On September 15, 2004, NHL Commissioner Gary Bettman met with the media following the expiration of the Collective Bargaining Agreement that had been in place between the owners and the players since 1994. The NHL and the NHLPA could not agree on whether a free market system or a salary cap would be best for the next CBA. Though both sides met many times during the previous year, the two sides stayed very untrusting and made no progress. The players stated that they would never agree to a salary cap, while the owners vowed such a cap would be the only alternative to the losses many franchises were already suffering.
Due to the lack of a new Collective Bargaining Agreement, the League locked out its players, stating that the 2004-2005 season would not begin until a new agreement was signed. Below is a transcript of the remarks Commissioner Bettman made to the media.
For the past two weeks, the greatest athletes in the world have treated the greatest fans in the world to a spectacular display of hockey -- the greatest sport in the world. For the past two weeks we have also seen how the League and the Players' Association working together, as partners, with common objectives and a commitment to fan satisfaction, can produce an extraordinary result. It is truly unfortunate that the Union's willingness to partner with us does not extend from international competition in the hockey arena to the Collective Bargaining arena.
We are here today because Union Leadership refused for more than a year to make any kind of proposal whatsoever - and during that same year rejected six separate NHL proposals that would have modernized our League's economic system, as other professional sports have done.
I stand here today to say that we owe it to hockey's fans to achieve an economic system that will result in affordable ticket prices and stable, competitive franchises. The very future of our game is at stake, and the NHL's owners are united, as never before - determined to do everything humanly possible to bring hockey's economic system into the twenty - first century.
We have no other choice.
For the past several years, as flaws in the current economic system have become increasingly difficult to overcome, we at the National Hockey League have done everything possible to negotiate a new Collective Bargaining Agreement that will work, day-in and day-out, to serve the best interests of all involved.
Sadly, those efforts have not achieved their objective. And as the League stands at the threshold of the conclusion of the current CBA, which occurs at midnight tonight, it is my somber duty to report that at today's meeting, the board of governors unanimously re-confirmed that NHL teams will not play at the expiration of the CBA until we have a new system which fixes the economic problems facing our game.
This action is not taken lightly - or eagerly - and when the Union wants to stop the posturing and acknowledges that the problems are as real as our governors' resolve to fix them, we will be here, ready to make a fair and meaningful agreement that will usher in a new era for our game.
League revenues have grown dramatically to over $2.1 billion annually over the 10-year course of this Collective Bargaining Agreement. At the same time, the League created 100 new NHL player jobs and now roughly 75 cents of every dollar earned now goes directly to player costs.
Over the 10-year span of the current CBA, as the average player salary has grown to more than $1.8 million U.S., the clubs have lost more than $1.8 billion.
Despite the staggering losses, our owners have gone to great lengths to preserve all 30 franchises, and now are determined to make this a viable sport with 30 healthy franchises in the markets in which they are currently located.
That is exactly what we intend to do.
Twenty of our Clubs are losing money. There have been too many bankruptcies and too many other close-calls. I have had too many owners tell me they will get out of this game if the economics are not repaired.
The losses cannot continue. We know it, and we made these facts clear to the Union long ago:
There is no short-cut or quick fix. We need an enforceable, defined relationship between revenues and expenses. We need a system that will eliminate the disparities in payrolls, so that a team's ability to compete depends on its team-building skills, not on its ability to pay.
We believe that such a business model can and must be crafted in a partnership that creates shared rewards.
In July, we offered the Union six different, creative, ground-breaking methods by which those partnership objectives could be attained.
Included in those frameworks was a willingness for the players to receive more than 50% of every dollar of revenues our business generates over $1 billion. It may be less than the players are getting now, but we won't apologize for an offer that is more than fair.
We offered the Union systems that would continue to pay multi-million dollar salaries to our star players. We will not apologize for contracts that could still be in excess of $6million a year, even if some players would make less than they are now getting.
