Continued sniping preventing negotiations
MARCO ISLAND, Fla. – With all due respect, Philadelphia Eagles president Joe Banner needs to stop distorting the truth. Even more, the rest of the NFL and NFL Players’ trade association need to stop sniping at each other if they really want to get a deal done.
The owners’ labor dispute with the now decertified NFL Players Association – I’ll resist calling this a battle or a war since the players are bunkering up at a Gulf-side beach resort here at the southwest tip of Florida and the owners are meeting at a high-end hotel in New Orleans next week – is becoming one of the most irritating showdowns in the history of sports labor.
Both sides are wrapped up in trying to win a PR battle that really is like the old nuclear buildup strategy between the United States and the Soviet Union in the 1970s and 1980s. The only end game is mutually assured destruction.
Right now, the league and the trade association are in a full arms, er, rhetoric race. Before Banner’s remark, the two sides traded barbs around the negotiations, including trade association president Kevin Mawae(notes) accusing the league of lying. Since Banner’s remark, DeMaurice Smith, former executive director of the NFLPA, referred to the league’s offer as the “worst deal in the history of sports.” That was followed by NFL Commissioner Roger Goodell sending a letter to all players attempting to explain the league’s offer and asking players to urge the trade association to return to the table. Guard Chester Pitts(notes), the Seattle Seahawks’ player representative, reacted to Goodell’s letter by saying: “I told my guys to set the letter on fire. We’re not that stupid.”
Ugly banter aside, Banner’s inane comment from an interview on Profootballtalk.com on Wednesday is a prime example of how distorted the whole thing has gotten.
“If you looked going forward over the next four years, this would produce somewhere between $19-20 billion in cash and benefits to the players. If you look back at the last four years, that number was a little bit over $17 billion,” Banner said. The quote was then used for a blog item that was titled, “Players offered $2 billion over next four years.”
Here’s the problem with what Banner is saying: The $19 or $20 billion figure he’s throwing out is not a nearly $2 billion pay raise, it’s a nearly $2 billion pay cut.
In 2010, the NFL grossed $9.3 billion between all of its TV contracts, ticket sales and other revenue streams. During negotiations before the start of the lockout, the NFL told the union that it expects those revenues to grow, conservatively, by 4 percent in 2011, 4 percent in 2012, 2.5 percent in 2013 and 2.5 in 2014. However, those numbers could drastically change when the league negotiates new TV contracts in 2013 and 2014.
So if you start at $9.3 billion and use the aforementioned percentage increases that the league laid out, according to Smith, the total gross revenue for the NFL over the next four years combined will come out to approximately $40.6 billion. Then, if you apply the old revenue-sharing formula from the previous collective bargaining agreement (the owners get the first $1 billion each year for expenses and the rest is split with the players getting 60 percent), the players stood to earn $21.96 billion over the next four years.
Regardless how Banner spins it, $21.96 billion is a long way from $20 billion.
Of course, the anger of the general public with this situation is understandable. Most fans can’t comprehend the millions of dollars that players make or the billions of dollars that get spent on the game. In short, how can two sides with so much going for them somehow screw this up?
But before you let emotion and hyperbole get the best of you, just stop and think about what it would be like to take a significant pay cut. Say you make $66,000 a year in a business that’s making a good profit. Do you think it would be OK if your boss asked you to take a $6,000 pay cut?
That’s basically what the NFL is asking the players to do. And they’re asking the players to do it without seeing the financial statements. In fact, trade association executive committee member Sean Morey(notes) said Thursday that the conversation turned almost demeaning when the players asked for the books.
“They said if they provided that information [we] wouldn’t be able to understand it,” said Morey, who went to Brown University. “You know what, we’re players, we’re coachable, help us understand it.”
While that’s part of the nastiness that goes with high-powered negotiations, the fact is that the trade association needs to justify any such decision to take less and it’s not getting justification.
“The numbers that they’re willing to provide don’t give us any sort of definitive ability to analyze that data and reach any definitive conclusion as to what we can negotiate and what is a fair deal,” Morey said.
At the same time, the owners are not wrong for asking for a change in how the money is distributed if they indeed see a need and can justify it. There are reasonable investments that the owners have to make that will ultimately benefit the players. For instance, there is a drastic need for new stadiums in cities like Minneapolis, San Diego, San Francisco and perhaps Los Angeles, if a team moves there. However, taking a nearly $2 billion cut without justification (the owners still won’t open the books to the extent the players want) is bad business if you’re the players.
For weeks, the trade association had talked about giving the owners a benefit on the backside of the deal, a concept that is known as a “true up,” as in the true upward value of a business. If, for instance, the NFL grew by more than the conservative estimates, the owners would get the initial payoff on that growth. In each year, the owners would get the potential to take the next 1.5 percent in growth above the conservative estimate.
For example, if the NFL grew by 5.5 percent rather than the estimated 4 percent in 2011, the owners wouldn’t split the entire growth. They would split the first 4 percent, then keep the entire next 1.5 percent. Based on the $9.3 billion the league made in 2010, the next 1.5 percent of growth is worth almost $140 million. Without having to split that money with the players, that’s approximately $84 million extra in just one year for the owners based on the old 60-40 split.
Overall, for the first four years of the deal, the players were giving the owners a chance to make another $350 million through this means alone. Again, considering that the growth rates listed by the NFL were conservative and that new TV deals are coming, it was a pretty safe bet for the owners to make that money.
The problem is that the owners’ last proposal put no limit on the increase. Instead of getting the next 1.5 percent before splitting the money again, the owners wanted it all. Thus, if the league grew by 7 percent instead of 4 percent, the owners would have had a windfall and the players would have been holding the bag.
“The players recognize it’s in our best interests to give the owners an incentive to make money because we benefit from the doing that,” a trade association source said. “But they could have made a killing on us if we let them keep it all.”
While one NFL source called the concept of there being a lot of value in the “true up” side of the deal “speculative,” that misses the point. The point is that there is potential value and the players deserve their share of it if the potential is realized.
It’s sort of like this: If you invent some great iPhone application and sell it to Apple, don’t you think you’d want a percentage of the sales?
On the flip side, the players need to realize that there is a point at which fighting the NFL is counterproductive. Smith has often talked about challenging the league’s antitrust exemption. While that might be scary to the owners and their ability to work out the best deals with the TV networks, it ultimately might lessen the value of the overall deals and decrease the amount the players get.
Same goes for opening the books of all the teams. While it’s a good negotiating ploy for the players, the fact is that having the owners open the books might create more public resentment of the NFL. More public resentment equals less chance to get public assistance for stadiums and other high-end expenses that ultimately create profits for the players to share.
In other words, it’s time for both sides to realize they need each other much more than they need a long, protracted fight. It’s time for them to be more upfront and, most important, completely honest.