I am a fan of my team and you root for yours, but we all love our Football and are united in our frustration that there may be no season. We look for answers for what is going on with the Lockout and CBA, but all we seem to get is a fog of PR and spin. This is my attempt to get beneath that PR spin and examine all of the factors that have brought us to this point. This is a long post because there are many complex factors involved, so grab a cold frosty one, sit down, and let's cut thru the fog.
However, before we attempt to analyze this situation we must have the correct mindset. It is not just a simple case of Billionaires fighting Millionaires. While Football is just an entertaining game to us which we want to enjoy once again, to the players it is their job. It is what puts food on the table and takes care of their family. For every "live high on the hog", headline grabbing millionaire player, there are 10 like Jets' guard Matt Slauson, who moved his family in with his parents in order to save money during the lockout. This was a job that they worked and trained for years to get, and they are the best of the best at what they do (no matter how much of a bum we think they are). They get hurt, give them a shot of a pain killer and send them back on the field, it was recently revealed that wide receiver Jerricho Cotchery played the whole 2010 season with a herniated disk in his back. For them, at any time their dream come true, can turn into a nightmare of pain, disability, and despair. Their average playing life is less then five years because their physical deterioration catches up to them. Some may be famous and self-centered prima-donnas, but for the vast majority, we will never hear their names. They are not just "Millionaire Playboys", on the whole, they are average people who just happen to have a difficult but very well paying job, and are doing what they can to protect it. Now put yourself in their shoes.
I would tell you to put yourself in the owners shoes, for I am sure they have real problems and concerns since the owners talk about them all the time. But I can not know for sure what these are, because the same owners are doing their best to hide any real evidence or proof of them. However, all the owners are not "Billionaires", there are many nice middle-class people in Green Bay, a small city of 120 thousand people which has had a non-profit, community-owned team since the 1920's. It is the only exception to the 1960 rule in the NFL Constitution that required the teams to be a closely held, for profit private organization. In fact, before any team can be sold to any other private owner, the other owners must approve the sale. The NFL seems to be operated like a social club and unlike any other business organization that I am aware of, unless it is a cartel. While the owners attitude under normal business circumstances makes no sense, it is the owners choice, their decision, their business and their profit or loss. They must have their reasons, but what it is, I do not understand.
It makes no business sense for the owners to have rules to prevent each other from becoming a public corporation, even when and if they want to do so. This could allow the owners to raise money for new stadiums the old fashion way, by selling stocks and bonds. A public stock offering would prevent the teams from going into debt, and the owners would not even have to give up control, if they choose to offer 49%, or less, of the corporation to the public. The NFL owners are unlike most business owners who consider their IPO (Initial Public Offering) their big payday, their chance to "cash out." All the owners would have to do is open the books, for the public investors to see what the numbers are. Instead of buying a players' Jersey to show your support, you could buy some shares and say it really is your team. Imagine how much more exciting the games would be, as you stood in the owners shoes.
Now that we know who the characters are in this drama, let's look at the drama itself.
The first thing that should be kept in mind that this is a Lockout in which the owners are asking the players to reduce conditions (benefits) that the players already have; not a Strike based on the players asking for more benefits. The players have said many times they are willing to work under the present contract, which has been in effect since 1993, and been extended five times. However, the owners don't want that, they will not allow the players to return to work until there is a new agreement with the Union. That is why there can be no season with "replacement players" as there was in the football Strike of 1987.
The owners are asking for "Give Backs" in the contract as far as the percentage of NFL revenue they share with the Players Association (NFLPA). This would directly impact the income of the players as a group, and therefore indirectly impact the possible income of players as individuals. It would seem that it is only fair and reasonable that the owners would justify their demands, with something more then words, before the players gave up the right to something they already had. Particularly since it appears the owners, as a group - the NFL - are doing better financially then they have ever done before. The present salary cap system was accepted by the employees (Players) in exchange for their giving up the right to unlimited free agency.
