International transfer disputes in ice hockey - Part 3: a three-part solution

Alexander_Ovechkin
Published: Wednesday, 21 May 2014 Written by Ryan Lake No Comments

In Part 2 of this series, the author explored potential solutions to the problem of international player transfer disputes in ice hockey, while also exposing their potential limitations. In Part 3, the author puts forward his own three-part solution, which he proposes offers a holistic resolution to the problem.

 

Three-part solution to resolve international transfer disputes in ice hockey: introduction

The international hockey world is comprised of several different leagues all-vying for the most competitive and financially viable product. Many of the international leagues and clubs have difficulty competing against the National Hockey League (NHL). As a consequence, each league is constantly trying to acquire and retain the most talented players. The process of acquiring players from other leagues is known as player transfers. Traditionally the International Federation for that particular sport governs player transfers.1 In soccer, for example, it is Fédération Internationale de Football Association (FIFA) and in hockey it is the International Ice Hockey Federation (IIHF). However, the current structure of international hockey restricts the IIHF’s ability to govern such transfers. This lack of centralized governance has resulted in many contested player transfers. 

In particular, the lack of universal procedures to regulate the transfer of players between leagues is a central issue of concern. In the past, several attempts were made to address the issues surrounding international transfers. These attempts, however, have created a complicated system that failed to bring harmony to the leagues. The primary issue is that the IIHF does not govern all of the top-level leagues in the world, but rather exerts control only over its member leagues, which does not include the NHL. With that being said, the remainder of the world’s top-level leagues are members of the IIHF and, therefore, subject to the regulations surrounding international player transfers. These member leagues include Sweden’s Elitserien, Switzerland’s National League A, Germany’s Deutsche Eishockey Liga, the Czech Republic’s Extraliga, and Finland’s SM-Liiga. 

Developing a solution to the international transfer issue must take into account several important factors. These factors include the structure of the individual leagues, financial restrictions placed on clubs, political relationships between the leagues and the IIHF, and the willingness of the leagues to work together. This article proposes a three-pronged system to address the endemic problems in the transfer of players in international hockey. 

First, in order to ensure the success of any system, it is crucial to have each league invested in the system and is, therefore, vital to close the distance between the leagues. The creation of an interleague competition would likely foster the required cooperative culture. Secondly, a universal and standardized arbitral procedure is necessary in order to handle transfer issues as they arise. Finally, a system should be implemented that will allow players to earn their maximum value while allowing clubs to receive adequate compensation for a player. Accordingly the governing bodies of hockey should create a Champion’s League of Hockey, develop a Hockey Arbitration Tribunal, and implement an modified Third-Party Investor model. The incorporation of these systems could dramatically reduce the number of disputed transfers. 

Champions League of Hockey 

A culture of cooperation among the leagues is necessary in order to minimize the occurrence of player poaching. A more cooperative culture may be fostered through an international club tournament among the top clubs in the world, thereby investing each league in the success of the other leagues around the world. An annual tournament highlighting the most successful hockey clubs would not only enhance the brand of the best clubs but would also generate additional revenue for the leagues. Further, this tournament could create competition among the leagues, which will serve to increase the quality of hockey throughout the world. Other sports that have undertaken club competitions have enjoyed the aforementioned benefits and many more. 

Club tournaments experience immense popularity and success in other sports. For example, FIFA, the International Federation for soccer, conducts tournaments throughout the world, known as Champions League. The most successful Champions League takes place on the continent of Europe. The tournament is held annually and has developed into one of the most successful sporting events in the world. In 2012 the European version, Union of European Football Associations (UEFA) Champions League, generated an estimated €1.34 Billion in commercial revenue.2 Examining UEFA and how the world’s most successful club tournament is administered provides a model to evaluate how a club tournament may operate in hockey.

UEFA Champions League

The UEFA Champions League, Champions Club Cup is one of the most coveted trophies in international soccer.3 The tournament was first held in 1955 and consisted of a sixteen-team pool.4 The competition has since expanded a great deal. Currently the Champions League starts from a pool of 76 teams, and through several stages, the pool is narrowed down to 16 playoff teams.5 These clubs compete to advance through three playoff rounds in order to play in the final game.6

Each knockout playoff round consists of a two-game series.7 These games are played in a home and home format, ensuring that each playoff team gets at least one home game in each round.8 The victor is determined by the “team which scores the greater aggregate of goals in the two matches.9 In accordance with Regulations of the UEFA Champions League, each playoff team is allowed to keep revenue generated by the sale of tickets for home games.10 Moreover, the visiting club “assumes its expenses for travel, board and lodging, unless the two clubs concerned agree otherwise.11 Therefore in each playoff round, each team is entitled to the revenue generated by home ticket sales but must pay for their own travel expenses for each away game. 

