What is Hockey Related Revenue?

By Stu Hackel

The CBA talks continue this week with most of the early discussions focusing on non-economic issues. As Jesse Spector outlined for The Sporting News, the two sides are making progress, especially on health and safety issues where NHL Deputy Commissioner Bill Daly said the owners and players had "a lot of common ground."

Daly added, “I’ve said this before and I believe it – I feel like we’re in a real negotiation process. I’m not sure I always felt that way in 2004. So, I would distinguish this somewhat from that.”

When it comes to the issues on which the ground won't be so common, the NHLPA's Mathieu Schneider said that the union was "closer" to making a counter-proposal, "but I still don't have a time frame," as its staff plows through the 76,000 pages of audited team financials the league handed over last week. Things may pick up when Don Fehr returns from addressing European players and joins the talks on Thursday.

One of the areas we've heard and will hear a great deal about in these negotiations is Hockey Related Revenue (HRR). This is a good time to delve into that definition so we have a better grasp of what the NHL and NHLPA will be wrasslin' about.

We'll try not to get too technical here, but if your mind is on vacation, feel free to come back another day. This post will be on SI.com for a while.

The concept of a salary cap system is based on the owners and players dividing, at a fixed percentage, the money that their business makes. The owners claim this system gives them "cost certainty" and allows them to run their teams in a more rational fashion without inflating players salaries out of control and leaving less wealthy teams unable to compete. That's the premise, anyway, and the purpose here isn't to debate what the percentage should be or whether the cap works as intended. We want to look at what makes up and defines the revenue that the sides would ultimately divide. It's an important point in these CBA talks because the league's opening proposal to the players last month called for the split to change more in favor of the owners, and to redefine HRR.

So what is the current definition of HRR? Here's the CBA and you can find the legalese starting on page 160 (Article 50, Section 1). So -- get ready for the blah, blah, blah -- it's the money "derived or earned from, relating to or arising directly or indirectly out of the playing of NHL hockey games or NHL-related events in which current NHL Players participate or in which current NHL Players' names and likenesses are used, by each such Club or the League, or attributable directly to the Club or the League from a Club Affiliated Entity or League Affiliated Entity..." and on and on.

In the broadest sense (and with specific exclusions), HRR includes money from regular season and playoff gate receipts; preseason and special games (such as international exhibitions); national, international and national digital broadcasts; the NHL Network; all local cable, over-the-air, pay-per-view and satellite TV broadcasts; local radio; club internet sites; all club publications, merchandise and novelty items sold in and out of arenas; concessions; luxury boxes, suites and premium seats; fixed and temporary signage and arena sponsorships; rink board advertising; parking in club operated facilities; and some other stuff. Pretty much what you'd expect.

The current CBA excludes the following items from HRR: money teams make from waiver claims on players; money the NHL makes from moving teams or granting expansion franchises; revenues that teams receive from operating other clubs, such as AHL affiliates; fines collected from players and teams; any money teams make through financial transactions, such as loans, interest income or investments; and the sale or leasing of real estate. (Even though the Maple Leafs currently partner with developers to trade on the club's identity in the Maple Leaf Square office, retail, entertainment and hotel complex adjacent to the Air Canada Centre -- the kind of thing that the Canadiens are also planning next to the Bell Centre -- whatever revenue they get from all of that is not included.)

Now, to make things just a little more confusing, when it determines the salary cap, the NHL doesn't use HRR. The league also subtracts Direct Costs from it. Those Direct Costs include "any costs, including fixed and variable costs, attributable to a revenue-generating activity" -- anything spent while accumulating HRR, including the salaries of employees whose duties contribute to the revenue activities. Direct Costs currently don't include "an allocation of arena occupancy costs, and general and administration expenses, such as finance, support and general management function costs." And that inclusion is something the owners in their opening proposal reportedly want changed in the next CBA: They want to be able to subtract from HRR what it costs them to occupy their arenas and a percentage of their finance, support and general management expenses. That could mean millions of dollars taken from the available HRR to be shared by the players.

It might seem reasonable for those costs to be deducted from HRR -- you obviously can't have hockey related revenue without a place to play the games and there are costs associated with that -- but it may be just as reasonable for some of what is excluded from HRR now to be included.

Perhaps this is the area where the focus of the hard bargaining and horse trading in the negotiations will be, but that's just a guess. Lots of things will be guesswork until the NHLPA presents its counter-proposal.

If you didn't or couldn't pay attention to everything above, don't worry. There won't be a test. This is some pretty heavy stuff for early August. Sorry to inflict this on you. You'd rather be at the beach or the lake. I understand. So would I.

That's a great version and here's the great original.

There were two nearly identical, but significantly different versions by the Drifters. Here's the other.

And I always liked this version by Sam & Dave from the mid-70s, well after their hit-making days were past them, produced by their old Stax Records guitarist, Steve Cropper.

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