At last, the 3rd part of the CBA series is here. I know you've been patiently waiting for it, so here goes. In case you missed them here is Part 1 and here is Part 2. This time around, we will be tackling the Escalation and Impact of the voiding of the CBA, and the Consequences of an Uncapped season. We will also talk about the Leverage and Who has it. It will be a long one, so grab your coffee and hang on.
The NFL’s last lockout was in 1987, a strike that lasted 24 days. Since then, Major League Baseball, the NBA and the NHL have all had labor issues that led to missed games in each of those sports. This impending battle could be the NFL's most difficult labor impasse since the league shut down operations for two months during the 1982 season.
The last labor agreement was reached in 2006, when the owners increased the players' shares of the league's estimated $8 billion a year in revenue to 60 percent, up from 57 percent. With the salary cap increasing by at least $5 million per season, and sometimes much more, the owners say that's too much. The players are guessing the owners will seek a rollback.
That's why the National Football League Players Association leaders became worried last year when the NFL hired Bob Batterman, an NHL labor lawyer during the 2004-05 shutdown that resulted in players under contract taking a 24 percent pay cut and accepting a salary cap.
The first step to labor unrest is virtually guaranteed to happen next year when the league reaches the ominous "uncapped" year for the 2010 season. After that, owners are expected to attempt to lock out players, and legal battles will ensue. The future of the game could be decided in a courtroom.
The players believe that the owners aren’t going to play around. They’re looking at a lock out. There is talk of union busting and scare tactics to provoke the players into taking a bad deal out of desperation.
Attorney Gregg Levy, who has represented the NFL in labor matters for approximately 20 years, recently sent a letter to all owners claiming that NFL teams were averaging $231 million in debt currently. Levy advised owners to get debt control quickly.
The players have countered with a union-commissioned study that showed the average value of the teams has grown from $288 million to $1.04 billion over 10 years, an increase of about 14 percent a year. NFLPA Executive Director Demaurice Smith said that he was not sure whether a business that generated $8 billion in revenue last year should be contemplating putting people out of work.
Ultimately, the NFL wants the entire court system to be removed from the labor process. Both Commissioner Roger Goodell and league counsel Jeff Pash acknowledged that getting the courts off the case is the goal.
The union would likely counter that the NFL has grown so drastically because of court supervision, not in spite of it. It’s hard to argue that the league is suffering in any way. For instance, the NFL announced earlier this offseason that it again broke its attendance records.
Most important, the union also has the right in the CBA to return to court and retained the right to decertify as a union in order to return to federal court.
Where currently players with 4 accrued seasons can hit unrestricted free agency, an uncapped scenario would require players to complete 6 years to reach the open market if no new agreement is reached. Teams would also be able to shackle players with both a franchise tag and two transition tags per year to prevent their best players from leaving, though they also would face serious limitations in free agency. Playoff teams reaching the final 8 spots only would be able to sign a FA if they lose one of their own, and the final 4 teams could sign only one FA for every two they lose.
Opting out of the agreement triggers many things, including the possibility that there will not be a salary cap in the 2010 season and that the terms of the agreement will cease after that season. If that happens, the NFLPA expects the owners to attempt a lockout of the players, starting in March 2011. A lockout that could ultimately threaten the 2011 season.
The late Gene Upshaw, the union's executive director, said before his unexpected death last August that if the cap went away, there would not be another. The new director DeMaurice Smith has agreed with his predecessor's stand.
"If we move to an uncapped scenario, we will not go back," Smith said during a conference call with reporters in March, days after being elected as executive director.
Ominously, both sides have begun to amass deep war chests. The players, according to NFLPA officials, have stashed away a $210 million strike fund. I appears the union is prepared to enter an uncapped year with a possible repeat of a 1987 strike. The owners' contingency is in the 10-figure category, and in its recent extensions with CBS and Fox, and its deal with DirecTV, there will be $24 billion from television revenue coming in this season. The league has included provisions to be paid even if there is a lockout two years from now.
Some players have made contingencies beyond saving money, such as going back to school. For those players that left school without a degree, that might be the smart way to go in this poor economy.
IMPACT OF WORK STOPPAGE
If a team wants to sign a restricted free agent, it would have to give up as much as 1st- and 3rd-round picks to get that player -- and that's before it pays him a big contract. That is a deal-breaker. Further limiting movement, teams will have an additional franchise tag to slap on players. There are also semi-complicated limits on free-agent acquisitions for the final 8 playoff teams.So, despite teams having a ton of money to spend, some of the best players might not be available.
Now you can see why so many players have been clamoring to sign long-term deals. The money they receive now could be greater than anything they could receive with their inability to test free agency unfettered.
All evidence points to 2010 being played without a salary cap. If that's so, then the list of restricted free-agents will be, by far, the best ever, including all the 4th- and 5th-year unsigned players. There are roughly 175 players who will be FA's if there’s a new CBA (with the same free agency requirements as now) but who will only be restricted FA's as we currently stand entering an uncapped year.
However, the players fear that prospect because it would affect their benefits. There would essentially be no limits on spending for players. If the labor agreement expires without a new deal in place, player salaries for 2010 won't be capped, but there won't be a minimum, either. Sure, a QB might get $10 million, but the punter signed at mid-season theoretically could be told to "take-it-or-leave-it" on a $100,000 salary. That's almost one-third the current minimum of $310,000.
The teams that are so far under the cap will be happy to see the uncapped year, even at the risk of becoming much like George Steinbrenners NY Yankees, outspending the smaller market teams. But without the Salary Cap, some teams may spend as much as they want, beyond the current maximum of $128 million, or as little as they want, since the minimum of $112.1 million would not exist either.
