year it won its 10th Stanley Cup. Still, according to Forbes, the Red Wings lost $3.4 million that year despite a league championship and an 18 percent increase in revenue from the previous season.
Red Wings GM Ken Holland told the Business Journal recently the franchise was pretty much leaving the negotiations for a new CBA up to Bettman and Goodenow. But he added the club has been preparing for a season that may be played, delayed or scrapped entirely in case of an owners lockout or a players strike.
“If you look at our roster, a lot of our players’ contracts expire at the end of the year and that was done by design so we don’t have a lot of financial commitment going forward. We want to have as much financial flexibility as possible,” he said.
“At the same time, we’re trying to keep the people that we think are going to be a big part of us trying to be competitive.”
In fact, 12 of the 23 players on the Red Wings current roster will become unrestricted free agents next July 1. Only Pavel Datsyuk, Derian Hatcher, Jiri Hudler, Curtis Joseph, Manny Legace, Kirk Maltby, Darren McCarty, Brendan Shanahan, Ray Whitney, Jason Woolley and Henrik Zetterberg are signed for the 2004-05 season. Chances are very good, however, that Joseph will be gone by then.
Taking that “no long-term signing” approach reduces the franchise’s player payroll from the tentative $75.4 million for this season to $32 million for next season. In the 2005-06 season, Detroit has seven current players in the fold and a payroll of $24.4 million. For 2006-07, the club only has four current players signed and $13.9 million in payroll on the ledger.
Holland said the franchise has purposely spent the past few years bringing younger and less costly players onto the roster. Two seasons ago, it was Datsyuk. Last season, it was Zetterberg. And this year, it’s Hudler.
All three are signed for less than the league’s $1.79 million average. Datsyuk will earn $1.5 million this season. Zetterberg will get $675,000. Hudler is slated to make $450,000 should he land a roster spot. Holland also said rookie defenseman Niklas Kronwall, who will likely play for the Griffins this season, could find his way into next season’s Red Wings lineup.
“When the CBA is finally settled we want to be able to have some young people that are ready to go, so we don’t have to move six or seven rookies in at the same time,” he said.
As for whether a salary cap is inevitable, Holland said he wasn’t sure. But he did say, with a lot of certainty, that something has to change. Holland declined to predict whether or not a labor agreement would be reached by next September, but he noted that he had to be ready for whatever happens then.
“At some point in time, I’ll have to start planning training camp. It will be business as usual because we have to be ready to go if there is a labor agreement put into place,” he said. “So I’m going to try to prepare for anything and everything.”
NHL owners locked out players for 103 days at the start of the 1993-94 season until the current CBA was signed. Associated Press reported that the league has established a $300 million “war chest” in preparation for contract talks with the union.