Boo
Cornholio
By John Niyo / The Detroit News
DETROIT -- In Detroit, a place the Red Wings faithful affectionately call Hockeytown, the home team seems a portrait of success: three Stanley Cup championships in six seasons, more than 300 consecutive sellouts at Joe Louis Arena, and a franchise worth a National Hockey League-best $266 million.
In contrast, last month in Canada's capital city, the Ottawa Senators, owners of the NHL's best record this season, played the Buffalo Sabres in a game jokingly dubbed "The Creditors Cup." Even though each franchise has an annual payroll less than half the size of the Wings', both are struggling financially, filing for bankruptcy last month with a combined debt of more than $360 million.
The NHL is at a crossroads, struggling to stay afloat despite its buoyant success in cities like Detroit. In fact, it is that very success that may be accelerating the league's failures, with skyrocketing player salaries, a limited revenue stream, slumping attendance and a competitive imbalance all threatening to sink several more franchises swimming in red ink.
It is, in many ways, the NHL's own Dickensian reading, a tale of two realities.
"The best of times," NHL Commissioner Gary Bettman said recently. "(And) at the same time, the worst of times."
The worst, though, may be yet to come.
The NHL's collective bargaining agreement will expire after next season, and already there is speculation -- an expectation, even -- that a players' strike or owners' lockout will occur, one that could wipe out the entire 2004-05 season.
Both Bettman and his counterpart, Bob Goodenow, executive director of the NHL Players' Association, have quietly told their respective camps to set aside emergency funds to last 18 months if there's a prolonged labor impasse.
Bettman was busy trumpeting the NHL's bright side last weekend as the league gathered in Sunrise, Fla., to celebrate what turned into a thrilling All-Star Game, but few TV viewers noticed. The game's ratings for ABC barely edged NBC's Arena Football League debut Sunday.
Money matters
The news is especially unsettling for a league still searching for a foothold in the United States among the major professional sports leagues.
"Hockey can't do it. It can't shut down, because it'll lose everything," said Manny Legace, the Wings' backup goaltender and union representative. "It's going to kill the league, if it happens."
The league has seen its tremendous revenue growth the last decade -- to an estimated $2 billion this season -- dwarfed by other leagues, and also by its players' salaries, expected to total $1.4 billion this season.
Lacking the kind of windfall from television rights fees other pro sports enjoy, several owners say they're drowning in debt. The bankruptcies in Buffalo and Ottawa -- five days apart -- bring the league total to four in the past eight years. Other franchises report annual losses in the tens of millions of dollars, although such claims are disputed by the union.
"We have some franchises that have to struggle until we get to a new system," Bettman said, adding that player salaries have risen 240 percent since 1995 under the current contract while revenue is up 171 percent. "After next season, we have to make some changes."
Even the defending Cup champion Wings reported an operating loss last season, according to Forbes Magazine, thanks in part to a payroll in excess of $64 million.
"Anybody that would think we're rolling in dough really doesn't understand economics," said Jim Devellano, senior vice president for the Wings. "It's really not hard to do the math."
No easy fixes
The solution is not simple.
Owners are seeking what Bettman delicately refers to as "cost certainty" in any new agreement with the union. That's a directive handed to Bettman by the NHL Board of Governors in June 2000. But the union interprets cost certainty to mean a salary cap, and it remains vehemently opposed to such a restriction.
"If that's the case, (the owners) understand the players are prepared to do what they think is appropriate," said Goodenow, who counters cost certainty with a call for revenue sharing, the mere mention of which causes many owners to balk.
Of the four major North American pro leagues, the NHL is the only one without a salary cap or payroll luxury tax. Yet, the players, as was the case in Major League Baseball's recent labor negotiations, are quick to shift the culpability for spiraling salaries to the owners.
"It's a matter right now of the owners controlling themselves," Florida's Peter Worrell said. "Nobody puts a gun to their head. They've shot themselves in the foot for a long time, and now they want to put the blame on us."
That's a charge Devellano, for one, quickly answers.
