SMBA Summer Class Recap – HMR NHL Lockout Project

As the SMBA calendar turns from August to September, the 2015 cohort wrapped up summer classes and transitioned to the final, rigorous fall semester of classes. Landon Hemsley (SMBA ’15) writes about some of his group projects and in Human Resource Management (HRM) and Managerial Economics.

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Summer has ended, and this year’s SMBA cohort is eyeing the finish line with increased anticipation and a healthy amount of anxiety. Anticipation because the cohort is excited to be finished with two more classes. Anxiety because we are now beginning the process of looking for the next step in our careers.

Last week, SMBA ‘15 wrapped up economics and human resources. Dr. Ely’s final exam put those of us who had never been exposed to the ideas behind the supply and demand curves through the ringer. But we all got through it with a deeper understanding of how market conditions spur people to buy and sell and how that affects price in the market as well as quantities sold. (Hint: Lower prices induce consumers to buy more, though perpetually lowering prices is clearly not always the best thing or a company.)

We also learned a great deal about the Great Recession and why the Federal Reserve continues to by US government debt in addition to keeping interest rates so low. We learned about the conditions that spurred the Fed onto its current course and what sorts of conditions could allow the Fed to extract itself without causing interest rates to skyrocket and the economy to contract again. On the whole, Dr. Ely’s course was a challenge, but one worthy of the cohort.

We also finished up our Human Resources journey that began some months ago with our trip to the Dominican Republic. We followed up that fantastic experience with an in-depth study on labor practices and how they apply to sports businesses, particularly professional sports leagues and college athletics. As part of the course, our groups studied labor disputes in professional sports and gave presentations elaborating on the details of the disputes and how they were resolved.

Landon Hemsley (left) and Daniel Cabral (right) take on the roles of the NHLPA and NHL Owners in a project about the 2004-05 NHL Lockout
Landon Hemsley (left) and Daniel Cabral (right) take on the roles of the NHLPA and NHL Owners in a project about the 2004-05 NHL Lockout.

For example, here’s a photo of me (left) and Daniel Cabral (right) elaborating on the positions of the NHLPA and the NHL owners during the 2004-05 NHL lockout, the only labor dispute that has cost a professional sports league an entire season of play. What was it about, you ask? In short, the lockout came because player salaries accounted for roughly 70 percent of league revenues at the time, by far the most in American professional sports. High salaries combined with many teams in areas where hockey is, shall we say, significantly less popular than it is in Canada created a perfect storm in which team owners were losing money hand over fist. Costs were high and revenues were low. When time came for a new collective bargaining agreement, owners demanded players take a salary reduction. Obviously, players weren’t so excited about that idea.

How did that dispute get resolved? The players held out for months insisting that no salary cap be implemented, preferring a luxury tax that punished owners that couldn’t control their spending habits. Owners, on the other hand, insisted on a salary cap to establish what they called “cost certainty.” In the end, the players accepted a salary cap of $39 million per team, and players as a whole were guaranteed 54 percent of league revenues, a significant decrease from where they were previously.

So who won? The owners. Prior to the lockout, player salaries accounted for somewhere around 70 percent of league revenues, more than any other major league. The new deal allowed the owners to contain their costs and distribute their revenues among teams more effectively, a necessity considering that the NHL had added nine teams during the 1990s.

Other groups presented on the 1994 MLB strike, the New Orleans Saints Bounty-gate case, the 2011 NBA lockout and other topics. We left the course with a new appreciation for the difficulties associated with collective bargaining and unionized labor relations.

Now the cohort is taking a week away from SDSU to brush up on our job-hunting skills. The class is spread out across the continent, from Miami to Winnipeg to Salt Lake City to San Diego, seeking to learn more from the people who know the industry best, those who actually work in it. Phone calls are being placed, emails are being written, interviews are being conducted and visits at workplaces are underway.

When we get back from our week of networking, we’ll have the fall semester to tackle. In the mean time, we’re enjoying the brief respite and looking to take advantage of any opportunity that presents itself.