Commentary: Put These Owners In The Penalty Box
National Hockey League Commissioner Gary Bettman went to his bench on Feb. 12 and sent in a Hall of Fame numbers cruncher. Arthur Levitt Jr. may not be a master of the slap shot, but as labor talks loom at the end of this season, Bettman is betting that the respected former Securities & Exchange Commission chairman can put to rest the long-simmering debate about the shaky finances of the NHL.
Levitt's report on the league's money woes -- for which the NHL paid $250,000 -- confirms many of Bettman's dark pronouncements. Among its findings: Leaguewide losses last year topped $270 million, 19 out of 30 teams lost money, and, perhaps most ominously, 75% of league revenues go to player salaries. That percentage easily tops the share of revenues that goes to athletes in pro football (64%), baseball (63%), and basketball (60%).
What the Levitt analysis doesn't say is that owners had to be as ingenious as they were reckless to push salaries so high so fast. The league's current labor agreement -- signed in 1995 and extended once by the owners -- has an array of built-in stoplights designed to keep player pay in line. Spend-happy owners have sped through most of them. "I think some people recognize there are financial issues in the league. I think some people also have concluded there has been poor management of some teams," says player agent Rich Winter, whose clients include the Washington Capitals' star right wing, Peter Bondra.
Poor management? How about atrocious? Since the 1993-94 season, the average player salary has leaped nearly fourfold, to $1.86 million this season. And the percentage of revenues plunked down for player salaries has gone from 41% in 1990-91 to Levitt's estimate of 75% last season.
In the current contract, Bettman inserted an entry-level salary cap to tamp down exorbitant contracts for promising but unproven rookies. In 1995, the cap was set at $850,000 and, with yearly step-ups, reached $1.025 million in 1999. But owners quickly found ways to wriggle free from the provision they should have embraced. Signing bonuses and incentive pay weren't explicitly barred. By 1997, the Boston Bruins were offering Joe Thornton, the first pick in the NHL Entry Draft, $925,000 in salary and $2 million more in incentive bonuses.
That's chicken scratch compared with what the Capitals frittered away this season on fading superstar Jaromir Jagr. Two years ago the Caps lavishly signed Jagr to a seven-year, $77 million contract. Last month they were relieved to send him to the New York Rangers in a deal that sticks the Caps with $4.5 million of the slumping player's salary in each of the next four years.
Bettman refuses to point the finger at his bosses for flouting rules or failing to live within their means. Instead he blames a flawed contract. "This is an inherently inflationary system. Look at what has transpired," the commish says.
"That argument is ridiculous," counters Ted Saskin, senior director of business affairs for the NHL Players Assn. "It may be more of a management [competence] issue in certain cities than a failure of the collective bargaining agreement."
As the Sept. 15 contract expiration gets closer, Bettman will no doubt reiterate his threat to shut down the league next season if the players refuse a cap -- a system that limits salaries to a set percentage of league revenue. Both the National Basketball League and the National Football League have caps that limit million-dollar mistakes. But even they aren't spendthrift-proof. Just ask Paul G. Allen, whose NBA Portland Trail Blazers racked up $80 million in losses last year, according to a league insider.
As the NHL asks the players to help clean up after their bosses' folly, what won't be on the bargaining table is a pledge by the owners not to spend like drunken sailors. "The psychic profile of an owner is made up of a fair amount of competitive zeal, a fair amount of ego, and a huge amount of tenacity. I think these guys have thrown caution to the wind," says Levitt. Followed closely by their checkbooks.
By Mark Hyman