Sunday, February 06, 2005

Idle Rumors Are the Devil's Tools

EklundThere is someone on the web going by the pseudonym Eklund anonymously writing up rumors about the NHL lockout based on anonymous insider sources. He calls himself Eklund after Pelle Eklund, the Swedish player who played for his hometown team, the Flyers. He claims to be a freelance hockey writer who has written for NHL.com and THN, among other publications.

Judging by his defensiveness, he has come under some degree of criticism. Judging by his claims, he has achieved some degree of popularity. I ran across him quite accidentally while surfing for other lockout information.

I was curious, so I put him to the test. I went through all his posts, every last one of them, quite a bit since November. Though he qualifies it all as rumor, I was surprised to find that virtually nothing he has reported has come to pass. So little that in three months of posting, he has only written “as I said” or “as I predicted” a few times -- and he says it every time a prediction comes true.

Let’s take it day by day -- after these disclaimers:

All excerpts are condensed and telescoped to save space in a very very long article -- so much so the excerpts read like shorthand (sorry!). All are faithful to the original spirit -- compare to the original site. Don’t use these excerpts to test my take on what Eklund’s writing style suggests about his claim to be a journalist -- look at the original.

This is all way too long (and for once, I can say I really don’t have this much free time on my hands, but I did it anyway). Feel free at any point to skip to the bottom to read my conclusions (I jumped the gun on some conclusions -- after the entries for Jan 27, Jan 30, and Feb 3, near the bottom, if you’re interested.)

OK, here goes:

Nov 9: “There will be hockey this year. At the end of the month, a hard salary cap will be traded for slightly younger FA. The season will begin mid-January. ‘There is ZERO chance season will be cancelled,’ one player rep told me.”

No hockey this year, hard cap not accepted, season didn’t start in January, as of this moment (Feb 5) there is near zero chance of season not being canceled.

Bettman_garyNov 10: “Sources say Bettman will announce date a deal needs to be made by to salvage season. All agree date is around December 10.”

No drop dead date ever announced. Most observers agree NHL cannot announce drop dead date for fear of undermining potential impasse declaration. The rest believe drop dead date can only help PA pressure NHL, another reason to not declare one.

Nov 15: “Word out of Toronto is players will make a new proposal on Thursday or Friday that could include some sort of salary cap.”

Nov 18: “Agent Meeting -- two agents who attended said PA was preparing offer with cap included. ‘Players are demanding this of PA leadership, NHL is fully aware of this.’”

PA proposal came four weeks later, never included any sort of cap.

Nov 22: “a few teams considering mini tournament of their own this spring. Both sides said they wouldn't rule it out. Leak came out because Detroit had TV rights issues. Belief of players I talked to that all this will be moot, play will resume in January.”

Jury out on possible tournament. No report anywhere of TV issues in any context, despite being a likely lockout subject. Play did not resume in January.

Nov 28: “I talked to several players. A penguin said, ‘My agent put out word to get in shape by January 8th for start of camp. He said a deal is being brokered by high-ups including: Mario, Wayne, Bettman, and Neil (player rep). Deal will include cap.’”

No deal, certainly not one with cap. No camp. Denials by Gretzky and Lemieux about involvement. No clue who “Neil” is or what makes him “high-up” (only two Neils in the NHL -- Ottawa’s Chris Neil, not a player rep, and Neil Little, not the guy).

[Update: been pointed out to me "player rep" could mean "agent" and one, Neil Abbott, represents Jeremy Roenick et.al., could be considered high-powered, although no evidence agents involved in negotiations and difficult to imagine NHL allowing them to.]

Nov 30: “Players new proposal in hands of NHL today or tomorrow. One thing certain, as I've reported all along, will include cap disguised as luxury tax or two caps. PA prepared to accept cap of 40 million. Offering tax and roll-back of 7.5%. Goodenow will say, ‘NHL backed us into a corner on cap but we didn't have to give a rollback.’ Bettman will say, ‘We appreciate the PA understanding the need for a cap, decided they shouldn't pay for past mistakes by cutting salaries.’”

Proposal still ten days away. No cap, not disguised as tax, barely a luxury tax of any kind. Rollback threefold at 24%. PA yet to withdraw rollback, NHL yet to give it back (“accepted” it in recent proposal). PA rejected $42 million cap last week.

Further: “NHL is dangling concept of 4 on 4 full-time. Rule changes discussed directly with TV execs. Shoot-out is 99% here. Fighting, they hope to increase. Guaranteed contracts being discussed, likelihood they are gone doubtful, but look for more generous buy-outs and for them not to count against cap.”

Don’t know yet about new rules -- everyone expects shootouts, but four on four just wishful thinking. He got one right -- contract guarantees not killed, but are exactly as in the past, appear to be included under cap.

Dec 1: “Drop Dead Date. December 15 -- Bettman will announce, if he hasn't yet. I got word last night. Skeptics say he wants season cancelled, but those in the know say not.”

Still no drop dead date, still no reason for Bettman to commit to one.

Further: “Heavy negotiations in secret in Boston to work out ‘easy issues.’”

No confirmation, no reports anywhere in mainstream media of secret meeting -- other reporters would’ve gotten minor leak like this that reflects well on both sides.

Snider_edFurther: “Group of owners headed by Ed Snider skeptical of Bettman. Snider said he has contingency plan, even legal council [SIC] should Bettman cancel season.”

Larry Brooks reported Snider’s unhappiness around the same time despite Snider's later public show of support for Bettman. No mention of legal threats or other plans -- Brooks not shy of reporting these things, had part of this story, but not that part? No way.

Dec 3: “A guy in the know said [Linden and Lemieux] bridged a lot of gaps and figured out cap resolution. One person said, "Expect one side or the other [to] pull out at least once before it is done." One issue players are going to try and get is re-signing players and having cap stretched like NBA. NHL will probably give them that.”

Linden emerged as momentary hero in January by restarting talks. Lemieux yet to admit negotiating -- steadfastly maintains his position as owner and player excludes him. Not much newsworthy predicting pull-outs. NHL wants no players outside cap -- never any rumor beyond this on the subject.

Dec 6: “PA is going in with big salary reduction and luxury tax. Will settle for a cap with teams [re-]signing their own players, no salary reduction. Bettman will announce end to 45 day rule. All AHL rules will be part of this season.”

Right on big rollback and luxury tax, wrong on settling for cap with no rollback softened for re-signed players. No end to 45 day rule. AHL rules already widely expected to be adopted when NHL resumes.

Dec 10: “It was clear to players this was the proposal two days prior. On their website terms were stated Tuesday. Also stated they should act surprised and disappointed.”

Players should forget about NHL and go to Hollywood -- they’re good actors. Otherwise, no way to confirm -- no report in any other outlet despite reporters having access to players’ web site.

Further: “It isn't slightly surprising the [rollback] would be so high. NHL will come back saying, ‘We don't think it is right for players to take such a large cut. Such a system only hurts current players. We do however need cost certainty.’ Goodenow can tell his guys, ‘I had to accept cap, at least I cut pay cuts to 10%.’”

NHL never offered to rescind rollback -- accepted it in their last proposal. PA never traded back rollback for cap, are still negotiating off rollback proposal.

Dec 13: “I'm hearing owners are at war over this. One [faction] wants to accept offer with lower luxury tax, other [wants] solid cap. One clause will protect them [from] collusion suits [so] they can have a cap and not have it public.”

Reports of ownership split seen elsewhere. No mention of tacit no-collusion in any other outlet. Ever. Would be completely illegal, as Eklund believed. Whole point of negotiating cap instead of imposing one is to make it legal via consent. Simple points like this and drop dead date betray Eklund -- every reporter and most fans know it.

Further: “I talked to a lot of folks. Players will reject offer but ask for closed door meeting. A player from Flames spoke to me, vocal guy, he'll be quoted in next few days, thinks a cap is inevitable, that players will accept it in the end. He heard about cap of 50 million this year, 45 next, finally 40 million. No pay cut. He thinks guaranteed contracts will be thing of the past.”

Ference and Commodore spoke out in October -- no Flame since. No graded cap ever rumored anywhere. Pay cut still on table. Guaranteed contracts too.

Dec 14: “Word today NHL may have something up there [sic] sleeves. Don't be surprised if there isn't a hard cap in today's proposal. If it is a hard luxury tax. Don't be surprised if PA rejects offer and calls meeting to decide where to go.”

A most resounding “NOT!” No hard cap in NHL proposal? Luxury tax PA will turn down? All prior predictions of trading rollback for cap out the window with NHL proposing a cap plus rollback.

Further: A cap is about hope, so Calgary doesn't become like Stockholm where players like Jarome Iginla eventually leave to play for Rangers.”

Iginla_jarome_2Not a prediction, but impossible to pass: Under current system, Iginlas of the world stay put through their prime, go to Rangers only after going over the hill. Flames let Fleury go at right time, got Regehr. Good move. Let St. Louis and Giguere go. Bad moves. Rangers nowhere with Fleury and his ilk. Ducks reached finals with Jiggy, Tampa won Cup over Calgary with St. Louis.

Dec 18: “Spent late night out with three NHLers [et.al.]. Players angry about counter proposal. Agreed they would come back with proposal next week or so that would get it done. Said they hear proposal will accept cap but not roll-backs.”

No PA proposal since Dec 9, never an inkling of trading back rollback for cap -- PA still opposed to cap today, NHL still asking for rollback on top of cap.

Dec 23: “I spoke to a team rep. Going to counter around December 28, framed around NHL's last counter. Taking all pay reductions off table, instituting a cap at 50 million for two years, then 40 million for two years. Free agency at 27, a bigger cut of merchandising.”

No counter Dec 28, or any time, certainly not with cap. Rollback still on table. UFA still 30. Merchandising issue curious -- small revenue item, they already get a cut off the top, then at least 53-55% of the rest under cap. Not much left to gain. Media is next big thing -- that’s what they’d ask for, not merchandise.

Jan 4: “NHL is releasing threats of scabs next year. I talked to someone in the know who doubts they actually would do this. They want players to think they will. Tomorrow players meeting in Toronto. Asked reporters not to mention [it]. I am mentioning it since many of you don't believe me anyway! I will report on the meeting tomorrow afternoon.”

Scab threat plausible -- many believe NHL would not risk going to impasse and losing, but nothing to lose by threatening. More on PA meeting later.

Jan 5: “From Rob Simpson: Players will offer salaries take up 56% of revenues and will not call this a cap. League would argue to 54%. They need to agree on party to conduct audits. Season will start January 24; some teams already have minicamp in the works. Players buckling because they've lost $800 million already. If this drags into summer PA would likely be dissolved, keeping union together a motivating factor for players. Quoted Leafs exec who said, ‘It will get done.’”

