Thursday, July 16, 2009

Will there be an NBA or NFL Season in 2011?
Will there be an NBA or NFL Season in 2011?

By Evan Weiner

July 16, 2009

3:00 PM EDT

(New York, N. Y.) -- You don't need a crystal ball to know that 2011 is going to be perhaps the most intriguing sports year in North America ever. The National Football League and the National Basketball Association may not be operating because of labor actions.

Both leagues and their players are two years away from the end of their respective collective bargaining agreements. The football players are acting as if they except the owners to lock them out of training camps in 2011, the National Basketball Association Commissioner David Stern said earlier this week that at least half of the NBA's 30 teams are money losers, the NBA has reduced the salary cap for team payrolls slightly for the 2009-10 season and there is a thought that the cap will be tightened more so in the summer of 2010 with the worsen economic conditions finally being felt by the league.

On Wednesday the new Executive Director of the National Football League Players Association DeMaurice Smith took some of his labor association members to Congress to discuss the economics of the National Football League. Smith's tactic is a new dimension for football players in their talks with the owners, he wants Congress to understand the players side of the story, that the owners are making a lot of money thanks to acts of Congress, including the 1961 Sports Broadcast Act and the 1966 American Football League-National Football League merger and that the players, who are the game, continue to get a fair shake in divvying up the NFL money pie.

It is an interesting but risky ploy by Smith and raises the question of whether he wants to help or hurt his membership. Undoing the 1961 and 1966 legislation would ultimately have a crippling financial impact on the players. Additionally Congress has never sought to unravel either of those pieces of legislation. Scrapping the 1961 Sports Broadcast Act will impact not only the NFL, but Major League Baseball, the NHL, the NBA and college sports along with golf and tennis tournaments as TV revenues, whether they come from over-the-air network TV or cable, provides the financial underpinning needed to run sports successfully and performances salaries are pegged to TV dollars along with ticket sales and marketing partnerships.

The National Football League Players Association has always been considered the weakest of the four major league sports players groups in North America. Whether it was Ed Garvey or Gene Upshaw at the head of the table, the main criticism is that the association leadership always looked for money first and did not look after pension benefits, health benefits for players on the field and retirees nor did they bother with getting contract guarantees. Talk to players who were part of the 1982 or 1987 labor actions and they think the strikes were pretty much a waste of time that accomplished very little.

NFL players get paid significant salaries but the way contracts are structured, players can keep salary bonuses but if they are cut, they get a slimmed down severance which is different from the other sports whether it is Major League Baseball, the National Basketball Association or the National Hockey League.

Smith has to be aware that the 1961 Sports Broadcast Act allowed the 14-team NFL to pool it's resources and gave NFL Commissioner Pete Rozelle the ability to sell the league as one entity in a bidding war between the two major broadcast entities of the day (1961), the Columbia Broadcasting System (CBS) and the National Broadcasting Company (NBC) with CBS winning. Because CBS was constantly beating out NBC for the NFL rights in the early 1960s, NBC said enough was enough and funded the American Football League with a lavish TV contract prior to the 1965 season. NBC's money gave the AFL additional credibility and eventually the leagues would agree to merge.

The merger required an act of Congress. That happened in October 1966. The two pieces of legislation rocketed the NFL into the upper stratosphere which enabled the sport to blast past baseball in popularity.

In the 1980s, two Congressional bills inadvertently created new and lucrative revenue streams for sports although the NFL did not jump into the cable TV game until 1990 some six years after the Cable TV Act of 1984 which allowed cable companies to bundle networks such as ESPN, WTBS, CNN and the Weather Channel into basic expanded tiers and sell the package as one entity to consumers instead of offering a la carte choices. The Congressional legislation saved ESPN from going under along with the other networks and quickened the migration of sports from over-the-air TV to cable TV which was able to pay leagues and teams more money than networks because there were two sources of revenue streams, cable TV fees and advertising instead of the one stream, advertising, which was available to over-the-air TV networks and stations.

