SBJ/December 12-18, 2011/Labor and Agents

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  • Early signs don’t point to big increase in NFL early entries

    Liz Mullen
    After the new NFL collective-bargaining agreement was completed in August, agents predicted there would be an onslaught of underclassmen entering the NFL draft. As it turns out, that may not be the case — at least, not yet, based on one of the earliest indicators.

    Some agents said last week that, compared with recent years, more college underclassmen were seeking grades from the NFL College Advisory Committee on whether they would be drafted into the NFL. Agents have been predicting that more underclassmen will declare for the draft because of the altered rookie pay system in the new CBA.

    However, NFL spokesman Greg Aiello said in an email early last week that the numbers at this time don’t show an increase in underclassman activity.

    “There is nothing to support that conclusion to date,” Aiello said. “The number so far is consistent with previous years and below the number of some years.”

    The earliest an underclassman can apply for a grade is after his last regular-season game. Friday marks the deadline to be guaranteed of receiving an evaluation. Aiello would not provide the number of players who have applied for an evaluation, but he said it was about the same as it has been for two of the last three years, fewer than it was two years ago.

    In the past, many players would opt to stay in school another year instead of coming out because improving their draft status from a projected late-first-rounder to a top-10 pick would mean millions of dollars. While a difference remains, one agent last week said that difference between being a high-first-rounder and a low-first-rounder is now about $7 million to $12 million, compared with $9 million to $21 million under the old CBA.

    This agent, and others, said it is more important than ever for players to be able to negotiate a second NFL contract in order to be financially set for life. Getting into the NFL, even as a lower draft pick, would put the player one year closer to that second-contract negotiation than if he stayed in school.

    The agent said he had heard from NFL scouts that a lot of underclassmen were seeking grades.

    Another agent said that he too had heard more underclassmen were looking for evaluations from the NFL, although it had nothing to do with the CBA. “Why not?” said this agent. “The people who are grading are the decision-makers. This gets you on their radar screen.”

    Each NFL team is represented on the committee.

    Agents requested anonymity, saying they did not want their interactions with college players made public.

    Of course, underclassmen can and do declare for the draft without receiving an evaluation.

    In this year’s draft, 56 underclassmen declared, 43 were drafted and eight of those players were drafted in the top 10 slots. In 2010, 53 underclassmen declared, 46 were drafted and five of those players went in the top 10.

    SIGNINGS FOR ROSENHAUS, SCHWARTZ & FEINSOD, PREMIER: NFL agent Drew Rosenhaus, whose agency, Rosenhaus Sports, is based in Miami, has signed four players from his alma mater, the University of Miami, including wide receive Tommy Streeter. Rosenhaus also signed defensive tackle Marcus Forston, linebacker Sean Spence and quarterback Jacory Harris. … NFL agents Neil Schwartz and Jonathan Feinsod have signed Boston College cornerback Donnie Fletcher for representation in the draft. … Premier Sports & Entertainment has signed University of Arizona cornerback Trevin Wade for representation in the draft. Agents Michael Hoffman and Gary Uberstine will represent him.

    MAXX SIGNS BROADCASTERS: Maxx Sports & Entertainment has signed ESPN broadcaster Bomani Jones and former Telemundo broadcaster Jorge Andrés for representation. Jones and Andrés will be represented by agents Mark Lepselter and Michael Klein.

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

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  • NHL, union at odds over escrow refunds

    As the NHL and the NHL Players’ Association prepare to negotiate a new collective-bargaining agreement, a dispute over player escrow from last season continues to escalate, with the league and union disagreeing last week about whether the union asked the league to release millions of dollars to players.

    Players put 12.4 percent of their 2010-11 salaries, or about $200 million, into escrow, and the NHL agreed that they should get about 8.4 percent back. Normally, players get their escrow refunds from the previous season in October, but this year, the NHLPA took issue with the NHL’s calculation of how much is due back to the players.

    The amount of money in dispute is a small portion of the $200 million, sources said, with both 1 percent of total salaries or a total of $25 million being referenced.

    Daly
    NHLPA Executive Director Don Fehr, in a letter to agents in October, said the amount in question could amount to “many millions of dollars” to players. NHL Deputy Commissioner Bill Daly, when asked last week how much money was at issue, said, “Hard question to answer. I don’t think it amounts to 1%.”

    Beyond that, however, Fehr in his letter to agents said that the union had asked the NHL to release the amount not in dispute to the players while the two sides work out a resolution on the contested amount, and that the league refused. Daly last week said the union had never asked that the undisputed money be released to NHL players. “No, we never received a request to distribute escrow,” Daly wrote via email in answer to questions submitted by SportsBusiness Journal.

    The dispute over the escrow funds affects not only money due to the players, but also money due to low-revenue NHL clubs, as a large portion of the escrow that does not go back to the players goes to those clubs as part of the league’s revenue sharing.

    NHLPA spokesman Jonathan Weatherdon said last week that the union made verbal requests on two occasions for the NHL to release the money not in dispute to both the clubs and the players. Daly, however, said via email, “I don’t recall any conversation related to interim payment being made to the players.” He added, however, that he does recall that sometime in late September or early October that the union suggested releasing some of the money to the clubs for the purpose of revenue sharing, but not to the players.

    “We said, ‘Thanks, but no thanks,’ because the CBA expressly contemplates that we come to a complete and final resolution of all outstanding issues before anything is distributed,” Daly wrote.

