SHEDDING LIGHT ON ISSUES IN SPORTS BUSINESS ONE POST AT A TIME.

Tom Brady has expressed his concern over an 18 game season.

The 18-Game Schedule and Rookie Salaries

a) The Owners’ Perspective

To football fans anywhere, two more regular season games would sound like a gift from the Almighty.  Owners are well aware of this and hope to grow revenue by expanding the schedule to 18 regular season games.  Indianapolis Colts President Bill Polian considers the 18-game season an inevitable outcome of the collective bargaining process (Associated Press, Colts’ Bill Polian: NFL’s 18-game Season is “Fait Accompli,” 2010).  “I think that the owners, and principally the commissioner, have decided that it’s the way to go, and so the debate, such as it was, is over,” said Bill Polian to the Associated Press (2010).  Both games will be the result of a swap: essentially, two preseason games will be eliminated and two regular season games added to the official schedule.  NFL Spokesman Greg Aiello wrote once that 18-game football seasons are nothing new, since the CFL and USFL played those schedules before, and Goodell agrees (Lobdell, 2010).  The owners’ argument holds well against the union’s contention since players already play four preseason games that do not count in the win/loss column; by making two of those four games count, any resulting player injuries would not seem in vain.

Owners will not argue much with the union over rookie wages, since both sides agree that unproven players do not deserve to be among the highest-paid players in the league without taking their first NFL snap.  Essentially, team owners are pushing for a rookie salary cap without meeting significant union resistance (Labor is Focus at NFL Meeting, 2010).  Packers President and CEO Mark Murphy has seen his fair share of the spotlight since July 2010, since Green Bay is the only publicly owned team and required by law to publish their yearly accounting statements.  He contends that the current system is “unsustainable” and that rookie salaries are “another thing we’d like to address in collective bargaining” (La Canfora, Pack Thriving and Suffering, Depending on Who’s reading Ledger, 2010).  NFL Commissioner Roger Goodell has long believed that rookie wages are “ridiculous… money is going to a player that never makes it in the NFL,” and that “the money should go to people who perform” (Associated Press, Goodell: Rookie Pay Scale “Ridiculous,” 2008).

b)            Perspectives from the Players’ Union

The Miami Dolphins' Jake Long became the league's highest paid offensive lineman before taking his first snap in the NFL.

“The Green Bay Packers’ net income rose by about 30% to $5.2 million in the fiscal year ending March 31 [2010],” according to Bloomberg.com’s Aaron Kuriloff (2010).  In the same report, however, Kuriloff reveals that operating profit declined by more than half: from $20.1 million to $9.8 million (2010).  Nevertheless, “it’s 1/32^nd of the financial information we’ve requested in response to their demand that we give back $1 billion and increase our injury risk by playing two additional games,” according to NFLPA President Kevin Mawae (La Canfora, Pack Thriving and Suffering, Depending on Who’s Reading the Ledger, 2010).  Two more games-worth of added risk of injury and decreased overall pay seems like a difficult proposition despite losses reported by one of thirty-two NFL teams.  Quarterback Tom Brady of the New England Patriots and Linebacker Ray Lewis of the Baltimore Ravens also disagree with a two game extension.

“Don’t get me wrong, I love the game of football.  If fans want to show their love, they should let everyone know that we are not machines,” said Lewis regarding an expanded season (NFLPlayers.com, 2010).  He added, “swapping two preseason games for two end-of-season games – when players already play hurt – comes at a huge cost for the player and the team” (NFLPlayers.com, 2010).  Tom Brady complemented Lewis’ position and stated, “The long-term impact this game has on our bodies is well documented.  Look no further than the players that came before we did” (NFLPlayers.com, 2010).  Brady finished by adding the fact that a player must play three years if he expects to receive post-career health care for just five years (NFLPlayers.com).  In an 18 October 2010 Sports Illustrated article, Peter King points out that the NFLPA wants owners to modify post-career health care plans if the season is extended, since players would play six extra games over three years to earn five years of post-career health care (King, 2010, p. 44-46).  The NFLPA also expects a 15% annual pay increase if the season is expanded to cover wages for two extra games.

Finally, the NFLPA’s position on rookie salaries does not much differ from the owners’ stance.  “They need to do it like the NBA… Get a rookie salary cap, then let a guy play for three or four years and prove himself,” stated Pittsburgh Steelers linebacker James Harrison in March 2010 (Dividing Line is Drawn, 2010).  In 2008, the Miami Dolphins drafted Jake Long from the University of Michigan – the five-year, $30 million deal made him the highest-paid offensive lineman in the league (Dividing Line is Drawn, 2010).

