NHL Lockout: Why Revenue Sharing Doesn't Solve Problem for Lesser Franchises

Steve SilvermanFeatured ColumnistNovember 15, 2012

Revenue sharing is one of the ideas that the NHLPA has endorsed in the current lockout.
Revenue sharing is one of the ideas that the NHLPA has endorsed in the current lockout.Bruce Bennett/Getty Images

The thrust of the NHL lockout is this:

While league revenues have gone up dramatically during Gary Bettman's tenure—from $400 million to $3.3 billion—not enough of the individual teams are making money (source: New York Times).

Perhaps nine or 10 teams are making a profit, according to the NHL, while the rest are either losing money or breaking even. Some of those franchises are losing boatloads of money.

One of the key proposals that Donald Fehr and the NHLPA have emphasized in its negotiations with Gary Bettman and the NHL owners is a greater reliance on revenue sharing.

That way, owners who are losing money will not have to endure as much of a burden. Some teams might actually become profitable while those who are losing the most money will have a greater chance of turning the situation around.

Fehr is very familiar with revenue sharing. When he was the executive director of the Major League Baseball Players' Association, revenue sharing became a major plank in turning a rancorous relationship with Major League Baseball around.

Major League Baseball locked out its players in August, 1994 and that work stoppage resulted in the loss of the September pennant races as well as the postseason. There was no World Series in 1994 and there was no World Series champion.

When the two sides finally came together in 1995, revenue sharing became a key component of the agreement.

Since then, Major League Baseball has had no work stoppages or labor unrest.

Revenue sharing is already used in hockey (source: thehockeywriters.com), but increased revenue sharing may not be an option that Fehr can take much further at this point.

If there were a majority of profitable teams in the league—say 20—and 10 needed assistance; revenue sharing would be a viable option.

But if 10 teams are making money and 20 are not, effective revenue sharing would involve taking the majority of the profit away from the money-making teams and distributing to those losing money. It's not viable.

Revenue sharing can be a part of the solution, but it can't be the answer.

That does not mean the majority of the burden should be placed on the backs of the players. The owners are responsible for their own businesses. They need to operate their businesses better by selling more tickets, getting better local television deals and coming up with innovative ideas to make money.

Owners of NHL teams have often been successful in other businesses; they need to use their business acumen to make their highly visible franchises more profitable.

Contraction may be an alternative to consider (source: thehockeywriters.com). Teams that cannot make money may not ever be able to turn the corner.

While there are markets like Quebec City and Seattle may be hungry for new franchises, moving teams to more prosperous locations can't accommodate every needy team.

Neither will revenue sharing.