We offered the Union systems that would provide an average player salary of $1.3 million, U.S., per season. An average salary of $1.3 million may be less than the players are getting now, but we will not apologize for an average player salary of $1.3 million per season.
That said, we do apologize to our millions of fans and the thousands of people whose livelihoods depend on our game. It is truly unfortunate that we have to go through this - I assure you that no one is more unhappy about this situation than I am.
My pledge, at this difficult moment, is that we will correct this untenable situation the right way - not with band-aids and half-measures, but in a way that will ensure the health and excitement of our game for years to come. This game's future depends upon getting the right new economic system. In the absence of such a system, there is no future for our game. As difficult as today is, the reality is, we had no choice in the face of the Union's continued refusal to address economic problems that are clear to everyone, but them.
When we offered the six systems, this Union discussed them with us for about eight hours, an average of a bit more than one hour per system.
With the future of the game at stake, the Union basically rejected our proposals - all six - out of hand. And the reason: they say is that all are salary caps.
Under this Union's definition of a salary cap, -- any system that links revenues to expenses or otherwise defines the employees share is a salary cap. There probably isn't any Collective Bargaining Agreement in any industry under the definition that isn't a salary cap. As a result, under the Union's definition, virtually every other Union in every industry has agreed to a CBA that is a salary cap.
The Union says, "we want a marketplace". But they cannot explain why a system - like the current CBA -- which provides for artificial raises based on qualifying offers or which provides for salary arbitration or which guarantees multi-year contracts regardless of the level of continued player performance is a "marketplace".
But, a system with a fair, negotiated percentage of gross revenues going to the players as a group, is not a "marketplace".
The Union defined their marketplace with their most recent proposal, which it waited more than 15 months to deliver.
The Union -- after meandering for more than 40 hours of meetings in the last month, going through a fairly elementary club by club review of business operations as today's deadline approached -- repackaged a proposal that is basically a carbon copy of the ineffective, proposal they made in June of 2003 and then reintroduced on October 1. The Union basically has made the same meaningless offer 3 times.
By the way, under the Union's so-called offer, the Union projects - the Union projects - that at least half the teams will continue to lose money.
Our Clubs were disappointed, but hardly surprised that this was the approach the Union chose to take.
When you look at the history, it is clear that this is a Union Leadership that negotiates only through confrontation, never looking forward to see what is needed or good for the game.
- In 1994, this Union's Leadership refused to negotiate until the season was about to be cancelled. It was the League that saved the season and encouraged the extension of the current CBA. These decisions may have turned out to be a mistake in hindsight, but they demonstrated, without question, our desire for labor peace. In fact, we have had more than a decade of labor peace - with considerable growth, but at considerable expense.
Consistent with that history of confrontation, this Union again doesn't want to negotiate now.
Why?
Because the Union's goal, the Union's objective for the last five years, has been singular - to keep the status quo - to keep what it has provided to the players and to try to get even more.
But what is the status quo?
For the players, as stated, it is an average salary of $1.8 million, a three-fold increase under this CBA.
For most clubs, however, the status quo means millions in annual losses.
For the League, it has meant bankruptcies in Buffalo and Ottawa and Pittsburgh and Los Angeles.
For fans, it has meant high and increasing ticket prices . . . And the status quo has meant teams that cannot meaningfully compete.
It is a fact - a fact - that during this CBA, a team in the top one-third in salaries has been three times more likely to make the playoffs than a team in the bottom third.
This is a status quo with which we simply cannot continue to live.
Our game and our fans deserve better.
Our game deserves better than a Union in denial. Just last week, the Union asserted that the severity of the League's problems is "nowhere near the extent it's portrayed by the NHL" or in any way "related to the CBA".
Really?
The Union has had full access to our financial records for over five years and it has had the Levitt report for over six months.
