NFLPA wants more financial information than it needs

Posted by Mike Florio on March 9, 2011, 1:46 PM EST

For months, the NFL has refused to provide the players’ union with financial information.  Now, the league has offered to crack the books open, but the NFLPA wants the information to be fully disclosed.

In our view, the union wants too much.

Per a league source (some of this has been reported elsewhere, including by Albert Breer of NFL Network), the league offered on Tuesday to provide collective profitability information over the past five years, and to have that information verified by an independent, mutually-selected firm.  The league also offered to identify the number of teams that have experienced reduced profits.

NFL general counsel Jeff Pash, in addressing the situation with the media on Wednesday, strongly implied that the league is willing to go even farther.  And we’ve confirmed via a league source that, indeed, the league is willing to go even farther.

The key, in our view, is the league’s willingness to allow the information to be verified by an independent, mutually-selected firm.  And the league’s offer comes close to what we suggested several weeks ago:  “The league and the union should agree on an independent accounting firm that would prepare verified profit reports for the past five-to-10 years, and the profit information would be shared with a very small handful of representatives from the two sides, who would be given the authority to negotiate a revenue-sharing arrangement based on the financial information.”

The league needs to offer to provide per-team profit information, along with some way of determine whether the profit is “enough” profit, either by comparing the per-team profit to per-team revenue.

And that’s all the union needs.  Detailed reports regarding team-specific expenses aren’t necessary, unless the union hopes to micromanage team-level business decisions — or to cause trouble by finding a way to leak certain aspects of the expense information to the media.

The question becomes whether the league is being truthful when the league claims that profits are dropping, and that profit levels aren’t acceptable.  The union doesn’t need to be able to scour the entire books to verify the league’s position.

So if the union persists in its demand for audited financial statements, it could be that the union has decided that it will get a better deal via the decertification/litigation strategy.  And maybe they will.  But if that’s the strategy, the union should quit wasting everyone’s time and decertify.

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36 responses to “NFLPA wants more financial information than it needs”

  1. –or to cause trouble by finding a way to leak certain aspects of the expense information to the media.–

    I think we all know that info would be leaked. EVERYONE in the NFL gossips more tham a an old lady.

  2. As an accountant your article has a flawed theory. Audited financial statements that are not detailed do not provide enough support. If an owner was paying his 3 sons $10 million each as team employees and himself $20 million that would go on the payroll line item and the accountants would be fine with it. However, that $50 million would just be padding profits in the NFLPA’s eyes. True financial disclosure would allow the NFLPA to see line item expenses so they can see if the costs the owners are spending are reasonable.

  3. I am consistently surprised that PFT thinks that its opinion on what is and isn’t necessary in the ongoing negotiations is pertinent information. It may be very pertinent to the union if teams have extraordinary salary, loans, and benefit expenses associated with owner’s families and other personnel that are not significant contributors to the teams’ operations. (E.g., paying an uncle $250,000 annual salary or ‘consulting fee’ for coming into team HQ twice a year.) Cutting back on such frivolous expenses may be an important source of funds to individual teams. Revealing such issues might actually be beneficial to owners needing an excuse to cut back on deadweight expenses.

  4. For months, the NFL has refused to provide the players’ union with financial information. Now, the league has offered to crack the books open, but the NFLPA wants the information to be fully disclosed.

    In our view, the union wants too much

    ————–

    Really? The fact you are in business with NBC (which is a “broadcast partner” of the NFL) makes one wonder if you are truly objective.

    Then again, maybe you’ve just been spending too much time with league shill/apologist Peter King….

  5. Wow, took you this long to figure out what the union was doing? They don’t care about negotiating a deal unless its a complete capitulation by the league owners. They want politicians to step in.

  6. Other than the Packers, these these are all privately owned businesses. The union should be glad that they’re getting as much information as they are.

  7. Here’s a question… if the players want 50% of everything the the leagues makes then should the league received 50% of what the players make on endorsments and sponsorship deals?
    I wonder why nobody has brought that topic up????

  8. The union and their supporters don’t give a rat’s behind what the books may or may not show. They’ve completely ignored what the Green Bay financial statements show because the numbers support the NFL’s position.

  9. “unless the union hopes to micromanage team-level business decisions”

    Mike Brown in a court case is documented as paying himself 7 figures as the teams GM. In addition to having other family members on the payroll. Those kinds of details is what the NFLPA wants and what Teams don’t want to share with them or with each other…

  11. The crux of the NFL’s argument is that certain teams aren’t profitable and possible future stadium expenditures justify overlooking $1B in revenue.