Simpson sounds a lot like Eklund. Hmm. As full of it too. Players hate concept of league-wide cap more than team caps -- NHL’s 53-55% offer rejected. Audits agreed -- no brainer. Real battle will be what to audit (what is revenue?). Season didn’t start Jan 24, no mini-camps. Players haven’t buckled. Eklund betrays an ignorance of PA dissolution potential that professional journalists already know -- PA will dissolve (decertify) only as tactical move, a move not to be eschewed just to keep union together.

Jan 6: “ [Board of Governors] meeting cancelled to fuel emerging player revolt. NHL planned to cancel meeting when scheduled. Meeting was ploy all along.”

Ploy was widely speculated elsewhere, everywhere. Brooks reported from his sources that meeting was canceled to pre-empt owners’ revolt.

Further: “[On] PA forum on secret website, Goodenow getting destroyed by players saying they need to go back to work. Why [are] players publicly saying season is lost? Wouldn't a few players to say, ‘The numbers are close, I hope they can figure this out?’ They are coached to tell media season is a goner.”

Right, except wrong conclusion -- if that many players were opposed, more than a handful would’ve complained publicly.

Further: “The one telling sign owners are sure deal will be done is lack of drop-dead date. Odd there hasn't been one yet.”

Have to wonder about Eklund. Reason not odd -- widely reported that impasse case weakened if NHL sets drop-dead date and doesn’t negotiate in good faith. This is like a hockey expert wondering why ice the puck only to get a draw back in own zone.

Further: “PA absolutely working on new plan, everyone knows it. NFL model is one they are basing it on.”

Repeatedly and consistently wrong on both counts -- no new plan, never adopted NFL model.

Further: “I got in trouble for reporting on meeting in Toronto, so I can't discuss. I just got IM from people at meeting, thinks PA plan will save season.”

No PA plan, season not saved -- was there really a meeting?

Further: “Plans have begun to launch season immediately following Super Bowl. NHL may even buy Super Bowl advertising.”

Not happening. But that would be one funny ad, eh?

Jan 7: “I just received following e-mail. ‘Announcement stating the following about to occur: NHL is facing a dire moment. We are forced to cancel an entire season if the PA does not comply with our plan. We are giving the PA 72 hours to respond and return to the table for serious, round-the-clock talks.’”

Jan 9: “Ultimatum from NHL coming Monday. Three sources on this. We'll see."

Jan 10: “Ultimatum not yet released. Best I can tell PA cut it off at the pass by telling NHL they are going to invite NHL back to table in next day or so.”

No ultimatum ever released. Linden meeting wasn’t for another nine days.

Jan 11: “Owners of a dozen teams considering a court order that would allow them to welcome players back while arbitrator comes up with solution.”

Completely unsubstantiated, even more implausible. Brooks has numerous sources and reports on owner dissatisfaction -- gotta believe he’d have this and freely written about it if true.

Jan 12: “Ownership group threatening Bettman may be getting to him. He could ask for arbitration in next week or so to ‘save the game.’”

Bettman, arbitration? Never happened, never will.

Daly_william_2Jan 14: “Daly officially invited PA back to table, PA said ‘they won't rule anything out.’”

Not reported anywhere. Wasn’t PA supposed to invite NHL to meeting? Linden did a few days later.

Jan 17: “Myriad of sources [say] lock-out is nearing end. According to one, ‘By end of this week.’ I've been told by someone high up in PA they expect basic outline by Thursday, announcement Sunday that players report back to camp in 7-10 days.”

None of this ever happened, never even rumored to be happening except here. If so many sources, why only Eklund hearing from them?

Further: “Terms of deal point to cap that increases each year, free agency at 27-28, franchise and transitional players, maybe a minor luxury tax system, players sign away rights to sue for collusion.”

None of this ever in any proposal from then on. Collusion clause still gives Eklund away -- why bother with a cap? Why doesn’t he understand this?

Jan 18: “I received several e-mails, following seems accurate. ‘Players held secret vote, majority in favor of cap. Player rep asked Goodenow why [no] vote on proposal. Goodenow [said] be a team player, they’d never allow vote [on] cap.”

Plausible, but no substantiation anywhere else. Gotta believe at some point some player or rep would take it public, even off the record.

Further: “Linden getting pressure to negotiate good deal before losing whole season and half of next year too. That's why he asked for meeting without Goodenow and Bettman. Players know if they don't get cap at $40 million now, owners in ‘06 will drop offer to $31 million and hard-line other issues. This deal done by Sunday.”

Plausible at the time, now discredited by PA rejecting $40 million cap last week.

Linden_trevor_2Further: “As I reported December 3, Trevor and Mario refusing to let season die. Credit [Linden] is receiving a concerted effort to give fans a hero. ‘That hero needs to be a player,’ a friend told me.”

Implausible. Fans would welcome anyone as hero, no one would give that up in this dispute, least of all Bettman. Anyway, no hero yet.

Jan 20: “Three years for players, three years for owners. Both sides leaking same thing. I don't think Bettman is going to go for it. Bettman, one source said, ‘wants players to sleep on fact that cap is a possibility.’ Process has begun, settlement next week for certain.”

Both sides denied hybrid plan ever proffered. Certainly Bettman would not go for it. Why pretend just to put idea in players’ heads if NHL knew weeks ago, as Eklund leaked, they were ready to settle for cap if they had to. Settlement never came, that much is certain.

Further: “Sources saying, big money teams steering ship. Threatened legal action, possibly even split from NHL, form their own league. Since revenue sharing is big part of Bettman moving forward, big teams have a lot of power. That is reason for softening stance.’”

What softening stance? Brooks reported big money teams already whipped back in line by Bettman after earlier revolt. With his renegade owner sources, this would’ve found way into print. Revenue sharing comment odd -- Bettman and owners long opposed to it, wouldn’t be so adamant about cap if willing to share. Everyone knows this, why not Eklund?

Jan 21: “As I predicted, Bettman made it known split deal didn't work, unless there was anti-collusion clause [to] allow owners to put in cap through side agreement.”

As I predicted, sun made it known it was rising today. Eklund still doesn’t get anti-collusion clause. Why would players agree if they want split deal to delay cap for three years? Why would Bettman ask for it, instead of insist on cap, which he indeed has steadfastly done? This is credibility buster.

Further: “They worked out all the small things. Free agency at 27-28, lift salary restrictions on rookies if overall cap is agreed upon.”

Neither made it into NHL’s final proposal. Compromise on non-cap issues essential to get players to agree, so why rescind later in the process if you’re actually trying to get deal done?

Further: “One major chip is what makes up revenue. Source close to meetings: ‘Linden said, “OK, if I'm saying yes to cap, what are we going to say to players? We need something big back.” NHL came back with merchandising.’”

Defining revenues definitely on PA radar screen so this is highly plausible -- but Saskin said NHL won’t address it. Already discussed implausibility of making up revenue via merchandise.

Lemieux_mario_1Further: “Last thing said at meeting: Linden going to talk to player reps today, they'd all talk Saturday with goal of getting this done this week-end. Next time they get together they'll sign deal.”

Didn’t happen.

Further: “Source: ‘Players primed to accept cap. Overwhelming majority already have. Linden wants vote, Goodenow doesn't. Players trust Trevor no doubt. When meeting broke Trevor called Mario, talked long. Mario a key player.’”

Still no deal. Still no vote. Still no confirmation Lemieux involved -- rumored to be in Toronto, but reiterated conflict of interest as owner-player precluded participation. Lamoriello went instead.

Later that day: “From source: ‘PA made last ditch effort to get owners to crumble. Expect owners to do same, giving players long-awaited ultimatum. I’d be stunned if owners cancel season without telling players publicly it is up to them.’”

Still awaiting ultimatum. Still awaiting drop-dead date or cancellation.

Jan 22: “According to several sources PA holding poll on their website. 1. I am prepared to accept cap. 2. I am not prepared to accept cap. Word is ultimatum will come today or tomorrow giving final date, placing responsibility for season on players.”

Poll never discussed elsewhere despite reporters being privy to PA web site. Ultimatum never made public. Drop dead date -- beaten that dead horse.

Jan 24: “From a source. ‘NHL's new offer will include concessions. About loopholes. There will be a cap, but definition widened to include percentage of NHL properties, especially when player's name used. 1. One franchise player [would] not count against cap. 2. Next five highest paid can't make more than a combined number dependent on revenues. 3. After that no cap at all.”

Completely groundless except possible negotiations over NHL Properties. NHL made no new offer, was killed by loopholes in the last CBA, has never given any indication of a tiered cap, especially one that caps only five players, allowing others -- including highest paid -- to go uncapped. Only NHL deviation from team cap is individual cap on highest paid.

Further: “Poll results. Vote in favor of cap. But only slightly.”

Rare instance of recognizing bad information (“Overwhelming majority already have” accepted cap) on his own.

GoodenowJan 25: “One source said, ‘Goodenow put desperate message on web site, ‘I’m convinced owners are about to cave. It may take us canceling season, but rewards are there for the taking.’ That started furious groundswell among players demanding Goodenow step down. He’s said to be considering it.”

Other than handful of statements quickly retracted, absolutely no news or rumors elsewhere that vast majority anything other than solidly behind PA. Eklund has created illusion of chaos and turmoil at PA. Expensive gag rule can’t stop owners saying big markets unhappy with Bettman -- stands to reason more players would’ve leaked unhappiness more stridently, more persistently than trickle we’ve seen. Eklund’s rumor mongering appears baseless compared to mainstream news, some of which is anti-PA. If he emboldened NHL to take hard stance, he's done NHL, players, fans huge disservice, even if intent is as pure as he claims.

Jan 26: “coach told me emergency coaches meeting called to determine what [to] implement THIS season. One reason they are meeting may have to do with NBC saying they want more scoring.”

Highly plausible, but just as obvious. Can’t confirm until play resumes.

Later that day: “Report I just received. ‘Two sides will likely announce “Deal in Principle.”’”

Didn’t happen. Opposite happened -- “philosophical differences.”

Later that day: “Moving Along. That’s what source just told me. Some saying little progress being made. NHL fine tuning their cap that isn't being called a cap. The tiered system as it is known.”

Those saying “little progress” were right -- source wrong. No tiered system ever proposed.

Further: “From my source, ‘PA and NHL way too close for this to fall apart. They’ll meet again tomorrow or Friday. Word is they’re going to NY to bring specialist into talks. Lawyer to help come up with solutions to bridge small gap that remains. Goal to get Deal in Principle announced ASAP.’”