First organized in 1956, the NFLPA was not recognized by the owners. Finally In 1968, the NFLPA won recognition from the owners and started to negotiate its first collective bargaining contract. On July 3, 1968, after talks with the owners stalled, the NFLPA voted to strike, and the owners countered by declaring a lockout. But on July 14, the owners relented and the brief strike was over. However, the concessions the Players received were small. The owners compromised by agreeing to contribute about $1.5 million to the pension fund, but maintained minimum salaries of $9,000 for rookies, $10,000 for veterans and $50 per exhibition game.
After they lost their strike in 1987 the Players Association dissolved as a union; and under federal labor law, the players gained standing to file class-action lawsuits against their employers. In 1988, a federal judge ruled that the NFL's unilateral rules limiting free agency did, in fact, impose unlawful restriction on the players' rights to sell their labor to the highest bidder. Unlimited free agency meant, at the end of each players' contract, they would be an unrestricted free agent with no limit, or rules, on what any owner could offer to pay him. This is similar to what exists in Baseball. However, because of the uncertainty of the on-going court cases, both sides decided to compromise and come to an agreement. Therefore, the Players Association again certified itself as a union, and entered into negotiations with the NFL.
In 1993 the NFL and the Players Association, on behalf of the players agreed to the CBA. The players gave up their right to unlimited free agency in exchange for a set percentage of the NFL's revenue which is defined by the Cap. The owners, in exchange, now knew that the free market competition for players services would be limited and governed by certain rules. In addition, the owners received the assurance that the total of players salaries would never be above a certain percentage of their revenues, as defined by the Cap. This was a significant accommodation on the part of the players to the owners. In the eyes of the union, the percentage of NFL revenue reflected in the Cap was bought and paid for already by the Players, in their loss of unlimited free agency. This is the heart and soul belief of the NFLPA and unless there is an extraordinary situation, it is non-negotiable. Since it was founded in 1956, The NFLPA's goal was winning 55 percent of league revenues for players, and it took a victory in court, and the loss of that victory through a negotiated compromise, to finally enable it to do so.
What the players believed they "paid" when they gave up free agency, can be seen in the shortfall in salary between these contracts below and the best paid stars in football. In this chart of the 15 largest sports contracts (at that time), the only football player who appears on it is Michel Vick, it should also be kept in mind while football contracts are not guaranteed, as in the case of Michael Vick, most of these contracts in the other sports are guaranteed. The one thing all these players have in common is that at one point they were all unrestricted free agents. As you read the incredible numbers, remember the players view their salaries relative to others in the sport and the entertainment industry (singers, actors, film stars, musicians, and celebrities in general) of which they are part. Also keep in mind 1) the players' have a skill set and talents as unique as any person who is intellectually gifted; and 2) they spent many years in the school of hard knocks (in high school and college) studying and training before they entered a profession league, based on being the best at what they do.
Player Team Length of contract Contract value Average per year
1 Alex Rodriguez New York Yankees 10 years (2008-2017) $275,000,000 $27,500,000
2 Alex Rodriguez Texas Rangers 10 years (2001-2010) $252,000,000 $25,200,000
3 Derek Jeter New York Yankees 10 years (2001-2010) $189,000,000 $18,900,000
4 Joe Mauer Minnesota Twins 8 years (2011-2018) $184,000,000 $23,000,000
5 Mark Teixeira New York Yankees 8 years (2009-2016) $180,000,000 $22,500,000
6 CC Sabathia New York Yankees 7 years (2009-2015) $161,000,000 $23,000,000
7 Manny Ramírez Boston Red Sox 8 years (2001-2008) $160,000,000 $20,000,000
8 Troy Tulowitzki Colorado Rockies 10 years (2011-2020) $157,750,000 $15,775,000
9 Miguel Cabrera Detroit Tigers 8 years (2008-2015) $152,300,000 $19,037,500
10 Todd Helton Colorado Rockies 11 years (2001-2011) $151,500,000 $13,772,727
11 Carl Crawford Boston Red Sox 7 years (2011-2017) $142,000,000 $20,285,714
12 Johan Santana New York Mets 6 years (2008-2013) $137,500,000 $22,916,667
13 Kobe Bryant Los Angeles Lakers 7 years (2004-2011) $136,400,000 $19,485,714
14 Alfonso Soriano Chicago Cubs 8 years (2007-2014) $136,000,000 $17,000,000
15 Michael Vick Atlanta Falcons 10 years (2005-2014) $130,000,000 $13,000,000
In any case, if your boss came to you and told you, and your fellow workers, that you were going to take a pay cut, wouldn't you ask: Why? Is it because the owner wants to buy a new Caribbean villa, or put this eight year old son on the payroll, or is the business really going broke? In the words of President Reagan, you should trust, but verify. And wouldn't you be upset if the only answer your boss gave you was "because I am your boss and it is my business, and you are too dumb to understand why anyway." You would do everything you could to prevent the pay cut, including taking legal action, and going to court. This is why there is the controversy over "opening the books," and why a perceived lack of respect and progress caused the Union to decertify.