    The dispute, sources said, relates to what the NHLPA contends is revenue that three clubs — Washington, Nashville and Phoenix — should have counted as hockey-related revenue, or HRR, but did not. The NHLPA had no comment on that point. Daly, via email, declined to specify any points of disagreement, noting that there are “a large number of open issues regarding a large number of clubs — as there are every year.”

    Fehr
    Fehr, in his letter to agents in October, wrote, “The [escrow] reconciliation process is normally completed in October. This year, however, we have a number of unresolved disputes with the owners concerning the proper calculation of HRR which potentially amount to many millions of dollars. In short, we do not agree that HRR as currently calculated captures all revenue from which players are entitled to share.”

    Fehr also wrote, “However, recognizing that this process will delay both escrow payments to players and revenue sharing payments to the teams, we proposed making an interim distribution to both teams and players in the immediate future, and then make final distributions once the final reconciliation is concluded. However, the League did not agree to this approach, meaning that no distribution can or will take place until the open issues are resolved.”

    A number of news outlets reported around the time of the Fehr letter to agents, which was dated Oct. 14, that the union had asked that the money be released to players and the NHL refused. Daly last week called those reports inaccurate.

    The escrow provision was agreed to as part of the current CBA, which ended the 2004-05 NHL lockout and the purpose of which is to ensure that players receive an exact percentage of HRR. Ever since it was put in place, NHL players have made it clear they do not like the escrow system, but it is not clear whether they will seek to get rid of it in the next CBA.

    Fehr has said he expects to begin negotiating the new CBA after the All-Star Game on Jan. 29.

    Player-side sources said last week that the dispute regarding the escrow has raised tensions between the two sides.

    Daly, when asked whether the dispute could hurt negotiations for a new labor deal, said, “I don’t [see] any impact on CBA negotiations.”

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  • Buffalo Sabres owner Pegula buys France AllPro, moves into the sports agent business

    When billionaire oil and gas entrepreneur Terry Pegula bought the Buffalo Sabres for $189 million in February, he was already in the sports agent business — a lot of people just didn’t know it.

    “I got into it before I became an NHL owner,” Pegula said in a telephone interview last week.

    On Tuesday, anyone who didn’t already know of Pegula’s interest in the athlete representation business learned about it after he announced he had acquired Atlanta-based France AllPro Athlete Management, the agency of prominent NFL player agent Todd France. FAAM represents 50 NFL players, including Baltimore running back Ray Rice, Kansas City wide receiver Dwayne Bowe and San Francisco tight end Vernon Davis.

    Terry Pegula is buying an Atlanta-based agency that represents 50 NFL players.
    Photo by: GETTY IMAGES
    Financial details were not disclosed, but as part of the deal, NFL agent Brian Ayrault will work with France to expand the company. Pegula said the reason he bought France’s company was that he was already financially backing the business of Ayrault, a family friend whom he has known for nearly two decades, and he thought the merger of France’s and Ayrault’s firms would be good business.

    It is not unusual for agents to go to the management side of the table in team sports. Perhaps most prominently, former MLB player agent Jeff Moorad became the lead owner of a group that bought the San Diego Padres in 2009. It is, however, somewhat unusual, if not unique, for a team owner to engage in the agent business.

    Pegula said he disclosed his financial interest in Ayrault’s firm to the NHL when he was approved to be the Sabres owner. Ayrault will fold his former firm, Charlotte-based Ayrault Sports Agency, into FAAM as part of the deal.

    As for extending FAAM into other sports, Pegula said, “I believe we are going to stay strictly NFL, because as an owner of an NHL team, I can’t represent NHL players.”

    Ayrault, 33, said last week he represents 16 football players, and although some of them don’t have jobs, at least two of them are starters in the NFL: Houston quarterback T.J. Yates and Philadelphia linebacker Jamar Chaney.

    It was Pegula’s idea that Ayrault partner with a more experienced agent, and it was Ayrault’s idea to choose France. Ayrault said that although he has had some success in the NFL player rep business, he acknowledged that it is a “tough business.”

    France, 40, has represented a number of first-round draft picks in the last several years, including Buffalo defensive end Marcell Dareus and New York Giants cornerback Prince Amukamara, who were the No. 3 and No. 19 overall picks, respectively, in this year’s draft.

    “I had a lot of near misses on a lot of top players,” Ayrault said. “And Terry and I discussed things, and he said maybe we could consider partnering with another agent. … Todd and I met in 2005, and we’ve competed against each other, and I always admired his work ethic.”

    France said Ayrault and Pegula approached him in October, and after meeting with Pegula and his financial team, he agreed to the deal. “I didn’t take it seriously at first,” France said, “but meeting Terry, he is extremely bright, a visionary, and his entire management team was very impressive — as you would expect them to be at that level.”

    France said he is excited about partnering with Ayrault, who has been in the business since 2006. France would not reveal if he had equity in the new firm or what his business strategy would be going forward, but he said Pegula’s backing would help current and future clients. “It puts my clients in a unique position to be involved with someone as successful, powerful and connected as Terry,” France said.

    Pegula founded East Resources, a natural gas drilling company with about $7,000 of his own money in 1983. He sold it to Royal Dutch Shell for $4.7 billion in 2010. He said last week that he expects to make money with his investment in FAAM, but when asked if he expects the same kind of return on investment as he did in the oil and gas business, he chuckled and said, “No.”

    In addition to buying the Sabres, Pegula acquired the AHL Rochester Americans in June. He and his wife, Kim, donated $88 million to his alma mater, Penn State, last year to build what will be known as the Pegula Ice Arena and donated $12 million to Kim’s alma mater, Houghton College, this year to build a multiuse sports complex.

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