National Hockey League deputy commissioner Bill Daly came to Philadelphia on Thursday to be a keynote speaker at a sports business conference organized by local law firm Cozen O'Connor and Penn's Wharton business school. Here are some highlights from his remarks.
On the current strength of the NHL and the quality of hockey being played:
I think most fundamental in terms of the the success the league has had and where we are today, I have to tie it to the on-ice product, because it all starts with the on-ice product. I think if you don't create an entertaining product, you are going to stagnate in the marketplace, and certainly not grow to the extent we've grown.
There's a lot of reasons for the product being as good as it is today. Obviously, it's an unbelievably talented player base. Much more talented than 20 years ago, when I started in this game. And it starts with that.
It's also rule changes, and how the game is played today, and how we at least try to emphasize skill over other attributes of the game that may have been emphasized at the time I took my position at the National Hockey League.
That kind of ties back a little bit to our collective bargaining agreement and our collective bargaining relationship with our players association.
During the late 90's and early 2000's, as a league and as a business we were struggling financially. Part of the problem with the league finances was there were some clubs who were doing fairly well as businesses, and there were a lot of clubs that were losing money. And the clubs who were losing money didn't have the ability to invest in their on-ice product to the same extent that the clubs who weren't losing money were. It created competitive imbalances.
It also affected the product on the ice. I think the product on the ice at that point in time did not emphasize skill. It emphasized neutralizing skill. Some of the lower-payroll teams had to employ people who were focused on hooking and holding and interfering and stopping players from scoring, as opposed to creating offense themselves.
I think the economic system that we created in 2004-05, the salary cap system, really put clubs back on a more level playing field, so to speak - both with revenue-sharing, and also the salary cap. Everybody basically has to spend within a very small range of payroll. So as a result, you have fairly equally-talented teams.
And with a package of rule changes that were approved at the same time, you put those things together and it adds up to a much better product.
On the state of fighting in the NHL:
I often scratch my head at how our sport gets criticized the way it is for the fighting that sometimes happens in our sport, versus what other sports do. But in any event, I think certainly [that] the role of fighting has greatly diminished, and thus trending in the right direction.
I think that's for a host of reasons. One is I do believe there's more education and more awareness with respect to the issues associated with head injuries, and there's no doubt that plays into it. I think the development that our commissioner did with our Department of Player Safety [helped], where we educate our players on a constant basis with respect to how to play the game our right way.
If you look at games today, while some would say they're not as physical, I don't know if I buy that necessarily. I think they're physical in a different way. I think what we've been able to eliminate, largely, is the head hits in our game that may have been far more frequent 10 years ago than they are today.
I think the head contacts we see today are more accidental, and it's because the game is played at such a high pace, and accidents happen. But I think the intentional dangerous play has been greatly diminished, and I think that only gets better.
I also think, in terms of fighting in particular, the fact of the matter is - and I alluded to it before - we've never had more a talented and deep player base. And the fact of the matter is, all of our clubs employ very, very talented players. So they don't really have room on their rosters for players who are single-dimensional in terms of fighting.
On the escrow clause in the collective bargaining agreement and its impact on the next negotiation, which could come in 2019 if the NHL or the players' association decides to opt out of the current deal:
The players, because of the nature of the system, really, the players kind of share in the growth of the business and revenue. From that perspective, certainly, they've indicated - and they did, in the context of the idea we floated about an extension*, [express] concern about how our escrow system works.
[* - In November, NHLPA executive director Donald Fehr announced that the NHL had offered to back off its resistance to allow players to participate in the 2018 Olympics in exchange for a three-year extension of the current CBA.]
It's certainly something that I'm sure we'll talk about as part of our next negotiation. I don't think the current player base really understands what the escrow mechanism was designed to do, and what in fact it does, and why it operates the way it operates, and how it ties into the salary cap and why their salaries are what they are in the first place. That might take some education.
If you want to have the type of system we have and the salary caps we have, you have to have an escrow system. You can have a different salary cap system without an escrow, but that's not the system we have. I think at least what's been signaled to us is that's burning issue they want to talk about.
Do I anticipate any labor problems? I don't. I do think there is benefit, and we've seen it in our business, to having long-term stability in labor relations.
