Tuesday, June 15, 2010

Lawyers give love a bad name

Lawyers give love a bad name
By Evan Weiner - The Daily Caller 06/15/10 at 6:41 PM

This is the kind of week in sports that lawyers love.
As the college sports map evolves, National Football League players question the legality of the NFL’s television deals with Disney Company (ESPN), General Electric (NBC), Sumner Redstone (CBS), Rupert Murdoch (FOX) and DirecTV, which promise that the 32 NFL teams will continue to get rights fees even if NFL owners lock out the players or if there are no games during the 2011 season.
And then there’s the case of the National Collegiate Athletic Association imposing sanctions on the University of Southern California’s athletic program.
The sports industry in the United States benefits from an extreme lack of public accountability. The people who cover sports – whether in print, digitally, on TV or on talk radio – have no idea how the business actually operates and, as a result, fail to report a large amount of standard, everyday business that would most likely upset fans were they to get wind of it.
But the U.S. is not alone to perpetrate this crime. The National Hockey League’s Phoenix Coyotes General Manager Don Maloney will tell you Canada is just as guilty.
Maloney, a Canadian who has lived most of his adult life in the New York City area, criticized the way the Canadian media covered his team’s bankruptcy and compelled fans to move the franchise back to the other side of the 49th parallel into Hamilton, Ontario and Winnipeg, Manitoba. And for all intents and purposes, Maloney’s criticism was justified. Toronto-based sportswriters acted more like welcome-wagon hosts than journalists in their effort to jockey the debt-ridden franchise to Hamilton. Most of the Canadian sports media wore its best red and white suit, complete with a red maple leaf lapel pin, when it wrote about the Phoenix franchise and deliberately chose to ignore the fact that the National Hockey League has the right to put a franchise where it desires. This basic business tenet was backed up by a Phoenix-based bankruptcy judge.
The Canadian media wants another team in the Toronto area. But as NFL Commissioner Pete Rozelle once said as he stood on the witness stand during the 1986 United States Football League-National Football League antitrust suit, leagues are natural monopolies and the business does what it wants.
Meanwhile, hourly lawyer fees continue to pile up as the Coyotes franchise fate hangs in the balance. A group called Ice Edge Holdings is still trying to nail down a lease with the city of Glendale, Arizona, that would include the establishment of a new tax and bonding district around the city-owned arena and Westgate City Center. Naturally, Canadian sportswriters have derided the plan and Ice Edge Holdings’ alleged money problems, and have counseled Winnipeg residents to patiently await the Coyotes franchise’s return to the city.
Yet while Glendale politicians devise a way to keep the NHL Coyotes in town, big-time college athletic directors along with their presidents, chancellors and boards of trustees try to figure out how to squeeze more money into their sports programs. Football is the big money maker for college sports. But just how much money do programs need?
At Wisconsin University, Badgers sports is a $90 million a year business.
Basic math shows that 800 athletes each awarded $40,000 in scholarship money makes approximately $30 million, give or take a few million for “labor”. The CBS-Turner Sports deal is worth about $800 million a year to be split among numerous schools. But it’s not enough money to fund every school. Something has to be done.
College sports and schools need more and more money due to rising salaries, health insurance and travel costs.
And despite the revenue stream that comes to big time college programs – in the form of luxury boxes and club seats at the stadium, concession dollars, merchandise sales and marketing partners – the pot of gold at the end of the rainbow is being depleted through deals with and the creation of cable TV networks, such as the Big Ten’s partnership with FOX cable.
The Big Ten currently gives member schools an annual $22 million cut from cable TV revenues, but that could grow to a larger sum if the Big Ten Network reaches 60 million subscribers and charges two dollars per head. In order to reach the 60 million subscriber target however, the Big Ten needs a bigger geographic footprint than its Midwest-based business. The Big Ten has taken small steps in this direction by adding Nebraska (from the Big 12) and looking to add some schools in the east and south. The bigger the Big Ten geographic footprint, the more leverage the conference has in its ability to convince multiple cable system operators to add the network at $2 a month. Do the math: 60 million subscribers at $24 a year makes $1.5 billion, give or take a hundred million here and there to be divided among the schools.
