Tuesday, April 26, 2011

Why are NFL owners really locking out the players?
TUESDAY, 26 APRIL 2011 08:10


The National Football League has been pretending that all is well in the land of the 32 franchises and the league's more than 1,600 employees. Teams are conducting cheerleader tryouts. The league released the 2011 pre-season schedule, then came the regular season schedule announcement and the exciting month of NFL football reaches a climax with three days worth of what is essentially a major restraint of trade, the college draft. That exercise, which starts on Thursday, is made legal thanks to the 2006 National Football League-National Football League Players Association collective bargaining agreement which gives the NFL the right to offer college players a chance to join the players ranks through that mechanism even though the college players have no say in the 2006 agreement.
So all is wonderful in the land of the NFL except for one minor detail. NFL owners have locked out the employees who perform on the field — the players and no new negotiations on the collective bargaining agreement are scheduled until May 16 after a flurry of court decisions will be made on the legality of the lockout and whether the owners can use TV monies from 2011 rights from FOX, NBC, CBS, Disney's ESPN and DirecTV for football operations even if there is no product.
The lockout was lifted by a Minnesota judge on Monday afternoon; the NFL will appeal the ruling which means both sides are back to the bargaining table with no rules for business for 2011. It could be that 2010 rules apply which is not necessarily good for either side. Players will have to wait six years, not four for free agency and the owners have no salary cap to control players costs.
A win for the players perhaps, a win for fans perhaps. A loss for the owners perhaps. But one thing is certain, a lot of the money problems, real or imaginary, that NFL owners are having come from municipalities building new stadiums for teams and that taxpayers dollars which went for palatial stadiums in 1990 are longer good because 21st stadiums are so much better.
The owners have contended that their side was forced into a lockout because the players cannot see that they are financially hurting or that the business model no longer works or that the stars aren't in the right place because the moon isn't in the seventh house and Jupiter hasn't aligned with Mars or something else.
There actually is a reason that the owners do have but for some reason the owners side has not spelled out the problem. Simply, every time a new stadium comes on line (in the most recent cycle, it has been Jerry Jones' Cowboys home in Arlington, Texas and the new Meadowlands facility), the stakes for lesser revenue teams become higher because the new stadiums raises league revenues (all those shiny luxury boxes, club seats, and personal seat licenses) because old facilities just don't have the whistles and gadgets the new places have. The salary cap ceiling goes up as well as the salary cap floor and spending to the minimum has caused owners with fewer revenues streams problems. Teams have to pay for players and probably debt service (for either buying a franchise or throwing money at a new stadium — Cowboys, Giants-Jets, New England Patriots to name some of the franchises that have kicked money into new facilities) and have to cut other areas and that may include the number of coaches on a staff, scouts and other front office personal including sales and marketing employees.
That seems to be the "broken economic model" that NFL owners through Commissioner Roger Goodell are talking about. The owners just have not spelled it out publicly. It goes back to owners versus owners and whether big market owners want to share revenues with smaller market owners.
Oakland, Minnesota, St. Louis, Atlanta, Charlotte (Carolina), Buffalo, Jacksonville, San Francisco and San Diego apparently in that leaky boat (old stadiums) with no upward ability to raise revenues. A little more than 15 years ago, Atlanta along with Jacksonville opened new stadiums and St. Louis officials built a domed stadium that satisfied Los Angeles (actually Anaheim) Rams owner Georgia Frontiere who moved her Rams from the second largest TV market (albeit Anaheim) to Missouri.
The present dispute between the owners and players has roots in the 1960s when Irving, Texas built Dallas Cowboys owner Clint Murchinson a stadium complete with luxury boxes which gave Murchinson extra revenue. In the early 1970s, New Jersey decided to become "big-league" and built the Meadowlands which also had luxury boxes which added to the Mara family's revenue stream.
By 1983, NFL Commissioner Pete Rozelle was complaining that the "luxury box" was the bane to his existence. NFL owners wanted new stadiums and started playing the field. Rams owner Carroll Rosenbloom began plotting the move of his franchise to Anaheim in 1978 although he didn't live to see the team play in a rebuilt Anaheim Stadium in 1980. The Minnesota Vikings ownership shopped around but eventually got a new stadium in Minneapolis. Al Davis ended up in Los Angeles in 1982 in a move that also was spurred by the possibility of more TV money. Even Leonard Tose thought about moving his Philadelphia Eagles to Phoenix although that was to get out of millions of dollars of legal gambling debts and get some money back into his coffers. The NFL didn't want to leave Philadelphia because of an owner's financial trouble caused by gambling at Atlantic City casinos.
Perhaps the NFL owners can explain their position which was caused by government subsidized stadiums being opened in select cities by using an example from New Orleans in 1999. In that year Saints owner Tom Benson started looking for either a rebuilt Superdome or a new New Orleans stadium. Benson was miffed when Louisiana officials did not follow the leads of Jacksonville, St. Louis, Baltimore, Nashville, Cleveland and Oakland which put up piles of cash to attract either an expansion or relocation team to their cities. Jacksonville got an expansion team in 1993, St. Louis wooed Frontiere and got married to the Rams in 1995, Davis took his Raiders back to Oakland in 1995. Houston Oilers owner Bud Adams grew tired of the Houston Astrodome (he first suffered Astrodome fatigue in the late 1980s) and took Nashville offer in 1996. Cleveland came up with funding for a new stadium after Art Modell announced his Cleveland Browns franchise would move to Baltimore in 1996. Cleveland came back online in 1999 in the NFL. Also in 1999, Los Angeles and Houston were bidding for an NFL expansion franchise which would start play in 2002. Houston voters approved a referendum and built a new facility which is what Adams wanted all along and didn't get.
Benson played the stadium game because his football revenues were failing as new taxpayers funded stadiums were opening around the country. In spring 1999, Benson began his attempt to renegotiate the team's lease with Louisiana Governor Mike Foster and the Louisiana legislature. The issue then was the naming rights to the Superdome. Benson did not want the structure named after former Governor John McKeithan who pushed to build the stadium in the 1970s. Benson said renaming the Superdome by calling it the McKeithan Dome would cost his team millions of dollars annually.
The legislature wanted to honor the former Governor while Benson wanted the naming rights to the facility so he could sell it to a business who would pay millions for the privilege.
By 1999, the New Orleans economy had slipped as businesses closed offices in the city and New Orleans population was on the decline. One Saints official said that the team once had the fourth best revenue generating lease in the business. However that official added that once St. Louis, Nashville and Baltimore started enticing team owners with virtual rent-free stadiums, the Saints franchise quickly plummeted to near the bottom of the league.

