2005 NHL Lockout Lessons: Compromise Would Have Been Better For Owners

But why compromise when you can keep shooting yourself in the foot?

"We really gave this our best shot," Bettman said. "This is what we really believe we need." -ESPN, Feb. 10th, 2005

Here's a history lesson from the last lockout that's as familiar as it is maddening: at a certain point, lack of compromise can get in the way of good business.

Everyone knows the lockout in 2005 centered around a war over the salary cap, but NHLPA president Trevor Linden had come around to the idea by February. In a series of secret meetings, Calgary owner Harley Hotchkiss moved Linden with his descriptions of the struggles of small market teams; that, combined with pressure from some of his fellow players, went a long way in changing his mind. Linden went around executive director Bob Goodenow, who had insisted the players would never accept a cap, and got the ball rolling.[1]

Both sides were tantalizingly close to making a deal that month, with a third of the season still left to be saved. The players had dropped their fight against the cap, and the owners had dropped their demand to link the cap to revenue. But no one made the final push. Though there were other differences at stake, the NHL essentially killed the season because they could not bridge the gap between $49 and $42.5 million.

Remember how ridiculous that was? It gets worse: in retrospect, the owners would have been far better off taking the players' offer than fighting for the "perfect" deal they eventually wound up with.

What went wrong?

The revenue linkage plan is what really cost the owners compared to the players' deal. The league wanted the salary cap to be linked to a percentage of "Hockey-Related Revenue" (total revenue minus various deductions), which would shield them in case revenues fell. The players wanted the cap to be fixed; not every team, the NHLPA argued, would voluntarily spend to the ceiling.

Bettman's plan had both a cap linked to HRR and a bare minimum teams were forced to spend (the "cap floor"). This was done in the hopes of creating a balanced, competitive league. We all know what happened when hockey resumed: revenues rose the very next season, fueled by a combination of fan loyalty and higher ticket prices, and the cap rose sharply almost every year after that. What had begun as $39 million cap swiftly ballooned to $70.2 million over the course of the agreement.

The cap floor rose sharply with it. Some teams were forced to spend beyond their means, no matter what their financial situation was. This setup worked well for the super-earners of the NHL at the top, who enjoyed record profits and fixed costs, and played a big part in driving total league revenues higher and higher. But it was a raw deal for smaller markets. It doesn't help that the NHL lags behind other major leagues in terms of revenue sharing.

The cap floor in 2011-12 was $48.3M. Imagine how many owners would like a $49M ceiling instead!

They lost out on it because they wouldn't grant players a concession.

What can we learn from this?

Hopefully, both sides could take away a variety of lessons from the missteps in 2005. One is that when two sides are so close, you're better off compromising than killing an entire season. Prejudices, egos, and a desire to "win" must be put aside. When you become entrenched in a position, you can miss out on what's best for you.

The second and perhaps most important lesson is that the disparity between markets in the NHL is a real problem. There aren't two sides to this dispute, but rather three parties involved: the players, the profitable teams, and the teams that could use more revenue sharing. If the next CBA agreement doesn't fix the real problems, the cap floor will rise again, and league will remain stuck in its abysmal cycle of lockouts--something that will only shrink the NHL's fanbase even further.

"We lived through a decade of a collective bargaining agreement that didn't work," Bettman said. "It doesn't matter whose fault it was." --Feb. 16th, 2005

This is my question, on the eve of another round of cancellations: where is the leadership?

Smart people on all three sides need to step up. The NHL has many bullets, but it's running out of feet.


[1] An account of the secret meetings initiated by Linden and the role Hotchkiss played in these more cordial negotiations can be found in The Instigator by Jonathon Gatehouse, p. 103. Antagonism between Bettman and Goodenow often impeded progress. Several key meetings were held without either of them present.