The 2011 Lockout- and Free Agency 2010

I have been studying the labor negotiations between the players and the owners.  I first was trying to understand the UFA / RFA rules for this year.  That I finally figured out and I posted all that at Restricted Free Agents.  Then I started looking at the negotiations themselves and got pretty sick to my stomach.  There is a great chance at a NFL Lock-out for the 2011 season.  I will do a quick review and then tell you what I think it means. 

For those of you , who don't want to read all of this,  here is what I think.   I think there will be a lockout of all Players covered under the current CBA in 2011. We will have rag tag football in 2011.  Because of that Few if any free agents will be signed this year. All RFAs will probably be tendered contracts and all transition tags and franchise tags will be used.

For a full length explanation you may continue reading.

 

The labor contract called the CBA (collective bargaining agreement) is a document that has been constructed after years of bitterness and several NFL strikes.  It all started in 1956 when a group of Packer players asked management for clean jock straps to use during two-a-day practices.  The owners thought this to much to ask and the players ultimately formed a labor union to get paid for exhibition games and some clean jock straps. If you want to read about the situation from the union's perspective go to the union website and click on history (History).  Suffice it to say that the players have fought hard to get to the salaries they are getting today.  It is extremely doubtful they will back down to taking less.  The owners have always wanted 100% control over a players future ( no free agency).  Since this is unlawful they have settled for the free agency terms under the contract.  The players will not retreat on free agency guidelines as they have fought for those as hard as for higher pay.

From an owners perspective players are expendable.  They come and go.  Some are great and some are not.  Some win games for you and some do not.  All cost you money.  Some cost more than others. All owners want to win.  But all owners want to make money more.  This is why the owners starting sharing revenue between themselves over 50 years ago.  A feeling that if the league was stronger "as a whole" then all teams would be stronger and more valuable.  This 50 year tradition is being challenged by some owners.  Large market, big money teams feel that subsidizing weaker, small market teams is not a good idea.  For example the league gives the Vikings about 10 Million a year.  The Viking Stadium just can't produce enough revenue to keep up with the salary cap.

So teams like the Cowboys hate giving money to a team that beats them.  If every small market team moved to a larger market and had new stadiums then revenue sharing would not be needed among teams the theory goes.  Of course this doesn't take fans, loyalty, or economic longevity into account but I understand the new owners complaints.

When the first big NFL TV contract came into existence every one realized that the league was destined to be the biggest and the best.  In fact 5 Billion of the total 8 Billion in revenue comes from the TV contract. After the 1987 strike the owners gave pay considerations to the players that totaled approximately 60% of the league operating revenues.  6 years ago when the CBA was extended this 60% figure was written into the document. Here is the deal.

1) The Owners get to keep all of the money from selling franchises and other income not designated as "income "under the CBA.  In other words not all income is generated by the players so it isn't included.

2) A certain sum is taken off the top and is used by the league to help grow the NFL Chanel and other parts of the NFL busines.  The Balance is revenue and 60% of that is used for salaries.  There is a salary cap and a salary floor.

If revenues go down so does the players revenues for salaries.  In fact the union keeps 10% of the revenues in a bank account to pay the owners back if revenues indeed go down.

3) The owners must share some revenue with each other in order to keep the game strong and the league stronger.

4)  Players will accept the Free Agency rules as defined in the CBA , EVEN THOUGH IT VIOLATES THE ANTI-TRUST LAWS OF THE UNITED SATES.  Yes, Free Agency restrictions are  a negotiated item that will not be permitted if the union contract is not in place.

 

                                           WHERE ARE THE NEGOTIATIONS NOW

 

The owners are asking for an 18% reduction in revenue by the players.  In other words they want to give up 42% of the revenue, not 60%.

The players say that the Owners won't give them all of the revenue figures of each team (true) and they don't believe the owners need a reduction to be financially healthy.  Translation.  We won't take one penny less unless you show us your private books and prove that our salaries are costing you from being financially healthy.

 

 

Typical owner/union stalemate.  But what happens if the teams don't resolve this dispute by March 5 , 2011.

1)  The owners will lock-out every player that has an existing contract under the current CBA. 

2) The owners will get 5 Billion Dollars from the 2011 TV contract.  Even if they don't play.

3) The owners will field teams from players that have been previously cut, the USFL, and the Arena league. It really shouldn't surprise anyone that the NFL was a big supporter of the USFL and that the NFL chanel just signed on to broadcast arena league football games.  These players will probably get paid about 10% of the total cost teams pay now.  Also there will be no pension payments and long term health cost afforded to these players.

4) The present players will be frozen out.  Their pensions will be frozen.  Future health care cost will be in Jeapordy.

5.  Football fans will not be paying for the best football in the world.  Instead they will be told to accept this rag tag football in order to "save the game".  In the meantime each owner will reap the reward of $156,000,000 one time profit for their team.  That is a bonus of 15% of the value of your business.  Just for being that unkind to your customer, the football fan.

 

                                               What then does it do for this year?

 

If you believe, as an owner, that football will be locked out in 2011 than you certainly DO NOT want to pay any up front  signing bonus to a free agent this year.  You want all the one year contracts you can get.  That means go ahead and tender your RFAs to one year contracts.  Use your transition tag and Franchise Tag this year.  Draft choices starting in 2011 will be prime because those players will never have been members of the NFL players association and won't hate you the way current players will.

Quarterbacks like Manning and Brees will be locked up to very long contracts because their stature on the field keeps a fan base alive.  Expect them to have clauses in their contracts to play through the lock-out.

 This could get very,very ugly.  Believe me 1987 and beyond was very ugly.

I don't really side with anyone in this argument.  I really support the fan and think the fan can make a difference in this process.  But this weekend I was amazed to see how truly money hungry the owners are.  In 2008 the NFL fired 150   ( a little over 10%) of their workforce to save money during the recession. They recently announced the Bonus payments to their top staff.  These Bonus's of over 9 Million dollars are more than the wages of 150 people at $50,000 per year.   The commissioner  alone made over  9 Million last year.

 

I hate to say it but I don't expect a league that now has No salary floor and the ability to cut payroll 90% next year to go out and hire expensive players.  Those Free agents your looking at.  Forget it. There will be no market for them.