IF A PERSON FEELS SOMETHING IS VERY VALUABLE TO THEM, SUCH AS THE LEVEL OF THE CAP IS TO THE UNION, THEY ARE NOT GOING TO GIVE IT UP JUST BECAUSE SOMEONE ELSE SAYS THEY NEED IT. PROVE IT, AND THEN THEY WILL CONSIDER IT. AND YOU HAVE TO BE REALLY STUPID IF YOU TELL THEM SUCH JUSTIFICATION IS NONE OF THEIR BUSINESS, AND YOU EXPECT A POSITIVE RESPONSE.
As an aside, in regards to looking into the owner's books: When I was a young man, I was involved in the computer revolution. I made a great deal of money, so I became a chapter S small business corporation. I bought a fancy new sport car, which I called a business expense; put my “girlfriend” on the payroll for "services rendered"; took a lot of “business” trips to luxury resorts to attend so called business meetings or conferences; took friends to football games using my season tickets to improve our business relationship – you get the idea. At the time, they were all 100% tax deducible as a business expense, and who was to say they were not. Every year I would attach a short summary of my books to my tax statement and the government never challenged me, because there were no details. I could do this because no one was watching me, and I was only judge if these expenditures improved my business prospects. I was not a public company so there was no one who was micro-managing my affairs. Nobody knew what I was doing, and if they did they were butting into my business, which they had no right to do.
There is a general misunderstanding about that this Lockout is all about at its core. This can be explained by employee relationship (the players) to the owners which exists on two different levels.
The first level is the group relationship as a whole. This was represented by the Union in the past, and is now represented by the Players Association. The Association differs from the Union, in that legally it can not speak in any BINDING way for the players. Legally (under National Labor Relations Law) the players have no longer certified the Union to act in their behalf, this was the decertification. The former Union is now only an association, (like the National Association of Manufacturers, or Chamber of Commerce) which can advise on common interests, but can not enter into an agreement that binds all of its members. Since the NLRB (National Labor Relations Board) only governs Employer/Union relationships, its rules governing Fair Practices are no longer in effect. Each player now can act on their own, acting in their own interest. To protect their interests when they feel they are being impinged upon, like any American, they go to court. A Judge in the legal/litigation will make a decision if any rights were violated, and make the rules that govern the enforcement of his decision. This is a much more uncertain situation for all involved.
Under these circumstances, the best result is that the Lockout is ended, and under the supervision of the judge, the representatives (Lawyers) for each side will work out something agreeable to both sides. On the other hand, the worse case would be the Judge will render a decision which is binding on both parties, and this would be the precedent for years of appeals and litigation. In the pass the players have almost always prevailed in the anti-trust cases in court. However, a Union can not go to court, and as long as there is a union a player can not go to court individually. They are bound by the collective bargaining process between the employer and the union, no matter how long that may take. In collective bargaining, the only factor that rules is which side can take the economic pain longer, in court there is the unknown "wild card" of what is the law. It is no longer just a war of attrition, and may in fact, be ended earlier. That is why the owners are fighting the union's decertification. (This may be a first, an employer wanting a Union to stick around, I have never heard of this before.)
