NFL Lockout: Who’s right, who’s wrong? And will there be a 2011 NFL season?

As some of you may know, I spent 11 years working for the San Diego Chargers. While employed there I had exposure to nearly every aspect of the NFL, from the business and marketing side; public and media relations; ticket sales; game day operations; the coaching staff and how they operate and organize; and of course, as a scout, the entirety of the NFL draft process and free agency, including dealing with agents.

It is with these “credentials” in mind that I share this one-time-insider’s view of the current NFL labor strife; on what the major issues are that led to the current lockout, and who I think is right.

These are my opinions—educated as they may be—so please don’t shoot the messenger.

The single biggest factor in this “crisis” is figuring out just exactly how to divvy up the $9 billion in annual revenues, which is actually a bit more complicated than it sounds.  And no, it’s not just a “dispute between millionaires and billionaires,” as many would like us to think, since not all of the players are millionaires.

Under the agreement that was extended by former NFL Commissioner Paul Tagliabue and former NFL Player Association Executive Director, the late Gene Upshaw, back in 2006 the owners and the players agreed to split the revenues roughly 60/40 in favor of the players, save about $1 billion shaved off the top to account for expenses.  The owners want to narrow that split and bring it closer to a 50/50 share, while the players want to maintain the status quo.

The Players’ Side

The argument on the players’ side is that the typical NFL playing career is short, averaging somewhere around 3.5 years.  They insist that the players, by and large, have a small window in which to earn, and they need to get as much as they can as quickly as they can.  They also say that the league is as popular and profitable as it is today because of the players and their efforts; that in effect they are the league; they are putting their health and well being—both short and long term—on the line every time they take the field, and therefore deserve a larger piece of the pie.

I have a couple of problems with this position.  First, the players are using a misleading figure in that they’re including players who don’t always make a roster out of training camp.  True, there is a portion of the player population that suffers career ending injuries.  But that number is dwarfed by the number of players who are simply replaced each year by another player who is perceived by team management to be a better player, or a better “value.”  Interestingly, the NFL agrees, saying that the average career for a player who makes the opening day roster in his rookie season is six years.

In my view, players who aren’t talented enough to make a roster shouldn’t receive special consideration just because they were given a tryout in training camp.

However, if we’re talking about some sort of compensation package for a player whose career is ended due to injury, then I’m listening.  Football is a violent game with the potential for a career ending injury on every play.  And if a promising young player has his career cut short by injury then it is reasonable to discuss implementing some sort of exit package or insurance policy that will provide him with a financial cushion to help him comfortably transition to the next phase of his professional life.  I view that as fair and something that can easily be accomplished.

I also take issue with the assertion that the league is what it is today strictly because of the players.  This is not the NBA, where the league markets its players above its teams.  Football is the ultimate team sport, where no one player will carry his team to a championship year after year.  The NFL has set up a system where with the right people in place and with good decisions, every team has a chance to compete for a championship.   A team’s success is more dependent on the decisions of team management in assembling the right group of players–not just the best players– and the coaching staff’s ability to outmaneuver their opponents on the chess board that is an NFL football field.

The NFL salary cap has created unprecedented parity across the league.  Every year the season starts with even the dregs from the previous year capable of reversing their fortunes.   The financial playing field is level.  Because of the salary cap there is more pressure on team management to make good, sound personnel decisions; every team has a marquee player or several, unlike MLB where the big money teams are allowed to hoard the top talent every year, and the same teams compete for the pennant every year.  Add in the fact that every regular season game is televised, making the NFL the most popular and profitable sport in the country.

Put it this way:  How often have the Pittsburgh Pirates or the Kansas City Royals been competitive in the last 20 years?  The Baltimore Orioles?  The Cleveland Indians?  Meanwhile, in the NFL formerly bottom feeding teams like the New Orleans Saints have won a Super Bowl; the Arizona Cardinals and Seattle Seahawks have each been to a Super Bowl and have become annual playoff contenders; small market teams like the Indianapolis Colts, through savvy personnel decisions and solid coaching, are expected to be playoff participants, have won one Super Bowl and appeared in another; and the Green Bay Packers—the ultimate small market franchise—have won their fifth Super Bowl in franchise history.  Both the Colts and the Packers are considered among the NFL’s elite.

That kind of parity does not exist in MLB or the NBA, while the NFL has been able to generate more interest and more revenues for the league.

The Owners’ Side

The owners argue that the current revenue structure is weighted heavily in favor of the players and therefore is unfair.  However, they are the ones taking all of the financial risk, paying all of the bills, and taking responsibility for the day to day operation of the teams and the long term health of the league.  They argue that their expenses are increasing disproportionately with the revenues and subsequently their profit margins are shrinking.

Even without combing through their books with a fine toothed comb, I buy that assertion.  The cost to charter flights—large airliners–to away games has gone up significantly, and air travel wasn’t cheap to begin with.  The cost to charter buses needed to shuttle the team from site to site has gone up.  And the hotel, food, and per diem bill for the entire team and traveling party on the road has gone up—largely due to gas prices hovering around $4 per gallon.

Also consider all of the travel costs associated with sending scouts, coaches, free agent players, etc. all over the country every year.

The owners have also made numerous concessions over the years.  At the players’ behest, the practice squad was created to supplement team rosters and create more jobs for more players.  It was a good idea that benefitted both the players and management.  The practice squad was expanded from six to eight players, with special rules in place to create opportunities on active rosters with other teams with open roster spots.