"It's competition," he said. "When a guy is an unrestricted free agent and you're trying to improve your club, we've all done it: We overpay to get that player because we need him and we don't want the other teams to get him."
Although the union insists it has yet to receive a formal proposal from the owners, Bettman's "cost certainty" reportedly would take the form of a $35 million ceiling on team payrolls, or slightly more than 50 percent of the Wings' current annual spending.
"Obviously, there has to be some type of correction to make the business work," Devellano said. "Salaries can't be as high as they have been. I think I can safely say that."
That said, neither side seems willing to budge on the key issues, leading nearly everyone in and around the league to conclude that the "War of 2004" is inevitable.
'Dire straits'
Just getting to 2004 might be a chore for some teams, as the empty-handed creditors of the Buffalo and Ottawa franchises can attest. Bettman's subtle attempts to link the insolvencies and the league's broader fiscal concerns were quickly shouted down by the union.
The Sabres and Senators are 23rd and 25th, respectively, in the NHL in team payroll at just over $30 million apiece. But in Buffalo, the team's finances collapsed after Owner John Rigas, founder of Adelphia Communications, was indicted for fraud and Adelphia filed for bankruptcy. In Ottawa, the expansion franchise has been saddled with an enormous debt load since it joined the league in 1992.
"We're well-educated on those two situations," said the New York Islanders' Michael Peca, a former Buffalo player. "We're not fooled by a couple of poor business decisions."
Still, there are more telling signs of distress elsewhere, particularly in some of the Sunbelt cities that joined the league during a rapid expansion phase that grew the league from 21 to 30 teams in the 1990s.
Bettman's idea was to build a stronger national base for the NHL in an attempt to land a bigger U.S. network television deal. But critics say the Board of Governors used expansion as an ill-advised cash grab, with owners overlooking shaky financial situations as they greedily divided up the expansion fees that totaled more than $550 million. That short-sighted strategy also created more problems -- more players, higher salaries and a diluted on-ice product.
Now, some of those sunny locales, including Miami, are in a figurative deep freeze. Florida reached the Stanley Cup Finals in 1996 -- its third season in the league -- but has since fallen into disarray. A recent financial audit showed the Panthers lost $17.5 million last year, and the club's parent company is seeking a $30 million loan to take care of operating costs.
The bottom three teams in NHL attendance this season are in Nashville and Atlanta, both expansion cities, and in Phoenix, where the league helped orchestrate the relocation of the Winnipeg Jets in 1996. Phoenix, a franchise that reported $25 million in losses last season, could be carrying as much as $200 million in debt when it moves into its new arena next fall.
"It's amazing being on this side, looking at the money crunch," said ex-Wings goaltender Eddie Mio, a former agent who is now the Coyotes' director of player development. "When I was on the other side, I believed, like many others, that it was a fabrication. Now I understand the (dire) straits."
Average salary: $1.75M
Under the current contract, the NHL's average salary has more than tripled thanks to free-agent contracts and arbitration awards, rising to an estimated $1.75 million this season. That compares to $1.12 million in the NFL, where rosters are bigger but so is the revenue stream.
"I don't think players are going to get away without a salary cap," the Wings' Brett Hull admitted recently. "We'll get away without a hard cap, but we're going to have to agree to some sort of luxury cap."
Asked later about those comments, Hull went a step further.
"Bob Goodenow will kill me," Hull said of his former agent, "but if we're going to be realistic about things, probably 75 percent of the league is overpaid."
And underfunded, perhaps. The NFL's network TV deal is worth $2.2 billion annually, and each of the league's 30 teams receives about $77 million, more than enough to cover payroll costs. The NHL's contract with ABC and ESPN -- that deal also expires in 2004 -- brings in just $120 million each year, and after the Canadian TV fees are included, teams receive about $6 million apiece.
It's even more difficult for the league's six Canadian teams that take in revenue in the weaker Canadian currency, but still must pay most salaries in U.S. dollars. League-wide, owners say player salaries will eat up 72 percent of gross revenue this season -- it's closer to 55 percent in Major League Baseball and the NBA.