That’s big money.
The pursuit of big money from cable TV is the reason why the Pac 10 conference hired Creative Artists Agency, a big time Hollywood representatives firm, to “advise” it on future expansion techniques. The Pac 10 didn’t miraculously fall in love with the thought of visiting the Colorado Rockies, nor did it develop a deep fondness for the song, “Deep in the Heart of Texas;” it saw revenue opportunities and went for them.
In the end, the promise of TV money from ESPN and FOX (coming from people with no stake in college football) kept the Big 12 going. The Big 12 lost Nebraska to the Big Ten and Colorado to the Pac 10 but kept Texas with the other nine schools.
A curious line from Big 12 Commissioner Don Beebe deserves some attention: according to a story at CNNSI.com, Beebe said establishing “super” conferences could lead to “more governmental, legal and public scrutiny.”
Apparently the entire governing system of big time college sports wants to operate in a vacuum and wants to downplay things like schools being “tax exempt” entities when dealing with earnings for sports and possibly being forced to pay players for services.
Big time college sports programs presidents and chancellors have a single mantra now: find new revenue sources.
Cable TV is that source. Multiple system operators can make or break a conference. The Big Ten Network was a struggling entity until Comcast agreed to place the channel on the basic expanded tier on cable TV giant’s systems within the Big Ten footprint. Conversely, the NFL Network has never reached the heights league officials envisioned because the network has not been able to secure a basic expanded tier with Time Warner and Cablevision, among others.
The basic expanded tier is the ultimate goal for conferences that intend to bulk up by adding schools because simply said, that’s where the money is. The 1984 Cable TV Act, which was signed into law by President Ronald Reagan, not only ensured cable networks’ survival but made them thrive. The basic expanded tier allows multiple system operators to bundle channels they think consumers want and sell them as one group to customers. The basic expanded tier allowed CNN, the Weather Channel, ESPN and other financially struggling networks of the mid-1980s to grow even though the bundling was in clear violation of antitrust laws and all the tenets of free market theory.
The basic expanded tier lineup is decided by multiple system operators and does not allow the consumer to choose what he or she wants to buy. It drives down the price of each channel because 90 million or more subscribers pay for ESPN, CNN, FOX News, MSNBC or Comedy Central on a monthly basis. But the system also begs the question of whether it is fair for 100 percent of customers to pay for what maybe one or two percent watch. College football is popular among a subset of Americans that forms less than eight percent of the 95 million or so subscribers that form the cable universe.
The re-regulation versus a la carte issue came up before Congress in the spring of 2004. In the end, cable operators, sports franchises, and cable news networks scored a huge victory when Republican Rep. Nathan Deal of Georgia conceded that he did not have the support of fellow House and Senate members to introduce legislation calling for the re-regulation of cable television and giving cable customers the liberty to choose which channels they wanted to purchase.
As long as big time college sports make billions of dollars off of people who have no interest in the product, Congress will not change cable TV laws anytime soon.
The NFL gets a slice of cable and satellite TV money as part of the overall deal; and while it’s a significant share, a good amount of the NFL’s $4 billion licensing fee for TV comes from Redstone’s CBS, GE’s NBC and Murdoch’s FOX. Over-the-air networks pay for the NFL from mere advertisement while Disney’s ESPN and DirecTV get subscriber fees and advertising dollars. The National Football League Players Association is very mindful of how the NFL is funded and is concerned that CBS, NBC, ESPN, FOX and DirecTV seem to be willing to underwrite a lockout of the players in 2011 and line the pockets of the 31 franchise owners and the Green Bay with the usual nine figure license fees whether the league plays a game or not.