Fell apart. Parties met again next day -- everyone knew that, highly publicized. No word about specialists or attorneys. No deal in principle.

Jan 27: “just got word about new proposal from NHL. My source says, ‘This will absolutely be over by Saturday. Posturing is over. These talks are final talks. Immense pressure coming from big teams. Players are going to have hard time turning down offer. Word is they already know what it is, are holding vote on website as we speak. It won't go past weekend. Not a chance.’ Source said [same or different source?], ‘This is where we'll see what those inside have said all along. PA will accept cap and get on with this.’”

Never happened, not one bit. Over a week later, PA still adamant against cap. NHL proposal, when made public, showed no influence of big-team pressure, was exactly what cap hawks have demanded.

Further: “I don't buy leaks that NHL proposed no revenue sharing. Goes against everything they've said they wanted. Individual salary caps, I don't get it. If leaks are true then owners solely interested in destroying league.”

Eklund deluded himself with own rumors on individual caps (opposite of his last report) and own misconception that NHL wants revenue sharing (almost totally opposes it). Only at this late date does it dawn on him what everyone already knows of NHL’s true intent. Even here he overreacts -- NHL wants to destroy this season and PA, not league. Apparent ignorance of owners’ well-known distaste for revenue sharing betrays credibility of his claim to be reporter and credibility of sources.

Jan 28: “a very reliable source: ‘Playoff revenue sharing is what owners would like, [to] further reduce incentive to spend to win. [But] for cap to work - to be fair for both sides - meaningful revenue sharing is essential.’”

Glad his "very reliable source" finally helped him get it into his head what kind of revenue sharing owners really want, already well known to everyone else in mainstream. Source’s opinion on meaningful revenue sharing correct too, reflecting PA position.

Further: “I also received this. ‘PA ready to call sides back to table. Could happen as early as tonight. Players to ask for higher ceiling and no single player cap. But are resigned to cap. NHL made it clear there was room. NHL made great strides taking rollback off table last night. Going to be hard for PA to turn this down."

Ceiling did increase, but became floating ceiling tied to league cap that could also decrease team cap -- Eklund had nothing on league cap. Individual cap in NHL proposal still, rollback too -- no strides there. PA easily turned down offer.

Jan 29: “From my source. "PA called, discussions heated, but when all said and done, NHL people laughing and high five-ing.’”

Eklund claims NHL chastised him for publicizing random point in time taken out of context in organic process. That NHL still has no reason to high-five proves them right, him wrong.

Further: “I'm also getting word pressure on Bettman from big teams led by Philly, Detroit, Colorado, and Toronto more and more intense. If it goes past weekend expect to hear rumblings from big markets.”

Went past weekend -- no rumblings. On the contrary, Brooks, with pipeline to big market owners, criticized them harshly for acquiescing to cap hawks.

Jan 30: “I’ve been posting rumors for years over at Flyersphans.com. I’m preparing story about how this lock-out has affected you. I’ve received word from several papers that they will run it. In all likelihood trigger the end of Eklund Blog.”

Even re: himself, Eklund’s prognostications fail. Story never appeared, Eklund Blog continues to churn out rumors that never come to pass. Admission of being from fan web site explains a lot to me:

As editor, I personally handle dozens of stories from a dozen professional reporters plus half dozen “fan reporters.” No offense to the latter (I’m one of them -- I too write stories about fans), but pros are just that, pros, and have learned to write flawless prose (pardon the pun). Read Eklund’s blog -- far from flawless. Reads like someone from Flyersphans.com not from mainstream journalistic endeavors like THN or NHL.com.

Further: “a friend in PA says every time point is agreed NHL changes it. ‘They agreed to free agency at 27 weeks ago. NHL said, accept cap and no salary reduction. PA says OK, NHL says we need FA at 28. Players fuming. We question their intentions.’”

Plausible in theory. In reality, UFA age never publicly below 30, neither side rescinded rollback from 24%. This is why it's dangerous to post rumors out of context -- info may not be real, may be negotiating ploy, but is mistaken as real if not reported properly.

Further: “Plans are to start season on February 14 if possible. ‘PA is going back to talk to reps about something big.’”

What happened to right after Super Bowl? Eklund missed every single date he reported. PA took back same proposal they got ensuing week, both rejected. Nothing big, nothing new.

Jan 31: “I have it on a very reliable source that meetings will resume in New York. Bottom line ask yourself, why hasn't season been cancelled?”

Continued meetings already known, wholly expected. Still doesn’t get why NHL cannot cancel season, but has to let clock run out on it.

Further: “two agents said, ‘We haven't gotten calls in months, today ten calls regarding players. I asked GMs why now? They said they are told to prepare for quick start in conference call this afternoon."

If true, hard to believe it’s based on optimism rather than realism -- if NHL wasn’t going to sweeten proposal rejected days earlier, why believe PA would suddenly accept it?

Burke_brianLater that day: “From a source in NHL Office. ‘Owners, realizing players aren't getting info from their leadership, sent Brian Burke detailed e-mail explaining new deal. Told him indications are players will accept, asked him to go on air, be as “optimistic as you ever have been”. Getting close to announcing deal in principle.’”

Mistakes in naming show and radio station are small signs of sloppiness. Bigger indicator of weakness in Eklund’s info: big thing Burke leaked profit-sharing element -- info came from NHL, said the source, but he didn’t give Eklund main piece of info they leaked? Clearly, Eklund got this ex-post secondhand via FAN, not beforehand from any source.

Further: “Season slated to start March 1, 30 game sprint mostly against your division, several home and homes. AHL rules implemented on trial basis for regular season.”

Two week slippage in start date from day before? AHL rules widely expected. Intra-conference play a certainty -- intra-divisional? Has to be that way, no?

Also that day: “My story: editor going through it, awaiting approval, may be delayed a day.”

Or a week?

Feb 1: “Public denials, NHL not putting new deal on table. As I understand it they aren't lying.”

Formal proposal was on table within 24 hours.

Further: “They are denying leaks to Burke. I was sent e-mail, ‘Burke not aware of inside negotiations.’”

Eklund didn’t believe them, neither do I -- Burke knew about profit sharing.

Further: “painfully obvious players don't have any idea what’s going on. One Av player vented to me... He called PA, asked whether he should take job in Europe, they said, ‘We aren't at liberty to give advice at this time.’”

Plausible, given fluidity of ongoing negotiations, impossible to verify, possibly misinterpreting PA response (in mid-meeting, might not have known what to say).

Later that day: “Sides are meeting tomorrow, though they’ve been at it for last four days. Goodenow heading to NY. I was told only to sign deal.”

Sides well versed in 21st century technology, know how to use phones, E-mail, don’t have to meet in person at all times. No subterfuge -- they get together when necessary, use other modes in between. Goodenow did go to New York, but to negotiate, not rubber stamp.

Further: “I'm doing re-write [of my story] before it’s sent out. I'm personally not happy with it. I'm not hitting the point I want strongly enough.”

Wait, wasn’t it supposed to published already?

Feb 2: “NHL's new deal might be better than rumored. From source: ‘They leak specific deal, come to table with something more attractive. Saskin will take proposal back for vote to make NHL sweat. They already held vote. Tomorrow the day to look for something to happen.”

What happened? Deal rejected.

Further: “GMs telling players this is last deal, if they don't take it 1/3 will not have job next year. GMs quiet until this week, gag order on them lifted.”

Possible, but hard to verify -- rejecting offer, players willing to risk GM threat, despite otherwise unsubstantiated rumors of player insurrection.

Later that day: “PA's first reaction was absolute no, NHL made alterations involving Luxury Tax and Free Agency age. Team reps contacted, meeting again, very intensely. My source said, "If we are still meeting by 2 pm chances increase deal will be struck. If still meeting by 5 pm, it will get done.’”

What could NHL do with luxury tax? Unless they re-opened soft cap-hard cap hybrid, tax within 53-55% range laughable, hardly “major alteration”. UFA age evidently not enough to sway PA. Meeting ended by 5 PM (E-mail from PA re: Saskin con-call at 5:03) -- no deal.

Later that day: “This follows what I expected this morning. PA walks away, makes NHL sweat. Tomorrow will be the day as expected. Goodenow coming is huge. He’s a deadline guy, his job is to get this done.”

Stating the obvious -- nevertheless, NHL never broke a sweat and Goodenow didn’t get deal done.

Feb 3: “Rumor perhaps Goodenow will use cap to his advantage. A lawyer says NHL is going to lose. 'NHL has made huge mistake by putting a big stake in cap. Goodenow could accept cap if they agree to other terms. He could get serious perks from this.'”

I wrote same thing on BlueshirtBulletin.com same day in context of NHL’s impasse strategy, not in extracting perks. I was clear Goodenow would never use this tactic, and he didn’t.

Further: “I am finishing my rewrite, will submit for publication.”

Wasn’t it already accepted? We wait with bated breath.

Later that day: “Letter from team employee: ‘They finally used C word, told teams to prepare STH's (season ticket holders) about season being canceled. My bet 6-32 hours this is all over one way or the other. Time has run out.’ My guess in 6 hours it’s over. The longer they meet the better indication players accept cap. Puck is in players’ end.”

Met late into night and next day -- players still reject cap. Still not over -- both sides left door open for more talks.

This is why journalists have sourcing and substantiation requirements. Eklund is presented with clearly contradictory messages -- the front office (GMs) gearing up for signings, the back office preparing STH’s for cancellation. Real reporters investigate which story is true, what explains this apparent paradox. Publishing both without explanation is irresponsible lazy journalism. Hiding behind a cloak of anonymity and blind items is no excuse, it is even worse.

Eklund defends his blog by accusing the mainstream media of a huge conspiracy to present only negative news, even though media are clearly split pro-NHL vs. pro-PA and want to out-scoop each other, not compare notes to tell the same story. What he fails to see is mainstream media only go with information they can journalistically verify. That includes Brooks and Strachan.

There is good reason for persistent mainstream negativity -- reality. Not one rumor Eklund published in his self-proclaimed noble pursuit of optimism and open information has come true. Not one!

Saskin_tedLater that day: “Bob explained to players he was going to New York to ‘make a deal. Saskin left me confident there is a deal to be made. I intend to not leave New York until we have agreement. I can reach this without a cap.’ Person I talked to said mood as ‘positive as I’ve seen it.’ Bob left saying, ‘Let's end this’.”

Sounds reasonable, though BG’s enduring belief he can end it without cap contradicts Eklund’s months-old reports players are resigned to one.