DETROIT -- In Detroit, a place the Red Wings faithful affectionately call Hockeytown, the home team seems a portrait of success: three Stanley Cup championships in six seasons, more than 300 consecutive sellouts at Joe Louis Arena, and a franchise worth a National Hockey League-best $266 million.
In contrast, last month in Canada's capital city, the Ottawa Senators, owners of the NHL's best record this season, played the Buffalo Sabres in a game jokingly dubbed "The Creditors Cup." Even though each franchise has an annual payroll less than half the size of the Wings', both are struggling financially, filing for bankruptcy last month with a combined debt of more than $360 million.
The NHL is at a crossroads, struggling to stay afloat despite its buoyant success in cities like Detroit. In fact, it is that very success that may be accelerating the league's failures, with skyrocketing player salaries, a limited revenue stream, slumping attendance and a competitive imbalance all threatening to sink several more franchises swimming in red ink.
It is, in many ways, the NHL's own Dickensian reading, a tale of two realities.
"The best of times," NHL Commissioner Gary Bettman said recently. "(And) at the same time, the worst of times."
The worst, though, may be yet to come.
The NHL's collective bargaining agreement will expire after next season, and already there is speculation -- an expectation, even -- that a players' strike or owners' lockout will occur, one that could wipe out the entire 2004-05 season.
Both Bettman and his counterpart, Bob Goodenow, executive director of the NHL Players' Association, have quietly told their respective camps to set aside emergency funds to last 18 months if there's a prolonged labor impasse.
Bettman was busy trumpeting the NHL's bright side last weekend as the league gathered in Sunrise, Fla., to celebrate what turned into a thrilling All-Star Game, but few TV viewers noticed. The game's ratings for ABC barely edged NBC's Arena Football League debut Sunday.
Money matters
The news is especially unsettling for a league still searching for a foothold in the United States among the major professional sports leagues.
"Hockey can't do it. It can't shut down, because it'll lose everything," said Manny Legace, the Wings' backup goaltender and union representative. "It's going to kill the league, if it happens."
The league has seen its tremendous revenue growth the last decade -- to an estimated $2 billion this season -- dwarfed by other leagues, and also by its players' salaries, expected to total $1.4 billion this season.
Lacking the kind of windfall from television rights fees other pro sports enjoy, several owners say they're drowning in debt. The bankruptcies in Buffalo and Ottawa -- five days apart -- bring the league total to four in the past eight years. Other franchises report annual losses in the tens of millions of dollars, although such claims are disputed by the union.
"We have some franchises that have to struggle until we get to a new system," Bettman said, adding that player salaries have risen 240 percent since 1995 under the current contract while revenue is up 171 percent. "After next season, we have to make some changes."
Even the defending Cup champion Wings reported an operating loss last season, according to Forbes Magazine, thanks in part to a payroll in excess of $64 million.
"Anybody that would think we're rolling in dough really doesn't understand economics," said Jim Devellano, senior vice president for the Wings. "It's really not hard to do the math."
No easy fixes
The solution is not simple.
Owners are seeking what Bettman delicately refers to as "cost certainty" in any new agreement with the union. That's a directive handed to Bettman by the NHL Board of Governors in June 2000. But the union interprets cost certainty to mean a salary cap, and it remains vehemently opposed to such a restriction.
"If that's the case, (the owners) understand the players are prepared to do what they think is appropriate," said Goodenow, who counters cost certainty with a call for revenue sharing, the mere mention of which causes many owners to balk.
Of the four major North American pro leagues, the NHL is the only one without a salary cap or payroll luxury tax. Yet, the players, as was the case in Major League Baseball's recent labor negotiations, are quick to shift the culpability for spiraling salaries to the owners.
"It's a matter right now of the owners controlling themselves," Florida's Peter Worrell said. "Nobody puts a gun to their head. They've shot themselves in the foot for a long time, and now they want to put the blame on us."
That's a charge Devellano, for one, quickly answers.