The final offer from the owners was given to the Union six hours before the CBA expired. In some ways there was an improvement in the owners offer, such as the diminished insistence on the 18 game schedule next year, but in other more important aspects to the Union it was a step backwards. It was one step forward, one step back. Overall, the Union felt no progress was being made in negotiations, they were a sham before an inevitable lockout by the owners. The negotiations were just delaying the inevitable, and that was an advantage for the owners. The feeling that the Lockout was inevitable was based on the documents made public after Federal Judge David Doty's ruling on the television rights contracts (the Lockout insurance), and the NFL's appeal of "American Needle vs. the NFL" to the Supreme Court. In this case the NFL argued that it, along with its 32 teams, were a “single entity” and therefore immune to the Sherman Antitrust Act when they act jointly in a business effort. Which, in broad effect, would end the ability of a player to be a free agent. The NFL lost the case 9-0, although the court limited the effects of its decision.
When the Union felt that there is no chance for compromise on the owners part, or even their part, they felt they had no other option then go to court. The members of the Players Association would feel no major pain until the start of the season, when they would miss their first check. If this whole negotiation was a sham, maybe going to court will bring this whole thing to a head and force an agreement on both sides before the start of the season. Remember there is no sure thing in court, so both sides will have pressure on them to reach an agreement, like a "Plea Bargain". Negotiations between the parties occur all the time within the legal context. However, if the players waited until the CBA officially expired and an impasse was declared, they would have to wait 6 months before any player could go to court. That would mean we, the fans, would have to wait another 6 months before the courts could even start to end this situation. For sure, there would be no football this season. Therefore, the sooner this situation was brought to a court for resolution, the better.
However, once an unofficial agreement in principle is reached, the Union will be re-certified by the players. Then the Union on behalf of the players (employees) will formally accept the agreement. The the relationship between the employees and employers (owners) will now be governed by the agreement (CBA) under the NLRB rules of behavior. The Union's role is to set up the basic floor level that affected all of the players, all of its members, from the rookie fourth string lineman to the star like Revis, or Brady, this is the CBA. This floor governs the pay of 90% of the players.
However, there is also a second coexistent level of the players relationship to the owners, it is that of independent contractors, who individually sell their services to the owner. This "independent contractor" type of relationship exists in many Craft type of Unions (AFL) such as the Screen Actors Guild whose "stars" abide by the same rules and pay dues, as does the nameless "movie extra", but they make much more money because of their additional individual bargaining power. To that extent this other employee relationship, that of the independent contractor is completely separate from the Union; however it is build on the CBA foundational floor. The CBA can be considered as a common clauses in all the employment contracts of the players.
In theory the independent contractor status exists for all players, but in reality it does not, the rookie fourth string lineman is too easy to replace. He has no bargaining power other then that found in the group. Generally, the rookie fourth string lineman, relationship to the employer is solely governed by the CBA. They are not able to get for themselves benefits above and beyond those found in the CBA. But the star player, by virtual of his being a star, has more bargaining power, which he can use to get conditions above and beyond the average player. He is the exceptional employee who can go into his employer's office and demand more money, or else he will go to work for the employer's competitor. Under the anti-trust laws, all the employers in an industry can not work together (in collusion) to prevent that from happening.
When you join a union, you certify that it can act on your behalf in certain things, but only in certain things. In the players case, it can act on your behalf to set up a minimum salary for all its members. It can act on behalf of all its members to set up a minimum pool of money for the members of each team or even a maximum pool (the cap) for all the players as a group. But no player gives the Union the right to set up an maximum for any individual player. Each player reserves that right as an individual, and can not be forced to give up that right, since that is in fact a restraint of trade, and is illegal under the law. However, when they join the union they can agree to be voluntarily regulated by certain rules that restrict their ability to seek a new employer who pays more, this is a part of the CBA.
It must always be remembered, the role of a Union is to protect the average worker. The exceptional worker can always take care of themselves. But sometimes he will make sacrifices, so that the average worker benefits. This is the most important strength of a union. That is why the lead plaintiffs in the anti-trust case against the owners include Star quarterbacks Tom Brady of the New England Patriots, Peyton Manning of the Indianapolis Colts and Drew Brees of the New Orleans Saints.
