Over the past twenty years, the National Football League (NFL) has seen its product grow and blossom into America’s premier fan viewing sport. The NFL currently has 31 franchises in cities located throughout the United States. Some teams are located in major markets like New York and Chicago, while some teams are have put down their roots in smaller markets like Kansas City and Indianapolis. No matter how big the market or how poor the teams performance is on the field, one thing is constant, the NFL, the NFL owner, and the NFL players are making millions upon millions of dollars playing a game.
The NFL is a money making machine. The kind we all wish we could operate or own. Every week the NFL rakes in the profits. Wherever there is money to be made, rest assured there is greed rearing its ugly little head.
This project focuses on the 2011 NFL Lockout and the negotiations that eventually led to a new collective bargaining agreement (CBA) that was signed in July of 2011.
(ESPN website, n.d.) On March 11, 2011 the current CBA expired and without a new agreement in place, the NFL owners officially locked out the players. Players were not allowed to use team facilities or be anywhere on team owned grounds. This did not come as a shock to the players for they were well aware of the pending expiration of the old CBA. The NFL Players Association (NFLPA) and the NFL owners had signed an extension for the previous CBA in 2006 with an option for either the owners of the NFLPA to opt out of the extension after the 2008 season.
The owners took the opportunity to opt out of the extension with a unanimous vote by the owners. At that time, the owners and players were aware that the current CBA would terminate on March 11, 2011 and that with no deal in place there would be no other option than a work stoppage. Due to neither side being willing to compromise or even negotiate a new deal before the expiration of the old CBA, the NFL experienced a long and ugly lockout that caused many to fear the worst from a fan and financial perspective, an entire lost NFL season. (ESPN website, n.d.)
Each year in the NFL, the profits total nearly $9 billion, which has to be divided between the owners and the players. Before the money is divided, the owners’ automatically take an agreed upon $1 billion off the top which goes to cover miscellaneous expenses incurred while operating an NFL franchise. When the NFL owners signed the previous CBA in 2006 they agreed to pay the NFL players a 59.6 % share of the revenues after the $1 billion is paid to the owners. This payment to the players comes in the form of the salary cap. In 2008, the owners felt like the NFLPA was getting too big of a piece of the profit pied and they wanted out of the deal.
The owners based their claim and decision off of inflation in our economy and higher utility costs incurred while operating their teams. (Oestmann, 2011) The owners have proposed that instead of the $1 billion that is taken off the top immediately, that they receive $2.4 billion off the top for their miscellaneous operating expenses. The owners still wish for the players to be compensated but they have decided that the profit pie needs to be a bit smaller before the players get their hands on it. This increase in pay to the owners means an 18% decrease in pay to the players. (Oestmann, 2011)
In the current state of the NFL, more owners have to assume the risks of stadium ownership and upgrades as it becomes increasingly difficult for an owner to receive public funding for their stadiums. For instance, Jerry Jones had to loan the money to pay for his billion-dollar Cowboy’s stadium in Dallas. That is a lot of risk and responsibility for the owner to have. The owners use this as an example to show the NFLPA to say that the players should begin to assume some of the same risks that the owners must assume since they are profiting from the owners risk so much. (Oestmann, 2011)
When the NFLPA was advised that the owners wanted them to receive an 18% decrease in pay and profits sharing it did not go over very well. I could not imagine the thoughts that would go through my head if my boss came to me and said, “Thank you for making me billions and to show you how much I appreciate it, I’m cutting your paycheck by 18%.” The players did not buy into the stance by the owners that they should assume risk along with the owners. The players felt as if they were just that, players. The NFLPA stance was that they were not stockholders in their teams and that they were just employees who were major assets to their employers. (Oestmann, 2011)
When dealing with the risks involved in the NFL, many would argue that they players assume the most risk. Owners stand to lose millions of dollars but the players stand to lose their lives or the ability to lead a normal healthy life. The NFLPA made it known that the players know the risks and dangers associated with playing NFL football and they gladly accept those risks for the reward and the owners should be no different. The NFLPA believed that the owners know the risks involved in owning an NFL franchise and that they should navigate ownership without putting some of the responsibility off on others. (Oestmann, 2011)
Although the NFLPA and the owners representatives met several times leading up to March 11, 2011, negotiations had stalled to say the least. As a matter of fact, the negotiations could not even get off the ground due to both sides unwillingness to compromise. The negotiation meetings had become quite contentious and on February 17, 2011 the NFLPA and the owners representatives met to discuss a new CBA under the oversight of George H. Cohen. Cohen was the director of the Federal Mediation and Conciliation Service and her served as a mediator during that negotiation meeting. Obviously that meeting was unfruitful and the NFL continued to barrel toward a work stoppage. (ESPN website, n.d.) On March 11, 2011, when the current CBA expired, the NFLPA decertified.
