SBD/February 4, 2011/Leagues and Governing Bodies

NFL Reportedly Would Not Use Media Fees Until Lockout Season Two

The NFL is not budgeted to use the $4B in media fees that are at the center of a bitter dispute with the players union until a potential second year of a lockout, according to two well-placed sources. The NFLPA said it would appeal to a federal district court judge a special master’s decision this week allowing the NFL to use those funds in the event of a lockout, which could begin as early as March 4. However, the NFL is not planning to tap the media money until March '12, if necessary, the sources said, apparently making the outcome of the appeal largely moot in the context of the heated labor debate. Most observers expect the league and union to reach a new labor deal long before spring '12. The NFL declined to comment for this story, but last month the league’s Exec VP/Business Operations Eric Grubman told reporters, “There are a lot of risks we account for, and to prepare for them, we line up sources of capital. (The TV money) is only one. We have other sources of capital that we lined up to account for any risk that we can think of that might face the league.” The union has aggressively challenged the league’s control of the money, charging that the NFL negotiated below-market rates for the broadcast deals in exchange for a promise that the money would flow whether games are played or not. The league is required to maximize revenue under the CBA. Underlying the charge, of course, is that the money is critical for keeping the owners afloat during a labor disturbance. “Now for the good news: The NFL, until the appeal in Minnesota, has $4 billion to not play football next year. VICTORY!,” union spokesman George Atallah tweeted after the decision on Tuesday. Atallah did not reply for comment for this story. The district court the NFLPA said it would appeal to is in Minnesota.

UNION DUES: The NFL already is building a $900M lockout fund, seeded with national revenue the league has held back from teams along with savings from teams not paying players non-health care benefits last year. Under terms of the CBA, the teams’ obligation to pay these benefits, such as life insurance or pension-plan payments, ceased with the expiration of the salary cap last March. The union spent heavily to lobby its case with the special master, Stephen Burbank, who under the CBA hears disputes between the sides. The NFL said the union spent twice the more than $6M Burbank awarded the union in his ruling, a penalty tied to what he judged as the mistiming of whether some TV money should have been counted in '10 or '11. The union used two law firms to argue its case, a source said: Dewey & LeBoeuf, its longtime legal adviser, as well as Latham & Watkins, a firm that has previously employed current NFLPA Exec Dir DeMaurice Smith. The NFL has emphasized that the TV money at issue has to be repaid, with interest, after games resume, presuming some of the '11 season is lost. Grubman, speaking last month, said to think of the money as debt. “This is cash money lost we can’t spend,” he said. “We have other sources we can tap, not just the money that is the subject of the (special master).”

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