Roger Goodell is the commissioner of the most popular and wealthy sports league in America, but he said yesterday the NFL would face economic hardship under the existing labor agreement with its players.
Goodell praised a unanimous vote by team owners to opt out of the deal agreed upon after the 2006 season, setting the stage for a possible season without a salary cap in 2010 and a lockout in 2011.
“We’ve had two years now of operating under the new deal. … Clearly the economics are not working for the owners,” Goodell said. “I think it’s a very clear signal that the ownership doesn’t believe this deal is working and that it’s important for us all to sit down at the table and address the matters that aren’t working for the ownership.”
The NFL is not exactly crying poverty, nor should it. Its annual revenues are more than $8 billion, more than any other sports league, while the median profit margin for teams as recently as 2006 was nearly 9 percent, according to Forbes magazine.
But things have changed, according to Goodell and team owners. The new labor deal requires the league to disperse nearly 60 percent of its revenue to players, the highest percentage among major professional sports. Teams have increasing debt loads related to the construction of new stadiums. And like many companies, teams are facing tougher economic conditions across the board.
“Clearly we have been investing more in stadiums, and the cost of generating that revenue has become more significant,” Goodell said. “And it’s clear what we’re going through from an economic standpoint. That creates more risk into the marketplace.”
The NFL Players Association has dismissed the league’s claims; at one point last week, NFLPA executive director Gene Upshaw referred to the owners as “greedy.” But yesterday he suggested there is enough time for a new agreement to be negotiated.
“All this means is that we will have football now until 2010 and not until 2012,” Upshaw said in a conference call, according to the Associated Press. “We will move ahead. This just starts the clock ticking. If we can’t reach agreement by 2010, then we go to no-man’s land, which is 2011.”
What’s surprising, according to some observers, is that the NFL would risk labor peace in the first place. It is the lack of a work stoppage, after all, that has been credited with the explosion of growth in the sport over the last 20 years. That peace has fostered long-term, record-setting television contracts, television ratings that regularly dominate those of even the most popular programs and sold-out stadiums in nearly every city.
“The NFL has pioneered the idea that league prosperity and franchise values skyrocket with labor peace,” said Stephen Ross, a professor of law at Penn State University who has written on the topic of labor law and sports. “They’ve always believed that you’re better off sharing your profits with your workers from a bigger pie than risk shrinking the pie but getting a bigger piece.”
Ross also said cries of economic hardship historically appear only after teams record hefty losses.
“Usually, there’s red ink running,” he said. “What’s puzzling to me is you don’t see red ink running.”
Labor experts said the league is taking the unique step of acting before problems become too severe. The NHL, for instance, imposed a lockout only after many teams in the league reported losses of tens of millions of dollars each year.
“I have no doubt there’s a proactive aspect to this,” said Robert Kheel, a lecturer at Columbia Law School and partner at the New York firm of Willkie Farr & Gallagher specializing in sports and labor law. “Teams may be making money, but if you put your money in a savings account, you might make 4 or 5 percent. The question is whether the return is economically rational.”
Indeed, not every team is making big money. Small-market teams, such as the Jacksonville Jaguars and Buffalo Bills, have long cried out for greater revenue sharing. Which is why, according to some analysts, this latest battle is more related to tension between owners than tension between the league and the NFLPA.
“It’s ’can we resolve the differences amongst each other by passing the costs on to somebody else?’ ” Ross said.
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