Further: “Despite Bettman's resolve, some question whether he will have guts to cancel season. Big market teams pushing hard, some middle level franchises starting to get edgy. Bettman has a lot of pressure.”

Still hasn’t budged, with owners reportedly back in line for weeks. If he didn’t have guts to cancel season, would’ve caved weeks ago under pressure from big markets. Cancellation remains non-issue.

Later that day: “I am told ‘major concessions made, neither side wants to release until all has played out.’ I have reports about concessions, but been told to keep it off blog. They don't want anything in the way of progress. I respect this in hopes they get season going.”

A sudden bout of conscience? No concessions in mainstream news as it the past, no progress made.

Feb 4: “I’m being asked by sources to not reveal much. Let's just say, they’re each giving a lot away, actually dealing. Only thing I can say is cap may be worked out. Pretty vague I know.”

Later that day: “From source in NHL, ‘We’re at halfway point of end game. Goodenow moved as far as he can, pretty far. Bettman said he needs approval from owners to move. Goodenow accused Bettman of staging that he couldn't deal without owners. Owners meeting tonight. Talks with PA could start tomorrow. Serious doubts whether Bettman prepared to pull trigger on season. Speculation was season would be cancelled prior to Super Bowl -- no indication [it] will be cancelled, signs point to deal being made.’”

Feb 5: “I spent last night talking to both sides, two are FINALLY in the dance. Deadline set. Feb 14. 30 game season March 1 being scripted. Concessions made, Goodenow saying ‘no progress’ is media play. A staged storming out.

"Here’s what I’ve heard. Players would accept 50 Million Cap, owners at 42. Way around this goes back to rumor posted here a while back. Franchise player exception. Difference between 42 and 50 could easily be 1 player. This will distribute superstars through the league. Big markets get big guys (NHL secretly doesn't mind).

"PA loves this because you don't swallow up 20% of cap to single player. NHL gets cost certainty, players know there will be money for third and fourth liners. Lower teams will compete. Balance will never get out of control again.

"This will get done. It was almost done, Bettman got nervous. He talked to owners last night. Call was only 25 minutes. I was told by someone in Flyers organization he feels ‘very confidant and relieved’ this morning."

Feb 6: “My sources say sides were in constant communication yesterday, plan to talk more today. Still not certain whether talks Monday in person. I can't release details, but I'm still in good mood. Enough said?"

Too much said, that’s the problem (a long unsourced opinion piece followed). In this case, too much is truly not enough, less would truly mean more -- if it was vetted properly.

The last three entries were posted over the last three days, too soon to say how they reflect the reality of a situation that remains under close wraps. Still little reason to believe that Eklund’s rumors can come true.

It doesn’t stand to reason that the NHL would agree to a de facto $50 million cap. Regardless of any euphemisms that might be used to pretend the cap was $42 million, truth is the hockey world is savvy enough to see the unconditional capitulation on Bettman’s part this would be -- no cost certainty, no ceiling on franchise player salaries, no linkage to percentage of league gross that is more the cornerstone of his philosophy than a hard cap and is more the source of PA intransigency than a hard cap. He’d have gone for three years-three years or a $35 million soft cap up to a $50 million hard cap before this -- this is worse.

Sherry Ross of the New York Daily News wrote on Feb 5 that “Sources said the talks included many alternatives and economic models by both sides, including a few not previously proposed, but with the NHL unwilling to budge much on its central point of a ceiling for a salary cap ($42 million).” One of those alternatives is all Eklund seems to have gotten (I won’t say made up -- let’s give him the benefit of the doubt, since there is not much benefit to it anyway). What about the others? What about the NHL “unwilling to budge” from a show-stopping ceiling with respect to the franchise player cap?

Even if we take Eklund at his word that he wants to counterbalance an overly negative mainstream media with positive news no one else wants to share with players or fans, he is still guilty of playing “Nearer My God to Thee” on the Titanic -- it is counterproductive to give passengers false hope about the fate of the sinking ship if it keeps them from getting to the life boats.

As a Ranger fan, I know all too well about that. It took seven years for the body of Ranger fandom to get past eternal optimism and realize the dire straits the franchise was in. It’s hard to criticize optimists, but realists were frantic with the lack of support for change. Only last year did the call ring out universally through Madison Square Garden -- too late to effect complete change, generating only a partial promise of a new direction.

Eklund, you are doing a disservice to the fans you think you are advocating for. You have not gotten one single major point right, and have gotten only a small handful of minor or obvious points right. In the process, you have created false hope among fans who should be clamoring for resolution, and worse, it appears possible you have emboldened one side to take a harder line by portraying the other side in an unflattering light that no other source has validated.

You call yourself a journalist, but you write and report more like a journalist wannabe, which opens you up to accusations of self-promotion. Behave like a real journalist and try to find some level of integrity in your sourcing and your substantiation if you want to start getting things right and doing a true service to your readership, not to mention your own ambitions.

[Financial contributions welcome -- all receipts guaranteed to be donated to that well known charity, The Human Fund]

Friday, June 11, 2004

Final Words at Conclusion of NHL Finals

Broders_hockey_6Good afternoon, everyone! Thank you for coming to Tampa for the conclusion of the 2004 Stanley Cup finals. I'd like to start by congratulating the Calgary Flames and Tampa Bay Lightning on their spectacular Game 7. Under the circumstances, with the NHL ready to shut down because of a dispute over its economic system, one can safely say there was no loser here. Yes, one team took the Stanley Cup home, but two small-market teams came this far, after years of losing, despite having payrolls a fraction of big-market teams left behind, some far behind.

These two unlikely finalists came this far, and 12 different teams have reached the Stanley Cup final four in the past three seasons, and 21 teams made the final four, 12 of them advancing to the finals, in the past decade playing under the current CBA, and 20 teams have vied for the Cup in the finals since 1990 -- including six of the nine teams that have joined the NHL during that span of time! That should say something about the ability of teams to compete on the ice regardless of market size or payroll level.

But you'll never catch NHL commissioner Gary Bettman saying anything like that. No, what you'll hear Bettman say over and over again is only what serves him best. In a 973 word introduction to his May 25th pre-finals Q&A, 386 words (40%) were about the CBA, mentioned five separate times, despite his protests right up front that "the Stanley Cup and the game itself should be the focus". In the overall press conference, 66% of all discussion was in re: the CBA, mentioned 20 separate times, despite Bettman's reiterations that the finals should be the subject of conversation.

Such protestations aside, Bettman said twice more that NHL revenues as publicly reported are "gross" even though the Levitt report clearly describes them as "net". Perhaps Bettman, who never used the word "revenue" alongside "gross", meant "gross profit" rather than "gross revenue", which is far closer to the truth. Regardless, both writers and readers of media reports continue to act as if he is referring to gross revenue -- which made it appropriate for Bettman to admonish reporters to read the Levitt report before asking stupid questions, though for the wrong reason considering his own repeated misquotes of the findings.

So let me take this opportunity to admonish all of you in advance for all of your stupid questions: Get a degree in economics, finance, and accounting before trying to figure all this out. In the absence of such, ask away, and I'll do my best to answer based on my own business experience:

Q. Why is the NHL so hell-bent on getting the players to agree to a salary cap? Why don't they all just get together and say, "This is how much we all agree to spend on our teams"? After all, they're in charge of their budgets, aren't they?

A. I know most of you know this already, but there are a handful of people who need to be reminded that the NHL cannot simply impose a salary cap on the players -- not even tacitly by getting together on the side and saying, "Let's not pay our players more than $x." It would be illegal price fixing without the players' consent in the form of a collective bargaining agreement.

On the other hand, there's nothing to stop owners and their general managers from saying, "From now on, we vow to manage our business sensibly," and based on that statement decide team by team and player by player what to spend. In fact, the players' association would welcome such a stance far sooner than the price fixing scheme the owners want to force upon them. That's exactly what happened this past season, causing a bit of a decline in salary levels, and the players readily agree that a decline is inevitable due to stagnant revenue streams -- they just don't want to be locked into artificially capped salaries when revenues and franchise values rebound down the road.

Q. What about some sort of revenue sharing or luxury tax system?

Revenue sharing between teams will never happen. There is no way the billionaires who own the big market teams will agree to subsidize the billionaires who own the small market teams (most of the paying public may not know just how wealthy their team owners are, but you can bet your booty their fellow owners do).

A luxury tax will never pass muster with ownership either. No way will the billionaires who are willing to spend money to try to reap the lucrative rewards of winning (some like Detroit with some success, some counterproductively like the Rangers) agree to share any of those profits with the billionaires (like those in Boston and Chicago) who prefer to bleed their fans dry and pocket all the earnings without ever pretending to ice a team capable of competing for the Cup.

Ultimately, franchise value pre-empts any potential for revenue sharing -- the fellows in large markets who own multiple teams playing in lucrative arenas on hyper-valuable real estate for rich broadcast deals on networks some of them own are not about to allow any part of their equity to transfer to teams that lack some or all of those key attributes, not when they paid premiums for them in building or buying their franchises.

Q. Is that what they mean then when they say the economic system is broken?

No, that's not what the NHL means, even though that summarizes the entire economic system, or rather the entire spectrum of business models, of the NHL -- and the inequities betweem them. The average fan, to whom any phrase that includes the word "economics" is roughly equivalent to Dracula saying "I vant to suck your blood", is able to boil it all down pretty quickly to the single essential element behind the dispute: money.

To put it bluntly, the NHL wants to take back about half a billion dollars of profits it has transferred to players in the past decade or so. The players, realizing that revenues have flattened and that they therefore have to give some back, unilaterally offered to cut their share of last year's pie by 5% across the board -- 15% of the disputed half billion -- while they negotiated the terms of the new CBA (they asked for a share of franchise value in exchange, and were of course immediately turned down, which sums up the whole ball of wax right there). More recently, the NHLPA was rumored to have offered a 10% salary reduction (30% of the half billion) in exchange for a luxury tax system, which we know owners will never agree to among themselves let alone with the players, and a reduced age of free agency.

Q. So what exactly is the economic system that they claim is broken?

Actually, the economic system of the NHL, the one operational across the board as opposed to individual team business models, was on full display this year in the Stanley Cup playoffs: in the NHL, success on the ice translates into financial success. Pittsburgh, Montreal, and Edmonton were not having any difficulty when they were winning Cups. Neither are Calgary or Tampa this year, nor was Minnesota or Anaheim last year, nor Vancouver or Ottawa the past few years despite disappointing playoff runs. Revenue, profits, and franchise value have soared in Detroit, Dallas, and Colorado in the past decade. The Devils are the only anomaly because of their unenviable geographic position in the armpit between two highly popular franchises in New York and Philadelphia.

