U.S. Players, Canadian Owners Win

May 27, 2005
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(Editor’s note: This is the second story in a two-part series examining labor issues with respect to the National Hockey League.)

GRAND RAPIDS
— If a visa regulation in the U.S. Immigration and Naturalization Act were enacted in the midst of the labor dispute between the National Hockey League and the National Hockey League Players Association, then Canadian and European players wouldn’t be able to be employed by franchises in this country.

If that happened the economic structure of the NHL could be turned inside out, and that might be one reason NHL Commissioner Gary Bettman recently put the talk of using replacement players on the backburner while the two sides negotiate.

Replacements would come from the minors and from NHLPA members who are willing to cross a picket line. The visa regulation, though, would stop the temporary work permit program for foreign NHL players, and leave U.S. owners with only one employment option — to hire American players.

But U.S. franchises, which make up 80 percent of the league’s teams, would be limited to chasing only about 15 percent of the NHL-caliber players. And according to the economic theory of supply and demand, that situation would force U.S. owners to drive up salaries in order to capture the services of a relatively few top U.S. players like Mike Modano or Mike Knuble. While the demand for U.S. NHL-caliber players would be high, the supply of those players would be low.

With NHL player rosters set at 23 for each team, the 24 U.S. franchises would need to hire a total of 552 American hockey players to meet the league’s roster regulation. During the just finished cancelled season, though, only 82 U.S. players were under contract to all 30 of the NHL franchises.

Even though the Detroit Red Wings, the NHL affiliate of the Grand Rapids Griffins, had 20 players signed through the lockout, only two — Mark Mowers and Darien Hatcher — were Americans. Last month, Red Wings owner Mike Illitch told the Detroit News that he was willing to go ahead with replacements, although U.S. players made up just 10 percent of his franchise’s signed players when he made that statement.

So the most competitive of the 24 owners in the U.S., a group that many would say Illitch belongs in, could find themselves angrily waist-deep in a red-inked seller’s market and easily exceeding the average player payroll of $44.4 million that U.S. franchises had in the 2003-04 season.

Conversely the Canadian franchises, which have suffered for years by being forced to compete in U.S. dollars, could be in the catbird’s seat if the league goes to replacements.

Canadian owners only have 20 percent of the NHL franchises but Canadians account for roughly half of the NHL players. The six franchises based in Canada only need to fill a total of 138 roster spots and there were 270 Canadian players under contract during the lockout. If U.S. franchises can’t hire Canadian players, then Canadian players could only look to their native country for NHL employment.

And if the provincial governments in British Columbia and Quebec certify the NHLPA, a case under consideration, then the franchises in Vancouver and Montreal wouldn’t be able to hire replacements of any nationality. Union certification in those provinces would prohibit replacement workers and drop the Canadian franchises to four during a replacement season. Those four, though, could still choose from the 270 Canadian players and put more salary pressure on the players by lowering the number of job openings for them from 138 to 92.

Not only could the Canadian owners be happily salivating in a buyer’s market, they also could likely deal in their nation’s currency instead of U.S. dollars. That change alone would save them about 20 cents on every dollar right now, and would have saved them nearly $50 million on their collective 2003-04 player payroll.

The difference between U.S. and Canadian currencies, which was 55 cents on the dollar just a few years ago, helped drive the Winnipeg and Quebec City franchises to Phoenix and Denver, respectively.

So under a replacement-player scenario, American players could get better contracts and Canadian players could get worse ones. U.S. owners could get more costly payrolls, while Canadian owners could get revenge.

“There are other people who have expressed the kinds of sentiments you’re expressing,” said a source close to the negotiations who asked to remain anonymous.

The end result of using replacements could make the league’s all-for-one lengthy lockout, and its mission of cutting salaries, all for nothing — at least for U.S. owners. Of course, this potential replacement scenario depends on whether enough NHL players are willing to defy their union, if the owners do make the call for replacements, and if the visas dry up.

Still, the possible outcome of making that call may be the biggest reason the talk of using replacements hasn’t been uttered a lot by the league lately. After all, wealthy American businessmen aren’t in the habit of playing second fiddle to anyone. And if U.S owners put themselves in the position of using replacement players some might not even get the chance to resin up, let alone play second fiddle.        

  • In the 2003-2004 season, the 30 National Hockey League franchises spent $1.3 billion on player paychecks. The average team payroll that season, the most recent the league was in business, was $43.8 million. U.S. franchises had an average slightly higher, while Canadian teams were under that figure.

But Canada’s average was in U.S. dollars. If replacement players are used in the upcoming season, Canadian owners might be able to pay players in Canadian dollars and write checks for roughly 20 percent less than they did in 2003-04 — without any change to salaries. Had they been able to do that then, the six Canadian teams would have saved $49.7 million on their collective payrolls, reducing it to $198.8 million for an average of $33.1 million, or $8.3 million less per franchise on average.

                             Number of            Total Player          Average Player

Country               Franchises                 Payroll                     Payroll

United States             24                          $1066.6                       $44.4

Canada                                                    $248.5                        $41.4

Total                         30                           $1315.1                        $43.8

Note: Payroll figures are presented in U.S. millions of dollars.

Source:USA Today

**During the cancelled 2004-05 season, 545 players had contracts with the 30 National Hockey League franchises. Only 15 percent of those signed players were Americans, and the U.S. accounted for the smallest of the three groups that provide players to the NHL.

                                           Number of                Percent of

Nationality                           Players                      Players

American                                   82                            15.0%

Canadian                                  270                            49.6%

European                                 193                            35.4%

Total                                       545                            100.0%

Source The Hockey News, May 2005    

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