On further review, the union has a point regarding the TV deals

On Wednesday, the NFL Players Association made a surprisingly aggressive challenge to the league’s most recent round of television contracts, which contain beefed-up language aimed at ensuring that payments worth multiple billions of dollars per year will continue in the event of a work stoppage.  (The league has called the allegations “meritless.”)

When I saw the posting on my Sprint device during a Cracker Barrel break somewhere between Chambersburg and Harrisburg, I suspected that the effort simply reflected the union’s frustration that the owners have found a way to ensure that payments can still be made on the significant debt from the purchase of franchises and/or the construction of stadiums in the absence of games actually being played.

But then it occurred to me during the early portion of the second act of Jersey Boys, when the guys were trying to figure out how to pay off Tommy DeVito’s $150,000 debt to Norman Waxman.  The entire player compensation model arises from the league’s ability to generate revenue.  So the league arguably — if not actually — has a fiduciary duty to maximize revenue.  By securing leverage-building terms like ongoing payments during a work stoppage, the league necessarily has failed to maximize revenue, since the right to ongoing payments in the event that games aren’t being played has an inherent value that could have been converted to dollars and cents paid to the league, and shared with the union.

The posting at the union’s website demonstrates that, indeed, the NFLPA has made that very argument.

As we see it, one potential flaw in the union’s position comes from the timing of the action.  A provision of this nature has appeared in the league’s broadcast contracts for as long as 30 years.  The union’s failure to challenge the tactic at some point since the establishment of the current Collective Bargaining Agreement structure (it arose as the settlement agreement to the Reggie White antitrust lawsuit) arguably means that it’s too late to do so now.

Even if the union successfully can argue that the renegotiation of the broadcast contracts re-sets the clock to zero, they can’t sit on their hands indefinitely.  Accounts of so-called “lockout insurance” appeared in connection with the league’s extension with DirecTV, which was finalized nearly 15 months ago.  It’s quite possible, then, that the union simply has waited too long to advance its current claim.

Of course, the ultimate decision will come from Special Master Stephen Burbank and then from U.S. District Judge David Doty, whom the league tried not that long ago to have bounced due to an alleged bias in favor of the union.  Whether or not such a bias exists, the league wouldn’t have tried to disqualify Doty if the league generally were pleased with his rulings in controversies arising under the CBA.

Speaking of biases, we need to point out that, yes, we have a partnership with NBC, one of the networks that has agreed to pay the league during any work stoppage.  Our analysis of the present situation does not reflect — and should not be interpreted as — any sort of admission or acknowledgment by NBC that the league’s actions constitute bad faith and/or a breach of any legal duty, fiduciary or otherwise.  We’re merely fulfilling our duty to the audience to apply logic and common sense (or our closest impersonation thereof) to situations like this in an effort to help football fans understand what’s going on.

Bottom line?  If the union wins this argument, guys like Jerry Jones won’t be able to afford a lockout — or a strike.  And so the pendulum would swing strongly in the players’ favor.

Given the league’s recent experiences in the StarCaps case and American Needle, we suspect folks are feeling a little nervous right now at 280 Park Avenue.

22 responses to “On further review, the union has a point regarding the TV deals

  1. Go Union! When it is millionaires vs billionaires I vote for the millionaires every time. Screw the old wrinkled balls owners.

  2. If there’s a ruling in their favor, though, wouldn’t it actually be more profitable for there to be no season while the NFL continues to receive TV revenue while not having to pay the players? I’d almost think the league would rather have a work stoppage.

  3. This is THE stupidist of the many stupid comments you make in Labor matters and ususally for the union. Guess what? The revenue IS shared with the union IF there are games. And since the rights fees went up substantially, that was part of the compensation that the union received before and until the end of the contract.
    BTW, if the owners have a fiduciary duty to maximize revenue as you claim, must the owner of the Vikings build his own stadium? Must the teams increase ticket prices? Charge PSL’s even for not new stadiums? What about the union? They would have the same responsibility…what have they done? Are they barred from striking because that would decrease revenue? (of course not because they are allowed to protect their rights as the owners are allowed to protect their rights as well). Also, when the owners pay the TV networks back by either giving them more games or reducing the fees in subsequent years, will the union pay their fair share (of course, not).

  4. I’m no fan of greedy owners but this is crap. The owners smartly prepared for a work stoppage by a greedy union and now the union is crying “it’s not fair”.
    Union knows it has less leverage to negotiate if the owners still have money coming in while all the million dollar spoiled children taking their ball(s) and go home.

  5. “But then it occurred to me during the early portion of the second act of Jersey Boys. . . .”
    Ah, Broadway musicals, you truly are the world’s lowest form of art.