The players voted on decertification for the sole reason of disbanding the union which gave the players the opportunity to sue the NFL owners for antitrust and hindering their free trade. As a result of the decertification of the NFLPA, 10 players filed suit for antitrust violations. (ESPN website, n.d.) Over the course of the next several months, instead of having serious negotiations about signing a new CBA, the NFL owners and the players were caught up in a court battle over the legality of the lockout. The decision to lockout the players was overturned and then reinstated by separate appeals courts. Ultimately the courts ruled that the owners had the right to lockout the players. This was a major feather in the cap for the owners and their efforts against the players. (ESPN website, n.d.)
Over the course of the next several months, instead of having serious negotiations about signing a new CBA, the NFL owners and the players were caught up in a court battle over the legality of the lockout. The decision to lockout the players was overturned and then reinstated by separate appeals courts. Ultimately the courts ruled that the owners had the right to lockout the players. This was a major feather in the cap for the owners and their efforts against the players. (ESPN website, n.d.)
After months of stalled negotiations and really no progress what so ever, the owners and the players representatives finally came together and worked toward a solution. The driving force and target point for both sides in this negotiation was money. The owners wanted more and the players did not want to lose what they currently had. Other issues were negotiated in this lockout that were not the focal point but were used as leverage by both sides. The players wanted to increase benefits for pensions and wanted to see more money devoted to players’ safety and medical research to prevent further injuries. The players wanted to change the Franchise Tag rules that were in place as well as their rights to Free Agency. The owners wanted to see a lower salary cap, lower rookie contract limitations, and to keep the Franchise Tag rules in place. These negotiations were more of a distributive style of bargaining than an integrative style.
Although both sides were involved in the negotiation process, both sides had target points, points of contention, and their resistance point. As far as the resistance point, I am not sure that either side was willing to go as far as to cancel the entire 2011 season just to prove their point. The owners could afford to wait the players out but the backlash from the NFL fans would be hard to overcome financially. The players could not afford to wait the NFL owners out. Although most NFL players are multi-millionaires, it is widely documented how poorly the majority of NFL players decide to spend and invest their paychecks. The players also understood that they have a limited shelf life and that a season missed means that they will be a season older. During the negotiations, both sides made offers and counter offers. Unfortunately, those offers were not made available. Eventually both sides made concessions as described in the section of this paper titled, “Terms of the new CBA”.
In the days, weeks, and months leading up to the lockout, many people speculated as to the ramifications and financial losses due to the NFL lockout. The average NFL fan does not live in cities where their favorite team, or any team for that matter, is located. That is said to keep in mind the fact that the average fan is not aware of how adversely a work stoppage in a major sports league can effect the local economy for that host city. This section will discuss some of the financial losses and the total economic impact that a potential long and drawn out NFL lockout could have on the cities that host NFL franchises. In a April 2011 article titled, “The Economic Impact of the NFL Lockout”, Lewis Howes reports that in a study conducted by ESPN, it was estimated that the NFL’s gross loss from lost revenue could total $1 billion by September 2011. Howes breaks the losses down in increments starting in March with an estimated gross loss of $120 million. If the lockout continues into August the estimated loss rises to $350 million. The loss reaches its highest estimation in September at $1 billion in lost revenues. The reason for the astronomical number in September is based on the scheduled start of the NFL regular season. (Howes, 2011)
The ESPN study breaks down the loss based on not just the money lost in ticket sales. The study focuses on the salaries lost of employees for each franchise plus the financial losses felt by local businesses, like sports bars, who depend on the Sunday game crowds. The study shows an estimated loss of $160 million per city. When you realize that there are 31 NFL cities, that brings the financial losses by the franchises and local economy to $4.9 billion if the entire NFL season is lost and a new CBA can not be agreed upon. (Howes, 2011) The 31 NFL franchises will lose $400 million in total per week from lost ticket sales. Over 3,000 seasonal jobs could be lost in each NFL city if the negotiations are not successful. Taxpayers in cities where NFL stadiums were built and publicly funded by taxpayer dollars may see an increase in tax to cover the lost revenues earned from game day proceeds. (Howes, 2011) Las Vegas has reported an estimated loss of almost $850 billion in lost wagers and earnings if the lockout continues throughout the 2011 season.