The Devils have won three of the last ten Cups under the management of the notoriously frugal Lou Lamoriello -- Bettman completely mischaracterized them as a top-ten payroll team (they may be now, after winning three Cups, but otherwise have been the model for economical team building). Two other Cups were won by Colorado, a team that has let far more free agents leave than they have signed and have staked their place in the NHL pantheon mainly by developing or trading their own home-grown assets. And now, with Tampa's win, fewer Cups have been "bought" during the current CBA than have been wisely built.

The incentive is to win, which seems to me to be a good thing -- what the NHL wants to impose is a system that makes losing profitable too, that rewards (or at least makes up for) bad management as well as good management, and that, if Larry Brooks is right about a lower age of free agency as in the NFL, will make it even harder for teams to retain their home-grown stars in the long run. Fans should think long and hard about whether they want their money to subsidize losers or reward winners before deciding whether they support skewing profits toward the players they pay to see play or to team owners.

Q. OK, we all know it's about money, and the NHL claims teams are losing money under the current system. Are they wrong to say that?

I've gone to great lengths to show that we really don't know -- and despite all protestations over what the Levitt report purports to say, I've shown specifically some of the ways that report intends to deceive us, some of the many holes remain in our knowledge even with the report, and how even Gary Bettman doesn't seem to know exactly what it says. I can say one thing with certainty -- recent bankruptcies in the NHL have zero to do with player salaries and everything to do with owners' extra-curricular activities (some of them criminal) or a lack of adequate arena facilities.

As if to demonstrate just how uncertain we will ever be about team finances, take newly reported information about the Rangers and their parent company, Cablevision. Cablevision has lobbied hard against a proposed new West Side stadium for the New York Jets that would compete with Madison Square Garden for arena events. We have learned during this dispute that the Garden receives an annual real estate tax abatement -- a 100% abatement -- from the city worth tens of millions of dollars annually. Is that credited as revenue? Is any portion of it credited to the Rangers? How many other teams have publicly funded benefits of this type? Teams in Canada that are taxed to death make no secret of its detrimental effect -- why does no one publicize beneficial tax programs like this one? What other types of revenue streams or cost abatements do teams benefit from that never make it to the operational ledger?

I have no doubt that some teams lose money and that some teams make money. Every piece of real data I have been able to get my hands on demonstrates 100% that this is a result of team management performance as it translates into business decisions and winning hockey. Seems to me the only solution to this problem, as it is for just about every business entity in the world, is to improve management. Why is the NHL avoiding that issue and trying to force millionaire players to subsidize billionaire and near-billionaire owners who refuse to subsidize each other?

Q. Good question: Why doesn't the NHL focus on getting its own house in order before resorting to a work stoppage?

Because they know it will mean contraction, and after collecting all those expansion fees and having already spent the money or having cashed in on inflated franchise value over the past decade, letting teams fold or relocate is something they want to avoid. Meanwhile, contraction may very well be the correct answer to the problem -- the true economic problem in the NHL is the simplest economic one, supply and demand.

Overexpansion has diluted the talent pool to the point where there are too few stars to go around. Fewer stars, more teams bidding on those stars -- that's called high demand forcing up the price of a limited supply item. Classic.

The NHL can try to impose any type of artificial system it wants on the NHLPA, the laws of supply and demand will subvert them in the end, just as they did in the last CBA. Funny that the owners are now hell-bent on undoing a CBA that was a huge victory for them a decade ago. Just as the limited supply of players caused teams to break the rookie salary cap they won in that CBA, just as the limited supply of stars caused teams to overpay for restricted free agents over whom they possessed all bargaining levereage under that CBA, just as the too-high age of unrestricted free agency caused teams to overpay for players past their prime, so too will the backbone of capitalism, the law of supply and demand, undo any future attempt to impose artificial trade restraints.

Tragically, the NHL's misreading of the supply and demand equation has also caused the nature of play on the ice to devolve. They can talk rule changes all they want, the truth is there are too many muckers and grinders and not enough skaters and scorers. Some coaches were smart enough to realize this and have built good low-budget teams strictly on the strength of one or two scoring stars surrounded by well-coached legions of trappers and checkers. To some extent, I believe the NHL might have even encouraged this style in order to devalue the power of stars heading into this CBA negotiation -- it may sound crazy for the NHL to undermine its top drawing cards, but listen to how they consistently downplay their financial performance in a world where most businesses do the opposite, and you can come to believe that anything is possible.

The draft has been likewise diluted by overexpansion. Glen Sather will never be able to luck into a team like the Oilers again -- he'll never have enough draft picks to get all those players in a single draft, because he will have to wait 30 or more turns between draft picks (this year he has all those first- and second-round draft picks he amassed in his Ranger fire sale last March, but that's a one-shot deal and it took several drafts to build the Oilers). To underscore just how much the draft has been devalued, check out its impact on Tampa and Calgary -- Tampa had only five of its own draftees on their Cup-winning roster, only one a first rounder, four of the five emerging from one draft class; Calgary likewise had only five (a sixth missed the playoffs due to injury).

Q. So that's it? It's as simple as supply and demand to not only right the ship financially but also get the on-ice game back to the level of excitement that spurred the growth of the NHL in the first place?

Well, that's the way I see it. But I'm no hockey professional. On the other hand, I do know a thing or two about economics and business -- a sight more than your average GM. If sports in the latter 20th century into this decade has become less of a game and more of a business, the players have gotten a step ahead of the owners by choosing to employ the right type of professionals (lawyers, agents, and such) to represent them and negotiate on their behalf against team management culled mostly from the ranks of hockey professionals (former players, coaches, scouts, etc.).

I for one am not surprised that two of the more successful GMs in recent years, Colorado's Pierre Lacroix and Brian Burke for Vancouver until last month, are former player agents. Meanwhile, everyone pretty much agrees that the game has passed the once fabulously successful Glen Sather by (except, unfortunately, his boss, self-proclaimed hockey ignoramus Jimmy Dolan). Perhaps the time has come for teams to strike the right kind of balance between business issues and hockey issues in selecting their management teams. A real company would structure itself so that a CEO would make appropriate decisions based on input from a CFO on relevant financial issues and peers representing the appropriate creative, technical, and/or operational issues -- so too should a hockey team set itself up so that the ultimate decision maker gets the chance to balance his decisions based on input from different kinds of experts.

Q. So how do we get ourselves out of this whole mess? There doesn't seem to be an answer, at least not one that anyone's willing to accept.

A. There's nothing we can do as fans anyway, except squawk about it, and in the extreme case choose not to spend our money on the NHL. The best we can do, like baseball fans did last time around, is to let all parties know loud and clear that they are just a bunch of greedy schmucks who had better figure out a reasonable way to split their lucrative pie without taking our hockey away from us, or else the pie is going to go seriously stale.

The point is, it really doesn't matter what system they put into place, since market forces will ultimately prevail, so why shut the NHL down over it? The time will come, sooner or later, where one team will put its own self-interest ahead of the collective interest of the league and undermine whatever restrictions may come into place. We will learn a lot about teams' resolve between now and September 15th -- the current CBA still holds for qualifying offers, free agency, and arbitration. A complete lack of activity by teams probably opens them up to accusations of collusion. But rogue activity by one team will probably trigger a cascade of activity among all teams.

[Links to be added shortly]

Friday, April 16, 2004

Your Own Worst Enemy

An eleven-step program for self-destruction by NHL ownership, or the miracle of the free market system?

Broders_hockey_6Salary escalation in the NHL is not, contrary to public opinion, the Rangers' fault. Not wholly. Yes, the Rangers certainly deserve a lifetime achievement award for perennially setting a new high-water mark for most dollars wasted on over-inflated salaries for under-achieving players. But the Rangers have, surprisingly, been followers more often than leaders in a salary spiral fueled significantly by teams that now cry poverty (or have in the past) -- teams like Chicago, Boston, Winnipeg, Quebec, Los Angeles, and Carolina. Here is a chronological look at the deals that most contributed to the salary spiral in the NHL:

1972 -- Winnipeg signs Bobby Hull to a five-year multi-million dollar WHA contract

The NHL was merrily rolling along, adding a decade of expansion revenue to half a century of holding players under the reserve clause, when the upstart World Hockey Association spoiled all the, um, spoils. That evil WHA! All the WHA did was exactly what entrepreneurs are supposed to do in a competitive capitalist market -- they saw a cheap source of labor in an expanding marketplace and found a way to arbitrage it. The entrenched monopolists in the NHL were outraged as the WHA scooped up players by offering them more money earlier in their careers than the NHL ever offered.

The first and most celebrated target was Bobby Hull, signed by Winnipeg to $350,000 a year for five years and a $1 million bonus after the corrupt cheapskates who have ripped off Chicago fans for decades on end (and counting) refused to give him a modest raise. Other stars joined Hull, forcing NHL teams to offer competitive salaries. The WHA tapped pools of talent the NHL snubbed, importing Europeans like Ulf Nilsson and Anders Hedberg (who in turn came into the NHL as high-priced free agents), and signing teens not yet draft-eligible. When the NHL lowered its draft age to 18, the WHA did the unthinkable -- Nelson Skalbania signed Wayne Gretzky, the child prodigy everyone was waiting for, to his WHA team at the age of 17 (he signed Mark Messier at 17 too, but no one knew who he would grow into).

In 1979, the NHL did what every other league has done to eliminate an upstart competitor -- if you can't beat 'em, buy 'em. The WHA merged with the NHL -- well, four teams did, including Edmonton, who had gotten hold of Gretzky and Messier, Winnipeg, who had started the spiral by signing Hull, Quebec, who would figure heavily later in the story, and Hartford, the team that kept Gordie Howe going. Of these four small-market teams, only Edmonton remains, and only barely, the others having moved to larger U.S. markets.

Pity poor Winnipeg, where hockey died because they could not keep up with the dreaded salary spiral forced upon them by players -- the entrepreneurs who took the team that started the salary spiral away from its public owners when they entered the NHL sold out to Phoenix, the leader of the group reputedly pocketing $10 million in "consulting fees" so he wouldn't have to share all the proceeds with minority shareholders like the Province of Manitoba, who underwrote half his losses in order to keep the team in Winnipeg.