The NFLPA filed a claim before Special Master Stephen Burbank of the University of Pennsylvania on Wednesday, contending that the league took lower revenue from the five media partners in exchange for guaranteed money in the event of a lockout in 2011. The owners, in the players’ mind, have a war chest and can easily afford to lock out the players.
Some of that money is coming from cable TV subscribers who don’t care about football and have no idea that they are contributing to the owners’ war chest and an NFL lock-out.
In 1984, President Reagan and Congressional leaders had probably never even considered the possibility that the legislation would lead to a complete realignment of big time college sports and give the owners some money in a labor action. Cable TV subscribers are still waiting for refunds for missed games from the 1994-95 Major League Baseball players’ strike, the 1994-95 National Hockey League owners’ lock-out, the 1998-99 National Basketball Association owners’ lock-out and the 2004-05 National Hockey League owners’ lock-out which lasted an entire season.
No cable TV subscriber has ever filed a class action suit requesting a refund for missed games, probably because they have no idea how much they are paying for sports on ESPN, Versus, the NFL Network, the MLB Network (which is also owned by multiple system operators), the various cable TV regional sports that are owned by Murdoch’s FOX, Brian Roberts Comcast or teams such as the New York Knicks and Rangers (MSG Network), the New York Yankees and New Jersey Nets (YES) , the New York Mets (SNY), the Boston Red Sox and Boston Bruins (NESN), the Baltimore Orioles and Washington Nationals (MASN), the Cleveland Indians (Sports Time Ohio), the Colorado Avalanche and the Denver Nuggets (Altitude), the Big Ten Network and the Mountain West Network.
And if that isn’t enough, what happens if the Bowl Champions Series decides to strip the University of Southern California of the Trojans’ 2004 football championship? Will the NCAA face a lawsuit for defrauding ticket holders, cable TV and over-the-air TV networks along with marketing partners by admitting that USC cheated? Five years after the fact, the NCAA has declared that USC cheated which could mean that all games featuring USC’s football team between December 2004 and December 2005 were not legitimate contests. Does that mean that there is a chance that the college football record book would have an unusual line in the honor roll of national champions?
Although the Bowl Championship Series might vacate the USC championship, the Associated Press will not rescind the news organization’s 2004 college football champion (and why is a news organization handing out college football championships?). It’s the BCS’ right to do what it wants and the BCS may have a legal leg to stand on if the title is vacated thanks to a 3rd Circuit Court panel’s decision in May relating to the New England Patriots’ secretly videotaping their opponents’ signals.
New York Jets season ticket holder Carl Mayer, who is a lawyer, was seeking $185 million in damages for Jets fans in a civil case on the basis that the game’s outcome had been predetermined. Patriots coach Bill Belichick knew the Jets defensive signals due to his espionage. Mayer’s complaint centered on the New England-New York Jets season opening game in 2007. The Patriots won the game 38-14. The NFL fined Belichick and the Patriots for the team’s dishonesty and took away a first round draft pick in 2008. The whole issue was taken up by Pennsylvania Senator Arlen Specter who met with NFL Commissioner Roger Goodell because of the enormity of the situation on the world stage.
Meyer’s case was thrown out by a three-judge panel in Philadelphia.
“We do not condone the conduct on the part of the Patriots and the team’s head coach, and we likewise refrain from assessing whether the NFL’s sanctions [and its alleged destruction of the videotapes themselves] were otherwise appropriate,” Senior Judge Robert E. Cowen wrote.
“At best, [Mayer] possessed nothing more than a contractual right to a seat from which to watch an NFL game between the Jets and the Patriots, and this right was clearly honored,” he added.
In other words, caveat emptor or let the buyer beware. You buy your tickets, so stop complaining.
It must be good to be a lawyer in sports these days: so many opportunities to make money on so many fronts. As George Young, the one time General Manager of the National Football League’s New York Giants, once said, “You show me a guy who says he is playing for the love of the game and I will show you a liar. It’s all about the money.”

No comments: