Sources: 'Bizarre' twists stifle NFL labor talks

Three weeks ago, as Roger Goodell and DeMaurice Smith broke bread in a midtown Manhattan restaurant, the leaders of the NFL’s warring labor factions projected a sense of mutual optimism. During a negotiation session earlier that day at a Long Island hotel, Smith and player representatives had suggested a new, “all-revenue” model for splitting up the billions of dollars generated annually by America’s most profitable professional sports league, and Goodell and the owners across the table seemed to embrace the idea enthusiastically.

Late Thursday afternoon, after another frustrating interchange between the two negotiating teams at a Minneapolis-area law firm that ultimately lasted past midnight, it was clear that labor peace – and an end to the lockout imposed by the owners on March 12 – won’t be achieved anywhere close to as seamlessly as numerous reports in recent weeks have suggested. Not only is the very definition of total revenue being debated, but each side also believes the other has tried to manipulate the negotiation process in its favor, and any semblance of trust has all but disappeared.

A little more than two months before the scheduled start of the 2011 regular season, the players and owners are still fighting over money, and quarreling over who deserves the brunt of the blame. One side is speaking Russian, the other Japanese, and that sense of mutual optimism once enjoyed by the NFL commissioner and NFL Players Association executive director has been lost in translation.

“It’s just bizarre right now,” one source on the players’ side said Thursday. “Two weeks ago, I was optimistic. I didn’t realize that we weren’t even close to close. It’s disheartening.”

I’ve talked to key figures from both camps, and others who are more neutral while familiar with the state of negotiations, and I’m still trying to figure out how what one source described as a verbal handshake between players and owners regarding a total-revenue formula earlier this month has degenerated into a montage of mutual finger-pointing.

Those on the players’ negotiating team are convinced that owners have played “bait-and-switch” games with them, belatedly asking for certain items to be excluded from the total-revenue pool after seemingly having agreed to a straight split. They view the recent wave of public optimism suspiciously, believing that owners have purposely tried to create an impression that a deal is near in order to persuade players to accept an offer in the next couple of weeks, thus ensuring that the entire preseason would be saved.

Conversely, owners continue to regard NFLPA attorneys Jeffrey Kessler and James Quinn as divisive forces intent on blowing up any prospective settlement in favor of continuing to pursue legal remedies, including the Brady v. NFL antitrust lawsuit, that could create monumental leverage for the players in the future. The owners trace recent player demands that they regard as unrealistic – i.e. an insistence upon counting sales taxes on tickets as part of total league revenue – to the two attorneys and charge that the players are the ones who’ve attempted to extract extra concessions in recent days.

The heart of the dispute remains how to split up the annual revenue pool, which in 2010 – the final year of the expired collective bargaining agreement – totaled approximately $9.3 billion. Under last year’s formula, the owners took $1 billion off the top in “expense credits,” and the players received 58 percent of the remaining money in salary distributed via a league-wide salary cap.

After opting out of the CBA two years early, the owners demanded an extra $1 billion off the top to cover rising costs such as stadium construction. The players balked, insisting that the owners open their books to convince them that they were struggling economically. The owners refused, and though the two sides made some progress on the expense-credit issue in the days leading up to the CBA’s expiration in March, it was not enough to forestall union decertification, the owner-imposed lockout and the players’ filing of the antitrust lawsuit.

Three weeks ago, shortly before that much ballyhooed Manhattan dinner between Smith and Goodell, a breakthrough occurred. Revisiting a concept they'd proposed shortly after Super Bowl XLV, the players suggested that instead of arguing over expense credits, the two sides should focus on a simple, equitable split of total, unadjusted revenue, or all revenue.

Back in February, the players had proposed a 50-50 all-revenue split, one which would have mirrored their haul from the previous CBA. The players received slightly more than 50 percent of total revenue in 2009 and an average of nearly 52 percent between 2002 and '09.

At that meeting in Long Island, in an obvious concession, the players offered to accept 48 percent of “all revenue,” a development first reported by ESPN’s Chris Mortensen. In exchange, according to the proposal, they would receive a more favorable salary-cap formula with higher per-team spending minimums than in the past and a provision that actual salary dollars must be spent toward achieving that figure, rather than “dead money” from contracts of players no longer on the team.

And unlike the owners’ final offer before the players walked away from the bargaining table on March 11, the “true up,” or back-end potential of the deal, was also addressed: If league revenues were to exceed projections during the term of the proposed CBA, the players’ split would drop as low as 46.5 percent, but they would still share in the windfall.

