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League reiterates position on "$5 billion" lockout fund

After NFLPA Executive Director De Smith broke out the wireless mic on February 4 so that he could walk back and forth across the stage like a trial lawyer in the well of a courtroom when conducting his first pre-Super Bowl press conference, NFL general counsel Jeff Pash knocked down several of the points that Smith was trying to make to the general public via easily-digestible sound bites.

The three messages from Smith that resonated most clearly were: (1) the league wants players to take an “18 percent pay cut”; (2) the league is a non-profit organization; and (3) the league has specifically renegotiated television contracts so that $5 billion will be paid to the NFL in 2011 if there’s no football played.

In a conference call conducted not long after Smith’s remarks ended, Pash addressed each of those points.  As to the most eyebrow-raising — the idea that the league has engineered a $5 billion money-for-nothing incentive to lock players out — Pash was clear.

“It is hardly the first time that a television contract has had that type of provision in it,” Pash said.   “That goes back in my experience at least to the early 1980′s.  More to the point, it is nothing more than a financing mechanism.   The networks aren’t going to hand over large amounts of money to us, and if they don’t get a product [in return] tell us to go ahead and keep that money.  We will have to give it back to them and take reductions about what we get from them for future years.  I am quite certain that the networks will make sure that they are made whole and then some if we are not able to televise games.  It is not a payment, it is a financing mechanism.  It is no different than borrowing on a home equity line.   You still have to pay it back.”

We made this point last year, not long after it was pointed out that the NFL’s new deal with DirecTV contains a pay-for-no-play provision.  “All sports league media deals are structured so payments continue in a
lockout or strike,” an industry source said at the time.  “The money is then deducted off
future years. . . .  The news would have been had this not been the
case.”

So the $5 billion would be paid back later, dramatically reducing the owners’ profit margin in years during which they’d be paying players and incurring the other expenses associated with running pro football teams.

We’re revisiting this issue because there’s a new item in the Boston Herald regarding the point Pash made 18 days ago.   NFL spokesman Greg Aiello tells Ian Rapoport of the Herald that Smith’s point on the $5 billion lockout fund is “completely inaccurate.”   Aiello reiterates that the money, if paid, must be repaid.

The more intriguing aspect to us is that the article has the look and feel of the league making an affirmative effort to “get the word out” regarding its response to Smith’s assertion.  Though it’s entirely possible that Rapoport was simply doing some cleanup work based on notes he took during Smith’s press conference, it’s also possible (if not probable) that the league decided that the response to Smith’s assertion didn’t get as much attention as it should have received at the time, and that it made sense during a relative lull in the flow of NFL news to fill the vacuum with an effort to clarify the record regarding one of the three liberties Smith took with reality during his press conference.

Though we included a general reference to the inaccuracy of the information in a February 5 SportingNews.com column calling for the league and the union to act more like partners and less like enemies, there had yet to be a clear rebuttal of Smith’s contention.

There now is, on one of the slowest Monday mornings the NFL will see until May.

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16 Responses to “League reiterates position on "$5 billion" lockout fund”
  1. djstat says: Feb 22, 2010 7:58 AM

    As a fan who was required to purchase a PSL to buy season tickets to a stadium that was built with public funds, I plan to sue not only my team, but the NFL as a whole if there is no football in 2011. As a PSL holder your are promised the right to football year in and year out. This is the first time fans have ever been able to take a stand against a labor dispute, so I encourage all season ticket holders who had to pay a PSL to sue your team and the league and the players association, since both groups seem to forget the fans are as much a part of this success.

  2. Chapnasty2 says: Feb 22, 2010 7:58 AM

    De Smith is a typical Obama union thug, full of big words with little if no factual truth yet are designed to scare the hell out of people to make them do what they want.

  3. GoBrowns19 says: Feb 22, 2010 8:09 AM

    I don’t understand why you can’t tell the powers that be to lock themselves in a room and not come out until a deal is reached. This whole thing would be over.

  4. Joe in Toronto, Canada says: Feb 22, 2010 8:11 AM

    De Smith is leading the union to disaster, dude will be fired in less than a year.
    There’s a way to get things done with the owners but this guy just doesn’t have a clue.

  5. 4ever19 says: Feb 22, 2010 8:15 AM

    Yes, Chapnasty, the Obama thugs went around telling people that health care reform would mean killing grandma and stringently rationing medical care. Obama thugs went around saying that Obama was not a citizen. Obama thugs went around saying that Obama was deliberately trying to submarine the U.S. economy. Oh wait — that was neocon thugs like Palin, Limbaugh and Beck.

  6. aec4 says: Feb 22, 2010 8:22 AM

    As a PSL owner, you are not promised football year in and year out. You’re promised tickets to the games if they are played. BIG difference.