As you know, the Levitt report was the result of a year-long super-audit by a financial expert of unassailable integrity. Mr. Levitt was granted access to every possible financial figure and revenue stream for every one of our clubs and all of their related entities. He wasn't just handed numbers. He investigated the business and when he had questions - he asked until he was satisfied with the answers. The result of his work was a report that reflected a catastrophic loss in 2002-03 of - more than $270 million, not including another $100 million in losses that any accountant reasonably could have been allowed to claim.
Mr. Levitt offered twice to meet with Union Leadership to answer any questions they might have regarding his methodology or findings. The Union declined.
We have invited the Union repeatedly to conduct its own audit of team economics. It never has accepted the offer. If the Union was so dubious of the financial figures we put before it, as it has stated countless times - if it was so dismissive of Mr. Levitt's findings - one would imagine the Union would jump at an opportunity to conduct its own audit and refute the report based on hard evidence, not rhetoric.
Instead, they showed no interest whatever - which leads one to conclude the Union either knows and does not care about the problems or does not want to know . . . And, either way, does not want to do anything meaningful about the game's economic crisis.
As far back as 1999, we were painfully aware that the economic system was not working. We were growing revenues, but the losses and disparities among the teams continued to increase at an alarming rate. I was so concerned, I wrote a letter to the Union on March 19, 1999 stating that we were worried about the viability of franchises and the loss of too much money. At that time - 1999 -- I offered the Union the opportunity to audit our teams' books. I concluded the letter by saying:
Quote: "If the current trend continues, I cannot predict what shape the League will be in 2004. I can, however, tell you with certainty that the potential for conflict will be greater because we would, under this scenario, be likely to insist on a significant retrenching (not just limiting increases) of player costs." End quote.
This was five years ago that we started to worry that the system was broken and five years ago that we offered to open our books.
In addition, at least twice in the past three years, we approached the Union to make adjustments to the current CBA. We offered, both times: let's freeze what the players have, -- every player keeps what he has -- redistribute dollars spent among the teams and when we can catch up and stop losing money, then we'll share in the growth of our business as partners.
Again and again, negative responses from this Union's Leadership, and things kept getting worse for the game - but - no doubt -- better from the Union's perspective.
The Union's proposal in June of '03 basically would have kept the current system intact, making, at most, only very minor adjustments to a fatally flawed system.
When we said a year ago, "We don't think your plan will work, but if you guarantee the results you are projecting, we'll have something to talk about . . ." The Union's response was, 'We won't guarantee anything; it's just a model.' When we said, 'what if it doesn't work?' the Union said, 'We'll do something else in a few years.'
That answer wasn't acceptable and now, we don't have a few years - or any time - to experiment. And with tonight's conclusion of this Collective Bargaining Agreement, it is the legal entitlement of the Clubs to create change. This is something the Clubs intend to do.
The Union talks about compromise. What is the point of a compromise that does not fix the problems and stop the losses? Should the League be satisfied to lose $150 million instead of $300 million? I think not.
We believe in compromise and negotiating in good faith. But, that doesn't mean we have to agree to continue losing money and we won't. The players did very well under the old CBA. We do not begrudge them that, but we don't have to continue the old system - and incurring any losses -- now that the CBA is over. It's now time to move forward with a system that works for everyone.
This Union doesn't seem to care about the problems, the game or our fans. So to the question: "Why won't the Union negotiate?" The answer: One simple reason, borne out by everything I have described to you today, this Union's Leadership seems to think that its best hope to let the players keep as much as they have as possible -- is to try to win a fight. Simply: The Union is trying to win a fight. Hoping that the owners will give up.
That will turn out to be a terrible error in judgment for the Union. Part of the job of Union Leadership is to understand the realities of the situation, and not bury its head in a state of denial.
It is mid-September. It's the time when our players belong in training camp and the greatest fans in the sports should be getting prepared to go to the rink. It is unforgivable that the Union could see this bleak day approaching and not lift a finger to prevent its arrival.
There is a partnership deal to be made. We encourage the Leadership of the players' Union to join us in partnership.
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