Prior to the lockout in late 2003 , the union proposed a system that included revenue sharing , a luxury tax , a one-time five percent rollback in player salaries, and reforms to the league's entry level system. The league rejected this proposal almost immediately because it essentially maintained the status quo in favour of the players. Shortly before the lockout commenced in 2004, the NHLPA offered another proposal to the league that was believed to be similar to their earlier proposal. The league again rejected the union offer, claiming the union's new proposal was worse than the offer they rejected in 2003. At this point, negotiations stopped until early December, when the NHLPA made a highly anticipated proposal based on a luxury tax that increased the proposed one-time rollback in players' salaries from 5 to 24 percent. The NHL rejected the offer and countered with a proposal that the union quickly rejected.

In late January 2005, near what the hockey media believed to be the point of no return for the 2004-05 season, discussions were held without Bettman, Goodenow, and the negotiators from both sides. The NHL was represented by Executive Vice President Bill Daly and Board of Governors Chairman Harley Hotchkiss, who also co-owns the Calgary Flames , and the NHLPA was represented by President Trevor Linden and Senior Director Ted Saskin. After four meetings, the sides remained deadlocked due to, according to Saskin, "significant philosophical differences". Shortly after this series of meetings, Daly presented Saskin a proposal that the league believed made a number of concessions to the players, but was still based on a salary cap linked to revenues. The players' association rejected the proposal, saying that it was "not the basis for an agreement."

After these negotiations failed, on February 9 , Bettman declared that if the lockout was not resolved by the weekend, there would be no hope of saving the season. When talks broke off between the NHL and the NHLPA the next day, there had been no progress in negotiations. On February 14 , the union offered to accept a $52 million salary cap under the condition that it was not linked to league revenues. The league proposed a counteroffer with a $40 million cap plus $2.2 million in benefits, which the players association refused. The next day, Bettman sent Goodenow a letter [1] with a final proposal of a $42.5 million cap plus $2.2 million in benefits, setting a deadline of 11:00 the next day to accept or refuse the offer. The NHLPA presented a counter-offer involving a $49 million cap, which the league refused.

With no resolution by the 11:00 deadline, Bettman announced the cancellation of the 2004-05 season on February 16 , 2005 , making the NHL the first major professional sports league in North America to cancel an entire season because of a labour dispute. However on February 18 , The Hockey News reported that a deal with a $45 million cap had been reached "in principle" with the help of owners Wayne Gretzky , a former player, and Mario Lemieux , a current player. Both camps immediately denied this report. A 6½-hour meeting took place on February 19 , 2005 , but no agreement was reached.

Bolstered by the thought of losing yet another season to a labour dispute, the sides began meeting again in June, with many pundits believing the lockout would end on July 4 , 2005 . That date eventually came and went, but sources were reporting to media that marathon sessions were taking place. Indeed, the sides met again for ten consecutive days (July 4-13), and a deal was reached "in principle" (meaning the sides have agreed, but nothing is signed) on July 13 . According to reports, the July 12 session lasted through the night and until 06:00 on July 13 , at which point the talks broke off for five hours, and resumed in time to complete the deal.

Both sides wanted to make an announcement on July 13 , as it was the day following the Major League Baseball All-Star Game  – the only day in the calendar year when none of the four major North American team sports has an event scheduled. On July 21 , the players association ratified the agreement with 87 percent of its members voting in favour. The owners unanimously approved it the next day, officially ending the 310 day lockout.