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SBD/March 2, 2011/Leagues and Governing BodiesPrint All
U.S. District Court Judge David Doty late yesterday overturned a decision that would have allowed the NFL to use $4B in media fees during a potential lockout next year. He said he planned to hold hearings to set damages. Doty's decision comes as the NFL and NFLPA are engaged in federally overseen mediation, which re-commenced near DC this morning. NFL owners also are set to meet today to decide whether to lock the players out with the CBA set to expire at the end of tomorrow. In his 28-page decision, Doty paints a picture of television network execs unwilling to agree to guarantee payments during a lockout, and an NFL that demanded it. "You know you've reached the absolute limits of your power as a major network," Doty wrote one network executive testified, "(when) the commissioner of the National Football League calls you ... and says ... 'We're done, pay this or move on.' ... (The NFL has) market power like no one else, and at a certain point in time, they'll tell you to pack it up or pay the piper." While Doty consistently wrote the NFL had not maximized revenue when it renegotiated its TV deals, as required by the CBA, he never addressed one of the league's core contentions: that the recession limited how much revenue the league could generate when it re-negotiated the deals. He also never addressed the NFL's contention that it had maximized revenues by stripping out digital and in game rights to create Red Zone, which was packaged with NFL Network, thus creating more revenue.
TACKLED FOR A LOSS: Doty's decision, while not unexpected, throws uncertainty into the overall negotiating process and, perhaps most unsettling for the networks and the NFL, exposed many deal terms that they would rather have kept under wraps. For example, Doty found the DirecTV deal particularly egregious and evidence that the NFL undersold its TV deals in '09 to secure payments during a lockout. He wrote extensively about terms of DirecTV's contract. "The extended contract provides that DirecTV will pay a substantial fee if the 2011 season is not cancelled and up to 9% more, at the NFL's discretion, if the 2011 season is cancelled. Of the total amount payable in the event of a cancelled season, 42% of that fee is nonrefundable and the remainder would be credited to the following season." The NFL consistently has said the work stoppage provisions are common in TV deals, but evidence outlined by Doty suggested differently. The old TV deals had language addressing work stoppages, but the league was not guaranteed money as a loan if games were lost. Under the new provisions, they would be. Many of the old TV deals required the NFL to pay for at least three lost games immediately; if the last year of the TV deal was lost to a work stoppage, the money would have to be repaid at the end of that year. Other highlights of Doty's report include: if NBC loses a whole season, its contract is extended by one season with a Super Bowl added; $421M of the $4B in fees do not have to be paid back even if games are lost; DirecTV fought the inclusion of a work stoppage provision; Verizon owes a non-refundable fee if there is a work stoppage. Doty also suggested the lockout provisions were evidence of collusion, though adding that charge was not before him. The NFL has the option to appeal. In a statement, the league said the decision would have no affect on its collective bargaining effort (Kaplan & Ourand, SportsBusiness Journal).
A LOOK INSIDE THE TV DEALS: Under the CBS and Fox contracts set to expire at the end of the '11 season, the NFL "would have been required to repay CBS and Fox that same year if there were a work stoppage." But Doty in his ruling noted under the contracts extended to the '13 season, the NFL "will repay the funds, plus money-market interest, over the term of the contract." If the season is canceled, the "contracts would be extended another season." Doty wrote that NBC's contract through '11 "contained the same work-stoppage provisions as the CBS and Fox contracts." While ESPN's contract was "not set to expire until 2013, the work-stoppage provision was amended." In negotiations, ESPN "requested that the rights fee not be payable if there is a work stoppage, but the NFL rejected the request" (AP, 3/1). In N.Y., Richard Sandomir reports Doty also found that during the negotiations to extend current media deals, the league "offered new rights, like an extra game last season to NBC, without charging an additional fee." With ESPN, the "lockout clause in the contract extension eliminated one from the previous deal that forced the league to pay the network damages if games were not played; in exchange, ESPN received new digital rights for the 2010 season" (N.Y. TIMES, 3/2). Meanwhile, in Minneapolis, James Walsh notes it is "unlikely that Doty's next decision -- on damages -- will come before a lockout could occur" (Minneapolis STAR TRIBUNE, 3/2).