    They need to produce audited P&Ls, not just top line revenue. Kinda absurd to make a determination on profitability without expenses. I’ve worked in audit and booking revenue can be a judgement sometimes, the fact that a big 4 auditor is “verifying” the report wouldn’t do it for me if I was in the NFLPA.

    True, the teams are private businesses, but they receive public funding through stadium deals and they receive an anti-trust exemption, so the public/private line is very blurry.

  12. mvp43 says: Mar 9, 2011 2:03 PM

    Other than the Packers, these these are all privately owned businesses…..

    ———————

    Are they? As the American Needle case showed, they claim they are “individual business’s” when it suits then but then they get together and make rules that all must accept (ie the draft, salary caps, drug laws) and act as one.

    You sure don’t see companies that are not involved in a monopoly act that way very often. And when they do they get nailed for violating the Sherman Act.

  13. Yeah, let’s just take the NFL’s word for it right? They’re crying the blues about profitability and economy and yet the numbers indicate the league has never been more profitable at any point in its history. I’ll bet every single NFL clubs (some more than others of course) waste huge amounts of money in bloated staff salaries and needless high priced schmoozing.

  14. Net Salary as a single line item is enough for the unions to decide and determine if payroll is being padded via family-employee salaries. Saying the details are necessary to uncover such proactices is just plain ridiculous. Any auditor worth a sent can figure that out especially when presented with the figures (and employee counts) from ALL teams for comparison purposes.
    The union needs to be broken. Since when do businesses in America let the Unions dictate how much profit is alright, what expenses are acceptable etc.?

  15. Unless the league gives in and provides more financials then guess where were headed?

    Answer- decertification!!

  16. Mike,

    I don’t know how to put this tactfully but you are wrong.

    To properly evaluate profitability statements, the accountants must be able to see the detailed expenses. Profitability is a vague concept that can easily be manipulated downward by paying relatives or the owners a salary greater than they deserve, renting or leasing equipment or space from a related party at an inflated rate, or hundreds of other easy to design schemes.

    Also profitability is one thing, cash flow is another. If I were the players, I would demand both.

    These types of arrangements that reduce profits are not illegal (as long as the tax reporting is correct) and are often common in closely held family businesses. GAAP would allow those expenses in a profitability statement or in audit. The difference is that an audit requires footnote disclosure of all related party transactions which would end up disclosing some of, if not most of, these arrangements.

    I do a lot Due Diligence in my job – both for buyers and sellers. I can’t see any way the proposed profitability statements can be analyzed based on what you or the owners are proposing.

    What would work is for the owners to release all the audited financial statements and any other requested data to a mutually agreed accounting firm to verify the accuracy of the data, adjust out any “non standard” or “non market” expenses and produce an income statement and cash flow statement for each team in some kind of agreed upon form. Have the mediator or Judge Doty be the arbiter of what is non-standard or non-market if there is a dispute on an item. Each team’s statements can be anonymous. You can standardize the classifications between teams to make the statements comparable.

    It would take a few weeks to gather and compile the information but it would still be quicker than a lawsuit and would protect some of the owner’s financial data.

  18. On the books there has never been a Hollywood movie that ever made any money. That’s why everyone wants GROSS points.

    Net profit is a VERY subjective matter and the NFL does not want to disclose or negotiate on GROSS profit.

    So yes, the NFLPA does need to see where the money goes if the owners claim that even after the taxpayers build their stadiums for them and selling $500 jerseys and flat out usury PSL practices they still can’t seem to turn a profit.

  19. If the owners want to keep a salary cap they better keep this out of the courts. The players don’t care either way. Bottom line is if the courts rule monopoly and they will, they will force the teams to remove the cap and create a free market for the players.

  20. Zaggs has it nailed. If the union wants “line item disclosure” it’s only because they know they won’t get it because the owners are not going to embarass themselves. The union is positioning for de-certification and the soon to follow court battle which they incorrectly think they will win. In the meantime, we lose.

  22. The union isn’t dictating how much profit is allright. The union is being told that they have to take a paycut, and they want a good reason why. They have a right to be upset if the owners are crying poor when they pay ridiculous salaries to family members that don’t work there… The question is how much of that really goes on.

  23. The league is being stupid. Very stupid.

    If the union de-certifies and files an antitrust action (which is the alternative if no agreement is signed) they will ask for EVERY bit of financial information in their lawsuit. And due to the very generous process of “discovery” they will get EVERY bit of it.

