Exclusive Blog – Insights Into CBA Negotiations

If you listened to the August 20, 2012 episode of the Puck Podcast you heard us reference an e-mail from listener Martin Devon that went into great detail about his insight into the ongoing CBA negotiations. The e-mail was way too long and dense for us to read on air but it was also way too good and informative for us to ignore so we decided to post it, in its entirety, here on PuckPodcast.com. So, without further ado, here is Martin’s blog about the CBA negotiations. Enjoy.

——————–

Eddie and Doug,

I have advanced negotiation skills training that Fortune
500 companies sent me around the world to get. Long ago I also designed
contract tracking systems to deal with artist contracts in the music
business. I’ve boiled down arcane language in high dollar contracts for big
artists in a way that a computer system could deal with it.  I’m trained to
see contracts negotiations differently. Soem key points that I haven’t seen
covered anywhere:

– Owners Initial offer: Studies have shown that most deals (75% I think)
wind up at the midpoint between the initial offers on each side. That is
why most negotiation experts advise you to make the lowest possible offer
(buy side) / highest possible offer (sell side) BUT WITHOUT going past the
other side’s piss-off point (insulting offer).  Offers beyond the piss-off
point engage egos, kill deals and often force you to give up ground to
placate the pissed off side.
– Owners could have offered say – same CBA terms as last time with
50% revenue sharing (big $$ for owners) with a new definition of hockey
revenues (what owners are *really after*) without pissing off
players.  The
50% threshold was probably the NHLPA piss-off point.
An aggressive negotiator might risk 49% or even 48%. Clearly 46% + new
revenue definition was well below the piss-off point. *Big mistake*.
– The real action is on “definition of revenues” as long history
of entertainment industry contracts has shown.  Fehr surely
knows that this
is the big issue, but educating all the players is a tall order
(especially
since many players are ego driven and their eyes glaze over in accounting
discussions). Bettman and company helped Fehr out quite a bit,
which brings
me to…
– Structure: “On whose paper”?
– To use Doug’s example, what happens when you go into a dealership
and offer $10,000 for a car they paid $13,000 for? Doug says they won’t
kick you off the lot. True but that’s not the right analogy. Try
going into
a car dealership and offer  $10,000 for a car they paid $13,000
and *demand
that the contract be one you hand them which has different warranty,
liability and financing terms than theirs*. They might just kick you
off their lot, when they are done laughing.
– That’s what the owners did when they changed the entire structure
of the contract IN ADDITION to lowballing the money in a year when they
have record revenues and CHOSE to opt out of the CBA.  They used to get
their way on this type of thing all the time, kinda the way the record
companies used to rip off jazz artists in the 50’s.  Which is
why the NHLPA
wised up and hired Fehr.
– Dynamics on each side.
– Owners:
– The owners are mostly wealthy businessmen with huge egos, who
have done many enormous deals,  employ (armies of) accountants and
understand how to minimize (ie hide) revenues.  The rich
teams are the ones
who control the NHL, and control the negotiation strategy,
although the
competing egos sometimes forces them to make a mistake.
– The smartest way to solve the NHL structural problems is revenue
sharing between clubs, which removes the incentive to
overspend on player
salaries.  This is what is best for the NHL.  It also means
the very owners
who control the NHL would have to give up money.
– Hmmm.  Did I mention the huge egos? Obviously that’s why they
choose option B — take the money out of the player’s cut.
– Players:
– There are 750-800ish players in NHLPA with extremely different
priorities.
– Unlike say, coal mining or textile workers unions, the highest
paid union member makes 19x what a rookie makes. Dwight King
makes $730,000
on a rookie deal compared to Alex Ovechkin’s $9,538,462 per
year (cap hit)
and Shea Weber $14,000,000 (actual dollars paid).
– This disparity is even bigger when you consider the length of
the deals and the guaranteed money. A rookie may get $750,000
or less in
guaranteed money on a 2 way deal depending on the round they
were drafted
in.
– Lose a season and Ovechkin is out $10Million (Weber gets paid up
front, thank you  Paul Holmgren !) and Dwight King is out
$730,000.
– BUT, if the NHLPA negotiates a good deal for the players rookies
like King comes out ahead in his 5th NHL year.  Stars on long
term deals
like Ovechkin lose $10Million they will never get back.
– Fehr has tons and tons more work to do than the owners in order
to get his side to agree on their bottom line.  This is why
the NHL has
been able to screw the players so effectively in the past.
– Impact on Negotiations:
– When the owners offer changed the structure of the previous CBA
(that THEY DESIGNED) it required
1. time to analyze (a week or more. I’ve done it, trust me)
2. time to explain it to the players and get them to agree on
an approach
3. time to come up with a counter STRUCTURE of their own.
– Not unreasonable at all.  Also, this is why Fehr flies to Russia
or Banff or wherever he has to in order to communicate with
the players.
Seven or eight stars breaking off will collapse the union.
Fehr knows it,
as do the owners.  Which is why they did what they did.
– How much time is remaining? Doesn’t matter!
– Nothing will start happening until Sept. 15th. * It was never going
to.*  That’s why they picked that date to start with.  Close enough
to threaten the season, with enough time to get a deal without actually
losing the season. All this baloney about needing time is bullshit.  The
actual brass tacks will take a week.
– Neither side will budge until the deadline is close. Why? Because
each side has experienced negotiators and each % point is huge
dollars. Neither side want to leave dollars on the table.
– Fehr already, *right now* knows what his bottom line number is.  *So
does Bettman*. For example, if Fehr will drop to 52% but no lower,
and Bettman will go up to 48% but no higher, then there will be a long
lockout.  Even if they both have the same 50% bottom line *there will
still be a short lockout.*
– Each side wants to make sure they got the best they could get.
Fehr may accept 50% but really wants 55%. Bettman might accept 50% but
really wants 44%.  Neither side gives a shit about the 1st two weeks of
preseason, so they won’t give their best offers before some
preseason games
are missed. Cards go on the table in late September.
– What is my guess on what will happen?
– The action will be on the definition of hockey revenues.  If the
owners are just testing the players but don’t really think
they’re going to
get it, then the players will go for a lower percentage (say
48%) and there
will be no lockout.  If the owners are serious about taking 10%
or more out
of players pockets then they go to the mat on this there will be
a lockout
till December at least.
– If the players just seem united but really aren’t Fehr will know
this.  He will either walk away and leave them to the wolves, or will do
the best he can but basically give the owners what they want. Fehr is a
pro, and probably dealt with this issue before taking the job.  We’ll see
some signs of this September 25th or so.
– This will go over the media’s head.

