1-19-21 – By Gary Morgan – @garymo2007 on Twitter
In 2004 the NHL had reached a precipice.
A powerful union opposed “cost certainty” Gary Bettman and the NHL Owners wanted and felt they needed to keep the league from continuing to fall behind other professional leagues, a salary cap system.
I hear so many of you tell me that MLB will never have a salary cap because the MLBPA is “the most powerful union” in the country. You’re right, there is just about no scenario that brings about a salary cap without great pain and loss. Implementing one has been compared to chemotherapy for sports leagues. In order to save the body you almost have to kill part of it.
It can be done. It has been done, and today we’re going to look a one example of how it came to be, why it reached this point and what it took to finally make it happen.
To talk about this properly we really need to travel even further back in time. See, ten years earlier in 1994 the NHL was playing a season with no collective bargaining agreement. Player salaries were exploding for superstars, and superstars were conglomerating in major media markets like Los Angeles and New York.
Owners wanted a salary cap, the players didn’t. Believe it or not, the NHL tried implementing an MLB style luxury tax that the players saw as a salary cap and dismissed it out of hand. To add to the contentiousness, this came only a few years after the players went on strike in 1992 winning concessions that started the inevitable ball rolling toward the league becoming the lopsided mess it would become. With no mechanism in place to support smaller market teams, some filed bankruptcy. Hell, some we should be very familiar with simply didn’t pay players which ultimately led to Mario Lemieux owning the Penguins franchise.
In 1993 Gary Bettman took over as Commissioner of the National Hockey League and he immediately set forth educating owners about how much more money they could make if they’d only come together and support a salary cap.
So when the lockout of the 1994-95 season came about the coalition he built was weak, and new. Following a man who didn’t have the undying trust of every owner, especially the big spending, and financially solvent large media market clubs. After the lockout dragged on the big markets fractured. Toronto, Detroit, New York, Dallas and Philly all broke with the league.
Union leader Bob Goodenow had won this round. He’d gotten in the ear of enough of those owners with talk of increasing revenue sharing that eventually he broke them down and settled for minimal changes.
After locking out players for half a season and coming away with nothing, it’s almost understandable that it would be nearly ten years before the issue would find it’s way to the surface again.
So back to 2004-05 we go. Believe it or not, the same figureheads would square off again. Bettman and Goodenow, both armed with the mistakes and victories of the past. This time though, Bettman learned some new tricks, and Goodenow underestimated how many franchises were in legitimate trouble.
This time Bettman had a coalition that included almost everyone. Ten more years of data to show how the NBA and NFL were flourishing. Ten more years of relationships, and more than anything a memory of getting burned by big markets splintering from the group.
His action? He implemented a 1 million dollar fine for any owner who spoke out against the effort. It wasn’t a toothless fine either, when the LA Kings spoke out against the long and painful lockout and suggested it perhaps wasn’t worth the fight (again wonder why) he slapped them with the fine.
It showed two things, the league would stay unified on the issue this time, and it also showed Goodenow he wasn’t going to create cracks in the group.
According to the US Securities Exchange Commission before this lockout NHL clubs were spending roughly 75% of their gross revenue on salaries for players. The league lost approximately 273 million dollars in the 2002-03 season.
They tried proposing light cap systems, faux caps, individual player caps, capped exceptions, even centralized salary tied directly to league revenue.
The Union vowed to never accept a salary cap under any circumstances. Thing is, the evidence was all there. Proof of dying small market clubs was everywhere you looked. Bankruptcies of several franchises, complete gutting of rosters, in fact some teams like the Penguins and Canadian teams not in Toronto were actively hoping for a lockout as they stood to make more money if there was no season than if they played.
Before this lockout would end the players would propose a salary cap themselves in an effort to play again. In fact former stars Wayne Gretzky and Mario Lemieux were rumored to have taken it upon themselves to negotiate with the owners to avoid losing the entire season. Both denied the report from the Hockey News.