We want to seize on that ability to continue that. It's something you can take to the marketplace, you can talk to your sponsors about, you can talk to your business partners about something they're concerned about - which we [understand], given our track record with labor relations. The sooner we can put that issue behind us, it will be good for all of us.
If you were to amend the escrow system or eliminate the escrow system, then you don't have a 50/50 split of the money [between players and owners]. You have something other than a 50/50 split, which is not what we negotiated.
There were two times under this collective bargaining agreement, believe it or not, where we actually had to write a check to the players at the end of the year. We actually had to gross up their salaries to get them to 50 percent. So it can go both ways.
I think the trend is most clubs want to spend to the cap. More clubs are in a position to spend to the cap. And as a result of that, that creates an escrow.
On why the NHL chose to expand to Las Vegas but not Quebec City, despite Quebec City being a fan favorite due to its campaign to bring back the Nordiques:
Obviously, a lot of due diligence, background thinking and discussion went into the decision. Las Vegas had expressed an interest in an NHL franchise, really, way back when I first started with the league. The serious interest in having a NHL franchise [came] as early as a couple of years after the salary cap implementation.
There was an expressed interest for a long period of time, and then when it was clear that perhaps they had all their ducks in a row, we said: "Okay. We had gotten the expression of interest from Las Vegas, we had also gotten expressions of interest from other places over time. Let's open a formal expansion process."
We put it on a very tight timeline. We created a fairly large non-refundable application deposit, and that resulted in two expansion applications, Quebec City and Las Vegas. When they both went through the entire process, which ended up being a year-long process, they both had merits in their applications. They both had some - I wouldn't say demerits, but some areas where you needed to do a little more due diligence.
I think Las Vegas, it's a unique market. That's what makes it a unique franchise. And we felt what was important in Las Vegas was to make a showing, or demonstrate, that they would have strong local support from the local residents.
As opposed to the local casinos and the local - I'll leave it at casinos, because I'd say businesses, but regular businesses are fine. If you're really just relying on casino clientele, we'd be concerned. You might sell a lot of tickets, but you might have empty buildings, and that's not good for any professional sports franchise.
So I would say the hallmark showing that they were able to make during the expansion application process was they had a season ticket drive where real Las Vegas residents had to put down deposits on a team they had no idea whether they would get.
And they did it, at pretty substantial numbers and within parameters where we knew they were real residents. They weren't casinos being disguised through fake accounts. And they already have 15, 16,000 season ticket-holders for this year. So that was a real key for us, taking that step.
On the imbalance of teams in the conferences - 16 teams in the Eastern Conference and 14 in the Western Conference - being a factor in the decision:
That imbalance probably is a bigger problem for us than having 31 teams versus 30 teams. We have gradually taken a step toward at least improving that imbalance by having 15 teams in the West [with Las Vegas] and 16 teams in the East. But quite frankly, I think one of the factors why we didn't grant Quebec City an expansion franchise was that geographic imbalance.
It's something we would like in a perfect world - I'm not saying that it's absolute, but we'd like to address that geographic imbalance before we look east again.
On where negotiations stand to have NHL players participate in the 2018 Winter Olympics in Pyeongchang, South Korea, and whether the league's interest in expanding its marketing in Asia might influence a decision to allow players to go:
I don't think there's anything new to report on the Olympic discussions. We had a visit from Thomas Bach, the IOC president, to the league office on Friday of last week. And that certainly was very nice and courteous of him to come visit. And really, it was certainly a goodwill mission, and I think he wanted to express his appreciation for the fact that we've partnered with the IOC over five previous Olympics and brought NHL players there.
We had, I think, a candid discussion of some of the concerns that we've had, and some of the issues, and some possible, potential solutions to - they're actually not solutions to the business issues, because I'm not sure how you fix the business issues. But there are other considerations that might kind of sway the balance for our board of governors.
Nothing came out of that meeting, in the sense that there's nothing new on the table at this point in time. Obviously, a decision has to be made relatively soon. I think René Fasel [president of the International Ice Hockey Federation] has a coordinating committee meeting in March where he would like to know what the answer is. So I would say over the next couple weeks, I think we'll get some more clarity on the issue.
