SBJ/20090817/Special Report

League wants to deduct more costs from revenue

Even as the NFL and the NFL Players Association have begun collective-bargaining talks more than a year and a half ahead of the March 2011 CBA expiration, hopes for an early deal seem to be vanishing.

The NFLPA’s negotiating team, led by NFLPA Executive Director DeMaurice Smith, and the league’s team, led by chief legal officer Jeff Pash, have held two formal negotiating sessions in the last two months, but league negotiators have not “come forward with a serious proposal so that we can begin fruitful negotiations,” said NFLPA outside counsel Jeffrey Kessler.

“While De remains optimistic that the parties can reach a deal this year, thus far the owners have apparently not been in a position to … move the ball forward.”

NFL players have said publicly in the last few weeks that they expect to be locked out. And last month, the union posted on its Web site a story in which Smith told players in locker rooms that “I am absolutely convinced that the default plan is to lock us out in 2011.”

NFL officials say the league doesnot want to talk lockout. “I don’t know what [Smith] is telling players … but we are a long way from anything,” Pash said.

What the NFL does want to talk about is what it sees as a need for a new economic system. The salary cap, which gives NFL players a percentage of NFL revenue, has been the basis for 15 years of labor peace, but Pash said it is no longer working.

Things have changed for the league since 1993, when it began using a cap, he said. Among them: NFL stadium projects are less likely to get public funding, and the costs of attracting and maintaining corporate sponsorship partners are rising.

DEADLINE: 3/2011

Multiple sources said what the NFL is looking to do is have players recognize some of those costs by deducting them from the total revenue figure that is divided between players and owners under the current CBA. The NFL now gets credit or deducts for certain costs, but the league is looking for more. Sources asked for anonymity because they were not authorized to speak publicly about CBA negotiations.

“We do believe that the system has to account for the costs associated with making investments that generate revenue, which certainly includes stadiums,” Pash said. “If we can promote a pro-growth, pro-investment economic structure, players will certainly earn more money under a new system, not less.”

Pash did not elaborate on how players would earn more if they pay more of the upfront costs, but sources said gains could come in the future if players, instead of taxpayers, shoulder some of the costs of building new stadiums that generate more revenue. The salary cap might even go up under the system, but players’ share of the revenue — which is now about 60 percent — would go down, sources said.

The NBA is also advocating that a new system be found, but NBA Commissioner David Stern announced in July that fewer than half of the NBA’s 30 clubs are profitable. The NFL’s selling job may be more difficult.

“We are not contending that the NFL is not a profitable business,” Pash said.

One issue that has come up early in the NFL negotiations, as well as with the NBA, is the question of financial disclosure by the owners. Unlike the NFL, the NBA has pledged to fulfill the players’ request for financial disclosure. “We think if you are saying to your players you want a different model, the best way to get there is to share the data,” Stern said.

 Smith says financial disclosure is the first step in making a deal and the best way for the league to demonstrate whatever financial hardships it may be facing. “It seems to me that if they are not pleading poverty, what is it?” Smith asked.

Pash noted the NFL has extended the CBA five times without providing the audited financial statements the union is seeking. “Agreements can get done, and there is substantial history to support that,” Pash said.

As Smith has begun negotiations for a labor deal, he says, he also has planned strategies to combat a lockout, including decertifying the union.

If the NFLPA were able to decertify, players would be allowed to bring an antitrust lawsuit to challenge any lockout as a group boycott, as well as sue for damages, a strategy that has worked for the NFLPA in the past.But the NFL is expected to challenge any decertification under existing law, and a future U.S. Supreme Court decision could provide another roadblock. The Supreme Court has agreed to hear a case brought by former NFL licensee American Needle against the league, and if the court rules that the league is a single entity rather than 32 businesses competing with one another, the players could lose the ability to sue under certain antitrust laws, making decertification a less attractive option. (However, labor law experts say a broad Supreme Court decision for the NFL that applies to labor is unlikely.)

Smith has other strategies he wouldn’t elaborate on, but one of them may involve Congress. The day after the league and the union had their second bargaining session in July, Smith and about 20 players went to Capitol Hill to talk to lawmakers. Smith has indicated that the NFL’s antitrust exemption to sell its broadcast rights on a pooled basis could be an issue.

“If you are using that monopoly status to get television contracts and you are using that monopoly status to share revenue and that status is a gift to you from the American people, the question is, should you be allowed to use those gifts to hurt the businesses that would be affected in a lockout?” Smith said.

Former White House press secretary Ari Fleischer, who now runs his own sports PR firm, said Smith’s trip to Congress was “an aggressive move,” especially since the two sides are in the early stages of bargaining.

Sports and Congress can be a double-edge sword, because legislative gains can be offset by public perception that lawmakers have more important things to do than regulate sports, Fleischer said, but “showing a flair for bold, political public relations is an interesting tactic.”

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