Judge David Doty's ruling yesterday in the closely watched NFL media fees case is "considered a major victory of the union because, at least for now, the owners can't count on having the money to use as lockout insurance," according to Jim Trotter of SI.com. Doty will hold a hearing with both sides, "at an undetermined date, to consider the award of monetary damages and equitable relief to the players -- which could include an injunction that would prevent the owners from being able to use the television revenues." The NFLPA would have been at a "decided disadvantage if the owners had access" to the $4B in NFL media rights fees during a lockout. It is "unclear at this point whether the ruling will spur the sides to come to terms" on a new CBA before the current one expires at the end of the day tomorrow, but it "clearly means the owners could have a harder time addressing their debt services if there is a prolonged work stoppage." Colts C Jeff Saturday, a member of the NFLPA Exec Committee, said last night, "I'm not sure what all that means, as of yet. We haven't been debriefed. We just got the news when we were in the meeting, so I'm sure we'll hear more tonight. But it sounds very favorable" (SI.com, 3/2). YAHOO SPORTS' Jason Cole noted the NFL "downplayed Doty's ruling" yesterday, but there is "little question that the owners are in a much more precarious position." The owners "feeling the most heat are the ones who recently built new stadiums with large portions of their own money or through private financing." A union source said, "The rules just changed. ... The negotiations just got to a more level playing field right now. Paying the debt on those stadiums just got a lot harder for those guys." An NFL source said, "This is a dose of reality for some of the hard-line owners who wanted a lockout. We can still do it, but it’s going to hurt a lot. I think the guys who want peace are going to be speaking up a lot more come Wednesday afternoon" (SPORTS.YAHOO.com, 3/1). CBS' Pete Prisco wrote, "Without that money, you can bet the owners will want a quicker resolution to these talks. The lockout insurance -- the TV money -- was a bullet in their gun. Now they have more empty chambers than they thought" (CBSSPORTS.com, 3/1).
LOCKOUT LESS LIKELY? NFL player agent Drew Rosenhaus in a text message about Doty's ruling said, "I think it increases the incentive for the teams/owners to get a deal done and not place the future of the NFL in the hands of the court system." Another agent said the decision is a potential game changer in the NFL labor battle. Another NFL agent, who did not want to be identified, said: "Because the owners have such overhead and they were banking on having this money, if not shifting the leverage to the players, it is certainly an equalizer." NFLPA Outside Counsel Jeffrey Kessler told SportsBusiness Journal in January that if the union won the case, it could affect whether or not the NFL locks players out. "The football fans, cities and others should hope that the players win this case," said Kessler said in January, "because if we win this case it makes the looming prospect of a lockout by the NFL less likely." Former National Labor Relations Board Chair Bill Gould agreed with that assessment. "I think that is right," Gould said of the impact on the NFL deciding to lock out. "I think it is less likely, how much more less likely, is anybody's guess," Gould said. "At a minimum, unless it is overturned on appeal, it has made the lockout more costly to owners. At a maximum, it may throw the right of owners to lock out into question." Tulane Univ. Sports Law Program Dir Gabe Feldman said, "Doty might give the players a large amount of damages, and more importantly, block the owners from getting the $4 billion, in the event there is a lockout. It gives the players more leverage clearly in that it makes it move difficult to sustain a lengthy lockout. The owners were going to be able to fall back on that $4 billion as a cushion or a war chest” (Liz Mullen, SportsBusiness Journal).
