SBJ/November 14-20, 2011/Labor and Agents

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  • Some revenue likely to remain excluded by any new NBA deal

    While NBA owners and players last week continued to debate the hotly contested issue of basketball-related income, any new labor deal is likely to leave unchanged a formula that last season deducted $500 million before revenue was divided between the two sides.

    Gross basketball-related income last year was more than $4.3 billion. From that, about $500 million was deducted to cover expenses related to generating revenue. The balance, $3.817 billion, is what the players and league then split, with 57 percent going to the players for a $2.176 billion share of compensation.

    The league and union define basketball-related income as money generated from nearly all revenue sources, including ticket sales, local and national television revenue, and local and national sponsorships. Forty percent of income generated from luxury boxes, signage and arena naming rights goes into BRI, as well. But even beyond that, not every dollar of revenue is counted toward BRI. Instead, expenses incurred by the league for generating certain kinds of revenue are covered up to a predetermined percentage of the revenue. The league and players have agreed on these percentages as being the generally expected expense-to-revenue ratios for the streams, and these percentages are not expected to change in the new labor deal being negotiated.

    Specifically, under the expired deal, owners’ expenses were covered for up to 19 percent of the league sponsorship revenue for costs incurred in generating that revenue. The balance of the revenue was then ascribed to the BRI pool and subsequently divided between the owners and players. The owners similarly were covered at up to 22 percent of international TV revenue for related expenses, 34 percent for local sponsorships, and 50 percent for concessions and novelties business. In sum, the expense allocations for the league last year totaled about $500 million, which was subtracted from the total revenue generated before the balance was divided between players (at 57 percent) and owners (43 percent).

    With players in last week’s labor talks discussing a reduction from that 57 percent to a 50 percent share, when these expense-related adjustments are factored into the formula, it means the players’ percentage ultimately would be less than half of gross revenue.

    “The NBA purported ‘50 percent offer’ is actually an offer to pay the players approximately 44 percent of all revenue,” said National Basketball Players Association lead negotiator Jeffrey Kessler in an email last week. “The reason is that more than $500 million of expenses come off the top.”

    NBA executives were not available to comment.

    Expense reductions in calculating what shares of revenue players and owners receive are not unusual in sports. Most notably, NFL players under the CBA that expired in March were told that they were receiving 60 percent of league revenue, but that 60 percent was after expense credits were deducted from the gross. What NFL players were actually receiving was about 50 percent of all revenue.

    The new NFL CBA changes the way expense reductions are calculated; the prior sum of $1 billion no longer comes off the top. Ultimately, the percentage of all revenue that the players will receive will be about 47 percent, but the percentage can go down from there based on credits and deductions designed to increase revenue for both sides.

    While much time was spent during the NFL CBA negotiations changing the economic model of calculating revenue, the NBA talks have not focused on making similar adjustments to their revenue model. Instead, the talks have aimed at the ultimate split of revenue between the league and the players, and the reduction of the players’ share.

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  • NFL argues elements of CBAs pre-empt retired players’ injury suits

    Former NFL players cannot sue the league for playing-related injuries because those ailments were covered under previous collective-bargaining agreements, the NFL is contending in two separate lawsuits brought by retirees.

    The league’s legal argument emerged last week in a Pennsylvania federal court in the NFL’s response to seven former players who in August became among the first retirees to sue the league for injuries they say they suffered during their playing days. The players — among whom is former Super Bowl-winning Chicago quarterback Jim McMahon — contend the league hid the true severity of their injuries from them and from all players.

    The NFL last week responded that, “Plaintiffs’ claims are … preempted because they rest on purported obligations that arise under the CBAs,” referring to the labor deals in place while the plaintiffs competed.

    The players contend, the league continued, “that the NFL failed to implement adequate rules and regulations regarding player health and safety, and failed adequately to enforce those safety-related rules that it did promulgate. The CBAs, however, expressly delineate the obligations of the NFL with respect to both the promulgation and enforcement of health and safety-related rules for NFL players.”