1989 -- L.A. Kings trade for Wayne Gretzky and sign him for $2.5 million a year for seven years

Peter Pocklington was in trouble. The only asset he had of any value to help get him out of his financial difficulties was his championship hockey team, led by perhaps the best player ever, The Great Gretzky. Edmonton was the only WHA team to thrive in the NHL, thanks to the enormous playoff and promotional revenue generated by Gretzky and Co. But suddenly it was more lucrative to Pocklington to sell off Gretzky's future than to harvest it with Gretzky and his posse poised to cash in on past performances.

Enter Bruce McNall, the flamboyant new owner in L.A. with a bold vision for jump-starting hockey in California, where interest had waned since the Kings entered the league in the 60s. McNall paid a handsome sum to Pocklington in hockey assets (which Pocklington wasn't interested in) and in cash (his true goal), and then he paid a handsome sum to Gretzky to lead the Kings into profitability. No one could ever overpay Gretzky, but that's not the issue -- the issue is salary escalation. In a famous reverse-negotiation described by Bruce Dowbiggin in "Money Players", Gretzky demanded less pay than McNall was offering, McNall forcing him to accept more. No one held a gun to McNall's head, not even the greatest gunslinger ever.

It turned out McNall was playing with other people's money, and he went to jail for it, but not until he demonstrated a new, lucrative way to do business -- to make the necessary investment in talent and promote the hell out of it, not only increasing traditional sources of revenue (gate receipts and playoff revenue) but inventing new ways to mint money (promotion and television). The die had been cast -- players were going to earn more money, but they were going to enhance revenue in the process.

1991 -- Rangers sign Adam Graves for $500,000 a year

Glen Sather knew as well as Neil Smith that Adam Graves was on the cusp of busting out as he entered his prime. But Sather was unwilling at first to pay what it would take to keep Graves in Edmonton, and later unable to match the offer that brought Smith's Rangers a key member of their 1994 Stanley Cup team. Considering what a pittance Graves asked for by latter day standards, it seems insane for Sather to not have found a way to retain Graves.

But the real failure here was the compensation system the league had in place to keep young players from defecting to the highest bidder -- at that slice of time, Graves was the statistical equivalent of Troy Mallette. But as Smith and Sather knew, Graves was on the verge of realizing a huge upside that Mallette simply did not have, an intangible factor the compensation system had no way of taking into account -- further supporting the notion that Sather should've just paid Graves.

Still, Graves did not open any floodgates. The subsequent Group II signings of Scott Stevens and Brendan Shanahan by St. Louis restored sanity to the RFA market because of the steep compensation paid by the Blues -- five first round draft picks for Stevens, and then Stevens himself for Shanahan. The Blues tried to lure Stevens back as a free agent but New Jersey exercised their right to match the offer and won a tampering case against St. Louis. Then they almost lost Shanahan in a Stevens-like way when they signed Vancouver holdout Petr Nedved, but this time the arbitrator did not give the aggrieved party what they asked for. With St. Loo's picks, Washington selected Sergei Gonchar, Jason Allison, and three busts -- not a bad trade for the Blues when you consider how long it took Allison to emerge.

1992 -- Quebec trades Eric Lindros to Philadelphia and New York

Gretzky and McNall proved one thing in L.A. -- beyond hardcore hockey traditionalists, new U.S. audiences respond to star power. Mario Lemieux validated the maxim by saving bankrupt Pittsburgh with his unparalleled skill set, despite being more ephemeral off the ice than a star is expected is to be. So when The Next One came along, teams salivated -- Eric Lindros, nearly as skilled as Gretzky and Lemieux in a size package so formidable it made Howe and Messier look like obsolete models of power forward.

If the lesson was not lost on owners, neither was it lost on Lindros. In an unprecedented event, a player held out for a better deal before playing even one NHL game. Lindros not only wanted a salary commensurate with Messier, a top star and proven winner, he also wanted exposure one could not get in a remote outpost like Quebec (so remote, it resembles a European city more than an American city, which is wonderful for tourists but not for promotion-hungry superstars, though Lindros failed to factor in the renown achieved by Gretzky and Messier in the equally remote Edmonton).

The Nords drafted Lindros nevertheless, but then had to deal him a year later or risk losing him. Marcel Aubut, a leading small-market complainer, traded Lindros for a ransom in players and cash -- and he got so greedy, he did it twice, trading Lindros to both the Flyers and Rangers. The Flyers "won" Lindros in arbitration. Like McNall, Ed Snider was willing to give up a wealth of players, including one who proved to be better (Peter Forsberg), and a bushel of U.S. dollars to Aubut, plus a rich contract to the untested rookie -- one who turned out to be as injury prone as he was talented and intimidating.

All Aubut did to reap this huge reward was lose. His team drafted Lindros first overall because it was terrible. They had already drafted Owen Nolan and Mats Sundin first overall because they were so terrible for so long, and ended up with Forsberg instead of Lindros, and then some. Then Aubut cashed in. On the eve of a Stanley Cup championship, Aubut sold out his Quebec fans to the tune of $75 million, nearly fivefold what he paid seven years earlier. The Avalanche won the Cup with Forsberg and other players obtained for Lindros, and by parlaying other assets from the trade into Patrick Roy, the final piece to their puzzle (with Mike Keane as a throw-in!).

So feel sorry for Quebec fans -- they got shafted big time. But don't feel sorry for Aubut, no matter how many crocodile tears he may have cried. Lindros deserves some blame for insisting on a trade to more lucrative climes, but Aubut reaped most of the benefit when he cashed in his asset. Aubut was well within his rights to make the most of his investment (even with all his whining about how awful a business the NHL is), as was Lindros in marketing himself. But what rights do fans have, other than gaining entry with the tickets they bought?

1993 -- Ottawa drafts Alexandre Daigle first overall

Everything you need to know about the economics of the NHL is encapsulated in Ottawa's handling of Daigle in their second year of existence. The NHL let small-market Ottawa into the league the year before solely because it was one of only two bidders willing (though not necessarily able at first) to pay a $50 million entry fee -- the powers that be, the very ones crying poverty today, did not look past their greed for one split second. The franchise's future was pinned, as franchises so often are, to a real estate deal for an arena -- one should not be surprised that primary owner Bruce Firestone was a real estate developer hoping to marry his interest in hockey with his day job.

Complicating matters, financing for the arena was forever on the verge of collapse, which would have taken the team down with it. Firestone broke ground on the project without financing in place and soon was forced to relinquish the entire venture to Rod Bryden. Financing fell into jeopardy again for a reason that would be laughable if it weren't so incredible -- the location was so remote (owned by the team of course) that a highway interchange had to be privately financed and built!

With the first overall pick (one they reputedly tanked to get, leading to the lottery system now in place), Ottawa did not attempt to get the best player available (second overall pick Chris Pronger, wanted by their hockey people) -- they wanted the most marketable player: Alexandre Daigle, the charismatic French-Canadian forward openly coveted by the other two Quebecois teams, the Nords and Habs. Daigle got a Lindrosian rookie contract controversial in hindsight because he was such a huge bust on the ice.

But was Daigle really a bust? He wasn't drafted to play hockey, he was there to attract financing and sponsorship. And that he did, helping ownership get past its real estate crisis. They eventually went bankrupt anyway, mainly because team-owned land around the arena was slow to develop. So a small-market franchise was born strictly from the greed of NHL owners in order to justify its owners' real estate ventures, a pivotal moment in salary inflation was created by this economically fragile franchise strictly to salvage these real estate ventures, and the failure of the real estate ventures ultimately forced the hockey team in to bankruptcy. Any questions?

Thankfully, this story has a happy ending, as the Senators have proven to be a model franchise in building a highly competitive and entertaining hockey team the old-fashioned way -- solid talent evaluation, dedicated player development, good management and coaching. Ottawa is the best argument against salary escalation, better even than a salary cap (which would only force a team like Ottawa to break itself up prematurely when it came time to pay its stars for services well-rendered). And Daigle, in a bizarre turnaround, has transformed himself from a player who turned his back on hockey in his prime to a Masterson Trophy nominee.

1995 -- Chicago signs Winnipeg's Keith Tkachuk to a front-loaded offer sheet

The Daigle affair led directly to the 1994 lockout. By all accounts the NHL kicked the NHLPA's butt in winning huge concessions before the shortened 1995 season was allowed to begin -- free agency, limited to players over 30, gave teams undisputed leverage over restricted free agents in their prime; new compensation rules precluded a repeat of a Graves-Mallette scenario; rookies were under an entry-level salary cap that made any reincarnations of Daigle impossible; and arbitration was streamlined in a way that favored owners in several respects.

Nevertheless, it was no surprise when one owner raised the salary standard for RFAs with a ridiculous offer. But it was a surprise which owner did it. There is no bigger skinflint in the NHL than Bill Wirtz (I won't repeat his and his family's unsavory history -- books have been written about it). This is a guy who once stormed out of an NHL board meeting, crying that he cannot do business with idiots anymore (Ed Snider's willingness to spend to improve his team had gotten his goat).

So what does he do? He signs Keith Tkachuk, then 23, to a front-loaded contract that paid him what was then a cool $6 mil in the first year, followed by $2.6 to $3 million per season over the next four seasons. If he had a grudge against Winnipeg, I haven't found a hint of it -- was he getting them back for Bobby Hull these many years later? One writer suggests the Tkachuk offer was orchestrated to defuse an NHLPA accusation of collusion weeks earlier, but I don't agree -- several lightweight RFA offer sheets would have done the trick, not one that proved too weighty for the financially troubled Winnipeg team that had to match the offer.

Tkachuk scored 50 that season, and the Jets moved to Phoenix the next season. Coincidence? Perhaps. But there is no disputing the gall and hypocrisy of Wirtz, his franchise sinking deeper into the mire since then due to his steadfast refusal to ice a competitive team.

1997 -- Boston signs Joe Thornton to the "Model Contract"

In a fitting twist, the rookie salary cap was shattered within two years by another low-payroll team with a similar need to fill a new arena. Boston was not incapable of paying competitive salaries, just unwilling. But with fans in open revolt after a terrible season, attendance dwindling, and the Fleet Center, built privately and owned by Bruin owner Jeremy Jacobs, set to open, something dramatic was needed. Harry Sinden's best answer was first overall draftee Joe Thornton -- like Daigle, the power center would be rushed to the NHL a year or two before he was ready at age 18 for reasons other than on-ice performance.

Fearing his client's career could be hampered without proper development, Thornton's agent proposed a bonus-laden contract that resolved performance issues to his satisfaction while allowing the Bruins to get Thornton into a marketable position. The model was so effective it is now known as the "Model Contract" for entry level contracts, blowing out of the water one of ownership's primary victories in the CBA. Unable to control themselves even when the rules favored them, owners and GMs now seek drastic measures to shackle themselves.

