De Smith is convinced there will be a lockout

Well, the talks between the NFL and the players union aren’t going well.

Per the Associated Press, NFLPA Executive Director De Smith told reporters in Indianapolis on Monday that he’s convinced that owners will lock out the players after the current Collective Bargaining Agreement expires following the 2010 season.

Smith said he still wants to know why owners opted to reopen the current labor deal two years early.  For the past several months, one of the primary NFLPA talking points has centered on the refusal of the NFL to generally open the books regarding whether and to what extent the franchises are making money.

The question, however, isn’t whether the teams are making money (and we’re told that some of them actually are now operating in the red, and that more will follow if tickets don’t sell in sufficient numbers this season), but whether the teams are making enough money to maintain the value of the franchises and justify the investment of time and capital that has been devoted to these billion-dollar enterprises.

Though the average person might interpret the fact that the Packers generated an operating profit of $20.1 million in the club’s most recent fiscal year as evidence that the Packers are doing well, large businesses have much bigger profit goals than that..

For example, the operating profit of NBC Universal was $539 million for the second quarter of 2009 (we should have asked for more money) — and that was regarded as bad news (regardless, we should have asked for more money).

So even if the union were able to point to the balance sheets of the NFL teams and argue that they are making money, the real question is whether they’re making enough money to justify the significant value of the organizations — and the ongoing ownership of the franchises.

At some point, the question becomes whether it makes sense for the owners to cash out and put their money into other ventures that entail a greater return.

Thus, Smith needs to get past the trial lawyer shtick aimed at swaying the uninformed observer who would potentially be in the jury pool if any of this stuff were going to be introduced at a trial, and he needs to begin consulting with experts who can interpret the information already available to the union.

At best, Smith and his colleagues at the NFLPA are playing dumb in order to try to score points in a public-opinion debate that has no real relevance.

At worst, Smith and company aren’t feigning ignorance.

17 responses to “De Smith is convinced there will be a lockout

  1. Aaron Rodgers is earning nearly half the Packers’ operating profit in 2009, to put that number into proper context. Successful billion-dollar businesses need to earn more than that in order to continue to grow and thrive.

  2. D Smith is a fool
    who makes money in a lockout not the over paid players nor the owners
    The owners are intitled to make money in there business they have all the risk signing these thugs for huge contracts.
    Yes the players risk gettting hurt but if not for the owners there would be no big $$$$ so getting hurt is part of the job if not into it thenn try tennis

  3. Either way, NFL owners shouldn’t base their stance on lack of operating profits if they aren’t willing to open their books and prove it to the NFLPA.

  4. Sure, the owners could have made a LOT more money by investing with Bernie Madoff or Goldman Sachs instead. Except for a few owners, buying a sports franchise has always been more about ego and showing off than profits. I’m guessing the whole reason the owners backed out of the current CBA was to show the players who has “hand”.

  5. economics 101…if a franchise is worth 1 billion dollars,a good return on investment would 10 if you’re getting 2 percent return on investment,20 million dollars,you’re in the wrong business.2 percent return is not enough to carry you through the bad times,like now.
    i would not be surprised if a couple of owners are feeling a financial crunch as we speak.remember,when teams change hands a portion of the sale is cash,the rest is financed to the absolute max.the leveraged teams are in a precarious position because you can not go to the bank and get more money at the present time.

  6. Bigbluefan’s right. The owner’s have all the risk and the players none. The players don’t even have loyalty anymore. Got to go to whomever offers the most. The players union has no right to inspect the owner’s books.

  7. misterj,
    the NFL owners don’t really have to justify why they opted out of the current CBA. The current CBA had an early opt clause in that was agreed to by both the owners and the NFLPA. They simply exercised an option that was legally available to them. So in short the owners don’t have to prove anything to the NFLPA!
    And what exactly would they be proving any way??? It doesn’t really matter whether the teams are losing money or making a profit… a team could be making $50mil but there is no basis to argue that they don’t want or shouldn’t want to make $100mil. SO THE BOOKS ARE POINTLESS! You are buying into Smith’s sideshow bringing up irrelevant points to distract from the real issues!
    I don’t care what the books say, I want to hear the union say something meaningful like “We need a rookie salary cap”.
    (and i am not a schill for the owners, I am just a realist)

  8. You are wrong Big Blue. The owners have no risk with the huge contracts with their players. Unlike other sports, NFL owners can cancel any of their contracts at any time. That is why players in the NFL try and get a chunk of the money guaranteed, because the owner could just cut him loose if they wanted. There are going to be many issues that will cause the lockout, but the NFL (Owners and Players) deserve what they get if it happens.