    And since a Federal suit would be a public record that means WE will also get to see what Jerry Jones pays his son. Just how many personal trips in the Gulfstream that Snyder charges to the Skins. Etc. Etc.

    It almost makes you hope they don’t get a deal done….

  24. Detailed reports regarding team-specific expenses aren’t necessary, unless the union hopes to micromanage team-level business decisions — or to cause trouble by finding a way to leak certain aspects of the expense information to the media.
    ==========
    Bingo on both fronts. The players want to be the defacto owners when it comes to everything but paying the bills and if they can embarrass the actual owners as well. Bonus!

    The players have been dirtier than the owners throughout this whole process. The very public decertification tour during the regular season was ridiculous. Who Pre-decertifies? Either the union is serving it’s memberships needs or it isn’t. It will never hold up in court if it happens. The financial smoke screen as well. Why do they need 10 years when the last CBA was only 5 years ago? They want to find as much information as they can to try to embarrass the owners, not because they need that much information.

  25. PFTiswhatitis says: Mar 9, 2011 2:25 PM

    The union needs to be broken. Since when do businesses in America let the Unions dictate how much profit is alright, what expenses are acceptable etc…………

    ———————-

    LOL LOL

    Yet another dolt who confuses the NFL with a home improvement store or an assembly plant in South Carolina.

    The answer to your question is simple- You do it when you hold a monopoly and you don’t want Congress up your butt.

  27. Agree with CKL and another point. If the NFLPA wants line items descriptions, let’s put up their salaries and discuss whether those are ‘reasonable’ or not also. After all, they’re employees, they’re getting paid by the owner and who are they to say what is reasonable or not? Paying a free agent $15million then he comes in and gets one interception, or plays three games in a year for whatever reason, or sits back and says he does not like the style defense the team plays, well then are they going to complain? No, they’ll say that’s what the owners agreed to pay. Can’t have it both ways. Can’t criticize owners for who they pay or how they run the business without being able to be criticized for your on field performance.

  28. BREAKING NEWS: Alas, PFT’s best—and most important—post to date on the NFL labor dispute! NFL general counsel Jeff Pash has just thrown a touchdown pass in the media game with the NFLPA.

    The owners have a VERY compelling argument here. Now, they need to break radio silence and get out front on this to turn the NFLPA’s flank in the public relations battle. That sound you’re hearing may be the first sign of the labor pains that may herald the birth of a new CBA.

    Mike has taken a giant step toward understanding what it will take to end this pain-in-the-posterior labor dispute—short of playing Dino’s “I Love Vegas” medley inside the mediation room. His last paragraph scores a bulls-eye.

  29. it’s ridiculous the union is refusing to acknowledge the reduced yearly profits by basically implying that most teams (including the packers) are padding their family members salaries. or refusing to use an unbaised firm to investigate things…instead of a group they’ve worked with for years.

    why can’t either side be realistic about things?

  30. nbcwantsitsmoneyback:
    The NFL DOES get a cut if a player wears his uniform in an endorsement. However, the players don’t get a cut of the deal your team cuts with the local opthamology practice to become the Official Lasik Surgery Provider of TEAM X

  31. This disappeared so let me try it again:

    TheBoredGuy says: Mar 9, 2011 1:53 PM

    As an accountant your article has a flawed theory. Audited financial statements that are not detailed do not provide enough support. If an owner was paying his 3 sons $10 million each as team employees and himself $20 million that would go on the payroll line item and the accountants would be fine with it. However, that $50 million would just be padding profits in the NFLPA’s eyes. True financial disclosure would allow the NFLPA to see line item expenses so they can see if the costs the owners are spending are reasonable.
    __________________________________
    I respect that you have a lot more practical knowledge on this topic than I do. I also acknowledge that some owners may be even more interested in giving money to family members vie fake job titles and salaries than other interests are because revenue sharing and taxpayer funded stadia mean that profit isn’t as big of a worry to them as it is in a regular business model. That said, MOST real businessmen (i.e. the ones who didn’t inherit the team and aren’t ALSO coasting off inheritance while being clueless having not earned anything on their own…I am talking to you and owners like you, Randy Lerner) want their teams to be investments and generate income while being a competitive team on the field. Much as I dislike almost every single thing about Jerry Jones, and think he can be too greedy at the expense of customer satisfaction at times I believe he is that type of owner. So is Robert Kraft. So is Arthur Blank. Etc. So are most of the other owners who, whether I like them or not, have either built businesses outside of the NFL from the ground up or grown smaller outside businesses into huge moneymakers which enabled them to purchase an NFL team. Say what you will about Jerry Richardson, he had the guts to fire his own sons because he didn’t like their infighting and it was hurting the running of the TEAM. Bloating their payroll with useless employees is not going to help them grow profit. Smart talented employees whether family or not ARE. Most of their relatives who are also employed are going to be inheriting the business from daddy someday (or at least still involved some way in running it)and I would rather they have PRACTICAL or at least TANGENTIAL experience in the day to day business than to be brought in cold from yachting around the world thanks to their trust funds.

    rdssc says: Mar 9, 2011 1:59 PM

    Detailed reports regarding team-specific expenses aren’t necessary, unless the union hopes to micromanage team-level business decisions — or to cause trouble by finding a way to leak certain aspects of the expense information to the media.