The owners want to shrink, in effect, that common money pool available to all the players in the future. This will most effect the average player. A star player like Revis or Brady will always have the right to hold out - refuse to play - for any team. They will always have the ability to receive top dollars. This lockout is not about Billionaires vs Millionaires, but rather Billionaires vs the great mass of players who make just over the minimums under the CBA. Some players will always be millionaires, and will not be effected, no matter what the new CBA is. But the average player and fourth string lineman will be.
But why did the owners terminate the contract a year early, bringing on this whole mess. It is not that the owners broke the contract, they oped out as they had the right to do under the CBA, but why did they do so? It is all about the money that will be paid in the new contract between the NFL and the TV networks. The TV networks need to know their budgets before they make their commitment for the pilots of new shows. Therefore they want to know what they will paying for the NFL rights as soon as possible. However if the deal is done while the current CBA is in effect, the expected players share will be known. The owners did not want that to happen. The NFL will be too successful to make arguments for economic relief. They would rather negotiate while the real numbers are unknown.
The TV trade newspaper "The Hollywood Reporter" reports that TV industry analysts expect the NFL will attain its next set of TV agreements for the period beginning in 2014 right after it signs a new collective bargaining agreement with the players association. They estimated that the new long-term NFL rights agreements with ESPN, CBS, Fox and NBC could add $46 billion in additional sports commitments for the TV industry, more then an additional 4.5 Billion per year above what they presently pay. Sports Business Daily reported that ESPN alone would pay $1.8 billion to 1.9 billion annually, up from $1.1 billion, for a new contract. According to the Players Association when they rejected owners proposal, they stated "Your proposal also would have given the owners 100% of all revenues above the low projections, including the first year of new TV contracts in 2014. Your offer did NOT meet the players halfway when it would have given 100% of the additional revenues to the owners." In two years, there would be no question about what kind of money they were talking about, it would no longer be a low projection by the owner, the numbers would be known.
The NFL salary cap, prior to the present CBA extension was based on a percentage of "Defined Gross Revenue" (DGR). This was the revenue shared by the 32 NFL teams. The biggest pieces of DGR were the multibillion dollar television contracts. The DGR also included ticket sales and team and NFL branded merchandise sales. What DGR didn’t include was local revenue, which includes local sponsorships like stadium naming rights and radio broadcasts. However, those local revenue streams are now included into the common and salary cap pool, called "Total Revenue."
This was done at the last extension of the CBA at the suggestion of the owners in order to resolve a conflict between the large market owners and the small market owners. The teams in New York, for example, received much more local revenue then the team in Kansas City. Since the pool of money was larger the Union was willing to take a smaller percentage of it, because the actual dollars the players received was increased. However, it must be remembered the pool to be shared was expanded at the owners request, not to satisfy a Union demand. Currently, the players take home approximately 55% share of Total Revenue. The share was higher – in the low to mid 60's – when using the DGR system prior to the 2006 CBA, but even with a lower percentage, it results in an increased salary cap due to the larger starting revenue pool.
The owners argue they need to reduce the Cap share of the players because many new stadiums need to be built, and they are no longer getting help from the state. While I don't know how many stadiums "need" to be built, since many average Jet and Giant fans report very little difference in their actual experience of games as compared between the old and new stadiums. However, it is true, the cost of building a new stadium for the owners is going up, as municipalities no longer fund them. Yet, the owners already have sources of revenue, much of which is not shared with the players, that can be used to offset this lost. Some examples:
1) The naming rights to their new stadiums. Among others, Reliant Energy paid the Houston Texans 400 million dollars for those rights for 32 years, Fed Ex is paying the Washington Redskins 200 million for the rights for the 27 years. Not a bad start for paying off a new stadium, however since 2006 it has been a part of the Cap.