  9. First off De Smith is wrong. There won’t be a holdout. Two reasons really behind this. One is that we’re in a period of social and political upheaval and the powers that be need their circuses. Say what you want about the owners but they’re connected. The second is that it serves De Smith to make it look like he’s in a tough fight.
    Re: profitability. There’s a lot more influence to owning a football team than can be put on a balance sheet. And many of the owners do it because they love the game. They love owning a team. Besides, using the Packers numbers as a way to project earnings is silly. You have 32 different franchises in 32 different markets. The profitability argument is bogus. If the league wanted to use this line of argument and wanted to be taken seriously they’d release their numbers, not hide them. The teams are profitable “enough”. If they weren’t you’d be hearing about it.
    Rumors of a lockout are greatly exaggerated.

  10. 2011 will not be a good year for sports fans. Not only is the NFL headed for a lockout, but the NBA has even bigger issues and will probably shut down for a long time. The fact is that the NFL is a $7 billion corporation and the players think they should get a bigger piece of the pie.
    And a lockout would take place after an uncapped year (2010). Try convincing the players to re-instate the salary cap then.

  11. I’m glad to see that most people here so far get it.
    Except for someone who thinks the owners have no risk because only part of the contracts are guaranteed.

  12. patsSB,
    I’m not sure you really grasp what is really going on here. The salary-cap is alsmost moot, the owners are trying to cut their expenses! The salary-floor that will also be eliminated in 2010 and that is much more significant! Have you watched how several teams reworked contracts this year with huge expenditures applied to this year’s books (to meet in the salary-floor) but with much lower payments in future years (where they won’t have to meet an requirement)? The owners are preparing for a NFL without a salary-cap/floor, they don’t want it! If Snyder and Jones want to spend themselves crazy, I believe the other 30 owners are just fine with that. They will control their costs and get their business models back to sustainable profitability. (and Snyder and Jones are only so crazy – they might spend more than the others but even they will have some restraint – Jones is already feeling a crunch right now with his new stadium – note how many big contracts he signed this offseason)

  13. even tho it wouldnt be a strike like 87, it would work out like 87. after a coupla weeks the players would crawl back under the table and take a cut from their current largest-ever take of the pie.
    key words – as stated – are “salary floor”.
    but it will still be a lot more $ than most players could make doing anything else semi-honest.

  14. Anyone who complains about the owners needs to look at it like this.
    The players get 59% of the revenues but have zero liability…sure they can get cut anytime but that’s about it.
    The owners have to pay the leases, interest, or loans on the stadiums the team plays in…they have to pay the coaches & trainers, they have to spend money seeking sponsors, they have to pay the utilities, they have to pay the food vendors, they’re the ones that suffer when sponsors cut back, and their image & potential loss of revenue comes from when players F up and bring a bad light upon the team.
    So yeah, the Packers made $20 mill last year in the start of a bad economic year…but realize this, the Packers are one of the most valuable franchises in the NFL, are always sold out, are always in the top 5 for merchandise sales and they only made a $20 million profit (before investment losses)!?! Just the salaries of a few of the players on the team make more than the Packers did as a business.
    Not a sustainable business model folks.

  15. If it weren’t a sustainable business model the league wouldn’t be so healthy and the owners wouldn’t be paying the ridiculous rookie salaries. Listen I’m not pro owner or pro player – I’m pro logic. The owners don’t want to reveal what their books look like. Teams don’t share playbooks with other teams. Same deal. If the books get out then everyone will get wise to all the little things going on with real estate and actual earnings and facts and shit. Screw that.
    The PA is in the driver’s seat here and if they don’t know it then all yall players picked the wrong guy. There isn’t a better time for a lockout if you’re a player. Fine let them lock you out. One year? Pshaw. Go longer. Jobs are drying up, people don’t have disposable income. This is the perfect time for a rival league with cheap gates and the players, rookies included, just got the best cashout they’re going to get if the owner’s bluster is honest. Now is the time to hold the owners to their threats. Football is one of those things that’s not going to go away, rich guys financing things or not.

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