As with Tkachuk, this serious step is salary escalation was taken by a notoriously miserly team. Sinden's defense, as quoted by Dowbiggin in "Money Players", is one of the best arguments the NHLPA could ever cite in support of its free market argument (which says owners do not overpay players, they pay them what they are worth): "I [said], 'From now on, I don't care what happens to you because of this contract. I let all kinds of players go over the years because I wouldn't pay them. I tried to do the party line, hold salaries. But you signed your players at whatever.' Now they can tar and feather me. I got a chance at the best player since Lindros, and he's come along really well. He has sold seats. Everyone is excited. We weren't going to sign him for nothing. We could not risk him going back into the draft."

1997 -- Vancouver signs Mark Messier for $20 million, Rangers give Joe Sakic a front-loaded $21 million offer sheet

We're deep into our list here, and yet still not ready to go directly to the one contract, the Joe Sakic offer sheet, often held up front and center as the main cause of salary escalation. As we have seen, small-market, low-budget, poverty-crying teams like Boston, Chicago, Quebec, Winnipeg, L.A., Ottawa, and Edmonton were at least as instrumental as free-spending teams like the Rangers, St. Louis, or Philadelphia in ratcheting up payroll standards. Vancouver, known to cry poverty now and again despite operating a gorgeous arena in a good hockey market, precipitated the Rangers' infamous Sakic offer sheet. With the Rangers no longer willing to pay a premium for the aging Messier for the 1994 Stanley Cup, the Canucks stepped in and lured him away with a three-year, $20 million deal. Faced with an unexpected hole at center, Neil Smith made a bold move to sign RFA Sakic from Colorado.

The offer sheet Sakic signed was not as heinous a raid as some portray -- with Forsberg and Sakic both restricted free agents, the Avs chose to re-sign Forsberg first, and were believed to therefore be unable to afford a commensurate salary for Sakic. To make it harder for Colorado to match, Smith put most of the $21-million three-year offer (barely higher than Messier's deal) into a signing bonus, and was prepared to give up the required compensation of five first round draft picks (a system that acts as an RFA signing cap -- you can only give up those draft picks once every five years). But Colorado matched (ironically, the infusion of cash Colorado received that enabled them to match came in part from Liberty Media, co-owned by Ranger owner Chuck Dolan, and in part from Fox Sports, owned by Ranger minority investor Rupert Murdoch).

In retrospect, Smith did little to change the landscape of NHL salaries with the Sakic offer sheet. Sakic didn't get much more than Messier, Tkachuk, or Forsberg. Paul Kariya, despite having the same agent, could not get a piggy-back deal from Anaheim, holding out well into regular season before settling for less. It was not the first front-loaded offer sheet designed to deter a poorer team from matching -- that honor goes to the Blackhawks' offer to Tkachuk. And only two others ever tried to load an offer sheet to discourage a team from matching.

The first was Bobby Clarke, literally weeks after crucifying Smith for this tactic, doing the exact same thing to Tampa to get Chris Gratton. Clarke worked a trade to get his compensatory draft picks back, but Gratton was such a bust in Philly that all players reverted to their original teams less than sixteen months later. The other was a truly heinous offer sheet in 1998 -- Carolina's Peter Karmanos structured an offer for hold-out Red Wing Sergei Fedorov that included a $12 million bonus for making the final four, something Carolina could not accomplish that Detroit was almost certain to (in fact, they won the Cup that year). Detroit matched, and Fedorov made $28 million that year -- thanks to Karmanos acting on his long-term multi-faceted grudges against Detroit owner Mike Ilitch.

1999 - Rangers sign free agents Fleury, Kamensky, Lefebvre, Quintal, et.al.

Very few pivotal moments in the history of the NHL salary spiral involve unrestricted free agents. This is the one area where the CBA actually worked as intended. By not allowing players to become truly free until they were over 30 (in rare circumstances younger), the CBA forestalled bidding wars on players in their prime. There have been anomalies, but most UFAs have gone for market value -- overpaid underachievers are offset by those who have to wait for contracts and end up settling for less (if anything at all). By contrast, troublesome rookie or RFA offers permanently raise the bar among players over whom management once had leverage.

The Rangers are the only club to never understood that UFAs are past their prime. Their biggest gaffe, the one that affected subsequent UFAs, was the binge of 1999 -- they gobbled up nearly every marquee UFA they could get in a misguided attempt to plug numerous holes. They overpaid wildly for Fleury, already known to have substance abuse problems that were not yet public, and for two other Stanley Cup alumni the Avalanche knew were done, Kamensky and Lefebvre. They paid depth defenseman Quintal to be a top pair D, which to everyone's chagrin proved to be a pipe dream, the affair ending badly all around. And to a lesser degree, adding fuel to an already out of control fire, they plugged lesser holes with the over the hill McLean and the fragile Taylor.

Neil Smith lost his job after this group not only failed to improve his team's fortunes but instead helped them crash and burn faster than ever. He learned no lessons from prior UFA failures (Ray Ferraro, Bruce Driver, Mike Keane and Brian Skrudland, John MacLean, and a bunch of lesser lights one step away from retirement -- even to some degree Wayne Gretzky in his final seasons). Shockingly, his successor Glen Sather, after berating him from afar and then again from within his former office, seamlessly continued making UFA blunders (Messier, Malakhov, Ulanov and Karpa, Ciger -- Holik and Kasparaitis have not been bad on the ice, but their contracts, for which a desperate Sather drastically overpaid, may yet prove to be albatrosses under the next CBA).

The problem created by the 1999 signings started with Sather's off the record hints before the start of the 2001 UFA season that he was going to sign every UFA he could get his hands on, starting with Colorado's Joe Sakic and Rob Blake. Sather's arrogance got the better of him, not for the first time nor for the last time -- he figured no one could stop him from repeating Smith's 1999 binge, but he was trumped left and right. Colorado re-signed their players before the deadline, Philly pulled off a deal of dubious legality with Phoenix when they de facto traded Daymond Langkow for Jeremy Roenick and re-signed John Leclair before they could reach the open market, and Boston snatched coveted power forward Martin Lapointe. The egg on Sather's face didn't dry for an entire calendar year -- he had to settle for Ulanov, Karpa, and Ciger in 2001, conceding that season right there, and was aggressive a year later pursuing and overpaying Holik and Kasparaitis (proceeding to mis-use them in another pair of lost seasons).

2001 - Islanders trade for Michael Peca and Alexei Yashin during the 2001 draft

There is one situation in which players do in fact hold a gun to a team's head demanding higher pay than they have coming to them. That is when a restricted free agent or a player in mid-contract holds out for more. In a sense, it's a Mexican stand-off, the team also holding a gun to the player's head -- he has no choice but to play for his team or not play (and get paid) at all. But the player is clearly the one making the power play, especially if he is failing to live up to a contract still in force. The best thing a team can do in that situation, as in any hostage situation, is to not give in.

Peca and Yashin are not the only players to ever hold out for significant portions of the season -- Petr Nedved did it twice to two different teams, once for more than a full season. What make Peca and Yashin unique is that they were both traded to the same team, the Islanders, within a day of each other, and given ridiculous contracts despite having no leverage under the CBA other than sitting out. Peca's team, Buffalo, did what they had to do in allowing Peca to sit out the entire 2000-2001 season and then trading him to the Isles for two good young prospects. Ditto Ottawa, who got an even better return for Yashin under threat of a second hold-out a year after the end of a season-long mid-contract hold-out.

The person responsible for allowing these players to get away with their nonsense is the one who traded for them -- Mike Milbury of the Islanders. The GM who once called a rival a "village idiot" has proven repeatedly that he in fact fits that description, literally trading away a full team of future (now) all-stars for less than a full team of lesser players (I worked it out, a full team, every roster spot -- and that doesn't even include taking Dany Heatley instead of Rick DiPietro first overall after trading Roberto Luongo and Olli Jokinen the day before the 2000 draft). Salary escalation for checking centers began with Peca (this season he's earning as much as Marian Hossa and Martin Havlat combined), culminating a year later with Bobby Holik's ludicrous $8.85 million annual salary.

Yashin's contract was even more ridiculous. The salary numbers alone are insane -- this season, Yashin is earning $8.4 million, a lot higher than dozens of better players. Even crazier is its length -- in 2011, the Isles (or anyone silly enough to pick up the playoff ghost's bloated contract) will owe Yashin, at age 37, $6.4 million. Maybe by then that figure will seem like a bargain, who knows? But one thing's for sure -- no matter how this CBA war ends, the escalation clause in his contract will ratchet his salary even higher than it is now to levels that will prove disastrous for the Isles. All this for a guy who, in three seasons on the Island, has barely matched his worst full season as a Senator.

2001 - Boston signs free agent Martin Lapointe for $5 million per season

Really, anyone who takes anything said by Boston owner Jeremy Jacobs seriously ought to have his head examined. A guy who became extremely wealthy by gouging us mercilessly when we have no one else to provide us with food and drink, Jacobs always led the charge in word and in deed in underpaying his players and cheating his fans out of competitive teams. Here's a guy who wouldn't even pay Raymond Bourque half what he was worth all those years he played so loyally for Boston teams that never had a chance to win a championship.

And yet, when it came to feeding his own personal needs, nothing else mattered. When he needed to make money off his new Fleet Center, nuking the rookie salary cap to get Thornton to the NHL two years early was OK. Even worse, when it came to getting revenge on Detroit's Mike Ilitch for an insult, Jacobs helped blow the lid off salaries for checking forwards by giving ex-Wing Lapointe $5 million per -- just to get back at Ilitch for defending Detroit's spending habits from Jacobs's attacks by noting out loud how many championships the Wings had won while the only thing Jacobs ever won was the first overall pick (a double dig, alluding as it did to the ruinous Thornton deal).

They shoot horses, don't they? What about lying, cheating, hypocritical dinosaurs?

Tuesday, March 30, 2004

Reading Comprehension 101: Dissecting the Levitt Report

Broders_hockey_6In a recent issue of The Hockey News, Bill Daly defended the Arthur Levitt report by asking all critics to read it first. Perhaps Daly should've asked his boss Gary Bettman to read it first -- Bettman, in the news conference introducing the report, said, "Actually, we thought the percentage of gross revenue taken up by player salaries was 76%, he [Levitt] said 75%."

