League Gets DirecTV Money Even If There’s A Lockout

In one of the more amazing developments we’ve witnessed regarding the ongoing question of whether the NFL and the NFL Players Association will resolve their differences as to a Collective Bargaining Agreement that expires after the 2010 season, the new deal between the NFL and DirecTV guarantees that the league will receive its $1 billion annual revenue for the Sunday Ticket package even if the NFL doesn’t play a single game in 2011.
The report comes from Peter King of SI.com, who calls the arrangement “lockout insurance.”
In our view, however, the willingness of DirecTV to commit to the payment represents insurance that a lockout won’t occur.
If the folks who call the shots at DirecTV have genuinely agreed to fork over a ten-figure payment with no reasonable assurance of getting a return on the investment in 2011, then the company should change its name to “AIG, Jr.”
The news confirms our suspicion that the CBA cancellation is, in large part, a bluff by the owners, who believe that they have nothing to lose by heading back to the bargaining table and seeking concessions from the players.
To preserve their current cut of the total football revenues, we think that the players will be poised to agree to all sorts of things.
Eighteen regular season games?  Check.
One game per team per year on foreign soil or in a neutral site in the U.S.?  No problemo.
A rookie wage scale limiting the windfalls at the top of the draft?  Sure thing.
The ability to send a pain-in-the-butt player home with pay?  You got it.
And the list could go on and on.  But, in the end, the NFL likely will strike the best possible deal, and will not lock out the players.
There’s another reason for the league to pretend to want a work stoppage, and then to avoid one at all costs.
Unlike the economic climate surrounding the last labor fight in 1987, multiple NFL teams have significant amounts of debt, primarily due to the privately-funded portions of newer stadiums.  Those payments will still come due, with or without games being played in the properties that still need to be paid off.
Though the DirecTV money could go a long way toward satisfying the debts in the event of a lockout, we still remain convinced that there’s no way DirecTV agreed to this provision without some idea that there won’t be a lockout — or without some way to make the money up pursuant to the more technical and convoluted (and as of yet unreported) portions of the contract.
That said, we think the league will posture the DirecTV commitment as a strike fund that will ensure a stream of revenue for the league at a time when the players will have to divvy up a much smaller pile of money that they have been hoarding like undersized acorns in the event of a work stoppage.
Look at it this way.  The union’s strike fund was estimated to be at $128 million as of 2008.  In 2009, the minimum expenditure on player salaries, based on a salary floor of $111 million per team, will be more than $3.55 billion.
Thus, the strike fund represents 3.6 percent of the total minimum player wages to be paid out in 2009.
And that’s without the $28 million verdict that might eventually be paid to the class of retired players who sued the union for failure to properly market their names and likenesses.
So, yeah, even if the DirecTV money for 2011 is secretly offset by a reduction in payments to be made in future years, and even if the league has promised the DirecTV execs on a wink-nod basis that there won’t be a lockout, the players will soon realize that their preparations for war entail tying knives to the end of broom handles, while the league is rolling out a brand-new fleet of tanks.

14 responses to “League Gets DirecTV Money Even If There’s A Lockout

  1. If there is a lockout dont worry.direct TV will stomp on the balls of us loyal subscribersThe little guy always gets the shaft from corporate America

  2. Yeah right! Rupert Murdoch will still pay the NFL a billion if they have no product! NOT exactly how he got to be rich!

  3. What Really Angers Me Is You Pay Full Price You Get Nothing. Then You See Direct Tv Offering Super Fan For Free To People Who Order It Late DAMN THE MAN

  4. Another way to look at this is the union now has an ally in DirectTV with a billion reasons to make sure the owners negotiate in good faith. If the union walks away from the table and gives TV interviews that they want a deal, but that the owners are being unreasonable, I suspect DirectTV execs might jump for the phones. I think both sides gain some leverage at the expense of the DirectTV subscribers.

  5. ST Florio offers a bunch of reasons why the players are in the drivers seat yet concludes the players are fighting at a disadvantage because they “only” have a $128m strike fund?? What am I missing here?

  6. Just random speculation, but perhaps DirectTV has worked out insurance on the money in the event that there is a lockout or the NFL agreed to pay premiums on said insurance. That would be the real “lockout insurance”.

  7. I don’t think Murdoch owns Direct TV. Isn’t it traded on NASDAQ?
    Also, for them to take a chance on $1b payout given the chances of a lockout vs the certain monopoly they enjoy for Sunday ticket seems like a reasonable bet. It carries with the good will of being able to tell the NFL in 2014 on.. “Remember what we did for you in ’09?”
    Not a move I would make without a great deal of thought and in-depth discussions with the Comish and as many key owners as I could reach, but one that makes sense for the long term interests of DirectTV.

  8. Markmanxp is correct, Murdoch used to own a large percentage of Direct TV, but traded his ownership to Liberty Media in 2006 (finalized in 2008) in exchange for News Corp stock Liberty owned.

  9. This is stunning. I can’t imagine any network not having a provision in the contract with any sports league that says if they don’t play the games, they won’t get paid. Something is missing, this can’t be correct.

Leave a Reply

You must be logged in to leave a comment. Not a member? Register now!