Cam Suarez-Bitar.

Happy New Year!!!!

The players' union is flexing its muscles as it prepares for a CBA process that most likely will not be resolved until after March 2011.

A Collection of Issues Revolving Around a New Collective Bargaining

Agreement – The Owners vs. The Players’ Union

__________

1 – What Peter King of Sports Illustrated dubs, “The Billion-Dollar Give Back.”

a)            The Owners’ Perspective

Team owners argue that player costs are too high and that revenue-sharing must be rolled back for several reasons.  First, owners state that stadium financing in the NFL has changed drastically over the last thirty years.  According to Peter King, Giants Stadium cost $78 million in 1976 and was paid with public funding (King, 2010, p. 45).  However, the New Meadowlands Stadium hosted its first NFL game during the 2010-2011 season and cost the Giants and Jets $1.6 billion with “practically no public funding” (King, 2010, p. 45).  Since the cost of either new stadiums or renovations have increased while public funding has not climbed at the same rate, owners are asking players to subtract another $1 billion from the revenue-sharing pool and allow the owners to allocate those funds to stadium renovation/construction, thereby increasing the exempt amount to $2.4 billion (King, 2010, p.45).

Players benefit from working in modern facilities, since newer stadiums usually include amenities that help the team generate revenue and improve the fan experience.  With new stadiums in Dallas and New York/New Jersey, team owners in other cities feel pressure to catch up to a new wave of modernization and need help meeting expectations.  Such pressure arrives from a myriad of sources, including the commissioner himself.  “The bar has been raised because you’re getting great facilities around the country in great communities… [Super Bowls] are a tremendous value to the communities, so there’s a lot of competition for [them].  So I think a new stadium with [sic] this great community would be beneficial to bringing another Super Bowl to this community” (Associated Press, 2010).  Though local officials and Atlanta Falcons ownership are currently discussing the costs of modifications to the state-owned, 72,000-seat Georgia Dome, the cost would place added pressure on team owners and taxpayers to raise capital without player assistance.  “That’s one of the reasons we’re focused on restructuring the collective bargaining agreement, to make sure that we have the kind of structure that will allow us to make those kind [sic] of investments in the game and the communities which allow the game to continue to grow… That is good for the players, good for the teams, good for the communities [sic].  That’s something we want to continue to focus on,” added Goodell (Associated Press, 2010).

Without financial support from the players, local governments may be pressured to

Atlanta's Georgia Dome: one of several "outdated" NFL stadiums eclipsed by the new palaces of technology in Dallas and New York.

contribute higher amounts of capital than ever before to stadium construction plans.  After local media plays both sides of the argument over public stadium financing, residents usually side with the owners after local news outlets sympathize with teams.  One example is Norman Braman, a Miami businessman who struggled to prevent the use of public funds to finance construction of the new Florida Marlins’ stadium in an impoverished Miami neighborhood, but failed after local media eventually took a softer stance on team owners and government officials partial to the Marlins’ cause.

b)            Arguments for the Players’ Union

In response to owners’ calls to lower player costs (i.e. players salaries), NFLPA Executive Director DeMaurice Smith asked, “How do I go in front of my players with information from Forbes [stating] that teams average $31 million in profit and justify an 18% pay cut” (Dividing Line is Drawn, p. 1c).  Smaller-market team owners depend on revenue-sharing between teams to maintain viability – this issue is also one of the most heated in the debate over the CBA, according to notes taken at a lecture by Northwestern University Sports Administration Professor Roy Kessel.  Under a new CBA, owners hope to reduce player costs by $1 billion dollars and offset inter-team revenue-sharing costs as much as possible and lessen dependence by smaller-market teams on their more affluent colleagues.  In spite of decreased profits/net income, teams in San Francisco, Minnesota, Oakland, and Atlanta are making overtures for new stadiums or renovations; nevertheless, they claim “financial hardship” as they apparently plan for these elective costs.