  6. Sorry, I don’t buy it. In the real world, and not in some-one’s entitlement-based wet-dreams there is no fiduciary duty to “maximize revenues,” even if in some meta-fashion, the potential future compensation of the employees could be effected by the increase in revenues. In fact, often times “revenue maximization” gives us crap like the financial meltdown we just went through or, like BP, a gi-normous environmental disaster.
    Another issue is that you non-accountants don’t seem to understand that “revenue maximization” does not necessarily lead to profitability. Many companies have been run into the ground, bankrupted, and consigned to the scrap-heap by attempting revenue maximization.
    It’s a stupid legal theory that’s creates a relationship that doesn’t exist. But then, that’s the problem with lawyers. They like to make up relationships that don’t exist so they can justify what ever they want…

  7. That’s a very interesting analysis, Mike. I hadn’t thought about the fiduciary duty angle. Of course, if I were the lawyer for the league, there’d be language in the contract specifically disclaiming that fiduciary duty, since the league knows that it doesn’t always want to maximize CURRENT revenue (which is what is in the interest of the current players). And the league historically has hired very smart lawyers who think ahead. But, if that language isn’t in there, it will be an interesting argument.

  8. On a judiciary note, is John Roberts the biggest activist chief justice the country has ever seen or what? The guy doesn’t stop trying to legislate from the bench.

  9. “When I saw the posting on my Sprint device during a Cracker Barrel break somewhere between Chambersburg and Harrisburg”.
    Damn Mike, Cracker Barrel, Chambersburg, Harrisburg – you are truly living large.

  10. Lawyers 1, Players and Owners 0, Fans (-1).
    Owners found a contingency revenue source. Pretty sure players will be working part time in the event of a strike or lockout. Maybe the owners should ask that those revenues be deferred also.

  11. Good analysis. I wish I could be amazed that some people could criticize your points since they cover both sides. Folks, if you do not know how the real world works with negotiations and legal battles, then just watch the games and give up your commenting hobby.

  12. @MosesZD:
    Dead on, man. The emphasis here should be on generating a profit, not revenue. With the real greed generated through the union, revenue is an irrelevant matter. They continue to demand a % of the pie, which is ever-increasing, squeezing margins to the point where any revenue growth is irrelevant. So, clearly, increasing revenue doesn’t mean a goddamn thing relative to increasing value. All about cash flow.

  13. “So the league arguably — if not actually — has a fiduciary duty to maximize revenue.”
    Mike, really, an employer has a fiduciary duty to its employees to increase revenue so that the workers could get paid more? Are you really making that argument? So, I would assume that when you were a practicing attorney, you had a duty to work extra hard so that your employees would make more money? No, you didn’t and no they don’t.
    The league has a duty to the teams to squeeze every dollar possible out of the players and the broadcast networks so that the owners of the teams can make as much money as possible. The players do not own the NFL, the owners of the individual teams own the league.
    Nice try, but try again.

  14. Reading this article, I thought- wow at least 90% of the readers of this blog aren’t going to understand anything in this blog- then I read the comments– HA HA, they comment ANYWAY. Florio could literally argue an obscure point about quantum physics and there will still be commenters arguing vehemently with Florio calling him an idiot-
    Just like the sun rises in the east– I love you all.
    That said, unless you understand labor law and collective bargaining- just save yourself from looking stupid and stop posting-
    I will also say- Gene Upshaw must have been on the take from the owners- or he was in over his head mentally. The 2010 uncapped year has been a disaster for the players and was uncapped by name only. The requirement that you can’t pay more than 30% was HORRIBLE. It gave owners an INCENTIVE not to agree to any deal until AFTER 2010 to take advantage of all the savings

  15. Is it possible that the networks were strong armed into paying during a lockout and are now freaking out about the possibility of having to pay big bucks for nothing, especially since them paying may substantially perpetuate the lockout? And is it then possible that the networks are working WITH the union and leaking info to them so that they can potentially void it?

  16. Given the league’s recent experiences in the StarCaps case and American Needle, we suspect folks are feeling a little nervous right now at 280 Park Avenue.
    If CBA talks go south and stall, I blame the Biqueens, 100%.
    It’s like the reverse-King Midas effect with them–anything they touch turns to sh1t.

  17. No wonder Bill’s owner Ralph Wilson didn’t understand what was going on with the last CBA at the time (despite Jerry Jones trying to convince him because he “knew” what was for the best).
    From the comments here, maybe Ralph’s a regular poster on these threads after all.

  18. SATAN567 says:
    They continue to demand a % of the pie, which is
    BALONEY. The average NFL team generated more than $230 million and the ones at the bottom were hit harder by the economy or stadium issues than they were by the players (While not at the bottom, Green Bay’s portfolio lost significant value because of the fact that their investments in stocks and real estate tanked. Know of any players that would have done that to them — yeah, I thought not).
    The guys with new stadiums aren’t even in the same boat as the ones at the bottom because they generate a lot of NON-FOOTBALL revenue that never hits their bottom line and guys like you can’t figure out that they’re making more money than God because you can’t see this extra money (Jerry Jones has been laughing all the way to the bank with his revenue since the Palace Near Dallas (TM) has opened).

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