The NHL shut down at midnight last night, locking out players from training camps and signaling that owners are willing to cancel the 2004-05 season if they don't get a new economic system that reduces player salaries.
NHL Commissioner Gary Bettman announced the action following a meeting yesterday of the NHL Board of Governors in New York.
"It is my somber duty to report that at today's meeting, the Board of Governors unanimously reconfirmed that NHL teams will not play at the expiration of the CBA [collective bargaining agreement] until we have a new system which fixes the economic problems facing our game," Bettman said. "This action is not taken lightly or eagerly."
The lockout, which began officially at 12:01 this morning with the expiration of the current collective bargaining agreement between the NHL and NHL Players Association, has long been anticipated.
Twenty of the NHL's 30 teams -- including the Washington Capitals -- lost money last season, and NHL owners collectively lost $224 million, according to the league. Two franchises, in Ottawa and Buffalo, filed for bankruptcy in the past two years.
The league blames escalating salaries, which have grown more than threefold over the past decade, and is seeking agreement with the players' union on a system that would link salary growth to revenue -- a model already adopted successfully by the NFL and NBA.
The union, which has about 700 members, is adamantly opposed to a salary cap and favors a continuation of the current system, under which players earn as much as owners are willing to pay them. Bob Goodenow, the union's executive director, accused NHL owners yesterday of trying "to force players to accept a system they know the players would never agree to."
Although the NHL has said it has no intention of eliminating unprofitable franchises, several sports business analysts have said a number of teams, the Capitals among them, would be vulnerable without a different economic model.
Capitals owner Ted Leonsis and his investors have lost about $100 million since buying the Washington franchise for $85 million in 1999. In an effort to reduce losses this past season, Leonsis traded several of his high-priced players, including Jaromir Jagr, Robert Lang and Sergei Gonchar.
"This clearly is not a sustainable business model, and [it is] one that we are committed to righting as soon as possible," Leonsis said in a statement posted on the Capitals' Web site yesterday. "I am concerned about the short-term future of our sport, but have great confidence the NHL will negotiate a fair and equitable agreement with the players' union."
The two sides were not talking as of yesterday and no new meetings were scheduled, making it unlikely an agreement will be reached before the Oct. 13 scheduled start of the season. Indeed, the two sides are deeply entrenched and prepared for a season-long lockout that would result in the first cancellation of the Stanley Cup playoffs since 1919, when the games were halted because of a flu epidemic.
Owners have a $300 million fund to see them through a protracted lockout, and the union has licensing money to help its members. Many players, who would have reported to NHL training camps today, have already made arrangements to play in Europe.
This is the third work stoppage for the NHL, which postponed 30 games because of a 10-day strike in 1992. Owners locked out the players over labor differences for 103 days in 1994-95, which cut the regular season from 84 games to 48.
The NHL is the only major league without some control on players' salaries, which have grown from an average of $463,200 a decade ago to $ 1.8 million per player last season. That's the highest percentage among the four major professional sports leagues. Three quarters of every dollar of NHL revenue is consumed by players' salaries, according to the league.
The union disputes the league numbers, arguing that the owners earn far more from hockey operations than they admit.
The disagreement at the bargaining table, where proposals have been tossed back and forth for more than a year, hangs on differing philosophies. The owners want the players to agree to a firm threshold, known as a salary cap, on the amount of money a team can spend on players' salaries. That amount is believed to be around $31 million. The current average payroll is $46 million.
The players refuse to discuss a salary cap, saying it eliminates the free market and prevents them from earning top dollar. The players have offered a series of carrot-and-stick incentives to hold salaries down, from taxes on fat payrolls to outright givebacks of a percentage of salary.
"It's terrible that it's gotten to this and that we're in this predicament, but the players aren't going to give an inch on two issues. We're not going to accept a hard cap and we're not going to give up guaranteed contracts," said Capitals defenseman Brendan Witt. "We've expected this."
"We're prepared for a long lockout," Capitals defenseman Jason Doig said. "Up to two seasons."
"It's extremely frustrating," Washington center Jeff Halpern said. "I mean, to have this opportunity to play in the NHL, and then not to be able to play, it's just sad. I'm just as frustrated as the fans. It's such a great game, it drives me crazy that it's come to this. It's catastrophic."
The lockout reflects far deeper problems than players' salaries for the 87-year-old league. Goal scoring has dropped. Teams are playing before sparse crowds. Television ratings have slid. And the league's big bet to embed itself into mainstream American sports culture by expanding into nontraditional U.S. hockey markets in the last decade has not brought the buzz, or the multibillion-dollar national television windfall, that it hoped for. The NHL recently signed a contract with NBC that guarantees the league no dollars upfront, which is almost unheard of when some major sports command hundreds of millions of dollars a year from networks.
"Hockey remains what it always has been: a niche sport," said Howard Bloom, publisher of an Ottawa-based sports business Web site. He said that even if the lockout lasts all season, the sport will remain popular in Canada and in traditional U.S. markets such as Boston, New York, Minnesota, Philadelphia and Detroit.
"But without major changes, it can't survive elsewhere," he said.
Staff researcher Julie Tate contributed to this report.