NFL Lockout - My Predictions

I wanted to post a little about the NFL Lockout, because I really don't think it is a bad thing.  In the end this is a labor dispute, management and labor fighting to keep as much of the pie as they can get, and both sides should keep on fighting.

That is where the easy part ends.  For those of you that need something to fall asleep to tonight, I'll give a recap of the dispute:

2006, The NFL and the NFLPA (Players Union) signed a collective bargaining agreement (CBA) that gave the NFL $1B, and then split the rest of the revenues 40/60 (59.5% to be precise, to the players).  Back in 2006, the NFL racked in Gross Revenue of $6.3B.  This agreement also included an "opt out" clause that gave either side an opportunity to "opt out" of the agreement in 2009 if they didn't think they were getting a fair deal.

2008, The NFL exercised their right under the 2006 CBA to opt out and renegotiate the agreement.  They claim that they have spent a significant amount of money growing revenues to the tune of now about $9B.  They also forecast that they will have to spend more to continue to grow the game, build stadiums.

Subsequently the NFLPA voted to have a Litigator (Trial Lawyer/former Federal Prosecutor) represent them rather than a former NFL player in preparation for a lengthy court battle.  Gene Upshaw, the former NFLPA director was also a former NFL player.  I would argue that a litigator was the right decision as the NFL was posturing for a fight as well by signing contracts with the TV Networks that would pay the NFL even in the event of a lockout when no games would be shown.


At that time, the NFL floated a few different proposals including increasing their initial take to $2B, and splitting the remaining revenue 50/50.  There were other proposals including an 18 game regular season, rookie salary cap among other things.  During this time the NFL filed a grievance with the Nation Labor Relations Board (NLRB) that the NFLPA was not negotiating in good faith.

The original revenue split was not really that bad, especially compared to other large service (people) based companies.  All companies like this pay out a vast majority of revenue to their labor, when the labor is the product.  And compound this with the fact that this is entertainment, the top entertainers get paid, and the rest of the cast makes good coin, but not enough to retire after 3 years.  To the firm, this labor is an expense, and after paying those expenses, in addition to other costs, headquarters, marketing, etc, the owners probably make a pretty good penny running the show, although we know that there are some clubs losing money.  But like all companies that are growing, it takes money to invest in expansion and growth, and the NFL continues to see a lot of growth potential.

The NFLPA said they would give up the cash if they could just see the financials of each of the 32 teams.  (They were lying by the way).  The NFL gave up 5 years worth of consolidated financials, but not broken out by club.  The NFLPA then asked for 10 years.  Just FYI, this has nothig to do with the financials and "trust but verify", the NFLPA wanted to see the books so they knew the exact dollar breaking point of the NFL and each club to be used as leverage during settlement talks during an antitrust lawsuit suit, nothing more, nothing less.  The NFL would be complete morons to release the books, and the NFLPA lawyers know that, but as calculated, it played really well with ESPN.com message boards bloggers to say the NFL was hiding something.

No real progress was made by the time the CBA was set to expire in March 3, 2011.

Shortly before the CBA expired, the NFLPA notified the NFL that its members had voted to dissolve the union and reorganize it into a professional association (not a union).  The new NFLPA also filed a lawsuit in federal court in Minnesota alleging that the NFL was operating an illegal monopoly, in addition they sought to have the judge block what they assumed would be a lockout of their players by the NFL, which subsequently occurred at midnight that night.

Now this is where it gets messy.  The NFL (and other professional sports leagues) are likely the only group of capitalists that absolutely NEED to have a union in order to operate.  Without the union, the NFL is just one big illegal monopoly.  The NFL is an association of 32 independently owned clubs, all which conspire to cap salaries, and divide up labor outside the normal process of hiring employees (they have a draft and declare that their picks can't go to another club for 4 or 5 years since they got "dibbs" on them.) 

Nowhere else is this legal.  GM, Ford and Chrysler don't have a bunch of college engineering students sign up for "career day" and then each take turns picking their favorites, and then tell them they can't go to a competitor if they don't like their deal.  It's just illegal.

But, if the company signs a deal with a union, and the union agrees to all of this, it is magically legal.

So the issue in court became "is it legal for a company to lockout employees if they are not part of a union" (because the dissolved it).  The district court judge said no, there is no union, so a lockout is illegal, in addition she ruled that she didn't have to wait for the NLRB to rule on the NFLs petition that the NFLPA was negotiating in bad faith because she had "original jurisdiction" to rule in this matter, because if there was no union, this dispute did not arise out of a labor dispute and run afoul of the federal law barring federal judges from stopping a lockout under the Norris–La Guardia Act.  In addition she ruled that the players would likely win their lockout suit if it was ever tried in court of fact, and that the lockout was illegal because the players were being harmed irreparably during the lockout.

The NFL subsequently appealed to the 8th circuit court of appeals, and the 3 judges voted 2-1 to put a stay on the order to lift the lockout, and the lockout was reimposed.  The judges also said that the circut judge erred in her finding that the lockout was illegal because the Norris-Laguardia act noted a lockout arising from a labor dispute, it did NOT mention that there had to be a union or formal organized labor of any kind, just that it had to arise out of a labor dispute.

And that is where we are today.  If the 8th Circuit rules formally as expected to keep the lockout in place, then the NFL will have the leverage it needs to push through many (but not all) of its demands.  If the players prevail, this continues to get tied up in court as the players have vowed to continue to sue under anti-trust claims.

I don't really care what the outcome is, I enjoy this fight.  Ultimately a deal will get done.  I personally believe that the players are over confident that the fans will back them against the NFL.  I didn't see a lot of Packers fans trade in their cheeseheads and season tix at Lambeau Field for horned helmets and Vikings jerseys.  Fans follow their team, they admire players, but they root for their team as generations of players come and go.

The players are short timers, and they need to bank all they can as fast as they can, you don't pay off $600k worth of bling debt with food stamps.  You need catches and touchdowns for that.  The average player lasts 3.6 years.  They either get hurt and more often they get outrun by the next big deal coming out of college.  Think about it, how many players can you name from your current favorite team?  3, 4 maybe, if you are a sports junkie 50% of the starters?



If the players win, we likely won't see football this year.  The antitrust lawsuit (with triple $$$ damages from the NFL if the NFL loses) is too big a gamble, they will temporarily shut down the league and possibly reopen it with most of the big market teams, several smaller teams will fold.  New rules would have to be put in place that would not run afoul of antitrust laws, this would eliminate the draft, salary cap and forced contracts.  Free agency would be king.  We can argue about whether it would be a bad thing or not, some teams will fold as they will anyway.

The disputes are much more heated between individual owners right now than they are between the NFL and the NFLPA.  Big market teams can weather the storm and make money on their own, even without team parody, but the overall take will be way south of $9B. 

Predictions: NFL wins at 8th circuit and holds their clubs together longer than the NFLPA can hold their members together.  Ultimately there are way more guys making $750k/yr than there are guys making $20M/yr.  The cheap guys will get tired of painting houses for $15/hr.  NFLPA subsequently folds re-certifies as a union.  NFL gets $1.4B up front and 46/54 split of revenues, and a rookie wage cap.  In exchange to get a deal done, the NFLPA drops its antitrust suit.