Causes and Effects of the Last Work Stoppage in Each of the Four Major Sports

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were not fixed because a salary cap was implemented. This allowed large market teams like the Yankees and Red Sox to continue their dominance on the free agent market. Within four years however, exciting playoff races, two new teams, six new stadiums, and record-breaking moments from Mark McGwire and Cal Ripken Jr. renewed the fan interest. By 1999, attendance had reached its pre-strike level and baseball became America’s pastime once again (Matheson, 1174-1176).

1998-1999 NBA Lockout

The issue of raising salaries hit the NBA in 1998. Owners became fearful of giving into the steep demands of younger players that had yet to prove themselves. In 1997 a second year sensation Kevin Garnett signed a six year $121 million contract with the Minnesota Timberwolves (Ringold, 101). Panic soon hit the owners as they were fearful that contracts similar to Garnett’s would become typical around the league. In addition to the rising salaries, owners also wanted less revenue sharing with players and a stricter salary cap. After an agreement on a new collective bargaining agreement could be reached; the NBA decided to lockout its players on July 1, 1998 (102).

As soon as news broke out about the cancellation of games, sponsors such as Nike immediately cut a majority of its NBA endorsement contracts (120). This caused most players to feel an economic loss beyond their NBA paycheck. In addition, cablevision companies such as NBC and Turner lost millions of dollars for paying TV contracts for games that were cancelled (115-116, 129). Also affected by the lockout was the clothing industry. It is believed that a drop in sales of about 60% in basketball shoes and NBA merchandise occurred because of the lockout (129). Unlike other lockouts in major sports, NBA host cities lost a tremendous amount of money due to the lockout. For example, New York City reported a $70 million loss, while Chicago reportedly lost over $8 million per game (130). Taxpayers in Seattle were forced to pay $1.3 million to the owner of the Seattle Supersonics to help finance the lost revenues (130-131).

On January 6 1999, a new collective bargaining agreement was finally reached (120). In an effort to limit salaries, new limitations were set for rookies and veterans. These new contracts could not exceed six years $100 million for all players signing with a new team. Players resigning with their current team were allowed to sign for seven years (122-123). In terms of salaries, they were not allowed to rise by more than 12.5 percent per year. Salary cap limitations were also set; teams were only allowed to exceed the salary cap in order to retain veterans or to add another veteran player (122). Lastly, the new revenue sharing mark was set at 55% (121).

Following the new agreement the NBA was fearful of losing many fans. Therefore incentives such as free access to all preseason games scrimmages and practices, cheap tickets and Valentine’s Day cards were given to all fans (129). Competitive balance issues were not resolved because teams were still allowed to exceed the salary cap limit. Although the players were not conditioned and their play was sloppy, league attendance only dropped by a fraction of a percent. TV stations indicated an increase in viewership of over five percent (128-129). Luckily for the NBA, fans were quick to forgive the players and owners and return to the game that they loved.

2004-2005 NHL Lockout

Despite the efforts of previous collective bargaining agreements, NHL rookies continued to make millions of dollars. Rookie star Marion Gaborik made over $3 million through various loopholes in his contract such as signing bonuses (Staudohar, NHL 25). Since owners continued to spend money on unrestricted free agents, signing bonuses, and salary arbitration, more than half of the teams suffered financial losses (25-26). Owners wanted less revenue sharing and to enforce a strict salary cap based of the revenue sharing. Fearful that owner demands would diminish their salaries, players refused any offers and were locked out by their owners for the entire 2004-2005 season (26).

Aside from a league wide loss of millions of dollars, the instant loss of games had an immediate impact on players and employees but not necessarily the host cities. Many fans in America did not let the lockout prevent them from spending money. Their money was now spent on going to the movies or shopping at the mall. However, Canadian cities like Montreal and Toronto took a large hit; it is estimated that their GDP dropped $170 million because of the lack of revenue hockey produced that year (26). Players like Jaromir Jagr, and Vincent Lecavalier were forced to play overseas in Sweden or Russia in order to make just a fraction of their current salaries (27). Other legends like Scott Stevens, Ron Francis, Al MacInnis, and Mark Messier decided to hang up their skates and retire. Arena employees were forced to look elsewhere for a job because they were laid-off (27).

When a settlement was finally reached in July 2005, the owners had won most of their arguments. A strict salary cap based on revenues was instituted along with an $850,000 rookie salary cap that limits signing bonuses to 10% (27). The implementation of the salary cap did not come as a surprise since player representatives Jeremey Roenick and Chris Pronger leaned towards accepting it (26-27). In addition, revenue splits with players were lessened, the arbitration process was simplified, and a system for drug-testing was implemented. Players were forced to take a 24% pay cut but they were granted free agency at an earlier age (27).

When the puck dropped on opening night in 2005 fans could not have been happier. With trimmed down goalie pads and shootouts to decide ties; games were now higher scoring and faster paced (Anderson). With rookie sensation like Sidney Crosby and Alexander Ovechkin, 25 out of the 30 NHL teams experienced a rise in attendance following the lockout. The competition could not have been any better as the salary cap forced a more even distribution of talent. Despite the lockout NHL Commissioner Gary Bettman believes that the economics of the game have been fixed and the game could not be any better with the exciting rule changes (Anderson).

Conclusion

All of the labor disputes in major sports share the same underlying cause, salaries. In most cases players demand higher salaries as the owners demand salary caps. Both sides refuse to agree until games have been cancelled and money has been lost. In the end it is usually the owners that win the argument since they are the ones paying the salaries. Unfortunately, lockouts and player strikes do not look like they are going to stop any time soon because collective bargaining agreements