Actually, he said no such thing. Levitt said 75% of net revenue, not gross revenue, goes toward total player costs, not just salaries. These are significant differences. What the NHL calls net revenue (a measure it invented all for itself that comes closest to what everyone calls gross profit) is gross revenue net of direct costs -- except for player salaries, as direct a cost as there is for a hockey operation. Other costs, such as travel expenses, insurance, social security, and the like, make up part of the 75% Bettman incorrectly called "player salaries" -- Levitt even includes minor league salaries, which would be fine if minor league revenues were included, but they were not.

Actually, I take it back -- Levitt didn't write "gross revenue" but he did say it. When asked quite plainly during the press conference introducing his report, "Can you tell me what the gross revenues of the League actually equal," Levitt responded, "two billion". But he probably just misspoke in the heat of the Q and A.

And the very next question? "Can you tell me what comes under the universe of player costs? I assume that's more than just what they are paying in salary." Deferring to his lieutenant Lynn Turner, the response was, "salary and bonuses, benefits and other payments including pension benefits, CBA monies, those are the type of costs that are all included in the player costs." No mention of travel expenses, insurance payments for injured players, minor league salaries, NHL award payments (that's part of what he meant by "CBA monies") -- those might have prompted additional questions.

The truth is, the NHL doesn't want anyone to read the report, and doesn't expect anyone to. The whole world parrots their net revenue of $1.996 billion, player costs of $1.494 billion, and the 75% ratio between the two without understanding of what those terms mean. The NHL even created its own web site for CBA issues that quotes Daly's letter to THN challenging critics to read Levitt's report, the transcript of Bettman's introductory press conference with its misstatement about player cost ratio, the transcript of Levitt's introductory press conference with its misstatement about gross revenues, and the full report itself.

The NHL attempted to bolster its case for a salary cap by hiring former SEC chairman Levitt to audit the league's finances for 2002-03. Despite Bettman's misreading, Levitt did indeed bolster the NHL's case, reporting $273 million in operational losses, additional losses of $100 million in interest payments (a non-operational cost), and a player cost ratio he claims is out of whack with other leagues.

That's $273 million in operational losses -- not true earnings after accounting for interest, tax, depreciation, and amortization (except for the $100 million selectively reported for one type of interest) -- for hockey operations as stand-alone entities, not including the joint operations at least 22 teams enjoy with related business entities like arenas, other sports franchises, and media networks. And that's 75% of net revenue of nearly $2 billion (aka gross profit), not gross revenue, going for total player costs, not just salaries.

Net revenue is not a term you will find in any accounting glossary. The closest you'll come is net sales, allowing deduction for returns, discounts, and undeliverable merchandise from gross revenue. Gross profit, the closest accounting term to the NHL's net revenue, is net sales minus the actual cost of goods sold -- for a hockey operation, the cost of food sold by concessions, for example. The NHL goes beyond that, deducting every direct cost from gross revenue, not just cost of goods sold (to extend the concession example, the cost of labor).

Look at any financial report for any company in the world, and you will not see anything resembling what the NHL calls net revenue (you'll find reports that show net revenue in the sense of net sales). Every other company in the world wants to maximize revenue, and then account for cost, not understate revenues and overstate a single expense category, as the NHL does for public consumption (their actual books have still not been scrutinized in full by anyone, including Levitt).

No surprise, despite his so-called independence, that Levitt came within $12 million of the league's own loss declaration and within 1% of its player cost ratio. But me, I'm a diehard skeptic, especially when nearly a hundred owners each worth hundreds of millions or billions of dollars cry poverty over less than $300 million -- less than the total amount they kicked in to help themselves weather a lockout. So I read the report, in detail (even before Daly exhorted me to -- my article originally started with the sixth paragraph, the others prepended in response to Daly). And I read other documents the report refers to, such as the NBA and NFL Collective Bargaining Agreements (CBAs).

And I hate to say it, but I come away believing Levitt has performed a conscious, if completely legitimate, sleight of hand, designed first, last, and always to support the NHL's claims, not test them.

That takes us directly to the pivotal issue of independence. "The Commissioner requested that I perform an independent review of the NHL's combined Unified Report of Operations (URO) for 2002-03," writes Levitt early in his report, "[and] to advise the Commissioner and the Board of Governors whether the URO results reflect a comprehensive and accurate statement of the financial results for that season." Requested and paid for by the NHL to prepare a report for the NHL -- in one sense, that precludes by definition any claim of independence, but it may not be a material violation of the essense of independence (to use one of Levitt's favorite words, "material") if the NHL asked him for a truly honest audit that it would not attempt to influence or otherwise interfere with.

As if to demonstrate how truly independent he was in a way a lay person could understand, Levitt emphasized that he was paid his full fee of $250,000 up front, so payment could not possibly be contingent on his results. OK, sounds good. On the other hand, Levitt never questioned his assignment, never used his independence to go beyond the scope of his assignment -- payment was after all contractually tied to completing his assignment, regardless of when it was tendered. And one could argue (as some have -- including Levitt himself) that an auditor's continued employment depends on delivering the results his employer wants.

"My assignment," Levitt dutifully reported right up front, "was to make findings and reach conclusions as to whether the [URO] instructions account for relevant revenues and expenses associated with operating a professional hockey franchise in the NHL [and] whether member clubs accurately reported information requested by the UROs; whether related company income is reasonable for a professional hockey franchise [and] similar to treatment in Basketball Related Income [and] Defined Gross Revenue, as defined in the NBA and NFL collective bargaining agreement[s]; whether player costs and revenues [are] consistent with reasonable and sound business practices in this industry."

His conclusions: "It is my opinion that the instructions governing the URO adequately and appropriately account for all revenues and expenses associated with operating a professional hockey franchise in the NHL and that teams accurately reported information requested by UROs; treatment of related-party income reasonably measures revenues and expenses and is similar to measures used in the NBA in calculating related-party revenues it shares with players; player costs and revenues [are] inconsistent with reasonable and sound business practices (player costs of $1.494 billion or 75% of revenues substantially exceed the NBA and NFL as set forth in their collective bargaining agreements)."

[I've telescoped some excerpts to save space, but I haven't created any "material" differences in what Levitt wrote -- read the report for the full text.]

Levitt did not say up front (though he did later) that in getting from his assignment ("whether the instructions governing the URO account for relevant revenues and expenses") to his conclusions ("the instructions governing the URO adequately and appropriately account for all revenues and expenses") he took the 2001-02 URO and corrected deficiencies before allowing the NHL to send it out! He was not actually being deceitful in omitting the statement, "and they are in fact adequate only because I corrected inadequacies from the prior year," but he did skip a material stepping stone.

Further, even when in revealing that he made modifications ("the NHL at our request clarified and modified the 2002-03 URO instructions prior to their issuance to the teams"), he failed to provide material revelations or qualitative judgements about the 2001-02 instructions or results -- after all, that was not part of his assignment.

It was not part of his assignment -- that is ultimately the failing of this report, one that undermines any credibility one can place in his results, even if they are accurate. If he was truly independent, why stick so meticulously to his assignment? Oh, wait a minute -- I take it back. He did go beyond the scope of his assignment in correcting the deficiencies of the prior year's URO in order to make sure he would reach the desired conclusion of said assignment. But he did not go beyond its scope and share the results of those highly relevant deficiencies. Curious!

But wait! He didn't just correct deficiencies in the 2001-02 UROs for 2002-03, he also corrected inadequacies in team reports for 2002-03. "During the course of our review, modifications were made to the teams' treatment of certain revenues and expenses. These modifications are included in the $273 million operating loss reported in the combined URO." He never spelled out those modifications. And yet, despite having to modify team reports, he still concluded that teams complied with the URO instructions. In this case, he can't even make a semantic case to support his self-fulfilling prophecy, that the reports were in compliance after his modifications, as the assignment was to evaluate compliance, not to correct non-compliance.

In the final analysis, there is no escaping this, as fully disclosed in the report: the URO instructions given to him were NOT adequate, so he corrected them before sending them out, and teams did NOT comply with the instructions, so he corrected their reports. And yet he stated unequivocably right on page two, "It is my opinion that the instructions governing the URO adequately and appropriately account for all revenues and expenses associated with operating a professional hockey franchise in the NHL and that teams accurately reported information requested by UROs."

And he repeated these conclusions in his, uh, Conclusions: "The instructions governing the reporting of the financial information by the teams through the URO adequately and effectively direct the team to report all revenues and expenses associated with operating a professional hockey franchise in the NHL. The teams have, in all material respects, accurately reported the financial information requested by the UROs."

This is what the NHL holds forth as the ultimate in credibility in support of their case. This is what the NHL tells us to make sure we read before we dare criticize their case. Am I missing something, or would George Orwell and Ayn Rand have a field day with this?

Were Levitt's "modifications to the teams' treatment of certain revenues and expenses" sufficient to overcome all inadequacies in team reporting? Doubtful, because he said he "obtained and read the URO Report and audited financial statements for three teams we selected for the 2002-2003 season [and] we visited each of those three teams and discussed the preparation of the URO." Other steps were taken to verify other teams' reports, but only these three unnamed teams were verified in full.

For other teams, Levitt relied on audit reports and telephone calls to team financial personnel. "We inspected the audit workpapers of the independent auditors for four teams we selected for the 2002-2003 season," Levitt wrote -- only three teams put through a thorough verification process, and now only four more unnamed teams put through this secondary verification measure. Despite stating that "revenues and expenses reported in a team URO may be different from revenues and expenses reported in the team's audited financial statements," Levitt relied on audit reports (usually reliable, except in rare cases like Arthur Andersen's audit of Enron) for the rest of the teams.

Well, not actually the rest of the rest: "Four teams did not have audited financial statements. For each of these teams, [we] visited the team and performed on site procedures. We were not engaged to and did not perform an audit. Had we performed additional procedures, other matters might have come to our attention that would have been reported. The sufficiency of these procedures is solely the responsibility of [the teams]. Consequently, we make no representations regarding the sufficiency of the procedures." Two of the four teams were Ottawa and Buffalo, who had an excuse -- bankruptcy. The other two are curiously unnamed.

But Levitt concluded nonetheless that teams complied with the URO instructions, and we have to believe him. Right? Read the report -- it's all there in black and white.

Levitt said three unnamed teams, plus Buffalo again due to bankruptcy, failed to supply financial reports for 2001-02 (he doesn't call them audits, so we can assume audited financials were not required until Levitt asked for them in 2002-03) or supplemental information responses. The supplementary reports are key: "The League office," wrote Levitt, "periodically makes supplemental information requests of teams for data to support the URO and test teams' compliance." Three teams failed to supply these reports, putting them in non-compliance with a random test of compliance! Not all teams are tested, and at least two teams without bankruptcy issues subjected to the test failed to even comply with the test, let alone pass it.

Levitt report