Hockey fans recall with dismay the 2004-2005 season, which saw the words "Season Not Played" engraved on the Stanley Cup after a labor dispute resulted in a 310-day lockout. The National Hockey League's current collective bargaining agreement is set to expire on September 15, 2012, and it came as little surprise when a notice of intent to terminate or modify the agreement with the National Hockey League Players Association was filed. If the NHL and the Players Association fail to reach a new collective bargaining agreement this summer, the threat of another lockout looms and the start of the season is likely to be delayed.
Hockey's impending labor troubles come at a time of record interest in the sport. Viewership statistics and ratings for the latest season blew past previous milestones according to national data, and April's playoff opening night presentation was the most watched NHL opening night in NBC Sports Network history. This year also marked the seventh consecutive year of record revenue for the NHL. With earnings and viewership on the rise, the NHL and players are eager to avoid a repeat of the nixed 2004-2005 season, which angered fans and halted the sport's meteoric upswing in popularity for at least two years. Nonetheless, a host of issues are on the table, and it is unclear which side will be the first to budge. As the lockout from eight years ago taught us, a failure to reach a new collective bargaining agreement will present unique challenges to stakeholders, who should begin planning now to protect their interests.
The NHL's payroll expenses are expected to take center stage in the labor negotiations, as individual franchises remain eager to eliminate, or at least lower, the salary floor. The players are currently guaranteed, in aggregate, a salary level calculated on the NHL's revenue. The players, who viewed the imposition of salary caps as a major concession in the 2005 negotiations, are unlikely to support lowering the salary floor, particularly as the NHL's revenues continue to break records. This point of contention between the NHL and its players could lead to a work stoppage if an agreement is not reached before the start of the season, which would mean canceled games and unfilled seats in arenas around the country.
The battle over the new collective bargaining agreement will not be entirely between players and the NHL, as individual franchises will almost certainly quarrel amongst themselves over the current agreement's revenue sharing scheme. The 2005 agreement requires franchises in larger, more profitable markets to pay fees into a pool that are then distributed to teams in smaller markets. Revenue sharing acts as a subsidy to prop up financially weak teams, and players support revenue sharing because maintaining financially stable and competitive franchises across markets is good for the sport. Wealthier teams, however, are likely to balk at any expansion of revenue sharing, citing cost concerns.
While the current arrangement guarantees a certain level of financial security for all hockey franchises, changing or eliminating the subsidy will inevitably make some teams riskier than others. This means sponsors and licensees in particular will need to engage in a more thoughtful analysis of each individual team with which they contract, recognizing that their bargaining positions may change over time as certain franchises thrive and others struggle to keep up with their deep-pocketed peers.
The possibility of another wiped out season creates enormous risk for television partners, sponsors, and licensees, who must monitor the situation closely and evaluate that risk. Stakeholders should familiarize themselves with the progress of the negotiations, keeping in mind that their agreements with the NHL, its franchises, and the players may be impacted by changes in the collective bargaining agreement or by an agreement not being reached in time. Equally important, however, is choosing legal counsel that appreciates the unique business issues encountered in the sports industry every day. Attorneys must not only navigate the complex laws surrounding business arrangements; rather, they must also possess a firm handle on the business models of their clients.