Since 1990 and in spite of recent claims of financial hardship and escalating player

Since it is publicly owned, the Green Bay Packers (right) are the only NFL team required by law to disclose its yearly financial statements.

costs, 28 of all NFL teams have either moved into new stadiums, completed renovations, or are currently in the planning stages (NFLPlayers.com, 2010, Taxpayer Subsidies for NFL Stadiums).  The average team “receives 65% of its stadium financing through taxpayer subsidies” as team values continue to rise (NFLPlayers. com, 2010). Increased elective costs, such as stadium renovations or construction, could appear irresponsible in an ailing economy.  Statistics on the NFLPA website suggest that increased dependence on public financing for stadium construction – and other high elective expenses that teams incur – as team operating revenues decrease does not signal responsible fiscal behavior.

Ownership enjoys significant leverage when issues regarding stadium financing arise.  In fact, the Minnesota Vikings’ Vice-President for Public Affairs Lester Bagley stated, “The clock is ticking, and the lease is coming due.  The state can’t afford to have us become free agents” (2010).  If teams cannot afford to build new stadiums or renovate current facilities, they should table the matter until finances improve.  In any case, if players are expected to contribute to stadium construction by taking a $1 billion pay cut, then they should have the power to influence the decision as stakeholders to build or not.  Even though players could benefit from the construction of new stadiums while under the employ of the team with the new facility, long-term benefits would only rest with management and ownership since teams could trade players away.

Essentially, the NFLPA could argue that Commissioner Roger Goodell ought to treat stadiums independently, not comparatively.  The players – and taxpayers – share no responsibility for excessive team spending while owners and the commissioner choose to invest in new facilities and operating costs, allegedly, continue to rise across the league.

President and CEO of the Green Bay Packers Mark Murphy (but I guess you already knew that from looking at the picture!)

Lastly, Chief Executive Officer of the Green Bay Packers, Mark Murphy, claims that the Packers’ “only growth in revenue in recent years has been on the national side,” according to the team’s 2009 financial statements (Kuriloff, 2010).  However, according to the Wisconsin Legislative Audit Bureau’s 1999 audit of the Green Bay Packers’ books between 1995 and 1999, the Packers’ annual net income ranged between $5.4 and $7.1 million, respectively, and retained earnings nearly doubled from 1995 ($40.5 million) to 1999 ($76.2 million) (Wisconsin Legislative Audit Bureau, 1999).  With 2009 net income at $5.2 million – a 30% increase from 2008 – (Kuriloff, 2010) the Green Bay Packers did not appear to be worse off in 2009 than they were 15 years ago.  As Troy Aikman points out, “owners claim they can’t keep up with player salaries.  Yet [sic] the Redskins’ Daniel Snyder reaches into his pockets and gives [Albert] Haynesworth a $100 million deal” (Aikman, 2009).  Former NFL punter Nick Murphy also disagrees with owners and wrote, “player expenses increased only 4 percent in 2009 and only half of that was salary-related.  From 1996 to 2007, the average NFL owner increased a franchise’s value by $693 million (338 percent) [and] according to Forbes magazine, player expenditures have nothing at all to do with the first decrease in NFL club valuations in 12 years” (Murphy, 2010).

Pete Kendall, “permanent player representative” for the NFLPA at CBA bargaining sessions, adds to the union’s argument by stating in a memorandum to NFL players that “the current salary cap system provides a percentage cap on the amount of football related revenue to be spent on player salaries and benefits” and that even though percentages of total revenue shared with players will remain the same, the league’s new definition of “total revenue” would decrease the money in that account and thus lower yearly distributions to players (DiTullio, 2010).

Without financial statements or audits from the other 31 teams, the players’ union has insufficient evidence to determine the league’s “need” – an essential set of details missing from the debate regarding a possible $1 billion pay cut.

Cam Suarez-Bitar.

Read Part 2 at: Part 2

Read Part 1 at: Part 1

Indianapolis Colts President Bill Polian, seen here with Peyton Manning (right) and former Colts backup Jim Sorgi (left).

And so, the dance begins... the NFL and NFLPA open their virtual tango over wages and schedules.

Introduction: A Concise Discussion of the Issues at Hand

In 1993, the NFL and players’ union (NFLPA) finalized the current collective bargaining agreement (CBA) set to expire 3 March 2010 (Kaplan, 2010, p. 36).  The process – initiated by a player strike in 1987 – took approximately six years to produce the 1993 collective bargaining agreement that both sides finally deemed fair.  This time, “We just want to play football… We weren’t the ones who opted out,” according to Patriots linebacker Adalius Thomas, who referred to the league’s threat to lockout the 2011 season if owner demands are not met (Dividing Line is Drawn, p. 1c).  In 2008, team owners chose not to renew and pushed for a new agreement; in fact, as of November 2010, the league has reserved $900 million to survive a lockout if arguments with the NFLPA over escalating player costs and decreased profits/net annual income outlive the current collective bargaining agreement (Kaplan, 2010, p. 36).