About Doug Stolhand 26832 Articles
Doug Stolhand is one of the co-founders and co-hosts of the Puck Podcast and has been a member of the NHL media since the show's inception in 2006.

2 Comments

  1. The players’ real problem is that they have absolutely no leverage. The owners can easily afford to lock them out indefinitely (some of them make, what, thousands of times what Ovechkin makes?), and won’t hesitate to do so, as we’ve already seen twice.

    What will the owners lose? Chicken feed (to them!). What will the players lose? All of their salary plus a year of their career. They don’t have a chance when push comes to shove.

    Plus, let’s not forget that we’re dealing with a group of professional athletes, not accounting, law or finance experts. They are clearly out of their depths on this.

    If they want to have careers, they will bluff as far as possible, and then accept what’s on the table come early October.

    I, for one, absolutely love going to the women’s college hockey games at UW (they’ve been #1 or #2 in the country for the last seven years and have the best women’s college goalie in the country), and so does my son. It costs us $7 total to see some amazing skating and playmaking. The NHL can go scratch if they have a lockout. We’ll be busy playing pickup hockey and watching the Badgers games.

    Love your show!

    -Verge

    P.S. I want to point out that the owners are human swill and I wouldn’t trust any of them as far as I could throw them. I’m just being realistic about these “negotiations”.

  2. I think the easiest way to describe who has the leverage:

    Owners: Hockey is a HOBBY
    Players: Hockey is a CAREER

Comments are closed.