TIME TO GET IT DONE: YAHOO SPORTS' Michael Silver writes if the NFL owners "react to this judicial setback in a rational manner, they’ll lose their hardline bluster and come back to the bargaining table with a renewed sense of compromise." Conversely, once the "buzz wears off" from last night's ruling, NFLPA Exec Dir DeMaurice Smith "and his fellow negotiators should resist the temptation to gloat and instead push for a CBA that bridges the philosophical gap between the two parties." If those "reasonable and logical reactions occur when the two sides meet" this morning, "we’ll soon have an announcement from the camps that they’ve agreed to a short-term extension of the current CBA beyond March 3 -- in the expectation of finalizing a deal over the next week or two" (SPORTS.YAHOO.com, 3/2). ESPN's Andrew Brandt said Doty's decision “could focus the negotiation and push toward, at best, a resolution and perhaps even stopping the clock.” Brandt: “Roger Goodell has to look at his ownership and see if they truly want to lock out the players. DeMaurice Smith has to look at his union leadership and see if they want to pursue this path of decertification” (“SportsCenter,” ESPN, 3/1). Sports attorney David Cornwell, formerly a finalist for NFLPA Exec Dir, said that the ruling has "tactical significance." But he added, "It's highly unlikely that all of the 32 NFL owners put all of their financial eggs in a single basket of getting TV money" (USA TODAY, 3/2).
LONG WAY TO GO: ESPN’s Adam Schefter said of the ruling, “View this as a victory of a big regular-season game that could help determine a divisional outcome. But there’s still the playoffs, and there’s still the Super Bowl. It’s a big win for the players, but it doesn’t end discussions, it doesn’t ensure that the players are going to get their way, it doesn’t mean that there’s going to be a deal this week.” Schefter added some NFL insiders believe the ruling could “even enrage and empower the owners.” Schefter: “We’re headed on the course we’ve been headed on all along, even with this ruling” (“Mike & Mike in the Morning,” ESPN Radio, 3/2). NFL Network's Albert Breer said, "This will be a major leverage point lost for the owners, and a loss of a nest egg for a potential lockout. But remember, owners were expecting this decision, based on their prior history with Judge Doty. They’ve lost a leverage point, to be sure, but this is just one in a series of rulings, and it’s one that you can expect to be appealed" ("NFL Total Access," NFL Network, 3/1).
The 10-owner labor negotiating committee attended this morning’s federally overseen mediation between the NFL and NFLPA, the ninth day of those talks but the first with such a large ownership presence. Giants President & CEO John Mara participated in the talks yesterday, becoming the first owner to do so, but today he was joined by the nine other members of the ownership committee. The CBA expires at the end of the day tomorrow, and the owners at the mediation session will be departing after just a few hours to attend a full ownership meeting in Chantilly, Va., at 3:00pm ET. “The CEC is coming here today to speak directly with the players, to hear directly from the mediator and to report to the rest of the ownership later this afternoon,” said Jeff Pash, the league’s chief labor negotiator, shortly before entering the Federal Mediation & Conciliation Service building in DC. The CEC is the name of the owners’ labor committee. Panthers Owner Jerry Richardson, the committee’s co-Chair, also spoke to reporters before entering the building, and described himself as optimistic a deal at some point will get done. “So far obviously we haven’t been successful but we are optimistic in due time we will,” he said. Pash said the decision last night by Judge David Doty to stop the league from using $4B in media fees during a lockout would have no affect on the league. “It doesn’t change the dynamic for us at all,” he said. “We have been very clear that the television money was a loan -- it’s not a payment, it’s not anything we were counting on. The decision frankly was not unexpected and so it doesn’t alter our planning one iota.”