Sports bars report that, on average, 20% of their weekly sales come from game day viewing hours. Most bars in NFL cities report that 33% of their yearly sales come from game days. The food industry is estimating a loss of almost $250 million in chicken wing sales just from missing Super Bowl Sunday alone. If you were curious, the food industry estimates that 1.25 billion chicken wings are sold and consumed on Super Bowl Sunday. (Howes, 2011) Even though NFL football is a game, and to some a child’s sport that grown men play, I caution you in thinking that it is just a game. It is not just a game. It is a major industry that fuels the economy in at least 31 cities across the United States. The numbers would be even greater if it were possible to estimate the loss of jobs, salaries, and revenue felt by all the cities and towns across our nation filled with avid NFL fans who regularly visit their local bars or order food to go just to sit and watch a game with their buddies. The NFL is big business. The bottom line is that we cannot afford for these negotiations to be unsuccessful.
After a long and drawn out negotiation process and NFL lockout that lost millions in revenue for the NFL, an agreement between the owners and players was finally reached. Concessions were made on both sides but the new collective bargaining agreement addressed the needs and concern of both the owner and players. (“NFL Owners’ CBA,” 2011) The owners were able to drop the salary cap to $120 million, which is less than the previous cap of $128 million. Along with the new salary cap each owner is required to spend at least 89% of the new salary cap on player salaries. This is a win for both sides. The wealthier owners, that spent more, and now saving $8 million per season. The downside for owners that spent less, is that they are forced to spend at least $106 million in players salaries now.
The players are appeased with the required minimum spending because small market teams, like Kansas City and Buffalo, are forced to devote more money to paying players. (“NFL Owners’ CBA,” 2011) The new agreement provides the owners with a larger share of revenues than the previous deal. The owners now receive 53% of revenues as opposed to their previous 47% share. This was a major contention point in the negotiations but concessions made by the owners on retirement benefits and minimum spending aided the owners in taking back the majority of revenue sharing from the players. (“NFL Owners’ CBA,” 2011) The owners and players agreed upon lowering the rookie salaries. This is a major win for both veteran players and owners. The days of signing a number one pick, such as infamous draft bust Jamarcus Russel, to a 6 year $61 million contract with $32 million guaranteed without ever playing a snap in the NFL are over. (“Jamarcus Russell Contract,” 2007)
The maximum rookie contract is now four years with an option to add a fifth year. The saved money from rookie contracts is now devoted to retirement and medical benefits. The only loser in this part of the deal is the NFL rookies. (“NFL Owners’ CBA,” 2011) Aside from the revenue sharing percentages, the other major issue which lead to the lockout was player’s safety and retiree benefits. Under the new CBA, the preseason workouts have been altered. Offseason Team Activities (OTAs) have reduced from 14 workouts to 10 workouts.
Full contact practices have been limited during the preseason and the number of days off for players has also been increased throughout the preseason and regular season. Players have also been given added injury benefits under the new CBA, which was very sought after by the player’s representatives during the negotiations. Possibly the greatest victory in the entire process went to the retired players. Over the next decade, between $900 million and $1 billion dollars will be devoted to retiree benefits with $620 million of those funds devoted specifically to a “Legacy Fund” which increases pensions for those players that retired before the 1993 NFL season. (“NFL Owners’ CBA,” 2011)
The following is the proposed new collective bargaining agreement (CBA) that the owners agreed upon and was later agreed upon by the reformed NFL Players Association (NFLPA).
The fixed term of the agreement covers the 2011 through 2020 seasons and includes the 2021 draft.
In summary, the NFL CBA that was signed in 2006 expired on March 11, 2011 without a new CBA in place. The expiration of the CBA caused the NFLPA to disband and the NFL owners locked out the NFL players. With the 2011 NFL season hanging in the balance, the owners and players’ representatives spent almost four months in heated negotiations before agreeing to a new CBA that will last through the 2021 season. The NFL was able to resume their operations and the lockout was lifted on July 21, 2011.
The NFL was able to avert a major disaster by ending the 2011 lockout and resuming with the regular day-to-day operations of the NFL. The projected financial losses were great and would have been felt by the NFL communities for years to come. Jobs were saved and so was the game of professional football in our country. Negotiations were heated at times but in the end a solution that appeased both sides was reached. The new CBA is in place until 2021. In that timespan, millionaires will make many more millions and billionaires will make many more billions.
Some may say that the players won the battle because they did not lose any more money off the top before revenues are split and they gained better benefits for pensions and retirees. Others may say that the owners won because they lowered their expenses, which means greater profits in the long run. I would venture to say that the real winner in this negotiation is the small town business owner in an NFL city or a training camp city. The losses from a missed NFL season could have meant the loss of a family business that depends on the revenues from their local NFL franchise. The little guy gets overlooked quite often, and even though the little guy wasn’t part of the negotiations, the little guy definitely came out on top this time.
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