"It's competition," he said. "When a guy is an unrestricted free agent and you're trying to improve your club, we've all done it: We overpay to get that player because we need him and we don't want the other teams to get him."
Although the union insists it has yet to receive a formal proposal from the owners, Bettman's "cost certainty" reportedly would take the form of a $35 million ceiling on team payrolls, or slightly more than 50 percent of the Wings' current annual spending.
"Obviously, there has to be some type of correction to make the business work," Devellano said. "Salaries can't be as high as they have been. I think I can safely say that."
That said, neither side seems willing to budge on the key issues, leading nearly everyone in and around the league to conclude that the "War of 2004" is inevitable.
'Dire straits'
Just getting to 2004 might be a chore for some teams, as the empty-handed creditors of the Buffalo and Ottawa franchises can attest. Bettman's subtle attempts to link the insolvencies and the league's broader fiscal concerns were quickly shouted down by the union.
The Sabres and Senators are 23rd and 25th, respectively, in the NHL in team payroll at just over $30 million apiece. But in Buffalo, the team's finances collapsed after Owner John Rigas, founder of Adelphia Communications, was indicted for fraud and Adelphia filed for bankruptcy. In Ottawa, the expansion franchise has been saddled with an enormous debt load since it joined the league in 1992.
"We're well-educated on those two situations," said the New York Islanders' Michael Peca, a former Buffalo player. "We're not fooled by a couple of poor business decisions."
Still, there are more telling signs of distress elsewhere, particularly in some of the Sunbelt cities that joined the league during a rapid expansion phase that grew the league from 21 to 30 teams in the 1990s.
Bettman's idea was to build a stronger national base for the NHL in an attempt to land a bigger U.S. network television deal. But critics say the Board of Governors used expansion as an ill-advised cash grab, with owners overlooking shaky financial situations as they greedily divided up the expansion fees that totaled more than $550 million. That short-sighted strategy also created more problems -- more players, higher salaries and a diluted on-ice product.
Now, some of those sunny locales, including Miami, are in a figurative deep freeze. Florida reached the Stanley Cup Finals in 1996 -- its third season in the league -- but has since fallen into disarray. A recent financial audit showed the Panthers lost $17.5 million last year, and the club's parent company is seeking a $30 million loan to take care of operating costs.
The bottom three teams in NHL attendance this season are in Nashville and Atlanta, both expansion cities, and in Phoenix, where the league helped orchestrate the relocation of the Winnipeg Jets in 1996. Phoenix, a franchise that reported $25 million in losses last season, could be carrying as much as $200 million in debt when it moves into its new arena next fall.
"It's amazing being on this side, looking at the money crunch," said ex-Wings goaltender Eddie Mio, a former agent who is now the Coyotes' director of player development. "When I was on the other side, I believed, like many others, that it was a fabrication. Now I understand the (dire) straits."
Average salary: $1.75M
Under the current contract, the NHL's average salary has more than tripled thanks to free-agent contracts and arbitration awards, rising to an estimated $1.75 million this season. That compares to $1.12 million in the NFL, where rosters are bigger but so is the revenue stream.
"I don't think players are going to get away without a salary cap," the Wings' Brett Hull admitted recently. "We'll get away without a hard cap, but we're going to have to agree to some sort of luxury cap."
Asked later about those comments, Hull went a step further.
"Bob Goodenow will kill me," Hull said of his former agent, "but if we're going to be realistic about things, probably 75 percent of the league is overpaid."
And underfunded, perhaps. The NFL's network TV deal is worth $2.2 billion annually, and each of the league's 30 teams receives about $77 million, more than enough to cover payroll costs. The NHL's contract with ABC and ESPN -- that deal also expires in 2004 -- brings in just $120 million each year, and after the Canadian TV fees are included, teams receive about $6 million apiece.
It's even more difficult for the league's six Canadian teams that take in revenue in the weaker Canadian currency, but still must pay most salaries in U.S. dollars. League-wide, owners say player salaries will eat up 72 percent of gross revenue this season -- it's closer to 55 percent in Major League Baseball and the NBA.