Every club that participates and reaches the group stage of the Champions League is entitled to a share of the marketing and television revenue that is generated by the 96 group matches and the twenty-nine playoff games. The “96 group matches consist of 16 rounds of 16 matches, eight quarter-final matches, 4 semi-final matches and the final of the UEFA Champions League.”12 According to the most recent regulations, the qualifying teams are entitled to 75% of the revenue received by “UEFA from television and sponsorships (including, without limitation, licensing and merchandising).” This shared revenue will be distributed evenly among the teams until the total revenue received exceeds €530 Million.13 Excess revenues over €530 Million, are distributed in the following manner: “82% to the 20 clubs involved in the play-offs and the 32 clubs involved in the group stages of the UEFA Champions League, and 18% remaining with UEFA.14

The Champions League Final, by contrast, is completely controlled and organized by UEFA. UEFA controls the sale of all tickets.15 Therefore, neither club profits from ticket sales. The two teams to reach the finals, however, are entitled to additional revenue. UEFA regulations provide for a process of developing a distribution model before the final match. In this process, 09 “[b]efore the final, the Executive Committee decides on the financial distribution model in favor of (a) the two finalists; (b) the host association (in accordance with the staging agreement); (c) UEFA.”16 Each year these financial distributions may differ, but each club that reaches the finals is ensured a compelling amount of additional revenue. The popularity of the event ensures this additional revenue. For example in 2011-12 more than 178.7 million viewers worldwide watched the championship game alone.17 The 2011-12 Championship game was viewed by 2 million in the United States, where soccer is decidedly the fifth most popular sport.18

The massive worldwide viewership generated €1.34 Billion in commercial revenue.19 According to the revenue sharing procedure, €754.1 Million was distributed among the participating teams.20 Chelsea FC, the victorious club received €59.935 million, consisting of €29.9 million for participation and reaching the final of the tournament, and €30.035 million as part of the television revenue sharing.21 The teams to reach the top eight earned between €59.935 million and €31.569 million.22 This massive influx of income for the participating clubs is the driving factor behind the team’s wiliness to participate in the tournament. Further, the ability to attract the top level teams in Europe has continued to grow the popularity of the tournament, which in turn generates more revenue. 

The model that UEFA has pioneered is an excellent starting place. In order to work within the confines of hockey several changes will have to be made, while maintaining the goal to turn a club hockey tournament into an income-producing asset for all of the participating leagues. 

IIHF Champions League of Hockey

A successful club tournament in the world of hockey requires that the competition generate revenue within the first few years. One way to ensure this occurs is to invite the best teams, from the best leagues, to participate in the tournament. The top leagues in the world include; the NHL, KHL, Sweden’s Elitserien, Switzerland’s National League A, Germany’s Deutsche Eishockey Liga, the Czech Republic’s Extraliga, Finland’s SM-Liiga and Slovakia’s Extraliga. 

To ensure the participation of the top teams, the tournament will have to be scheduled so as not to interfere with the playoffs or regular season of each league. Consequently, the tournament will have to be held in the offseason. This is one major difference from the current IIHF World Championships, which are held during the NHL playoffs, and thus limit the quality of players that can participate. An opportune time to hold the tournament would be in August before the start of training camp for each league. Holding the tournament in August allows the players to recuperate from a long season, and also provides them with an opportunity to skate into shape for the next season.  

A successful format would invite 16 teams to participate in the tournament. The 16 team pool would be comprised of the 4 top teams from the NHL (the two teams to reach the western conference finals and the two teams to reach the eastern conference finals); the 4 top teams from the KHL (the four teams to reach the semi-finals); the champions from Sweden’s Elitserien, Switzerland’s National League A, Germany’s Deutsche Eishockey Liga, the Czech Republic’s Extraliga, Finland’s SM-Liiga and Slovakia’s Extraliga; and the two top teams from the Continental Cup (a club tournament currently held by the IIHF for clubs in developing hockey leagues).

Using the 2012 season as an example, the invited teams would have included: the Los Angeles Kings (NHL), Dynamo Moscow (KHL), ZSC Lions (Swiss League), HC Bratislava (Slovakia Extraliga) Donbass Donetsk (Continental Cup finalist) SKA St. Peterburg (KHL), New York Rangers (NHL), Traktor Chelyubinsk (KHL), JYP (Finland SM-Liiga), Rouen Dragons (Continental Cup Finalist), HC Pardvbice (Czech Extraliga), Eisbaren Berlin (German Deutsche Eishockey Liga), New Jersey Devils (NHL), Avangard Omsk (KHL), Laea HF (Sweden Elitserien), and the Phoenix Coyotes (NHL). Figure 1 below is a potential bracket for the tournament. 

