Click HERE for part 1 of the series and HERE for part 2.
Part 3 follows:
When we left off the players had decertified the union, filed lawsuits for free agency, scored a victory in the court system and were still smarting from the way ownership handled them when the returned from the strike in 1987. They reformed the union and the game changed radically. While the owners stood in lock-step during the strike, when free agency came about it became very clear that not all owners were on the same page. Some owners really were committed to winning and made a great effort to spend the money to garner better players. Others were more concerned about profits and found their rosters being almost looted as many of their good young players, and some all pro’s as well, were hired by other teams through free agency.
Owners like DeBartolo of the 49ers would sign aging veteran free agents to decent contracts and use them as backups to their first string. Late in the season, as injuries started to mount, the 49ers would have a cadre of backup players, most with a good deal of experience and former all pro’s to fill in. Their caliber of play rarely skipped a beat.
Other owners would see their secondary players being signed by other teams and it became embarrassing to them. Mike Ditka who coached the Bears was often criticized because his record of winning in December was poor. All one had to do was look at the roster of the Bears and see that the first team players were paid in line with the market but the balance of the roster was filled with low paid rookies and castoffs. It is no wonder the 49ers had a series of Super Bowl victories. As an aside, the owner, Mr. DeBartolo was fined $50,000 by the league, I believe for tampering. Joe Montana held a players only meeting and within minutes the players donated the money to pay their owners fine, they knew from a players perspective he was something special.
Now let’s bring it all together into what I call “The Dirty Little Secret”. Recall in the first article I discussed in a free market that ownership contributes capital to build factories, develop products etc. and that is their contribution to the company. Now the original franchise owners that sat in a Hupmobile dealership in Decatur, Illinois in the 1920′s and formed the NFL did just that. They took risks and built the league. One would likely agree the original owners of the AFL also took risk capital to build their businesses. However the league started 90 years ago, and the AFL started 50 years ago, it is time to look at the here and now.
For example we can take Jerry Jones the owner of the Dallas Cowboys who paid millions when he bought the franchise from the Murchison family. Now from Mr. Jones perspective he will likely tell you he indeed has a lot of capital invested, and like any person who invests in a company he is entitled to a fair return. There seems to be a major difference however when you look at the NFL, what I like to refer to as “The Dirty Little Secret”.
Does ownership capital go to build a factory where the product is produced? Now it seems the taxpayers in Texas have not only built one but two new stadiums for the Cowboys over the years, so the answer is no, not only in Dallas but throughout the league.
Does that capital go to train their labor force? Once again the answer is no. That is done by the colleges and the college draft makes it such that there is no competition for each team in hiring that labor. The Arena Football League came into being and they too serve to develop players who, in the cases like Kurt Warner migrate to the NFL.
So just exactly what does that capital buy? It buys admission into a club of wealthy owners who own their portion of a monopoly on one of the most popular games in America. They have no competition in the marketplace, nor do they have any real competition for labor. Sure there is free agency, but they have a collective bargaining agreement that compensates the team losing the free agent with draft picks and the like, plus they have a salary cap (which just expired but is more than likely to be included in the next collective bargaining agreement) which means there is a limit on team payroll throughout the league. Not a bad gig, when you think about it.
Following is a couple of paragraphs from an Associated Press article published on February 9, 2010 regarding the current status of the NFL and their labor agreement.
The 32 team owners clearly are prepared for a go at the first uncapped season since 1993. Enough restrictions are in place, including extending the minimum years of service for unrestricted free agency from four years to six, that baseball-like bidding wars are improbable.
With the owners claiming they are losing millions and the players arguing that teams are making money by the fistful, a common ground will be difficult to find.
In an article on the ESPN web site it states the owners want the players to reduce their share of the pie from 59% to 41%. They went on to quote the commissioner as saying….”of the $3.6 billion in incremental revenues since 2006, players received $2.6 billion.”
I did some calculation and basically had the players received the 41% the owners are looking for, each NFL owner would have received an additional $35 million.
Now here is the final piece of “The Dirty Little Secret”. Just exactly what does ownership contribute to the product? They have a guaranteed percentage of the revenue, their factories are built by the taxpayers, they have near total lock on the labor market, so what do they do to earn their share of the pie?
Realistically the players are entertainers, just like Michael Jackson, Oprah Winfrey, The Who, and any other person or group in the entertainment field. The owners are the promoters of entertainment events. If anyone knows much about the entertainment field, normally top name entertainers earn much more than the promoter of the event. How would you like to have promoted a Michael Jackson concert in his heyday? You would have to find a facility for the event, do all the advertising to promote the event, pay the entertainer, and clean up the trash after the event. Now you sure would make a nice profit, but my guess is Michael Jackson would rightfully have earned the lion’s share of the pie. Here is why.
