Labor update: NFL could lose $1 billion in a lockout

The 2010 NFL season has been amazing thus far -- without a dominant team in place, league-wide competitiveness has never been so robust, and spread across so many franchises. That said, the gloomy stream of music that plays underneath this season (the volume is getting louder ...) is the March deadline for the owners and players to agree on a new collective bargaining agreement.

The owners have put it out there that they'd prefer to get something done sooner than later, but only if the players recognize the financial shortfalls they're incurring. The players respond with the reasonable concept that if they're the ones paying with their bodies, why should they take a smaller cut of a $9 billion annual revenue pie as the NFL pushed to increase the regular season by two games?

The fight is over an 18 percent split in the middle. Either side is willing to concede 41 percent of the annual overall gross revenue, but the players want to keep the 50-50 split they've built up through the most recent CBA (the 60-40 figure frequently cited is after existing expense credits), and the owners want a further 18 percent giveback right off the top to offset operating expenses. The owners have seemed to be ready to play "chicken" with the idea of a lockout in the interests of breaking the union if a work stoppage doesn't hit their pockets too hard.

And according to a recent report by the Wall Street Journal, the ability of teams to somehow have it both ways is rapidly decreasing. EA Sports, the gaming and merchandising titan responsible for the Madden franchise of games, has already requested a $30 million reduction in its payments based on the specter of labor unrest, and the hit from the loss of season-ticket revenue and long-term ad placements could total as much as $400 million in the month of March alone. In total, if there's no football and no hope of football through August, the WSJ report indicates that an additional half-billion dollars could fly out the door.

The problem with the league's position is that at the same time the owners are crying poverty, their long-term debt structure is floating on the promise of locked-in revenue on an absolutely reliable basis. And just because the games stop doesn't mean that the need to pay insurance and stadium costs, as well as other base-operation expenses, magically disappears. And for the players, the risk is that as the fight goes on and the owners begin losing more money, the NFL might dig in and figure that as long as the clubs are already in the hole, there's no reason not to take this as far as it needs to go to put the NFLPA on its knees and out of business.

While all this is going on, NFLPA executive director DeMaurice Smith is touring the franchises and polling the players on the prospect of decertifying the union. Smith is getting overwhelming support, which could throw a real wrench in the league's plans. If the players give up the right to bargain collectively, a lawsuit bringing an injunction that would prevent any work stoppage might be the next step. NFL commissioner Roger Goodell keeps insisting that these issues will be hashed out at the negotiating table, but it seems that Smith would be just as happy to keep kicking the NFL's butt in court.

The question for Goodell is how content the owners will be with their own hardball tactics when they actually start bleeding money as they claim they are (their complaints about the current debt structure seem to be based on the preposition that nobody understands the difference between the cash and accrual methods of accounting). Who will they look to then? The players? The players will be going through the same financial hemorrhage.

It's an interesting (and somewhat frightening) situation, led by the increasingly infinite truth in matters such as these: Money talks, and everything else can take a hike.

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