a measure of winning percentage dispersion, given by the ratio of the standard deviation to the idealized standard deviation (to take into account the length of the season). The higher the dispersion, the higher the imbalance. Of course, other measures of competitive imbalance have been proposed, but we shall stick to this one. Winning dispersion in the 1990s is no worse than what it was in the ‘golden years’ of ice hockey, and it is much reduced compared to the 1970s. In addition, the increase in payroll imbalance of the new century is associated with a reduction in performance imbalance. It could be argued, however, as do officials of the NHL, that while competition in the NHL in a given year is now tighter than it used to be (reporters say that parity in the NHL has been achieved), the same clubs keep ending up at the top of the ladder. To account for this, some other approach is required, one that examines competitive imbalances through time. Studies by Richardson (2000) and Wakeford (2003) show that the correlation between present and future performance is much weaker than it used to be. In other words, it is harder for good teams to remain at the top, and poor teams improve more quickly. Hence competitive balance through time has also improved. The major problems facing the NHL thus seem to be entirely financial, rather than related to a lack of competitive uncertainty on the ice. The new 2005 collective agreement It thus follows that the only valid reason for imposing a payroll cap was the need for team owners to get protection against themselves – the first two points made by Bettman (the issue of ticket prices will be discussed in the last section). While the players had vowed never to accept any payroll cap, the NHL lockout ended in July 2005, with the signing of a new collective agreement incorporating such a cap, valid from 2005 to 2011. Players were forced to surrender on all counts, ending up with less than they had been offered at some stage of the negotiations. Goodenow, the head of the NHLPA, had no choice but to resign a few weeks later. The quotes found at the beginning of the chapter would now seem to be fully appropriate. The main features of the new agreement can be summed up with six major points. 14
First, all existing salary contracts were automatically rolled back by 24% – a reduction that the players had already conceded to the owners in December 2004, in the hope of evading the payroll cap and saving the second half of the hockey season. Second, the owners imposed the much sought-after payroll cap, which was set at $39 million, accompanied by a payroll floor of $22 million. Ironically, in February 2005, the players had turned down a cap offer at $42.5 million, but without the payroll floor. Third, to provide for true ‘cost certainty’ in relation to revenues, the payroll cap is linked to league revenues: if revenues rise so will the cap. In addition, players cannot earn more than 54% of league revenues; to insure this, an escrow tax has
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