The NHL players' association agreed to accept a salary cap, but contract talks broke down early Tuesday over the amount that teams would pay.
Even while the negotiations were going on, NHL commissioner Gary Bettman had already planned to announce the cancellation of the season Wednesday, a source close to the negotiations told The Associated Press on condition of anonymity Monday.
Bettman was slated to speak Wednesday in New York, but the NHL declined to give details beyond the time and location.
The NHL offered to remove its demand for a link between league revenues and player costs, a "significant move in the players' direction" the union said in a statement early Tuesday following a meeting in Niagara Falls, N.Y.
But when the players offered to accept a cap at $52 million — the first time they came off their opposition to a ceiling on salaries — the offer was rejected by the NHL. The league insisted on a salary cap that topped out at $40 million per team.
"It is indeed unfortunate that with the major steps taken by both sides we were unable to build enough momentum to reach an agreement," players' association senior director Ted Saskin said in a statement early Tuesday.
No new talks were immediately scheduled, but with the philosophical differences now bridged there appeared to be room for the sides to negotiate dollar figures.
The 24-percent rollback on all existing contracts, originally offered by the union on Dec. 9, as well as more aggressive luxury tax rates and thresholds, were included in the players' counteroffer.
With the major stumbling blocks now out of the way, the sides are only $12 million apart on what each team's cap should be. With the salary rollback, only eight of the 30 teams would be above $40 million.