Screen Shot 2014-05-21 at 16.03.52

Based on the bracket above, the tournament should have a strong fan base, and, therefore, generate significant revenue. Imagine a tournament featuring the Russian born NHL superstar, Ilya Kovalchuk of the New Jersey Devils playing two games against Dynamo Moscow, with one game in New Jersey and another in Moscow. A final game contested between the New York Rangers and Moscow Dynamo would wage the two largest cities in the United States and Russia against each other. With matchups such as this, the marketing possibilities are endless.

Like in soccer, each round of the tournament would be comprised of a home-and-home game series, with the tiebreakers being total goals scored and away goals. This ensures that each team in the competition has a home game in each round. However, the finals will be a one game event held at a neutral site. In order to be crowned champion, a team would be required to play a total of seven games. The total number of games any one club has to play is limited in order to reduce the risk of injury to the players as well as to make each game more meaningful and thus increase the potential viewership. 

The revenue generated from the tournament would be shared in a fashion similar to UEFA Champions League, with a few meaningful changes to ensure the participation of the top leagues. Principally, the revenue sharing model Although in UEFA, which allocates tournament revenue among the individual clubs that participate in the competition would not work in the hockey world. Rather, due to the structure of the NHL, the revenue would have to be shared with the leagues, not the clubs. According to the Collective Bargaining Agreement (CBA) between the NHL club owners and the players, all non-league games must be agreed to by both the NHL and the NHL Players Association.23 The CBA also requires that all revenue from interleague games be divided equally between the NHL and NHLPA.24 Therefore, the percentage of the revenue that each NHL club generates will have to be equally divided between the NHL and the NHLPA. This is in line with the goal of the tournament, which is to incentivize and grow the leagues not the individual clubs.

The reasoning behind awarding the revenue to the leagues and not the clubs individually is due to the select number of the teams that are invited to participate in the tournament. Further, the allocation of revenue to the leagues will act as an incentive for the top leagues as well as an enforcement mechanism for the Hockey arbitration tribunal, discussed in the next section, to enforce judgments against certain clubs and leagues. 

Importantly, however, the revenue sharing will not be equal for each participating league. The NHL and the KHL will likely need to receive four-times the revenue than the rest of the participating leagues. The rationale behind this is that both the NHL and the KHL are providing four teams for the competition, and therefore, deserve a greater share of the revenue. Moreover, the marketability of the tournament would greatly depend on the participation of the NHL and KHL. As a result, it is important to incentivize their participation by creating a new revenue stream for the NHL and KHL to tap into.

Along with the revenue generated from the tournament itself, the competition will allow the clubs and leagues to grow their individual brands. A global platform will increase the exposure of club brands to the entire hockey world. For example, using the tournament bracket above, the New York Rangers, would be well situated to take their nationally recognized brand and turn it into an international icon of hockey. In the soccer world, this transformation has occurred with many top-level teams. The most successful team at tapping into the global market is Manchester United of the English Premiere League. Manchester United generated $166 Million in commercial revenue during the 2010-2011 season.25 Manchester United’s ability to grow their brand was greatly assisted by the team’s success in the UEFA Champions League. Therefore, it is entirely possible for the top teams in the world of hockey to grow their brand in the same manner as Manchester United. 

The creation of a Hockey Champions League by the IIHF, in cooperation with the NHL, is vital in solving the transfer dispute issues and will create opportunities to foster a new revenue stream for the top leagues as well as providing an annual stage for the world of hockey to come together and grow the sport. Players in the IIHF member leagues will have an international platform to demonstrate their abilities, and maximize their earning potential. Moreover, invitations to the competition can be restricted as part of the enforcement arm of the Hockey Arbitration Tribunal. For these reasons and many others, the creation of the Champion League of Hockey is essential if the hockey world hopes to grow the sport globally and maintain collegiality between the leagues. Additionally, the fostering of mutual respect between the leagues will have a dramatic effect on the international player transfer issues.

Hockey Arbitral Tribunal 

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About the Author

Ryan Lake

Ryan Lake

Ryan is an American attorney at Lake Law Group, LLC and a sports consultant at Beyond the Playbook. He works extensively on ice hockey, soccer, baseball, basketball and Olympic movement issues. Ryan is also an Adjunct Professor at St. John’s University School of Law.

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