    The NFL is using the same line of defense in a lawsuit brought in a California federal court by dozens of former players. Last week, those players filed to have the case removed to a state court. The request was made so as not to have to contend with federal labor issues, therein spotlighting a labor law defense from the NFL.

    “The logical conclusion of permitting Defendants to hide behind the CBAs is to provide the NFL with a free pass to create an unsafe working environment,” the motion by the retirees to move the case to state court said.

    The lawsuit, which includes spouses among the plaintiffs, also names equipment makers Riddell and Easton-Sports as defendants. The McMahon lawsuit only names the NFL.

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  • No league discipline for players investing in Ala. bingo parlor

    Liz Mullen
    The NFL will not discipline players who invested in what was supposed to be a gambling-style bingo parlor in Alabama, an NFL spokesman said last week.

    Yahoo! Sports reported in June that at least 25 current and former NFL players had invested in the project in Dothan, Ala., and that the players might face discipline for violating the league’s policy against NFL employees associating with any gaming operation.

    Greg Aiello, NFL senior vice president of public relations, said in an email last week, “The bingo parlor never came to fruition. Therefore, there was no basis for any action by our office.”

    Meanwhile, some of the players who invested in the project — which was first called Country Crossing and has since been renamed Center Stage — have been trying to get their money back through the courts.

    Owens filed suit over his investment in what was billed as a gambling-style bingo parlor.
    Photo by: GETTY IMAGES
    The entertainment development is in operation and is operating bingo games, but the games are not the high-profit-margin, gambling-style games players believed they were investing in.

    Free agent wide receiver Terrell Owens filed a lawsuit late last month in a Palm Beach County, Fla., state court against his attorney, Pamela Linden, and her law firm, Greenberg Traurig, alleging negligence and breach of fiduciary duties over his investment of more than $2 million in the project. The lawsuit contends that Linden organized a limited liability company that Owens used to invest in the project.

    Greenberg Traurig, in a statement on behalf of Linden and the firm, said, “We did not represent Mr. Owens in the investment referenced. To the extent we represented him in other matters, the facts will show the firm and its attorneys acted faithfully and appropriately at all times.”

    The lawsuit also states that Owens’ financial adviser, Jeff Rubin, and other employees of financial advisory firm Pro Sports Financial, where Rubin was president, told Owens about the investment and promised him a 15 percent rate of return on his investment and that it was unique to Alabama because it would run a high-profit-margin electronic bingo operation.

    Rubin and Pro Sports Financial are not, however, named defendants in the lawsuit.

    However, another NFL player, Buffalo wide receiver Roscoe Parrish, has a $525,000 judgment in a state court in Broward County, Fla., against Rubin, Pro Sports Financial and Ronnie Gilley Properties, the developer of the project. The judgment was entered against them in June.

    Attorney Michael Simon represents both Parrish and Owens, but he declined to comment on the litigation.

    Patricia Christiansen, Rubin’s attorney in the Parrish case, said Rubin is not going to appeal the judgment and that Florida-based Pro Sports Financial is no longer operating. She said Rubin shut down Pro Sports Financial several months ago to run Center Stage on a full-time basis.

    Rubin did not return messages left for him at Center Stage.

    Said Christiansen, “All I know is [Pro Sports Financial] is out of business,” adding that the NFL player clients of the firm have “gone to other advisers.”

    PRIORITY, OCTAGON SIGN NFL PLAYERS: Priority Sports & Entertainment agent Deryk Gilmore has signed New York Jets guard Brandon Moore. He was previously represented by NFL player agent Hadley Engelhard. … Washington Redskins running back Ryan Torain has signed with Octagon football agent Sean Howard. Torain most recently was represented by Lamont Smith, and earlier this year he was represented by Jack Scharf.

    Liz Mullen can be reached at lmullen@sportsbusinessjournal.com. Follow her on Twitter @SBJLizMullen.

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