Hockey Related Expenditures

On Wednesday’s Marek vs Wyshynski podcast, Jeff Marek had John Shannon on as a guest.  One of the topics they discussed was the upcoming CBA negotiations.  Shannon brought up an interesting point that not only will hockey related revenue (HRR) be an issue, but hockey related expenditures (HRE) will be equally crucial.

John Shannon: But the players’ association when they get to look at those books, they don’t look at hockey related expenditures.  Like how much do you spend on president of your club, how much do you spend on corporate travel.
Jeff Marek: There’s no salary cap for GMs, coaches, management, all that stuff.

Much like with the recent NBA negotiations, teams often claim to barely break even or even to lose money in the current revenue system.  Sometimes this can be a legitimate claim but, more often than not, it is because of unique accounting practices.  It’s important to note that these practices are not illegal, but rather represent theoretical losses as opposed to actual losses.  How does this affect a team’s budget?  If a team pays X dollars to lease a building owned by the same group for accounting purposes, it shows a team having higher expenses than in reality.  While that money can be accounted for in HRR, a team can claim a loss on its books.  Looking at HRE would allow the NHLPA to determine which claims of losses are legitimate and which are accounting losses.

Shannon pointed to owners’ salaries as an example of this, “I’m not saying that he does, but does Ted Leonsis get $10 million a year?”  These will be the types of questions the NHLPA will ask and demand access to before any concessions in HRR are made.  Considering how much the NHL has grown since the last CBA was signed, Commissioner Bettman and the owners will need to provide reasonable evidence for the NHLPA to accept a revenue split similar to the NBA and NFL.  It’s another variation to be factored in when considering how the NHL and NHLPA will eventually agree to share revenue.

John Shannon: And I think those are questions the [NHLPA is] going to start-you’re going to start hearing about HRE, hockey related expenditures, [being discussed]…there are still teams saying we broke even this year and the [NHLPA] says “we know you made more than that.”  “Well no, we broke even.” Because the money was spent before they could record it as HRR.
Jeff Marek: Is this specifically a Donald Fehr issue or was this, to the best of your knowledge, on the agenda for Paul Kelly.
John Shannon: I think this is one of those little nuggets that Donald Fehr is bringing to the table.  I think amongst all of those other issues when you talk about how the teams go into revenue sharing and how many teams do qualify, and the equation [for revenue sharing], I mean that’s the stuff Donald Fehr’s concerned about because that does have an impact on the players.

Issues like this are why the NHLPA hired Donald Fehr as executive director.  He’s not going to back himself, and the players, into a corner by ignoring potential talking points.  While some would see this detail as proof there will be a stalemate and part of the season will be lost, it’s not an automatic deathblow.  It’s clear that Fehr is looking at the CBA and HRR from every possible angle.  This gives him the ability to compromise in one area and make up ground in another without sacrificing too much.  The talks may last longer and the reports coming from meetings will list more topics but, if both sides have 7 or 8 issues within HRR to work from, a resolution may be easier to reach with both sides feeling like they have accomplished their goals.

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