Benson could no longer keep up with the big boys in what was supposed to be a socialist society which is the NFL's business model.
On January 10, 2001, Benson and the Saints filed a "letter of default" alleging that the state and Superdome officials violated the Saints lease at the dome. Benson had other options which he used despite the fact he had a lease until 2017 with the state for his team to play football at the Superdome. Mississippi officials talked about building a multi-sports complex some 45 minutes from downtown along Interstate 10. Benson owned a car dealership in San Antonio, Texas and seemed to have an interest in the then eight-year-old Alamodome which seated 65,000 people. But the Alamodome was already outdated by 2001. San Antonio Mayor Howard Peak admitted that the Alamodome needed "more suites even though we have 65,000 seats, we have to have club seating and other types of seating."
San Antonio had a new building but the wrong type of seating.
Benson did play the game masterfully. He got an agreement with the state that gave him $186.5 million in state handouts between 2002-2010 and his recent agreement came with a Superdome revenue for more bells and whistles and up to $6 million in annual state handouts if certain benchmarks are not hit. Additionally Benson took control of a building near the dome and is renting offices to the state as part of the new Superdome agreement.
New Orleans may be a small and financially challenged market by Governor Bobby Jindal has no problems providing subsidies to a private business — an NFL team.
Benson can compete because of taxpayers dollars. Other owners aren’t as fortunate in getting a block grant from state or city governments although they do well in other government related tax break areas.
St. Louis has an interesting lease, the Rams-St. Louis agreement calls for the team to be in the top 25 percent of stadium generated revenues in the NFL. With newer stadiums opened, the revenues are probably not in the top 25 percent and an owner can opt out of the lease agreement which ends in 2014. Will Missouri follow Louisiana lead and throw money at Rams ownership?
Right now, Santa Clara, California officials are trying to figure out how to transfer money into an account to build a stadium for the York family's San Francisco 49ers. In Los Angeles, competing groups want an NFL team and in one case, AEG's downturn stadium proposal, the company looks to be trying to pull off a land grab.
The owners want to cut players salaries yet have not given a reason why. It seems hard to believe any NFL owner has financial difficulties with a team. In 1993, Jerry Richardson and Wayne Weaver paid about $140 million for expansion teams in Charlotte (Richardson's Panthers) and Jacksonville (Weaver's Jaguars). By the end of the decade, Houston's Robert McNair paid five times as much for an expansion team. TV monies exploded when Rupert Murdoch bid for NFL rights for his weak FOX syndication alliance of TV stations in late 1993. The owners have done a poor job of articulating their side of the story but apparently there is a side. The lesser markets cannot keep up with the big boys who drive the revenues and in a league that has prided itself with a "leaguethink" philosophy where the weakest link (or smallest market) is equal to New York, Dallas, New England, Washington, Houston and Philadelphia this has become a major problem.
The owners are financially hurting, so they say.
But all of these problems will be swept aside for the draft, just the same way the problems disappeared when the league announced the regular season schedule. It is Kafka-like, black is white, up is down, the NFL is operating as if it is business as usual.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at bickley.com, Barnes and Noble or amazonkindle.

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