The 2004-05 NHL Lockout and its Effects

On September 16, 2004, owners of all 30 National Hockey League franchises called a work stoppage, beginning a lockout that resulted in the cancellation of the 2004-05 NHL season. This lockout was the first in the 4 major North American sports leagues (NHL, NFL, NBA, MLB) to cancel an entire season, and it’s the first time since 1919 that no team was awarded Lord Stanley’s Cup, the championship trophy in the NHL

The two sides in the lockout dispute were the NHL Players Association and the owners of all franchises, represented in negotiations by Gary Bettman. There were a few issues that were dealt with, but there was one issue that stood above the rest. This issue was the cost of player salaries.

Prior to the lockout, teams spent roughly 76% of their or their revenues on player salaries, far higher than all other major North American leagues. This resulted in many teams losing money, including a net loss of $273 million in the 2002-03 season. The league wanted to achieve “cost certainty,” where teams pay players an amount proportional to the team’s revenues. To accomplish this, the league proposed various changes to salaries such as a salary cap.

Since the issue was over players’ salaries, there was no easy fix. The league and the NHLPA had much trouble with this, which was exacerbated further by low television revenues and low stadium attendance in some places. It is hard to dispute the owners’ complaints, since some franchises had declared bankruptcy.

The lockout devastated the league in terms of television revenue. ESPN, a major sports broadcaster, declined to broadcast NHL games, which has hurt television revenues. However, ESPN’s Canadian affiliate TSN continues to broadcast games in Canada where hockey remains the most popular sport.

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League revenues did recover. In 2012, the NHL posted its highest-earning season to date, earning $3.3 billion. While player salaries decreased after the lockout, they quickly recovered, rising at roughly the same rate as league growth. Payroll disparities among teams also decreased. The owners were ultimately successful in implementing a soft salary cap, meaning that each team had a salary limit and would be penalized for exceeding the limit.

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