  7. gopher says: Feb 22, 2010 8:23 AM

    djstat is right on commenting on the fans are
    a part of the NFL success. The revenue the fans drive for both the owners and players are driven from ticket sales, jersey sales, beer sales, etc and the number of fans who watch the games and keep the TV ratings up so the sponsors pay the money they do.

  8. lawdjayee says: Feb 22, 2010 8:49 AM

    Sorry, this one doesn’t pass the sniff test; the owners want a lockout in order to position themselves for a negotiation. They hope the CBA thus negotiated will make them more money than the last one. They need money to make the lockout threat viable. Whether or not they have to pay the money back is beside the point; presumably they are more than willing to take what amounts to a short-term loan if it means they get a better CBA (from their perspective) than the last one. The $5 billion is indeed a lockout fund. And it ain’t as if the league or any of its teams has ever or will ever open their books to show precisely where moneys come from etc….
    Chap: shouldn’t you be breaking into a Senator’s office or something? Or painting leetle mustaches on pictures?

  9. pointNumberOne says: Feb 22, 2010 9:20 AM

    What about his responses to #1 and #2?

  10. Hap says: Feb 22, 2010 9:20 AM

    This situation is beginning to annoy me. The fans have had it with labor/ownership fights. neither side wants a work stoppage so somebody get them together and stop all the silly, stupid game playing.
    Both sides need to take a long, hard look at the state of the economy.

  11. Chapnasty2 says: Feb 22, 2010 9:55 AM

    4ever19—-do some political research for once, both sides suck at life but Obama’s inner circle are thugs who bribe and intimidate, learn some facts.
    Law-Nope, I have a job, for how long I am not sure, tax hikes and carbon taxes might end that one.
    anyways, this is about de smith and how he is trying to bully the owners by empty threats. sorry you guys dont get the facts or the point.

  12. smashmouthd says: Feb 22, 2010 11:11 AM

    # pointNumberOne says: February 22, 2010 9:20 AM
    What about his responses to #1 and #2?
    —————————————————-
    #1 is the truth, and the players can accept some type of negotiated cut, probably not 18% but maybe 10%, or they can go without paychecks in 2011.
    #2 is so absurdly ignorant, only the biggest of imbeciles would give any credence to it.

  13. Fire_Reid says: Feb 22, 2010 11:44 AM

    @Chapnasty2
    You Say “anyways, this is about de smith and how he is trying to bully the owners by empty threats. sorry you guys dont get the facts or the point.”
    Take your own advice and talk about de smith and not the president.
    Also, the facts? what part of your right wing nut job, flying a plane into an IRS building rant was factual? That Obama is a Thug?
    Just a quick lesson for you. That is an opinion. This is very different than a fact. A fact is something more like:
    You are dumb!

  14. Chapnasty2 says: Feb 22, 2010 12:02 PM

    @ Fire
    thank you sir for getting me “fired” up. First of all, idiot, and I cannot begin to possibly stress that you are an idiot enough, to attempt to say that I am flying planes into buildings because I stated the truth about Chicago Politics is clearly inaccurate, moronic and tasteless. Second, rant? I didnt go on a rant, this is a rant. Third, good attempt to label me racist by saying Obama was a thug, I was referring to his style of politics which is inded accurate. Fourth, De Smith worked on Obama’s transition team, incase you forgot, making him politically affiliated. I didn’t bring up the president, just those who work for him. My political status is irrelevant. Kind of like how I can say the Patriots are cheaters, my team affiliation becomes irrelevant since it is true. You are a complete moron and a prime example of what is wrong with the country and the world.

  15. fathouse says: Feb 22, 2010 12:09 PM

    Let’s think about the math for a minute:
    5 billion paid in lockout year, little overhead
    Following 5 years, revenue reduced by 1 billion as ‘payback’
    - not exactly sure of the terms
    With revenues reduced, salary cap is lower, league maintains normal operating margin, though gross profit is reduced each year.
    The league has a massive money grab during the lockout year where margins are astronomical without player salaries. The subsequent five years, they have to pay back the money, but percentage margins are maintained.
    Seriously, someone needs to look at the numbers and figure out if the net loss of one year’s revenue and normal operating profit is more than offset by the high margins of the uncapped year, where the owners get to keep an extra 58% of the money.

  16. HarrisonHits says: Feb 22, 2010 1:39 PM

    Yes the funds will have to be paid back as you pointed out in previous articles. But that money can still function as a lockout fund to some extent. The owners will use that money if its paid, and the following years will have to make it back while taking lesser profits so it is not that much of a hardship.
    DeSmith’s position is clearly wrong, it is not a free 5 billion. But it can still be used to get the owners through a lockout and gives them far more resources than the players will have.

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