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More Money, More Problems

The Potential NFL Lockout

Merritt Rizoti

on 26 April 2010

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Transcript of More Money, More Problems

More Money, More Problems The Potential NFL Lockout Allison Gee, Merritt Rizoti, Deanna Rothberg, Melvin Williams Collective Bargaining - the process by which wages, hours, rules, and working conditions are negotiated and agreed upon by a union with an employer for all the employees that it collectively represents.

The NFL CBA is set to expire in March 2011
The Collective Bargaining Agreement What is the Final League Year?

the term used in the CBA to refer to the last year of the agreement.
without extending the CBA, the "Final League Year" will be the 2010 League Year Timeline of the CBA: March 2006 - February 2010 March 2006:
NFL owners vote 30-2 to extend the CBA for an additional 6 years.

(Football is guaranteed through the 2012 season) February 2007:
Owners impose lockout clauses -->right to reduce compensation in the case of a lockout

May 2008:
NFL owners voted to opt out of the 2006 CBA extension
This decision terminated the agreement in 2011, 2 years early February 2010:
The NFL launched www.NFLlabor.com to address labor issues and to spread misleading information in an attempt to drive a wedge between the players and the NFLPA. February 2010:
The NFL rejected the NFLPA's proposal to continue the current capped system for an additional year
Would have allowed the parties more time to complete work on a long-term CBA
Owners What Owners Want to Change Some Other Issues that Factor into NFL Owners Wanting a New CBA
Each team operates as a business entity where owners assume 100% of the costs
Highly sophisticated fans
New stadium construction and upkeep
Economic recession
Market size

As much as an 18% decrease in revenue that goes towards player costs
"The NFL has generated '$3.6 billion in incremental revenue since 2006 and [Goodell] claimed that $2.6 billion has gone to the players' making the owners '200 million worse off than they were in 2006'" - NFL Commissioner Roger Goodell Financial Disparity Between NFL teams *operating incomes - earnings before interest, taxes, depreciation Benefits for Retired Players One issue that both the players association and owners agree on is “more money diverted back to veterans and retired players”
Disagreement on the way benefits for retired players should be funded
Mutual contribution and cooperation needed for funding pension plans in new CBA
Coaches How will NFL Coaches be affected by a lockout? Coaches are in a particularly bad position for two main reasons:
1. they cannot unionize
2. they have a fear of revenge by owners if they
complain or come forward with a strong opinion
about their situation
Many owners will argue that coaches should not be paid if they are not coaching anymore, in the event of a lockout
Some coaches are choosing to leave the NFL to coach at the college level
Coaches' Contracts The majority of NFL coaching staffs have contracts through the 2010 calendar year, but negotiations for 2011 coaching contracts have been going on since the end of the season
In preparation for a potential lockout, owners are putting new language in 2011 coaching contracts, for example:
- A team can impose a 25 percent reduction of salary in the event of a lockout;
- A team has a right to terminate without further pay upon 60 days notice;
- If the lockout extends to 90 days, teams can impose a 50 percent salary reduction
or right of termination
Final League Year Final League Year No salary cap
No minimum team salary
- In 2009, the minimum team salary was $107,748,000
- Team salary cap was $123 million
ARE individual player minimum salaries
- They rise at a slower rate than in capped years
30% increase rule remains for contracts signed in capped years
- Restricts salary increases form 2009 to 2010
Additional restrictions on player free agency

Reductions in player benefits

Teams are relieved of their obligations to fund benefit programs
- (player annuity, severance pay and
performance based pay)

No reduction in pension or disability payments to retired players
Franchise/Transition Player Must be offered a minimum of the average of the top 10 salaries of the prior season at the player’s position or 120% of the players prior year’s salary --> whichever is greater

In the capped seasons, one player may be designated as a transition player.

