Does “Guaranteed” TV Money Change Anything for the NFL/NFLPA?
on February 1, 2011 at 9:13 PM
NFL Lockout
The NFL’s special master, UPenn law professor Stephen Burbank, decided today that the NFL is, in fact, entitled to rights-fee payments from the TV deals it negotiated with ESPN, NBC, CBS, Fox, and DirecTV, in the shadow of the looming lockout. These deals guarantee $4 billion to the league, whether or not the 2011 NFL season actually happens.
The NFLPA filed a grievance with the special master, who is designated as the ultimate authority on disputes between the two entities, claiming that the NFL failed to uphold their 17-year-old agreement to make good-faith efforts to maximize revenue for the players. The negotiation of this television deal, which was extended last summer, is being called a lockout protection fund, and it effectively guarantees the league profits in the event of a lockout. By nixing $4.4 billion in player salaries while bringing in $4 billion from the networks, the owners have very little financial incentive to push for a new CBA to be agreed on any time soon.
Specifically, the NFLPA asked that the money generated from the networks be put in escrow if the lockout happens. They say that to do otherwise would allow the league to use this money explicitly as a weapon against the union in the negotiations, and that this would be a direct violation of the agreement between the league and the union to maximize revenue.
Burbank’s decision to award damages to the NFLPA, reportedly to the tune of about $7 million (when they asked for $60 million), while denying the request to have the league put the money in escrow, is considered a ‘win‘ by both sides.
But how can both sides really be pleased with that result? What this really looks like is more posturing and more deception to try to win over the public. Both the league and the union have been putting quite a lot of effort in to playing the victim card to the fans.
But wait, how could the TV networks be stupid enough to shell out that kind of money with no guarantee of return on the investment? The league is savvy, but that would take true genius.
Ed Goren, an executive producer with Fox, says that this so-called guarantee is really just a loan, with interest (link may require subscription).
“It’s not as if we are running a charity. We give every year. That money comes back.” When asked if it was a loan, Goren replied emphatically, “With interest.”
These sentiments were echoed by Dick Ebersol with NBC Universal Sports, referring to the requirement that the league pay the money back.
“I have been around longer than anybody else, and I don’t remember a deal, certainly all the way back to the early 1980s, that this wasn’t in,” he said. “This is not a new development.”
Certainly sounds like the NFLPA is lucky to have gotten $7 million in damages on this one. But we don’t know the full story. The NFLPA probably doesn’t know the full story. The NFL seems to hold all the power here. People have been saying all along that this is a fight between millionaires (players) and billionaires (owners). But the players won’t be millionaires for very long. They may not even be millionaires right now.
So we’re still mired in a very expensive game of “he said-[s]he said,” with the CBA expiring in just a few short weeks on March 4th, and owners apparently comfortable with the idea of locking the players out for the indefinite future.
A few other things worth noting about the lockout: this affects far more than just the 2011 season’s games. The lockout would be in effect beginning in March. This would mean that players are not allowed to set foot on team property – they cannot train, they cannot rehab, they cannot receive coaching, they cannot have access to any of the amenities to which they are accustomed. So if you are a the owner of a private training facility right now, you are licking your chops. But if you are one of the thousands of vendors, equipment managers, marketers, publicists, hoteliers, janitors, restaurateurs, etc. in an NFL town who makes a living off of the NFL, you are facing a very dark stretch. I hope you’ve planned for this. If you are a player, I hope you saved your last few game checks from 2010. Financial planners beware as well, there may be some claims against you coming down the pipeline.