On whether the NHL has leverage over the IOC to get something it might want because of the increased exposure Olympic hockey gets from NHL players participating:
I don't think it's a game of leverage necessarily, and I certainly have not seen any indication that the IOC feels any pressure to either do what we ask or make concessions for purposes of securing NHL player involvement in the Olympics. I think they want NHL player involvement in the Olympics for sure, and they've certainly suggested that.
But I think to a certain extent, it's a great unknown as to what would happen if we don't participate. Because five Olympic cycles is actually a pretty long time. Our business is in a lot different than it was when we first went to Nagano [in 1998], and some of the reasons underlining Olympic participation then don't necessarily transcend to today.
It's been a very respectful discussion from the start. We've primarily dealt with the International Ice Hockey Federation on those issues. The direct IOC involvement was really last week for the first time. In terms of players, there's no doubt that the players want to participate in the Olympics, for a host of reasons.
Obviously, representing your country on the biggest sports stage in the world is a great attraction. But as Gary [Bettman, the NHL's commissioner] likes to say, it's not just the 150 players or 160 players who go to the Olympics. It's the other 750 players, 650 players, who get 17 days off in the middle of February of an 82-game season. They like the Olympic break as well.
Even if we got every Olympic player to vote no, it would still be an overwhelming majority of players who want Olympic participation.
In terms of the atmospherics, I think it goes back to what I said - I think the situation for the National Hockey League, the equation and the balancing that we do for the National Hockey League today, is totally different than it was in 1998. And I'm not sure everybody appreciates that to the same extent.
As the Players Association told us in a meeting last week, today's generation of players grew up with the expectation that they would get to participate in the Olympics. Whereas when we went the first time, it was a first-time thing.
So it's going to be far more disappointing to today's players when you tell them we're not shutting down our season, and we're not going to the Olympics, than it would have been in 2002 or 2006.
It's a really complicated equation. I also, from the league perspective, would suggest that the equation for the 2018 Games might not necessarily be the same equation as we'll face in 2022 - if we have an option in 2022, if we haven't gone in 2018. It's a very, very complicated issue [and] there's probably going to be criticism on both sides regardless of where we come out on it. So we'll kind of see how it plays out.
After Daly finished his time on stage, he took a few questions in a one-on-one interview.
You talked a lot about why Las Vegas got an expansion team, but not so much about why Quebec City didn't. For those here who don't know, could you expand on the Quebec City story?
Geographic imbalance was certainly part of the issue. I think all the other aspects of their application were in line.
Obviously, I think the other thing that kind of transpired in the year in which their application was pending was the devaluation of the Canadian currency, which made the expansion franchise a lot more expensive for local owners.
Not that it was a negating factor, and I'm not trying to suggest it was. But it was certainly a consideration, both for us and for them, with respect to how an additional franchise adds to the equation that we have to deal with every year, and the players have to deal with every year, on the currency issue.
So I would say those are probably the two primary things that came up in discussions.
When or if the time comes to reconsider Quebec City's potential, everyone knows already about the passion of fan base. How important is it that they've got a new arena built that can take a NHL team right away in the Centre Vidéotron?
With the World Cup property, we had Team Europe have its training camp in Quebec City, and they used the arena, and we were able to visit it in the context of the World Cup. It's a gorgeous arena, a first-class arena. Certainly, that's not a negating factor.
Their ownership group, Québecor and TVA [the French-language NHL broadcaster in Canada] is very qualified. Lots of passion for hockey. They certainly have the financial wherewithal to do it. And the market itself is a hockey-mad market.
It's a small market. It's a very small market. But we've had success in other small markets. Winnipeg is a good example of that, where the rabidness of the fan base can compensate for a lack of population. So all those attributes work in its favor.
As we've said, we deferred their application. It could come up again as part of the next expansion process. I just can't speculate as to when that might be.
There was news Thursday afternoon that in Seattle, the leading candidate for a potential NBA and NHL venue is a renovated KeyArena. It would be smaller than building a new arena from scratch, but it might be a more reasonable proposition for the city. Is KeyArena a venue that could work for the NHL?
It would totally depend on the extent and substance of the renovations. Certainly, there's been a lot of well-intended people who've wanted to build a new facility in Seattle, whether that's a renovated KeyArena or an entirely new facility.