LEAGUE OPEN TO FURTHER MEDIATION: Pash also said the league would be open to further federal mediation even after the CBA ended “if these mediators, if they are willing, can continue to be a constructive part of that process.” Pash noted an extension of the CBA deadline is still on the table. The owners will assess later today where things stand and make a decision, but Pash added nothing is off the table. The owners on the Management Council Exec Committee (CEC) are Richardson, Mara, co-Chair Pat Bowlen (Broncos), Mike Brown (Bengals), Clark Hunt (Chiefs), Jerry Jones (Cowboys), Robert Kraft (Patriots), Mark Murphy (Packers), Art Rooney II (Steelers) and Dean Spanos (Chargers) (Daniel Kaplan, SportsBusiness Journal). Newsday reporter Bob Glauber said of the committee members attending today's session, “This was a very impressive display. Now was it a show? We’re about to see. ... It could be a positive development" ("ESPN First Take," ESPN2, 3/2). ESPN's Adam Schefter said, “I don’t think anybody is expecting an agreement will happen today or even this week. This only question that remains is whether or not both sides would agree to an extension.” But he added, “It doesn’t seem like an extension is even in the realm of possibility at this point. So it is a bleak set of circumstances” (“SportsCenter,” ESPN, 3/2).
LIKE FATHER, LIKE SON: NEWSDAY's Glauber notes Mara has "been a voice of moderation, similar to the role his late father, Wellington, once played in labor negotiations." But it is "uncertain whether Mara can turn the tide of the talks, because little substantive progress has been made, even with Cohen prodding the sides to come to an agreement on the pivotal issues" (NEWSDAY, 3/2). In N.Y., Gary Myers writes if the NFL was "ever in need of the Mara family once again exerting its influence and steering the league away from dangerous times, this was the time to bring the Giants co-owner to the negotiating table." Seahawks G and player rep Chester Pitts said he was "absolutely" encouraged to see Mara at yesterday's mediation. Myers: "All hell is about to break loose in the NFL if there is not a major breakthrough in the next two days, either leading to a new collective bargaining agreement or enough progress to convince the sides to stop the clock. ... John Mara needs to help pull things together like his old man did, back when the NFL began to assert itself as the most popular and profitable sport in the country" (N.Y. DAILY NEWS, 3/2).
NO NEED TO RUSH: Giants C and player rep Shaun O'Hara last night said that the NFLPA "shouldn't rush into" a new labor agreement, "because any deal struck in the next two days wouldn't be good." O'Hara: "At this point I almost hope we don’t (agree), because I think it’ll be a bad deal for us. ... At this point any deal that we get done in the next 48 hours would probably be a bad deal for us. Let’s get what’s right for us, too." In N.Y., Ralph Vacchiano reported for O'Hara, the "biggest concern is post-retirement health insurance, which he believes won’t be adequately addressed if the union rushes into an agreement" before the CBA expires at the end of tomorrow (NYDAILYNEWS.com, 3/1). Steelers S and player rep Ryan Clark said, "There's not going to be a big push by anyone to take less than what they want at this point. There's time to negotiate and get what's fair. Both sides will continue to work toward what they feel is a fair goal for them" (PITTSBURGH POST-GAZETTE, 3/2).
HOW LATE IS TOO LATE? The WALL STREET JOURNAL's Matthew Futterman writes November appears to be the "point of no return -- the moment when the NFL has to cancel the entire 2011 season." CBS NFL analyst Charley Casserly indicated that it is "hard to imagine the league staging anything less than an eight-game season." Futterman notes pushing the playoffs "back a ways won't be a problem," because February is "perhaps the sleepiest month of the year on the national sports calendar, especially when there's no Olympics." He adds, "Assuming the teams would need a three week pre-season to prepare, D-Day for the world's richest sports league appears to fall in mid-November" (WALL STREET JOURNAL, 3/2). Indiana Univ. School of Law Dean Gary Roberts said, "The deal will probably get done in late August or early September. That's really when the deadline is." Tulane Univ. Sports Law Program Dir Gabe Feldman said, "There has to be some pressure on both sides to make a deal. The pressure point right now is this March 3 expiration. That doesn't seem to have been effective at getting them to make a deal" (INDIANAPOLIS STAR, 3/2). But ESPN's Andrew Brandt said, "Everything is subject to negotiation at this point, everything is on the table. So they can say (the deadline is) not going to be March 4, it’s going to be March 10, March 15, March 20, and continue negotiations. The reason that would happen is if the mediator says to the parties, ‘We’re making a little progress here. Let’s stop the clock. Let’s put everything on hold.’ And that could happen” ("NFL Live," ESPN, 3/1).
