Wednesday, February 23, 2011

Lockout? No Chance - Why the NFL Will Have a New CBA By March 4th

There will be football next year. Neither side is willing to admit it, but both the NFL Owners and the NFAPA know that a deal is going to get done on time.  There is too much money on the table for this to not work out and the owners know that the players can't afford to not come to the negotiating table.  The players union knows that it is going to agree to the deal in the end, but the union also knows that it's better for them to wait until March 3rd to finally agree.

How can I say all of that with certainty?  I've done the research and connected the dots that no one is talking about.  Rather than harp over what the Union and Owners say every day, I've gone back and looked at the current expiring CBA to understand why the Owners opted out to begin with.  

People believe the NFL and the Union are fighting over stuff they really aren't as concerned with.  The eighteen game season is something the players aren't happy about, but it will add in the end add cash to their pockets.  It's not the line in the sand people would have you believe it is.  Also unimportant is the debate over the proposed rookie salary scale, as the players and owners alike agree that the rookie salaries are out of control.

So what is the arguing really about?  Cash, obviously.  The owners did a bad job negotiating the last agreement and haven't been making enough money.  The players, I'm sure, know that the last CBA doesn't work but aren't going to just freely give the money back to the owners.

The Outgoing CBA

First, to understand each side's current position, you have to take a look at the leagues last collective bargaining agreement.

Last time they negotiated, it was a peak revenue time for the owners.  While the NFL's popularity and value has increased since that point, the owners' profits have fallen.  In 2008, some NFL owners were complaining that their profits fell from 10 percent before the 2006 agreement down to just 4 percent...and that was when they opted out of the agreement.

That fall in profit is in part because the players went from getting 55.5 percent of the total revenue marked to them up to receiving 60 percent of the revenue.  That 60 percent seemed palatable to the owners at the time, but raised operating costs and stadium repair/replacement/upgrade costs across all the major sports have made that number unworkable.

While the NBA isn't as successful as the NFL, as another major sports league and another league with a cap that is set based on total revenue it does provide a good basis for comparison.  The NBA agreed in 2005 on a new CBA that gave it's players 57% of it's total revenue.  It was a number the NBA owners were happy with at the time, but now there is a threat of an NBA lockout after the season, as their league is projecting 350 million dollars in losses this year.

The NFL owners are aware of the NBA numbers.  While the NFL still posted a profit this year, it knows it can't continue with the current collective bargaining agreement without falling down the same hole.

The Owners Weapon - The Lockout

Based on the last section, you would think the owners have no power in these negotiations, but that isn't true. While the players currently have the deal they want and don't want to give up their cash, the owners have the power to lock them out.  The last thing the players union wants is a lockout.

Taking a look once again at the NBA... In 1998, the NBA locked out it's players.  It went very well for ownership.  Click Here if you want the full story, but to sum it up, David Stern and the owners whipped on the players union.

The NBA locked the players out for 191 days from 1998 to the beginning of 1999.  The players were united at first, but that didn't last.  The media and fans heaped equal blame on both sides and that hurt the players.  The owners had deep pockets and no simple salary number they were losing, however the players we running out of money and the fans didn't want to hear them complain about not making millions that year after they made more millions the years prior.

The players expected the millions of dollars to pour in year after year, most did not have anything saved.  After half a year without a paycheck, the players were broke and with half the season gone, the players were worried about not getting a paycheck at all on the year.  On January 5th of 1999 the NBA players had a meeting to decide whether or not to accept what the owners had dubbed their 'final proposal'.  The union negotiating committee had recommended against it, but many of the players just wanted to go back to work and were going to break ranks with the union.  That night, the union director called NBA Commissioner  David Stern and on January 6th there was a settlement in place.

The NFL Owners are very aware of what happened to the NBA players in 1999 and expect the same to happen to the NFL players if they move forwards with the lockout.  They know that the players aren't prepared to not be getting weekly game checks come fall.  Players like Antonio Cromartie, with his nine kids to support, have already started to speak out because they need to get paid.

The NFLPA's Waiting Game

The Players Association knows they only have negotiating power while the players are together.  If players start to openly complain about the lockout going on too long, the owners will start to have the upper hand.  However, there is also no reason for the union to agree to anything too far before the lockout either.

The Owners have been trying to get a deal done for the last two years to help fix their bottom line, but the NFLPA has had no reason to come to the table.  It's clear that the 60 percent of the pie the players currently get is too much, but the players are locked into that 60 percent until this March 4th.  It would have been irresponsible of them to come to the table before this year because it would just take money out of the players pockets.

It also didn't make sense for the union to get a deal in place right after the Superbowl either.  Any player who's contract is up this year will become a free agent at the end of the league year.  Between the labor unrest and CBA 30 percent raise rules, it has been difficult for the last year for any team to sign players to an extension.

Because of the lack of extensions, the 2011 free agent class looms as the largest ever with 495 players scheduled to become unrestricted free agents, or roughly 15.5 players per team.  A third of those players started at least eight games for their team last year.

Almost all of those 495 players stand to make more money on the open market than they would have if they had signed extensions.  They can now drive up their price by looking at multiple teams for offers rather than taking a below market extension last year to protect themselves in case of a production falloff or an injury.

Also, don't overlook the money that stands to be made by all of the players that have been given the franchise tag already this year. Because they can't really negotiate with their players, many teams have given out franchise tags to players that normally would never receive them.  Guys like Peyton Manning and Michael Vick would probably have been tagged anyway, but players like Mercedes Lewis and Chad Greenway aren't among the top five at their position despite the fact that they'll get paid that way next year.

The Mediation and The Pending Agreement

The owners know they can lock the players out to get what they want, but they also stand to lose money if they do so.  The players union knows they can't let it go to a lockout, but aren't going to simply agree to ownerships' demands.  Thats where the private government mediator comes in to play.

Now, behind closed doors, the NFL and the NFLPA can work out a new fairer CBA while avoiding the prying eye of the media.  After their week of private negotiations, each side can claim they fought long and hard on each and every point and no one will be able to question them.

Each side is sure to claim victory, but I expect a bunch of compromises.  The NFLPA will probably keep their 60 percent of "total revenue" but the owners will likely change the way they compute total revenue to keep more money in their pockets.  The owners will get their 18 games and their rookie wage scale, while the NFLPA gets better benefits for retired players as well as expanded roster sizes.

Now of course I could be completely off base and there could be a lockout, but if I am it will not end well for the players.  In the end we would end up with 18 game season with the players making less than they make right now.  The NBA got their players association to agree to contract maximums after their lockout, expect something as crazy to happen in NFL negotiations if the players are locked out.

In the end, it's pretty simple.  The players don't want a lockout, they just didn't want to give up any money before they had to.  The owners don't want a lockout, they just can't afford to continue with the current agreement.  The fans don't want a lockout, and neither side want to lose fan support for the number one sport in the country that has been growing every year.

Nobody wants a lockout, so there wont be a lockout.

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