Wednesday, January 27, 2010

The 18 percent solution won't fly

The 18 percent solution won't fly

By Evan Weiner

January 27, 2010

(New York, N. Y.) -- Peter King has been around the National Football League as a reporter for a long time so there should not be any reason to doubt his January 18, 2010 column which stated that National Football League Players Association Executive Director DeMaurice Smith sent out an e-mail to his players that ownership wants to cut players compensation 18 percent and that a management source confirmed the figure. The 18 percent figure has not filtered down to the teams yet but it sounded about right according to one NFL person who is not involved in the day-to-day talks. Not every owner is filled in daily on the bargaining, which is a normal business standard.

The owners and players have about 13 months until the present collective bargaining agreement ends and it is highly unlikely that the players would even consider an 18 percent pay decrease but this is the starting point in the negotiations.

The owners want change, the players want status quo. Something will have to give or the National Football League owners will simply lockout the players sometime after February 28, 2011 and the work stoppage which ensue meaning that some or all of the 2011 NFL season will be canceled.

The players in some way are collateral damage in an on going fight between the high revenue teams and the low-end teams and economic realities. Before Dallas Cowboys owner Jerry Jones and the New York Giants/Jets ownership decided to build new stadiums, the high revenue owners like Dallas’ Jones, Washington’s Daniel Snyder, New England’s Robert Kraft, Houston’s Robert McNair and Philadelphia’s Jeffrey Lurie were arguing that the owners revenue sharing system needed to be changed and that Jones, Snyder, Kraft, McNair and Lurie among others should be keeping a lion’s share of locally produced revenue so they could use that money on their teams. Small market owners like Buffalo’s Ralph Wilson and Cincinnati’s Mike Brown reminded the big revenue guys that the National Football League was built on a sharing system that made sure the small market Green Bay Packers could compete (in the 1960s and beyond) with New York, Chicago and Los Angeles.

Wilson and Brown wanted to keep the revenue sharing rules in line with league financial history since the 1960s but times have changed. Wilson paid $25,000 for his American Football League franchise in 1960 and does not have the debt problems as other owners but his market, Buffalo, is one of the NFL’s smallest and his local revenue potential is limited compared to New York, Washington, New England, Philadelphia and Dallas. Brown’s Bengals cost was about $7.5 million in 1967 when the team joined the American Football League, presumably the franchise is in good financial shape in terms of debt but Cincinnati is another revenue limited market.

Brown’s Bengals have played in two publicly funded facilities; Wilson’s Bills also play in a facility that used a lot of taxpayers’ dollars for a renovation in the late 1990s. But Jones, Snyder, Kraft, McNair and Lurie have put up a lot of money to either buy the franchise or build new facilities and in some cases have had to put a lot of their own money into the new venues. Jones paid for about half of his new Cowboys Stadium (Arlington, Texas taxpayers have kicked in the other half through a sales tax hike) and one of Jones’ plans to help pay down the debt of the new place fell through. He was unable to sell naming rights to the stadium.

Snyder paid a bundle for the Redskins and while one magazine claims the team is the most valuable franchise in North American sports, Snyder still has to pay off the debt. Kraft used a lot of his own money to build his new Foxboro, Massachusetts stadium, Lanier paid well over $700 million for the Texans expansion franchise in 1999 although he got a taxpayers funded stadium and Lurie had to kick in money for his new Eagles stadium.

There will be more owners tales of woe in the future. The combination Mara/Tisch family-Woody Johnson new East Rutherford, New Jersey football palace is costing according to estimates at least $1.3 billion and while New Jersey is picking up infrastructure costs and given Mara/Tisch/Johnson all sorts of tax breaks and incentives, there is still a debt that needs to be paid and the new stadium naming rights are still up for sale.

The York family’s San Francisco 49ers franchise may be singing off of the same music sheet sometime this year. The Yorks would like to build a new football venue in Santa Clara, about 40 miles south from Candlestick Park in San Francisco and the plan is to get minimal taxpayers support for the facility.

The NFL and the Yorks have been in contact with the Raiders Al Davis about possibly being a partner in the venture to help the financial burden.

The 18 percent solution according to King’s column comes out to about a billion dollars in additional revenue for the owners.

There is one area that the owners and players probably can agree upon for cost reductions.

Entry-level contracts.

First round draft picks cost a lot of money and players like the New York Jets Vernon Gholston is a perfect example of where costs can be reduced. Gholston was the sixth overall pick in the 2008 NFL Draft. He signed a five-year contract for a reported $32.5 million and was guaranteed over $20 million. Gholston has been a bust so far but he will get his bonus money whether he is with the Jets or out of football.

The Raiders quarterback JaMarcus Russell was the top pick in the 2007 NFL Draft. Russell has done little in his career to justify the deal which reported was for six years and $68 million with a guarantee of $31.5 million.

The NFL and the NFLPA can negotiate a rookie wage and not worry about the consequences of harming a third party, in this case entry level players, because of labor laws. But veteran players would want the money shifted from the rookies to them.

The owners will have some leverage in the battle with the players. Rupert Murdoch’s News Corp (FOX), General Electric’s NBCUniversal, Sumner Redstone’s CBS, Disney’s ESPN and Liberty Media’s DirecTV (NFL Sunday Ticket) will continue paying the owners under the terms of their broadcast/cable/satellite agreements with the league whether the league locks out the players or not.

The NFL’s deals with News Corp, NBCUniversal and CBS end after the 2011 season. The TV deals bring in more than $3 billion annually for the 32 owners.

NFL players went on strike in 1987 but the NFL owners had a backup plan and offered replacement players contests. The games went on after the league shut down for a week. A number of top names including the New York Giants Lawrence Taylor, the San Francisco 49ers quarterback Joe Montana, the Dallas Cowboys defensive tackle Randy White along with Seattle Seahawks receiver (and future US Congressman) Steve Largent crossed the picket lines and the strike collapsed after four weeks. The NFLPA had no war chest to support the players, not learning any lessons from the 1981 Major League Baseball strike, the players and owners had a strike fund or insurance in that battle, or the 1982 NFL Players strike. The players picked up a little money in 1982 from two NFLPA “All-Star Games” in Washington and Los Angeles.

“In 1982, Ted Turner and Turner Broadcasting stepped forward and funded the strike games and put the two games on TBS which allowed the players to go forward. There was enough money raised at that time to field a mini season of 10 teams with the teams owned by the players had the strike continued. But the players voted against having their own league,” said Sheldon Saltman, the NLFPATV consultant who created and organized the two All-Star Games under the aegis of then NLFPA Executive Director Ed Garvey and former Redskins All-Pro defensive back Brig Owens.

After the players crumbled, the NFLPA decertified and the players led by New York Jets running back Freeman McNeil sued the NFL, challenging the league’s free agency rules. By 1993, the owners and players settled their disputes.

The game has changed though for the owners and players. Three prominent people are no longer at the negotiating table, Paul Tagliabue, the former NFL Commissioner who retired, the late Gene Upshaw, the executive director of the association and former Pittsburgh Steelers boss Dan Rooney who rode off into the sunset and is now the United States Ambassador to Ireland. Tagliabue and Upshaw had a very unique relationship that was unlike other league commissioners/negotiators and players associations’ executive directors in that they worked together in an amicable fashion and resolved differences and extended the 1993 agreement five times. The players trusted Rooney as a voice of reason.

The owners’ 18 percent solution is not going to fly this time around.

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