In the Final League Year: one additional player may be marked as a transition player.
How Powerful is the NFL? •The most powerful organization in the world
•Annual Revenue of $8 billion
•Huge deals with CBS, Fox, NBC. ESPN, DirecTV (Sunday Ticket), and ESPN radio
•According to the Nielsen ratings in 2008, 5 out of the ten top single event television broadcasts were NFL related
•Draft draws more viewers annually than the games of the other leagues
What Does It Mean If There Is No Salary Cap? •A salary cap restricts the amount of money an owner is allowed to pay any given player

•Without a salary cap, players can be paid as much or as little as the specific owner and player decides

•Attractive to players
Consequences of a Season Without a Salary Cap •Highly beneficial to the large market teams with high annual revenue
- Have the capacity to pay players that they want enormous salaries

•Highly detrimental to the small market teams with low annual revenue
- Cannot compete with the prominent teams to pay the necessary
- May lose players

•Difficulty of getting players to agree to a salary cap, after an entire season without one

•Teams will be able to release players with little to no financial consequence

•Small Free Agent Pool
Why the NCAA is Pro Lockout •Increased Exposure
•Maintaining All-Americans
•Committed and Loyal Fans
Compared to the MLB 1994 Strike •Drop in Average Attendance at Games from 31, 612 to 25, 260
•Operating Revenue cut from $1.87 Billion to $1.2 Billion
•Television Revenue Dropped
- Price that Fox paid for new MLB deal in 1995 was
significantly smaller than price that CBS paid in early 1990’s
Compared to the 2004 NHL Lockout •Attendance did not suffer much
•Television revenues decreased
Expected Effects of the Lockout on the NFL

•If owners succeed in lowering the amount that is paid to players – team values could increase
•If the public image of the NFL is damaged enough to reduce demand – team values could decrease
•Top teams with larger markets and larger revenue – no decrease in attendance
- Have long waiting lists for season tickets
- Stacked teams
•Bottom teams with smaller markets and smaller revenue – decrease in attendance
•Cities as a whole are not expected to lose revenue
Media NHL MLB Expected Effects NFLPA The NFLPA is the union for pro football players in the NFL.
Established in 1956
Represents all players
Assures that the terms of the CBA are met
Negotiates and monitors retirement and insurance benefits
Provides assistance to charitable and community organizations
Enhances and defends the image of players Rookie Contracts What the Players Want to Negotiate in the New CBA •"The system as it is set up right now is not working," the league official said. "The players get 60 percent of the revenues and the owners assume 100 percent of the costs. Extending the current CBA is not a solution; it's the opposite of a solution. Their offer to extend it is in itself a recognition that it's a one-sided agreement.”

•Outrageous rookie contracts and salaries are becoming a hot topic once again. There is a strong disapproval about the amount of money rookie players are making.

•The situation poses an even larger problem this year due to the lack of a salary cap after the players and owners somehow couldn’t manage to reach an agreement. Despite the billions of dollars in revenue generated every year.

•Roger Goodell expresses desire to change the way the rookie contract is set up. As part of changing the contract, he suggested making a rookie salary cap similar to that of the NBA draft and rookie caps.
What the Players Want Cont... •Goodell stated that he and the Player Association have met to discuss this issue
•The owners are interested in giving more of the NFL money to veteran players who have proven they are good players and give less to the rookie players who have yet to prove themselves
- For example, Veteran - Michael Turner, RB, (Atlanta Falcons): Signed a 6-year,
$34.5 million contract
- Rookie - Darren McFadden, RB, (Oakland Raiders, 4th Overall Pick): Signed a
6-year, $60 million contract
•Both these players play the same position and signed six year deals
•However McFadden, a rookie with no NFL experience signed for twice as much as Turner, a veteran running back.
How it Affects the 2011 Draft and Players
•A potential lockout will effect many senior in the up coming 2011 draft

For example, UNC Football has a lot of NFL prospect which is rated high in there positions or rated to go first round.

•If there is a lockout these seniors will be without a job for a year.

•They wont be paid
How Powerful is the NFL? How a Lockout Will Affect Current Players
•Players will lose health insurance

•The last Credited Season that a player can earn will be in 2010. (The players has to play three season to earn the retirement plan)

•Clubs will not make a contribution on your behalf or pay expenses for your 401(k).

•There will be no new reimbursements from the Tuition Assistance Plan.
Our Opinion A CBA will be reached in the final hours... Questions??? Owners
Full transcript