Saturday, March 7, 2009

2011 NFL Lockout: Here is another clue for you all

March 7, 7:25 PM · Add a Comment
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It is March and generally an NFL owner starts thinking about all the money that will be coming their way in the next few months from the sale of luxury boxes, club seats, in-stadium signage, naming rights, marketing partnerships and in the case of Tom Benson, the owner of the New Orleans Saints, a $23.5 million check from Louisiana Governor Bobby Jindal and Louisiana lawmakers thanks to a 2001 $186.5 million bailout that former Governor Mike Foster gave him as a thank you for keeping his football team in New Orleans through 2010. But this particular March is very different than those in the recent past as the owners begin preparing for the annual spring meetings which will be held in Southern California later this month. NFL owners have started digging in for what very well could turn out to be a protracted battle with their players over a new collective bargaining agreement with the 2011 season very much in jeopardy.

One clue for you all is the national over-the-air radio deal or the lack of a national over-the-air radio deal. The National Football League's association with Westwood One, an entity that has been firing people in waves since the fall because of financial ruin, was done with the 2009 Pro Bowl. Normally, the NFL has a new radio deal in place by the end of the final year of the old contract which allows the partner to start selling advertising well in advance of the season. This time around, Westwood One did make an offer to extend the contract but the radio syndicator is in brutally bad financial shape and has been delisted from the New York Stock Exchange. The NFL opted to talk to others including ESPN Radio, Sporting News Radio, Sports USA Radio and The Content Factory.

It was thought that the league would have a new deal by the middle of last week. It didn’t happen.

Length of contract and money are two primary factors behind the delay in reaching an agreement. The NFL would prefer a short term agreement, say two years, for the 2009 and 2010 seasons. The NFL's deal with the financially troubled Sirius Satellite Radio and another partnership with Sprint, which provides wireless play-by-play of games, also end in 2010. Coincidentally, the NFL's collective bargaining deal with the players as lo ends in 2010.

Another clue that the owners are ready to take a hard line stance against the players can be found in the league office and with individual teams. NFL Commissioner has taken a 20 percent pay cut and the league has let go 169 employees due to the recession. The NFL put out a statement saying "It will continue to take collective sacrifice to get through this challenging economic environment, but these and other steps by our office and clubs will enable us to be more efficient and better positioned for future growth."

New York Jets owner Woody Johnson is not laying off people who work on the business side of the team but Johnson has implemented cost cutting measures by making his employees take a two week unpaid leave in either June or July just prior to training camp. The workers are giving back two weeks pay but they will continue to have jobs and receive benefits which is better than the league employees without jobs or former workers of NFL franchises in Cleveland, Washington, Indianapolis and Carolina. The players will not be downsized because of the economy in 2009 due to the collective bargaining contract

The NFL has a salary cap which means teams have to pay at least $86.4 million in salaries and could shell out as much as $116.2 million on players. Most of the money for players salaries comes from the national TV contracts. There is no cap on coaching, scouting and managerial staffs. In 2010, the final year of the collective bargaining agreement, there is no salary cap or floor. Although there is a national TV deal socialism, the difference between high revenue and low revenue teams is the result of local radio contracts and local sponsorship dollars, signage in stadiums and the ability in the past for large market teams to charge more for tickets than their smaller market counterparts although there is revenue sharing on tickets sold. Detroit may be in for a horrible season financially with the potential of bankruptcy looming for General Motors, very high unemployment and a Canadian dollar that has fallen against the US dollar which may preclude those from the Windsor, Ontario area from crossing the tunnel and buy Lions tickets.

If the economy doesn't improve in each of the 30 NFL markets, the owners may decide to totally rein in spending in 2010 and not care about the win-loss record and then tighten their grip on salaries by locking out players starting with the 2011 free agency period. The owners can outlast the players in a strike/lockout scenario. The 1987 players strike was a disaster for the players as a number of big name players including Lawrence Taylor and Joe Montana cross picket lines to play. Eventually the National Football League Players Association caved in and returned to the field. The players and owners finally signed a new collective bargaining agreement in 1993 after a court battle.

The NFL might not have as much money in 2011 anyway as the Sunday Ticket deal with DirecTV will have ended by then. The NFL has seen escalating TV dollars for a decade and a half but that may come to an end if economic conditions continue to deteriorate for media entities.

The lack of a radio deal, the layoffs and furloughs of employees are just the tip of the iceberg. The economics of sports is probably changing hourly. Advertising dollars, marketing deals, selling club seats and luxury boxes has come rather easily for NFL teams, along with other sports leagues and teams throughout North America. As the Dow sinks, as the jobless rate continues and as banks refuse to lend money, something has to give. NFL owners told the players a year ago that they wanted changes in the collective bargaining agreement and that was before the economic meltdown. The owners and players have two years to got a new contract signed but reading the tea leaves it becomes very apparently, the owners are in no rush to sign a new deal and the lack of a national radio deal, the firings and furloughing of workers are two signs that the owners are ready to change the course and fight for a new financial system with the players.

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