However, with owners saying they've girded for a 2010 season with no salary cap, the teams that drafted well this season and last season have an edge. Sure, it's exciting to think the owner of your team might break open the vault to get a premiere player, but in an uncapped 2010, those potential difference-makingFA's could have restrictions placed on them that choke off their availability and leave your needy team out of luck.
That's why so many teams are hoping they drafted well this season and do as well or better in the 2010 draft. With the free-agent pool potentially limited, some of these teams could be in the same rut they're in right now if their draft picks don't pan out. It's imperative to their success to choose wisely in the next year to be really good.
That might not be great news for bad and rebuilding teams like St. Louis, Kansas City, Buffalo or other franchises that need to upgrade their talent. It could be even worse for ailing veteran teams like Tennessee or Jacksonville, that could use free-agent help to augment their rosters since they think they can still be competitive now.
WHO HAS THE UPPER HAND
According to league figures, the players have received about 75 percent of revenues since 2006, while the other 25 percent has gone to costs, plus another 6 percent over that which owners have absorbed because of rising costs.
The union disputes those numbers.
"The CBA explicitly restricts player costs to just under 60 percent," NFLPA spokesman George Atallah told The Associated Press. "That is fixed."
Citing a recent survey by Forbes magazine showing 19 franchises are worth at least $1 billion, Atallah said:
"Average team profits last year increased by 31 percent and labor costs by only 4 percent. Historical reports by Forbes also reveal that team values have increased exponentially. The Patriots, for example, increased in value from $172 million in 1994 to $1.4 billion today. That’s 713 percent in the past 15 years.(Doesn’t seem like a broken model to me).
"Just tell us directly the specifics of why this CBA is not working," he added. "We can’t be forced to negotiate over a proposal that doesn’t yet exist."
Cincinnati, St. Louis, Tampa, Jacksonville, San Francisco, Kansas City, and Miami could conceivably sit there and play with a cheaper payroll, and that wouldn’t be much different than where they are right now.
So, the small-market teams likely would stockpile bargain-basement players with contracts that are commensurate with their level of NFL experience.
More importantly, the consensus among team executives is that plenty of owners believe that they can simply pocket the savings they get in 2010 by playing for around $100 million or so. Then, the theory goes, the owners would simply renegotiate a new deal with the players that will again feature a salary cap for 2011 and beyond. And if there is a lockout in ’11, owners will still receive money from the existing broadcast deals.
One team executive said:
"The owners are going to make a point in 2010, that they can get by paying a lot less and then they’ll see how the players react,"
Can the owners finally get the leverage required to beat a union that over the past two decades has turned the tables on the power structure? Under the guidance of Gene Upshaw, NFL players now make the largest percentage of gross revenues 59%, than their counterparts in other professional sports. And what's more important, unless the League can get the federal courts to discontinue their supervision of the labor negotiations, the union will have the upper hand.
That is the question facing ownership. In the NFL, the main source of revenue is television money and that is shared among the 32 teams. Over the years, however, there has been a growing disparity in other money made by teams, from corporate sponsorship to local television and radio rights fees. When those are included, the large market teams such as Dallas and Washington far outstrip the likes of the Pittsburgh Steelers and Minnesota Vikings when it comes to earning power.
Jerry Jones is one of the large market owners that doesn't feel like sharing with the smaller market teams. He just completed a luxurious new $1 billion stadium just outside Dallas that will host the Super Bowl on Feb. 6, 2011. That could be the NFL’s last real game before the labor situation gets really ugly.
WHO HAS THE LEVERAGE
Thus, all of the actions started last November with the owners and then flowing through the courts will ultimately define who has the leverage. In short, this is how it works:
The NFL votes to opt out of the agreement in November 2008. Talks between the sides on an extension will reopen, but little progress is expected at this point unless a new deadline for an agreement is set. In 2010, the league has an uncapped year for salaries. In March 2011, the CBA expires.
Upon being locked out, the NFLPA would presumably decertify as a union, making players free individuals who aren’t subject to collective bargaining and therefore can’t be locked out. The players, as they did in the early 1990s, would then file a class-action suit against the league saying that such a lockout would be an anti-trust violation.
Again, that’s only if the court continues supervision. This is where the owners are working to change the dynamic and where the union is hoping to preserve the current state.
Here’s the basic equation: Every percentage of the total football revenue equates to roughly $2.5 million per team on the salary cap. The belief by the union’s side is that teams will lose far more than that for every game that is missed if a lockout goes into the regular season.
Thus, the union believes it clearly has the leverage. Seeing as how the NFL owners have continually leveraged the television networks into giving them what they want, that response seems almost comical.
The right place to start is a place where the players understand why the owners opted out. We know that the players didn't opt out of this deal. We know the NFL generated in excess of $8 billion last year. We know that the average team has grown by 400 percent in 10 years. But what we don't know, is what is wrong with the current deal when those facts exist.
The NFL extended its television deals with Fox and CBS for two years through the 2013 season, and Goodell acknowledged those pacts allow for "flexibility" if the league added a 17th or 18th regular-season game. But it now seems likely no decision will be made until talks are held with the players.
DeMaurice Smith said players need to be aware of what's at stake for additional games.
"The players understand the cost to their bodies," he said. "The players understand how tough it is to get through a regular season. They understand how hard it is to try to stand up on a Monday morning. They understand why they need a day off on Tuesday. Their families understand when they get out of football and they have arthritis before they're 40. They understand the cost."
Well, there you have it. I hope this clears things up for many of you. I may have to do more posting on this. One more thing...
There was a really good article on the National Football Post site by Robert Boland on October 28th. The Commenter's are pretty knowledgeable too.