Finally after Ten Months and Six days the players association with 87% of the vote ratified an agreement with a salary cap firmly in place. It would be adjusted every year and be tied to revenue with players receiving 54% of the dollars brought in. Players were granted guaranteed contracts, a salary floor was instituted and revenue sharing split money from the top 10 grossing teams to distribute to the bottom 15.
Since the season was lost and there were no results to base the draft on, the NHL used a lottery. So thanks for Sidney Crosby by the way.
All of the arguments you’ve every heard for why this can’t happen in MLB have happened in other leagues. Oh sure, the dollar figures are bigger, the gap between the haves and have nots is wider too. No baseball team is in danger of filing for bankruptcy, because MLB already tried to fix that by introducing revenue sharing.
Make no mistake, the NHL didn’t start out with the plan they wound up with. They offered six different plans that the union pushed away for simply sounding like a cap system before they finally realized there was no path forward that accomplished much more than making things a little better and setting up for another very similar fight 5 or 10 years later. Eventually the answer was in front of them, and the price was worth getting it done.
MLB isn’t special folks. It might be your favorite sport, I mean you’re reading a Pirates website on January 19th during a lockout with a terrible team, but baseball eventually has to address many of the same problems every other league has.
When you see the league propose a salary floor and a lower tax threshold with increased revenue sharing, make no mistake, that’s a salary cap system. A weak one. One that wouldn’t completely fix the game, but a cap nonetheless. When you see them slightly adjust salaries down over a decade as we’ve just watched, it’s not an accident.
The Pittsburgh Penguins filed for bankruptcy twice and after the cap was instituted the franchise value increased by over 161%.
This was painful. The league lost stars to other leagues in Europe, some never returned, but the league is stronger than ever. A league that used to be primarily supported by attendance now has a national audience, strong national tv deal and recently expanded twice. All things MLB wants, all things MLB wants in every market.
As you see from this tale, it’s not always about New York or LA agreeing. In fact it rarely is about that, it’s about the health of the league eventually winning out. It’s about every team having the same opportunity.
In fact, MLB commissioned a study not unlike the NHL to talk about just how much money the league lost during COVID, so it’s not without precedent that they’re willing to have an independent body dig into their finances. None of this can happen without that step.
Now, if I’m honest, I think we’re a whole lot closer in MLB to 1994 than 2004, but the rhetoric is starting to make its way into the conversation. Late last year Hal Steinbrenner the Yankees owner said he supported and voted for Major League Baseball’s proposal to lower the luxury tax threshold to 180 million and a 100 million dollar floor. Here’s his direct quote from the AP “There’s seven of us on labor policy,”
“Boston, me, several mid-markets, a couple small markets. We’re a very diverse group, and when we came up with the proposal, including CBT and luxury tax that we brought to the union, it was a unanimous, on our committee, a unanimous deal.”
“And every owner on the committee, there are certainly things in the proposal that we didn’t like, I mean every owner. But we wanted to put together a proposal that address their concerns and come together as a group.”
Does that sound like these teams are miles apart? Does that sound like a league that is never going to recognize the better all teams do the better individual teams do?
I’m not sitting here telling you this is currently on the table, but every time the players cavalierly bat away a proposal without a counter, or move a percentage or two from where they were, they usher in and draw more teams into a coalition that will one day be their undoing.
It’s not about hurting players, it’s about saving a league. Players will do quite well no matter which direction they go, but much like the owners, the richest among them will be a little less so, while the lowest earners will finally get their share of the pie.
Baseball on the field is beautiful. Baseball behind the scenes is ugly, but it’s no different than all the other leagues, with the exception that they are the lone holdout that hasn’t realized the players and owners should be partners, not enemies.
Oh sure they’ll fight about things even with a new system. But the millionaires and billionaires nonsense will have ended and the arguments will be more about ticky tack stuff that rarely if ever threatens the game we love.
When I tell you it’s all been done and said, I mean it. History is a beautiful teacher if only we use it to our advantage.
One thought on “Ten Months and Six Days – The Story of How One League Saved Itself”
In order for a salary cap/floor to happen, you need a leader and owners with some stones.
Players win again, most fans lose.