2) The newer stadiums have large club box seats and private suites, which are leased to corporations for thousands and 10's of thousands of dollars. The money, in excess to the price of a normal seat, is not shared with either the players or other owners. It is imperative to distinguish between “ticket revenue” from luxury boxes, which is “subject to gate receipt sharing among NFL teams and the players,” and non-ticket luxury box revenue, which is not subject to revenue sharing. The fancier, more expensive the box, the lower the proportion that needs to be shared. Thus the owners have a big incentive to get a new stadium with fewer normal seats and more corporate seats. The owners will be getting a lot more money from these seats as this report suggests: "Cowboys Stadium has about 320 suites, and now the Dallas Cowboys have gone to court to force 10 luxury suite holders to honor their 20-year leases. The leaseholders put down deposits of $15,000 to $210,000, but stopped paying. Under the terms of the agreement, if a payment is missed, the entire balance becomes due. In the case of the current lawsuits, $82.3 million is at stake." Assuming this is a representative sample, the Cowboys could expect more then 2.6 Billion dollars over the next 20 years from just those 320 suites. This alone would pay the total cost of the construction of the stadium, with a billion dollars left over.
3) The Personal Seat License (PSL) which is a one time payment of $5k, $10k, $15k to have the right (?) to pay another $60 - $150 per ticket per game. If you don't have a PSL, you can't buy your annual season ticket, no matter how many years you have had your tickets. This is not considered revenue, subject to sharing. According to reports the NY Giants stood to make some 340 million from the sale of their PSL's, that are sold for $5,000 to $20,000 per seat, depending upon seat location. The Jets will sell PSL's for their games in the same stadium, and presumably make the same amount. It is only after they have put this money in the bank, do the teams sell their Tickets for the games. Of course since everything is bigger in Texas, the Cowboys' PSL's range from $15,000 to $150,000. If you're building a billion dollar stadium, someone has to pay. In both cases the PSL's offset a substantial part of the cost of the new stadium.
4) Concession revenue, such as $5 Hot Dogs, $14 Deli Sandwiches, $8 Beers, are not shared with the players nor the other owners. In the past this revenue stream represented peanuts, but now with the growth of auxiliary services found in the new stadiums, it can be a very significant amount. The new stadiums now include restaurants, gift and clothing shops, and game arcades. The NFL is about tailgating, first paying 25 to thirty dollars for your parking spot in a enormous lot, and then partying with fellow fans. It is not about people wandering through an local area to spend money before and after a game. The owners don't want fans to spend their money anywhere except at team-licensed or owned facilities within or adjacent to the stadium.
The owners want customers, not fans. Customers can spend money for very expensive personnel seat licenses, club seats, luxury boxes and dine in expensive stadium eateries. Customers can also take off the cost of sports tickets as a business expense. This is why so many owners are pushing for very expensive luxurious new stadiums, not aimed at fans who can seldom afford the five to six hundred dollars, on average, for a family of four to attend a game. The stadiums must be big and luxurious, so that for the "Average Joe Fan" who attends one game, it is an event to be remembered. For their every game customers, their season ticket holder, it is a happening which is mostly a chance to social network.
I have tried to be fair and objective in my presentation, however it is difficult to be so, when you only have hard data from one side. The conclusions I can draw from the data that I have, would seem to indicate the NFL does not need the players help to keep it from going broke; or is it even necessary for the NFL's growth. Nor have the owners promised, for the good of the game, they would lower ticket prices with the money the players gave back. Absent data to the contrary, I have no other choice then to "side" with the players, otherwise I would be just lapsing into a subjective ideological position.
In Summary, given the history of the labor relationship between the NFLPA and the NFL, I can see why the percentage of the Cap is an non-negotiable item, absent a financial crisis on the part of the owners. It took the NFLPA thirty-five years to win it, and they are afraid that once it is reduced, they will be on the slippery slope, they will never get it back. Once it became evident that the owners were not going to move from their insistence that there be some lowering of the Cap, nor were they going to justify their stand in a meaningful way, it became in essence a non-negotiable item for the owners also. No matter how much farther negotiations continued in time, they were at an impasse. An impasse that could only be solved, through the courts. Was the decertification a sham? Yes it was, but it was a only a tactic to get this dispute quickly settled in the only way it could be, in court. When the Major item is non-negotiable for both sides, all the negotiations in the world are not going to bring an end to the dispute. The so call negotiations were a sham, which only delayed the possible start of our football season.
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