CAN YOU FEEL THE DRAFT? In San Diego, Kevin Acee notes a lockout "could be bad news for teams (and their fans) hoping for rookies to make an immediate impact in 2011, maybe even changing their new team’s fortunes with a breakout debut season." One GM who "downplayed the significance when asked about it in an on-the-record group session was candid in an off-the-record conversation at his hotel." His assessment is that a "severely shortened offseason would limit most rookies’ impacts in 2011." Acee: "No minicamp? No offseason coaching sessions? No playbooks in their hands until summer? A shortened training camp? One or all of those scenarios could lead to this being something of a lost rookie class" (SAN DIEGO UNION-TRIBUNE, 3/2).
NFL owners and the NFLPA are "prepared to escalate" their dispute as a new CBA does not appear to be "within reach, at least not soon," according to sources cited by Mark Maske of the WASHINGTON POST. The sources indicated that the players "could decertify their union Thursday, hours before the expiration of the current labor deal, in anticipation of filing antitrust litigation against the owners." Sources noted that the owners are scheduled to meet today and tomorrow in Chantilly, Va., and "could make a final decision then about locking out players as soon as Friday" (WASHINGTON POST, 3/2). In N.Y., Bart Hubbuch reports those involved with the labor negotiations believe that an "extension of the negotiations beyond tomorrow's deadline is the most likely short-term outcome" (N.Y. POST, 3/2). In L.A., Sam Farmer notes a "crescendo is building between two dug-in adversaries who emerged from mediation with no deal in hand" (L.A. TIMES, 3/2).
WHAT'S AT STAKE? In N.Y., Judy Battista in a front-page piece reports NFLPA leaders have said that they "would decertify simply as a way to get players back on the field, and to prevent a work stoppage that threatens the 2011 regular season." If the union does elect to decertify, "owners will face a decision." They could "impose their own rules that would allow the games to continue, a decision likely to expose the league to a series of antitrust lawsuits brought by players that would attack the underpinnings of the current game: the salary cap, the franchise tag that restricts movement of some free agents, and even the validity of some player contracts." The goal would "be less to alter the shape of the game than to create pressure on owners to make a deal by arguing that the rules unreasonably restricted players’ earning power." If the players won, the owners "would be subject to triple damages -- a potentially devastating loss of billions of dollars." If the union decertifies, it would operate as a trade association, and with a "player as a plaintiff, it would immediately file for an injunction from a federal judge seeking to stop a lockout." But Battista notes litigation "could take years and cost substantial amounts of money as it works through the courts." During that time, if there "was no union, there would be no way for players to negotiate on any other issue -- pension, health care, even grievances" (N.Y. TIMES, 3/2).
TWO-DAY WARNING: SI.com's Don Banks noted "no one knows exactly what we're counting down to this week." Banks: "Will it be an NFL-orchestrated lockout that kicks off at that long-awaited hour, effectively beginning the first real labor crisis that the league has faced since the 1987 season? Or will the NFL Players Association move to decertify itself as a union, perhaps blocking the league's owners from shutting down the game? Or will the two sides make enough progress in this week's negotiations to merit stopping the clock, with a temporary extension of the CBA in order to continue working to toward a new deal?" While Judge David Doty's ruling yesterday in the closely watched NFL media fees case is a "victory for the players and gives them more leverage in their showdown with owners, there is some debate whether it will have as much as an impact on leveling the playing field in the negotiations as the union hopes." The ruling is a "blow to the NFL," but it is "not seen as a potential kill shot that immediately changes the dynamics of the ongoing CBA negotiations." League sources "painted the Doty ruling as somewhat expected, and said it would potentially hurt the NFL's bargaining position if Doty locks up the TV money in an escrow account and awards a significant amount of damages to the players." But Banks noted "those key details are not yet known until the hearing before Doty" (SI.com, 3/1).