Sources on both sides say the owners indicated a willingness to work within that general framework, and there was a sense that other remaining issues, such as a rookie wage scale, a reduction in offseason workouts and a continued desire by owners to expand the regular season to 18 games, would be settled quickly once the revenue-split was solved.

Beginning last week, however, the momentum began to evaporate. What happened? Each side gives a very different story.

The players blame the owners for suddenly insisting upon “expense credits” that would reduce the all-revenue total by a significant margin (described by one source as “several hundred million dollars”), effectively reducing their share to 45 percent.

The players also balked at the owners’ insistence that the proposed “legacy fund” to aid retired players would come out of the salary cap – essentially meaning that the players, and not the league, would be responsible for those costs. Owners also clung to the possibility of adding two games to the regular season as early as 2014, a move to which most players are adamantly opposed.

Owners, meanwhile, claim that certain expense credits were part of the “all revenue” understanding achieved earlier this month and charge that the players are the ones attempting to change the terms. They are also frustrated by players’ insistence that “all revenue” should include a share of money generated by non-football events (such as rock concerts) at team-owned stadiums.

As for the notion that government taxes on game tickets should be included as revenue under the formula, rather than taken off the top, the owners are downright aghast. They claim that such sales-tax payments were not included among the revenue split in the previous CBA and that an accounting miscalculation by Price Waterhouse Coopers, the firm which monitors the salary cap (and which was commissioned by the NFLPA to calculate projected NFL revenues during the current negotiation), has misled the players into demanding the inclusion of those dollars into the formula.

NFLPA counsel Jeffrey Kessler.
(Getty Images)

Further, owners see a direct correlation between last week’s reappearances of Kessler (who was absent for Thursday’s sessions) and Quinn in the negotiating room and the negative turn the talks have taken.

Players, meanwhile, view NFL senior vice president and general counsel Peter Rucco as a divisive force who has played games with the revenue numbers in recent days.

As things have degenerated, Goodell and Smith have once again been caught in the crossfire. Players believe that Goodell lacks deal-making authority and hasn’t displayed the necessary leadership to build a consensus among the owners, his de facto employers.

Owners see Smith as someone unable to exert control over Kessler and Quinn, even though, according to a source familiar with negotiations, the NFLPA executive director conspicuously silenced Kessler during a session with owners two weeks ago, ordering him to “stand down.”

For his part Goodell, according to a source, screamed at owners during a meeting in Rosemont, Ill., early last week ago after his update to the group on the progress of negotiations was leaked to Mortensen, telling them such breaches in confidentiality were hurting the negotiation process.

For all of the negativity of recent days, there is still a possibility that the optimistic vibes each side experienced earlier in June can return, and that a deal can be reached in time to allow the league’s preseason opener – the Hall of Fame game between the Chicago Bears and St. Louis Rams in Canton, Ohio – to be played as scheduled on Aug. 7.

After all, once preseason games are canceled, the league will experience a loss in revenue that will make the overall deal less valuable for both sides. For this reason, TV network executives shouldn’t be the only ones who are nervous about this prospect; players and owners, too, should feel a sense of urgency. There is also the possibility that the U.S. Court of Appeals for the Eighth Circuit (which is deciding whether the lockout is legal) and federal judge David Doty (assessing how much players were damaged in the “lockout insurance” case against the owners) could issue rulings which create leverage imbalances that change the negotiation landscape and make a settlement more problematic.

Despite the recent negativity, there is cause to remain hopeful about a settlement. Unlike a few months ago, players no longer feel personally affronted by the owners, and the two sides have remained civil and professional in negotiation sessions.

The relationship between Smith and Goodell has also improved, a welcome development given the frostiness that once existed between the two men. On Tuesday night they flew together to Sarasota, Fla., where Goodell – at Smith’s invitation – addressed incoming rookies the following day at a symposium staged by the NFLPA.

Before Goodell spoke to the rookies, he and Smith had another meal together, a breakfast that one source described as “awkwardly comfortable.” They did not talk business, making a mutual effort to steer clear of controversial topics.

By Thursday night, as a marathon negotiation session between the two sides continued in Minneapolis, it was unclear whether Smith and Goodell were communicating on a higher level – or whether they were even speaking the same language.

If their mutual optimism doesn’t return soon, things could start to appear very bleak for anxious NFL fans.