Earlier versions of this story, including in the print edition of The Washington Post, incorrectly said that this year's Super Bowl XLV was the most-watched television program in history. It was the most-watched program in U.S. television history. This version has been corrected.
NFL labor dispute has prosperous league on the brink of shutting down
Thursday, March 3, 2011
A month ago this Sunday, the National Football League capped another season as master of the professional sports universe by hosting the most-watched program in U.S. television history: Super Bowl XLV, seen by an average of 111 million viewers. A $9 billion industry, the league has brought unprecedented wealth to its owners and players during 24 years of labor peace.
On Friday at midnight, unless there is a spectacular fourth-quarter comeback, the entire enterprise is likely to shut down - because the league's 32 owners and its players cannot agree on how to divide their riches.
"For fans, the headline is, 'How could they have gotten into this mess?' " said David Carter, the executive director of the Sports Business Institute at the University of Southern California.
Negotiators for the league and the players' union are meeting with a federal mediator in Washington this week, but few in the sport seem optimistic that a deal will be reached any time soon. Without a settlement before its collective bargaining agreement expires at 11:59 p.m. Thursday, the NFL is headed for a confrontation that could include the owners locking out players and the players decertifying their union in order to file an antitrust lawsuit against owners. There is fear that some of next season's games could be canceled.
Needless to say, a prolonged pro football hiatus would not sit well with fans who have just ridden out a brutal recession and pay an average of $420.54 to take a family of four to a single game, according to the Web site Team Marketing Report, which tracks such costs.
In the recent past, the idea of the NFL hurtling toward a precipice would have seemed impossible. After strikes by the players in 1982 and 1987, the sport established a system of free agency and a salary cap in the early 1990s as part of a settlement of antitrust litigation filed by the players' side. An era of labor peace ensued, with former NFL commissioner Paul Tagliabue and late union chief Gene Upshaw working together to negotiate repeated extensions of the league's labor deal. The union even joined the league to help get new stadiums built.
The players received about half the league's revenue and labor extensions generally were negotiated early. There was a hint of labor unrest in 2006, when Upshaw pushed for financial gains for the players and the bargaining deadline was postponed several times before a deal was achieved. But Tagliabue and Upshaw managed to make it happen, and the owners approved a settlement.
Tagliabue said recently that he and Upshaw knew at the time that the deal was a short-term, transitional arrangement. But neither man is involved in this phase. Tagliabue retired and was replaced as commissioner by his top lieutenant in the league office, Roger Goodell, in 2006. Upshaw died in 2008. The players elected D.C. attorney DeMaurice Smith in March 2009 to succeed him.
"Both sides have gone back toward a traditional labor-management model," said Gary R. Roberts, dean of the Indiana University law school and a sports law expert. "Tagliabue and Upshaw truly crafted a partnership. But owners are putting a lot of pressure on Roger Goodell to get back what they perceived was given away under Tagliabue. Players and agents are putting a lot of pressure on DeMaurice Smith not to be cozy with the league."
The owners voted in May 2008 to exercise a reopener clause in the labor agreement and end the deal two years early.
"The players have gotten 70 percent of the incremental revenue that the NFL clubs have generated since 2006," Jeff Pash, the league's executive vice president of labor and chief negotiator, said last month at the Super Bowl. "They know that's not a sustainable model. They know that. They have sat in meetings with us and said: 'We know you're being squeezed. We know your profits are being squeezed.'"
Under the most recent arrangement, before the NFL spent the 2010 season without a salary cap, owners were credited with about $1.3 billion for expenses and players received about 60 percent of the remaining revenue. That worked out to about half the sport's total income, according to the union.
The owners now want an additional $1 billion for expenses before the players' share is calculated. League officials have said the additional money would give owners more to reinvest in the product, and would result in so much increased revenue that players ultimately would not lose money.
The NFL Players Association calls the proposal a demand that players take a sharp pay cut not justified by the sport's economic circumstances.
"The business of football is probably the best business economic model in the country because that $9 billion was generated during the worst recession of our lives," Smith said last month. "You're now asking the players to give back a billion dollars a year for the next seven years."
Pash said this negotiation "has nothing to do with get-backs. This has to do with creating a business model that will allow us not to look backwards but to look forward, to have an economic system that will fuel growth."
In the meantime, the NFL's television ratings continue to soar. The average national telecast last season was watched by about 17.9 million viewers, up about 1.3 million viewers per game from the 2009 season. NFL officials began last season expecting ticket sales to drop 1 to 2 percent, but game attendance remained steady at about 65,000 per game.
Forbes estimated last August that, even with a 2 percent decline in franchise values from the previous year because of the sluggish economy, the average NFL team is worth $1.02 billion.
The league has estimated that a work stoppage that lasts until August would cost it $350 million, and $1 billion if there's no deal until September. It has projected $400 million in lost revenue for each canceled week of the regular season. But with the games still six months away, some say neither side is feeling great pressure to settle just yet.
The owners also have proposed lengthening the regular season to 18 games per team, imposing a wage scale for rookies and testing players for human growth hormone. The union has expressed wariness about each of those proposals. But if the two sides can resolve their differences on dividing the money, some believe the other issues will be settled.
A federal judge in Minneapolis ruled Tuesday that the league's TV contracts are improper. U.S. District Judge David S. Doty wrote that he will hold a hearing to determine damages and other potential remedies. The union has asked that the league be barred from receiving its approximately $4 billion in annual TV payments next season if there is a lockout. A league spokesman said the ruling would not affect the labor situation.
The union also has a separate case before the NFL's special master, University of Pennsylvania law professor Stephen B. Burbank, that accuses teams of colluding last offseason to restrict players' salaries. The league has filed an unfair labor practice charge against the union with the National Labor Relations Board, contending that the NFLPA has failed to bargain in good faith and is more interested in filing antitrust litigation against the owners than reaching a settlement.
Many believe the two sides will jockey for leverage for some time before a deal is reached.
"I think it plays out over some time," Carter said. "When both sides can emerge telling a victorious tale, that's when it will be resolved. Neither side wants to come out of this being perceived as a loser."