Essentially, both entities disagree on the following key points: owners want players to shave $1 billion off the “revenue-sharing pool, estimated at $ 8 billion annually;” an 18-game regular season schedule proposed by owners that high profile players like Tom Brady and Ray Lewis strongly oppose; replacement of the current revenue-sharing system – which allots 60% of total league revenue to players after deductions – for a lump sum over the duration of a new collective bargaining agreement (which ties in with the first point); and revisions of policies regarding rookie salary guarantees (King, 2010, p. 44-46).  Other issues also define the current NFL labor dispute, but will not be covered in this analysis for the sake of brevity and efficiency.

Methodology and Thesis Statement

NFL Commissioner Roger Goodell

This analysis will treat aspects of the current labor battle between the National Football League and the NFLPA.  First, we will look at a brief history of the current collective bargaining agreement signed in 1993 by looking at academic papers and newspaper articles by sources close to the league and players’ union.  An examination of future possibilities/outcomes regarding the new collective bargaining process accompanies our historical review.  Discussions of ethical issues (as perceived by both sides) help determine the strength and validity of both the owners and union’s arguments in the current collective bargaining process and form the basis of my argument in favor of the union’s position.   Finally, a conclusion section includes a look at how the NFLPA could use antitrust laws to counter league obstinacy regarding ethical issues at the core of the current collective bargaining process.

At varying points throughout this study, I will cite an audit of the Green Bay Packers’ financial statements performed by the Wisconsin Legislative Audit Bureau in 1999 as an example of NFL team financial performance in the years immediately following the 1993 collective bargaining agreement.  Unfortunately, for the sake of this study – and, ironically, the union’s purposes – financial information from the other thirty-one NFL teams is unavailable, since the other teams refuse to “open their books” to the public (laws require the publicly-owned Green Bay Packers to disclose annual financial reports).  Nevertheless, by understanding the Green Bay Packers’ financial performance in the years immediately after the 1993 CBA, one may form a basic picture of league and union arguments regarding perceived financial hardship and season expansion.  Lastly, to complement the Wisconsin Legislative Audit Bureau’s study and assess the team’s position relative to the government’s findings, I will count on articles based on the Green Bay Packers’ financial statements published in 2010 (which detail the franchise’s performance through 2009) at different points in my study.

Since a thorough and exhaustive treatment of the entire collective bargaining

NFLPA head DeMaurice Smith

process and all underlying legal and ethical issues would be unfeasible in 10-15 pages, my objective is to provide an assessment of the current CBA’s impact on NFL culture, an overall view of key ethical issues in the current collective bargaining crisis, and an analysis of antitrust cases in sports business in my conclusions, since I recommend that the NFLPA strongly consider decertification if the NFL does not negotiate.   The last few pages contain a deep and carefully assembled bibliography containing over thirty sources I used in my analysis of the legal and ethical issues surrounding the current collective bargaining process.

Basically, I contend that: the NFLPA’s arguments prove both valid and strong when the Green Bay Packers’ financial records and league revenue numbers are considered; the league’s current push to build new stadiums contradicts its claims of “financial hardship;” and the league risks a lapse in ethics should it assert its power and force players to both receive substantial pay cuts and play longer seasons.  The NFLPA should not hesitate to decertify and sue the NFL over violations of federal antitrust laws if both parties do not agree on a deal by 3 March 2011.  The new collective bargaining agreement will, essentially, determine acceptable payment, compensation, and revenue-sharing thresholds for a sport that generated more than $8.83 billion in 2009 (Dividing Line is Drawn, p. 1c).  The results of collective bargaining will shape the league’s culture for years to come.

Cam Suarez-Bitar.

Read Part 3 at: Part 3

Read part 2 at: http://csbcomsportsbiz.com/2010/11/30/the-nfl-and-the-nflpa-the-significance-of-the-current-collective-bargaining-process-and-a-collection-of-relevant-legal-and-ethical-issues-part-2-a-brief-and-general-history-of-the-1993-nfl-collecti/

Do the players have enough leverage to negotiate a favorable deal?