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New age of sports reality, economics

By: Evan Weiner | Special to the Sentinel

Nuclear winter for sports fans has arrived. Get ready for long work stoppages in both the near and distant future, and you can blame it all on the money. The owners want to keep more of what comes in and players want to maintain the status quo.

The 5-month-old National Hockey League lockout has ushered in a new age of sports reality and sports economics. Owners are going to flex their collective muscle and drive down salaries, and the NHL is first in line. The National Basketball Association could lock out its players next July 1 and Major League Baseball could do the same in 2007.

The National Football League players and owners may squabble over small issues, but the NFL is in a different position than other sports. They have a foolproof system, and if you don’t believe it, just look at Arizona Cardinals’ owner Bill Bidwill, who thrives despite his franchise’s incompetence.

The NHL lockout was about eight years in the making and caused by spiraling salaries. But just who was to blame for the economic problems in the industry? The owners or the players?

The owners have to accept all of the responsibility. As former NHL President John Ziegler has pointed out, the owners fell for agents’ pitches for players.

Here’s how it worked:

When Wayne Gretzky scored 92 goals and was the league’s highest-paid player, agents of 23-goal scorers went to managers and said: “My client scored 23 goals. He is one quarter as good as Gretzky and should get one quarter of his salary.” When managers went to the owners with this argument, they approved the pay increases.

Then, other players compared themselves to those 23-goal scorers and had their salaries bumped up. As the players’ salaries increased, the owners covered the costs with a new national TV deal from Fox and Disney, expansion fees (the NHL went from 21 to 30 teams), a rise in ticket prices, new buildings with more luxury boxes and club seats and money from new technologies like cable and satellite TV deals.

In 2004, those expansion fees are long gone, the NHL is not expanding anymore, the NBC over-the-air deal has no money guarantees, the new buildings with club seats and luxury boxes were a once-in-20-years phenomenon, and the cable and satellite rates aren’t going to increase in significance anytime soon. Also, owners aren’t getting as much money on bank interest and inflation on cash taken in from season-ticket holders on short-term accounts.

NHL players recognized that the industry is struggling and offered a 24-percent giveback. But NHL owners want a foolproof system and cost certainty. The owners want players to police the industry and make sure owners make a profit. But does cost certainty always work?

Apparently, it doesn’t in the NBA. In 1999, after an owners’ lockout, the players and owners came up with a new revenue-sharing system, which is not working as well as Commissioner David Stern and team owners want. Stern, representing the owners at the bargaining table, will try to cut guaranteed contracts down and raise the luxury tax as a way to keep salaries down. The NBA also lost a significant chunk of cash from TV rights as the present TNT-ESPN-ABC deal is worth less than the previous NBC-TNT deal. The NBA owners did get a one-time expansion fee this year when the Charlotte Bobcats entered the league, but money issues will be a wedge between owners and players that could force a July 1 lockout. And NBA owners will get some income whether they lock out the players or use replacements.

Also, Disney-owned ESPN will pay the NBA owners rights fees whether there are games or not should there be a lockout.

Major League Baseball is two years away from its next possible strike or lockout. Whether baseball is played or not in 2007 may depend on the deals that both hockey and basketball players settle upon. If either the hockey or basketball players cave in and accept the owners’ proposals, which is what Pittsburgh Pirates owner Kevin McClatchy is openly rooting for, the baseball owners will try to force players to accept a lesser deal by locking them out.

Baseball owners like McClatchy are likely to be emboldened by their fellow basketball and hockey owners. All of the sports industry is watching the NHL labor dispute because it will impact other sports.

Evan Weiner is a radio commentator on “The Business of Sports.” He wrote this commentary for the Orlando Sentinel.

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