Do NFL fans go to see the owners or the players? Without the entertainers, the owners have nothing! In the NFL it is the entertainers (players) who work their tails off perfecting their craft and each week literally put their lives on the line for the entertainment of the fans in person and on television. Just remember this. When you see an athlete in any sport being paid a huge contract, you must ask yourself a question. Would you rather that money go to the person providing the entertainment or to the owner who paid millions to buy their way into their exclusive club? Owners who have the kind of money to own a franchise are not stupid, they understand the profit motive very well. If the owner could not afford it, they would not offer the huge contract to the player. They are stewards of their own business.
Recall in the strike year of 1987 the owners hired replacement players and put them on the field, and the TV networks went along with the charade that the games were just as competitive an just as much fun as when the real NFL players were on the field. The players, and players union, made a huge mistake in not setting up a strike fund to tide them over. With most having short careers they felt tremendous pressure to cave in to the owners demands to get back to work.
The current situation as I understand it in the NFL is this. The Collective bargaining agreement is set to expire in March 2011. Starting in March 5, 2010 there will be no salary cap which means owners can increase their payrolls as they see fit. Now the owners claim they are losing millions according to the commissioner. While, in 2011 it is unlikely the players will strike, the head of the players union was quoted as saying on a scale of 1-10 the chances of the owners locking them out is a 14………a statement which was quickly denied by the commissioner.
Whether it be a strike or a lockout, it will be interesting to see if the players learned their lessons in 1987 and are better prepared this time. Like most negotiations of this type there is a good chance it will drag out until the last minute. As the deadline nears there will be tremendous pressure on both sides for a settlement, from inside the players and owners groups, the fans, the TV networks and likely from congress. Neither side has any real incentive to settle early, it just generally is not the way it is done. In the meantime we will see tremendous public posturing from both sides.
As a fan I am not in favor of either the union or the owners; but rather what is good for the game and the fans in the long term. What is best for the good of the game and the fans? Having been to mediation in my lifetime a couple times, one question I have seen asked of both parties in a negotiation is “How do you feel about the deal”. If both parties say something like, “I didn’t get all I wanted but I think we did OK, we can live with it”, normally the two parties will work together throughout the lifetime of the contract, they felt it was FAIR.
In this particular negotiation the owners are demanding substantial “give backs” on the part of the players union, billions of dollars. In order to accomplish that, the party demanding the give back almost always must provide good, irrefutable data to the union to take back to the membership, to justify making concessions which are in essence agreeing to a salary reduction. Many industries in the United States have negotiated salary reductions from their members due to the economy and the health of the company they work for. It is best accomplished when the union and ownership lay all their cards on the table and work together toward a common goal.
I have a series of questions that I feel must be addressed by the ownership before I will believe they are really entering into good faith negotiations with their employees:
1. If owners are losing millions, then why are franchises being sold for close to a billion dollars? (Note: I just read where the St. Louis Rams are being sold. They valued the franchise between $750-$900 million. Certainly one would wonder why a buyer would pay that kind of money to buy a business that is not profitable.)
2. If owners are losing millions, then why should free agency be a concern, no owner in his/her right mind would pay millions, if not billions, for a franchise to lose money…..they just would not compete in running up player salaries? One must remember that there is still substantial revenue sharing so no owner should have a huge economic advantage over the other unless they want to forego a good bit, if not all their profit.
3. If owners are losing millions, then the prudent thing would be to open up their books for the world to see. It would establish credibility with the unions and the fans. Will they do that?
4. What other sources of revenue are not included in the “defined gross revenue” pool? Owners are masters at hiding income from other owners and the players unions in all sports.
5. Why would ownership lockout players if they are losing millions? That will hurt the game in the long run and make it even more difficult to turn the game into a profitable venture.
6. And finally, if the ownership is successful in having the players share of the pie cut from 59% to 41%, how much of that increased owner’s share will go to the fans in reductions in ticket prices? One would reasonably assume the owners will point to the poor economy as the reason for concessions on the part of the players. I happen to believe the millionaire players and the billionaire owners can withstand tough economic times much better than the average fan.
The last time I looked the average life of an NFL player was something like 3.6 years. Every game a player takes the field could be their last. One can easily understand their motivation to try to be as well paid as they can for their career. On the other hand ownership also has a lot of money invested and wants to make as much profit as they can, their motivation is also understandable. There are billions upon billions of dollars at stake in this current labor negotiations. It is going to get interesting.
If you look at the situation, the framework of the 1993 agreement was kept in place for 15 years. The owners notified the players association they wanted to opt out in 2008. There has been fifteen years of labor/ownership harmony and the game has flourished to the multi-billion dollar enterprise it is today. The 2010 Super Bowl drew the highest television audience in the history of television. This has the potential to be a wonderful opportunity for both sides if the owners indeed do open up their books and labor and management work together to provide a framework that is fair to both parties and once again provide several more years of harmony. As fans, let’s hope they don’t screw it up!
As the negotiations progress I will try to publish updates and try to make sense about what is really going on.
