Basic Economic Theory Eludes Owners

[Dr. Jack]

Basic Economic Theory Eludes Owners
by Rink Rat

Storm clouds are upon them: will they run for the hills or batten down the hatches and defeat the tempest. We're talking about the National Hockey League here, chances are they'll run, meaning a costly war with their players over the next collective bargaining agreement. Owning a hockey team is not a license to print money. Clubs have large player rosters, including minor league players, equipment is expensive, injuries are prevalent, and revenue is pretty much limited to gate receipts. Since the last union agreement in 1995 salaries have increased rapidly due to limited free agency and salary arbitration.

Last summer Holik, Guerin, Kasparaitis, and Joseph hit the bull's eye. Free agency drives up prices and arbitration awards cement the new baseline salary. The average salary is now in the neighbourhood of two million dollars per season. Not bad for 18 minutes work per game. NHL management and team owners have only themselves to blame, which explains why they will be targeting the players next year. What the upper echelons of the league can't get through their thick heads is that market conditions changed but they haven't. Under the present rules, players have more bargaining power. They have free agency at 31 years of age and arbitration rights after their second contract. Each summer a few players dribble onto the market, and when those few are of the calibre of Guerin or Holik, a bidding war ensues. Supply and demand. Things being what they are the supply is never great guaranteeing a bidding war. Bidding wars drive up prices. Supply and demand. The result? Outlandish salaries, splashes of red ink, totDoesn't have to be that way. Remember? Supply and demand.

With the stroke of a pen the NHL could drastically alter the supply. Turn 'em all loose. Have only one year contracts, which would take a while to become standard, and each spring, the day after the Stanley Cup is won, all players become free agents. Flood the market. Massive supply, lowered demand. Overnight instead of teams competing with each other for scarce supply, the two or three choice free agents, and driving prices up, eight or nine hundred players would be rushing to grab precious roster spots on quality teams. Prices would drop. Supply and demand. Teams argue they'd lose their investments with this proposal.
The Rat's response? Boo hoo.

Sure there would be more movement, but less than some might think. And so what if the Nashville Predators lost Jordin Tootoo - they would simply scoop up another player from the Mighty Ducks. And so it goes. Not every player is going to want to move. Those with quality organizations will sign faster than the blink of an eye. A few will put quality of life ahead of Cup prospects and stay where they are. Teams on the edge of greatness, such as the Vancouver Canucks or Ottawa Senators this season, might want to stay together another year for their big shot - there are lots of reasons to not move. The answer to the NHL's woes is as old as money - supply and demand. What's missing is as old as the National Hockey League itself - boldness.