Wednesday, May 21, 2008

Keeping up with the news...

I've been watching and listening to sports (and particularly NFL) events over the last few days, and I have some thoughts that I'd like to express...
 
First off, the referee who bet on NBA games.  Did I see that he gambled on more than 100 games that he refereed?  What of the integrity of that sport?  I used to watch pro hoops, but I grew tired of the me-first attitude and the 9pm tipoffs for the playoffs and stopped watching.  This just compounds it.  And the commissioner of that league says it "was isolated" in spite of the referee saying otherwise in testimony.  The relevance here is that the NBA is trying to sweep this one away as one bad apple, and the sports media seems uninterested in really taking issue with it. 
 
And that bring us around to the Patriots.  No surprise here, Goodell says he will not be having an independent investigation.  That would seem to indicate he has something to hide, wouldn't it?  And that can only mean a congressional investigation will follow.  How soon is anyone's guess, but I can assure you that Mr. Specter will not let that one rest that easily.  Goodell says "its over" and wants it to go away.  You can't let one situation bring down the money-making machine that is the NFL.
 
....well, that, and he has other issues to deal with now that are not unrelated.  The owners opted out of the current CBA.  That's not unexpected.  A few years ago when Tagliabue worked tirelessly to avoid a work stoppage (and the "end of the NFL as we know it"), the deal was that small market teams got their fair share of the revenue stream, and the players got additional money.  But, everyone knew it was a short-term fix and the issue was bound to come back up over the course of the interceding time.  And yet, no one actually addressed the problem.
 
So what we have now is a situation where the current CBA prevails in '08 and '09.  In '10 we have an uncapped year, and in '11, well, the situation gets out of control.  There is esentially no CBA in place and no one knows what might happen.  The most likely thing is a lockout, possibly coupled a decision to go ahead with replacement players.  But, there's still time to get a deal done.  Given how much has been accomplished over the last few years.  I'm a bit pessimistic about how this will turn out.
 
There are a few key issues at stake here - and don't be fooled by the way the media presents everything: They tell us the owners have said that an economic downturn has forced their hand, and that they are willing to negotiate in good faith with the players union.  The also tell us the union says it wants to keep concessions and doesn't want a salary cap.  None of this is exactly true.
 
(1) What is true is that the owners of larger market teams (Dallas, Washington, NY, Philly, as examples) want a larger piece of the pie than the smaller market teams (Cincinatti, Buffalo, Jacksonville).  They generate more revenue for the league in terms of gross sales of merchandise, tickets, TV exposure, etc.  And they want to keep their share.
 
The smaller market teams favor the current structure of revenue sharing.  This could tip either way, and I can see the argument on both sides.  But the reality is that one side is going to have give in on this.
 
(2) The owners have a stadium fund for construction of new stadiums.  Its an interest free loan supplied by the NFL, with unknown terms, but which are generally believed to be fairly liberal.  A portion of the gross revenue is taken and put into this fund, and every team may borrow from it and pay back to it when they generate revenue from it.  With municipalaties spending less on construction of ballparks, the fund has been hit more often, and it sometimes takes a while to pay it back.  Owners don't want to use their own money to fund construction, so they use it extensively. 
 
(3) Owners get to keep revenue from parking, concessions, and luxury suite licenses, without having to share that revenue.  So, guess what?  Every owner wants more luxury licenses.  And how do they get more?  By expanding their stadium using the construction fund, and paying it back over time.  To keep up, they keep borrowing and expanding.  You have more luxury licenses, you make more money.  Its that simple.
 
(4) The players currently get about 60% of the total of the shared revenue.  It was estimated that least season their cut was $4.5 billion, so the total revenue would be about $7.5 billion.  Taking away some expenses, there was probably $3 billion to spread among 32 owners.  That would be just over $100 million in profit for each owner, and that doesn't account for the non-revenued shared items. 
 
And don't forget that the NFL is private, and each owner has legal standing as a private ownership of a sports franchise...meaning that they don't have to show anyone their books.  This is just my best guess at what the numbers look like.
 
The issue here is that the owners want more, and the players want at least that much.  Who's right?  A guy like Jake Long (just as an example, I'm not saying he is the source of this problem) is guaranteed to get $30 million over the course of the next several years, while H Wayne and Mr. Ross are guaranteed to make $100 million this year.  They're all making a buttload of money.  Its no wonder they each want to keep what they're getting.
 
(5) The players would like to not be bound by a salary cap, and allow the market to decide the payroll.  They might be willing to give in on a rookie cap, with shorter time frames if it meant overall that more money would be coming in.  Also, as I understand it, they want the NFL to contribute to the pension program, rather than it coming from the salary component.
 
Not having a salary cap is debatable.  In some ways, its good for the league, because it allows for competitive balance.  But, look at baseball.  The Yankees have a higher payroll than anyone else, but they don't win championship after championship.  Spending more does generally equate to winning more, but doesn't guarantee you'll win the critical games.
 
My take on all of it is that there are some tough days ahead for the NFL.  If congress pries into the Patriots mess, then its possible it gets expanded into the bookkeeping.  Or, this CBA might be fuel for another investigation into how the league is managing itself.  And don't forget about the NFL network issue.  That's not dead, and could also lead to more eyes looking at the revenue issues in the NFL.
 
I am a fan of the league and the way it is run, generally.  I hope that things don't go south, and the league maintains its integrity for a long time to come.  Lets just hope that they don't forget that fans are what makes it, and having serious labor issues, or dragging financial issues into court or the legislature will cause some hit to the fan base.  And therefore, popularity...

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