    When Ralph Wilson has himself and 2 daughters on the payroll and they are being paid well above the league average for what they do he is writing that off as an expense. The owners have proven in the past and present they can’t be trusted. Without that detail they can easily create accounting expenses that in reality are profit.

    The Devil is in the Detail.
    ___________________________________
    I run a small business and also did accounting functions for a good sized department in a large one and I can tell you that yes salaries are expenses, but they ALSO cut into profit. My understanding is that the players were getting their % BEFORE all expenses are factored in with a billion dollar credit give to mitigate it. If the amount of leeway the players give is fixed, it doesn’t hurt their bottom line % wise.

  32. nbcwantsitsmoneyback says: Mar 9, 2011 2:06 PM

    “Here’s a question… if the players want 50% of everything the the leagues makes then should the league received 50% of what the players make on endorsments and sponsorship deals?
    I wonder why nobody has brought that topic up????”
    —————————————————-

    The reason this isn’t brought up is because the players have already given in in regards to the rights of their images in team uniform during the games & in the selling of their jerseys. NFL players all get the same percentage of Jersey sells regardless of their ‘value’. The last thing the NFL wants to do is be required to negotiate every revenue stream like movie stars. Also, owners such as Irsay in Indianapolis receive payments for the use of Lucas Oil even though public money was used to build the stadium. Shouldn’t this money be given to the players as revenue?

    As I stated a full ‘free’ market without the Union would require owners to pay ‘star’ players like Peyton Manning a higher percentage of jersey sales, a percentage of ticket sales, etc . . . Instead of players requesting additional percentage of overall revenue from different streams, these negotiations are taken care of now under the CBA and all they negotiate is their salary.

    When arguing owners should get revenue from players off field work you have to ask, is Peyton paid what he is worth to the NFL? I would argue that Manning/Brees/Brady are worth more to the their teams in real dollars than A-ROD or Ryan Howard is to the Yankees/Phils. The current highest paid NFL player, Brady, makes $18 mil. A-rod makes $33 mil and Howard makes $19 mil a year. It seems, when looking at value created, football ‘stars’ are underpaid and the only way to keep the system moving is to allow them their own endorsement deals.

  33. The union will never get enough financial information to satisfy those guys. As an accountant and auditor all my life, I know you can make financial statements look almost any way you want.

    Enough already, time to get back to preparing taxes for my clients that have to provide ALL their financial information before I sign their returns.

  34. The union needs to be broken. Since when do businesses in America let the Unions dictate how much profit is alright, what expenses are acceptable etc.?

    ——————————————–

    Well in this case the union represents the very reason people tune in. People watch the NFL for the players, not the owners. No players = no pro football league. That is very unlike any other union situation one could name. And if you’re going to cry the blues and tell me I have to take a pay cut, despite the fact that ratings and merchandising are through the roof……then you better show me some hard copy to prove your point. And this is why we have unions, to stop corporations from taking advantage of people…….in this case those drawing the money for the league. The players are the star of this show, not the suits in the front office.

    I hope there is a lockout and I hope it’s long and very ugly. The NFL needs taken down several pegs and I will take great delight in watching it happen.

  35. It is a waste of time to write long, detailed, logical posts on this site. The general poster here has no interest to read anything longer than two sentences. After 2 sentences, a longer post is almost guaranteed to get a thumbs down from those who fell asleep reading it.

  36. You do not need detailed information particularly on salaries. The league has a Salary Cap and knows what the players were paid, they can take that right off the top. It should not be that difficult for the NFLPA to figure out a reasonable range for salaries of employees that are not players. They can use the Packers as a baseline and use ratio analysis to determine teams that may be padding certain expenses.

    Most of these teams probably don’t have reviewed financial statements yet alone audited. There is no reason to have audit statements. Most of the owners are able to lend money to their teams from themselves or other businesses, they do not need to spend the money on an audit to get a bank loan.

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