Skip to content

Why increased revenue sharing could benefit owners more than players

Oct 7, 2012, 10:00 AM EDT

Bill Daly and Gary Bettman Getty Images

Much has been made about the benefits of increased revenue sharing, although the conversation has often been framed as a boon for the players.

In the long run, that might not be true, according to what sports management guru Rodney Fort* told The Globe & Mail.

“What basic economic theory tells us about revenue sharing is that it doesn’t change relative value on the margin,” Fort said. “Eventually it drives player pay down, ultimately their revenue is the source of the sharing. It’s surprising to me that the NHL doesn’t want more of it.”

That point brings up two interesting questions.

1. Why won’t the owners go for it?

Fort believes that it might come down to politics – not just puck politics.

“Sports franchise owners tend to be politically conservative people, and [revenue sharing] flies in the face of pre-conceived notions; it has the taint of socialism,” Fort said.

2. Why would the players want an increase in revenue spending?

Conversely, if this might lower long-term earnings, one must wonder why it would appeal to players.

The article’s answer is simple: it might help them protect their earnings for next season – a clear priority for the NHLPA in the current CBA talks.

***

That provides some interesting supplementary information about revenue sharing, but there are other stumbling blocks such as the much-cited topic of big-market vs. small-market interests.

Still, if you ask experts such as Fort, the idea is at least worth considering.

* – Yup, that’s the same Michigan professor who wonders if the two sides are really that far apart.

  1. phillyphanatic76 - Oct 7, 2012 at 11:18 AM

    I’ve mentioned this idea several times as the reason why the top owners refuse to even acknowledge the idea of revenue sharing. These independent businessmen have spent the last five years disparaging President Obama for being a socialist (eventhough I doubt most of them truly understand the differences between capitalism, socialism, and communism) and so there’s no way in hell they’re going to adopt an idea that threatens their free market loopholes and taxbreaks. They’d rather hoard their wealth and have the league collapse then share a tiny percentage to save the sunbelt teams and other struggling franchises. Instead their solution is to take back 9-17% of player contracts that they’ve been throwing around the past few years. That seems beyond hypocritical to me, especially considering half the league handed out $200 million in contracts right before the CBA expired.

  2. manchestermiracle - Oct 7, 2012 at 12:10 PM

    Good points, philly. It won’t fly because “long-term” is obviously something the owners can’t grasp. Multiple lockouts, even while revenue grows, reveals the short-sighted strategy employed by the owners. Consistently voting against your own interests in order to blindly follow ideology is also the biggest hurdle in politics.

  3. nhstateline - Oct 7, 2012 at 3:26 PM

    lost in all this is the point that the richer owners aren’t going to pay the revenue sharing out of their own pockets, they’re going to raise ticket prices to do it to the point that they can. People in places that care a lot about hockey will then be subsidizing the small populations that do in sunbelt cities that generally don’t care at all about it. Better to take hockey out of markets that don’t really care about it and put it into markets where people do rather than making the interested and the passionate subsidize the small group of their peers in those markets but really the much bigger audience that doesn’t care at all. A few people will miss the Bolts, Panthers, Canes, Stars, Preds, Coyotes and Ducks but based on their fiscal situation not too many. Better to give teams to Quebec, Vaughn, London, On, Saskatoon, Seattle, and somewhere else in New England (with that many AHL teams there’s room for another NHL team somewhere). The Isles are in a unique situation and I think Columbus still can work but the rest of these places are always going to be a struggle. Better to move the business to where there are a lot of customers than it is to keep imagining that someday businesses with no market or customers will be successful.

    • blomfeld - Oct 8, 2012 at 5:28 AM

      “People in places that care a lot about hockey will then be subsidizing the small populations that do” …

  4. bellicosejeff - Oct 7, 2012 at 4:19 PM

    I know people love to knock on southern teams and a few out west. However this problem is bigger than 6 or 7 teams. NJ, Minnesota, the cup winning LA Kings are also losing money. I read somewhere that over half the league is losing money. I’m sorry but when you have half the teams losing money and the players getting 57% of league revenues. Which is more than the players of the two more successful leagues than ours get (NFL, NBA). Leagues that also have revenue sharing. Something needs to change here. I love hockey and the star players should be compensated fairly, but they have to be realistic. Some NHL stars are making more money than some NFL stars are. If the owners and players want to eventually compete with the big boys it’s time wake up and realize they are NOT bigger or even anywhere near the NBA and NFL at this moment. If they want to get there they need to start following their business model of long term CBA agreements, lower percentage of revenues going to players, and more revenue sharing. Worked for them, they had teams struggling, still do, but you don’t hear or read about those leagues or teams losing money. Because they take care of their own, they don’t look for loopholes in the CBA throwing player salaries through the roof either. Which isn’t helping anything.

    The owners and players both don’t want what’s best for the league, but what’s best for them. Until that changes and they actually work together to make this league better over the long run. Get ready for lockouts everytime the CBA expires.

  5. nhstateline - Oct 8, 2012 at 10:04 AM

    that’s exactly what’s going to happen because it already does in the other sports with revenue sharing. Just compare ticket prices in the bigger markets versus what they are in the smaller ones. The idea that the guys leading this lockout are just going to dip into their own pockets before the reach into those of their customers more than they already do is silly. What kind of business insists on leaving its franchises in places where they lose money and trying to make the difference up from the employees or the successful franchises ? A badly run one, that’s what kind. Put these teams in places that can support them like any other franchise business will do. If Starbucks, DD or Horton’s can’t make it in a location, they move on. The NHL should do the same and if it could find a commissioner who could actually make that decision instead of what’s going on now, that would be good too.

  6. dcc695 - Oct 8, 2012 at 6:45 PM

    Nhl has been moving franchises to find better markets for decades. Remaining Canadian cities aren’t big enough. They could close franchises, retreat to Canada, northern midwest and New England in US, but that would limit TV market, leave them permanently as niche sport.
    Current revenue sharing is complex, arbitrary, and purely redistributionist. Suggestion: junk this system, share national tv money evenly and recognize tnat games only work if visiting team shows up. Give Every visiting team a set percentage of the home team’s local revenue. X. Per cent of 1/41 st of local tv, radio,ticket sales, and profit from concessions. Big market teams would still get more, and still incentive to market well, but small market teams would be paid for the competition they provide. “X” could be varied by negotiation among owners to keep all teams competitive.

Sign up for Fantasy hockey

Top 10 NHL Player Searches
  1. B. Ryan (1349)
  2. J. Drouin (1332)
  3. C. Giroux (1193)
  4. J. Quick (1157)
  5. N. Horton (1112)