The 1986 Tax Act had revisions which changed the formula of paying off municipally built stadiums and arenas and limited the amount of money municipalities had available to pay off debt from events inside of new stadiums and arenas built after 1986 to just eight cents on the dollar. The stadium and arena game became a nuclear arms race between cities throughout the United States as political and business leaders wanted to make sure they satisfied owners wallets and egos by building the best facilities they could on the public dime, facilities which upped potential (and untapped) revenues streams to unimaginable levels prior to the Reagan era or even in the first five years of the Ronald Reagan Presidency.

The cable TV and tax bills opened the door for billions of dollars to be captured by the owners of NFL, NBA, NHL and Major League Baseball teams in the 1980s and now Major League Soccer is taking advantage of the changes in the tax code dating back to 1986.

NFL owners want to keep more of the revenue coming into the league because of high debts that have been incurred but various owners who overpaid for a franchise or put too much into the building of a new stadium. The owners still have not come up with a sufficient revenue sharing mechanism that will keep Dallas' Jerry Jones happy or Cincinnati's Mike Brown enthused. It is a little more than seven months to the Super Bowl but the NFL's real big game will take place after this year's championship game as the league and players need a deal struck by the start of free agency in March or the rules of the Collective Bargaining Agreement change. The owners will no longer have to abide by a salary cap while the players give up two years of free agency from four to six years. If there is no deal by March 2010, the likelihood that the owners will lock out the players in 2011 increases expediently.

Expect the rhetoric from both sides to increase as well with the looming March free agency period.

Meanwhile NBA owners and players will soon get to the bargaining table to discuss life after the 2010-11 season and it might get very ugly long before the end of the current bargaining agreement. NBA revenue streams from marketing partnerships are down, ticket prices are being dropped and that means basketball related income will be less, the players get 57 percent of basketball related income at present. NBA owners say they are losing money and for the first time in ages, players salaries will go down in 2009-10.

Sitting on the sidelines are Major League Baseball and the National Hockey League. In 2004, the NHL owners locked out the players for an entire season and got a salary cap as part of the new deal. The NHL labor negotiations seem to set the tone for the NBA and Major League Baseball as the two players associations came up with new deals without a labor action because the theory goes the players saw the owners meant business in hockey and because of various cross ownerships in the three leagues, the players paid far more attention to the hockey lockout than they would under normal circumstances. Major League Baseball, the NBA and the NHL are joined at the hip because of ownership overlaps in the various leagues and in the ownership of regional cable TV networks. Baseball's collective bargaining agreement ends after the 2011 season. The NHL's deal could end as early as September 2011 or September 2012.

It is doubtful that Bill Hunter, the National Basketball Players Association's Executive Director, Paul Kelly, the NHLPA Executive Director or Michael Weiner, who is succeeding Donald Fear as Major League Baseball Players Association Executive Director, would seek out Congress and ask them to change the playing conditions by reviewing the laws that have strengthen the owners' pocketbooks, but DeMaurice Smith is going down that road, at least he has put Congress on notice that he might need help. Smith might have been on President Obama's transition team and might know how Washington works but Bill Clinton could tell him a little something about sports collective bargaining. President Clinton tried to use the bully pulpit of the Oval Office to end the 1994-95 baseball strike.

He failed. Neither the owners nor the players wanted to listen to the president. It took a United States District Judge in March 1995 to end the strike after that judge ruled the owners had violated the National Labor Relations Act by ending the free agency and salary arbitration systems and the judge ordered the reinstatement of the old collective bargaining agreement after finding that the owners (the owners chief negotiator at the time was Richard Ravitch who recently was named by New York Governor David Patterson as the state's lieutenant governor) did not bargain in good faith. One of those owners was Texas Rangers Managing General Partner George W. Bush.

The District Judge? Sonia Sotomayor who is President Barack Obama's choice to fill the vacancy on the Supreme Court.

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