The players insisted on having lunch, and then breakfast and lunch catered for them any time a practice was held.  The owners agreed.

The players also convinced the owners that they should be paid for participating in offseason workouts and practices in addition to their in-season game checks.  The owners also pay for the players’ medical insurance, which due to the high risk nature of being an NFL player is among the most expensive and comprehensive there is.  It’s the Bentley of Cadillac insurance plans……but it’s a necessary and justifiable expense.

The practice facilities have been upgraded to include the latest and greatest in athletic training, weight training, and therapy equipment.  They have also upgraded the locker rooms with more amenities to make the players’ workday more comfortable.  All at the owners’ expense.

But perhaps the biggest—and newest—contributing factor in driving expenses is the debt service on new stadiums.  The owners have willingly incurred hundreds of millions of dollars in new debt to build new stadiums across the country in the past decade.  They viewed the investment as necessary in order to grow the game and increase revenues overall.

It is admittedly difficult to predict the extent revenues will grow because of the new stadiums, yet the owners are still making those investments to ensure the long term viability of the league.  Still, their argument that revenues will grow as a result is pretty compelling.  To that effect, the league claims that an offer made on March 11 would have given the players a 14% increase ($2 billion) in cash and benefits over the four year period between 2011-2014.  Yet the players refused to accept.

There is another factor to consider:  As profit margins continue to shrink under the current terms of the CBA, the owners are forced to react in order to maintain a measure of profitability.  And they react by raising ticket and sponsorship prices.  The average cost of an NFL ticket is already hovering around $90, pricing most families out of attending.  At some point as prices continue to increase there will be a breaking point that will serve to alienate significant portions of the fan base.  When that happens, the game’s popularity will plummet, and revenues will fall off a cliff.  It’s in the best interests of both sides to maintain a certain level of affordability, or they risk destroying everything they’ve built to this point.

Let’s be very clear here:  The owners are not crying poor! No one is claiming that they’re losing money……yet.  They’re simply saying that collectively they are heading down a path to where eventually they will no longer be profitable.  They have not reached that point yet, but they can certainly see it coming and they want to head it off at the pass.

Other Issues

The Players Association also wants to address long term health benefits for current and future retired players.  The league has agreed, recognizing the disgraceful way in which some alumni players have been forced to live their lives.  Several have met tragic, early ends due to injuries suffered during their playing days.  The league has been sickeningly slow to address the myriad of issues in better working with their retirees, but to their credit they’ve finally owned the problem—complete with the requisite shame—and have pledged to make it right.  This is not an issue that will prevent a deal from getting done, and both sides agree that more must be done, both for current retirees and to protect the future of active players.

The league has also said that they are willing to offer lifetime health benefits to all players (presumably who have accrued a certain number of years of service).  Dicker over the details if you must, but there’s a deal in there somewhere.

The owners have proposed an 18 game regular season schedule, and the players have balked.  Fans don’t appreciate having to pay full price for a ticket to a “meaningless” preseason game, so the owners have proposed cutting the preseason from four games to two, converting them into regular season games.

I’m with the players on this.  Adding two regular season games will have the effect of shortening playing careers.  Veteran players typically don’t play much during the preseason, but would fully participate if those games counted.  The extra games would lead to extra wear and tear on bodies that are already put through a grind.  The players don’t want it, and I think they’ll get their way.

The players would also like to see the rules governing “Injured Reserve” status revised.  Currently, if a player is placed on injured reserve their season is officially over.  Teams will sometimes place a player with a long term injury on IR in order to clear a roster spot, even if the players might be able to return later in the season.  Again, I’m on the players’ side, and I think it’s something they’ll likely get.

The league is proposing a rookie salary cap to prevent unproven players who have never yet taken a single snap in professional football from receiving contracts that guarantee them upwards of $70 million or more.  This would protect teams from investing tens of millions of dollars in players who turn out to be major busts (Ryan Leaf, anyone?) and forcing them to actually earn their big contracts, while simultaneously making more money available to put towards the salaries of veteran players who have proven their worth.  I think it’s long overdue, and the veteran players are generally pleased with the concept.

Also being discussed is giving the players more time off, both during the season and in the off season.  The league has tentatively agreed to reduce the number of offseason practices from 14 to 10, and also to reduce the offseason programs overall by five weeks.

The issue of free agency, including the use of the “franchise” tags needs to be addressed.  The players don’t like the franchise tag, which is in effect a one year contract that pays the individual player a salary that is averages the top five highest paid players at his position.  But the players don’t like the short term nature of that arrangement, preferring to be able to seek better long term security elsewhere if they can’t come to an agreement with their current team.  The players would also like to see younger players be able to become unrestricted free agents after three years instead of the current four, but I don’t think they’ll get their way on this one.  And I don’t think we’ll be seeing the franchise designation go away, but perhaps they’ll tweak the system to where it’s more agreeable to the players.

Then there’s the sticky issue of adding human growth hormone (HGH) testing to the regimen of performance enhancing drug screening.  The players union is unconscionably resisting.  The owners should stick to their guns on this one, and it appears that there are some cracks in the union’s solidarity on this issue.  I’m guessing we’re going to see HGH testing, and rightfully so, as HGH is the new anabolic steroid and has no place in the game of football.

None of these “other issues” should be so profound as to prevent a new CBA from being completed.  In fact, there is wide agreement on most of those issues.  The main roadblock is the division of revenue.   In my opinion it’s the players that are in the wrong here.  The owners have not asked for anything unreasonable, and are simply seeking a more equitable split.  They’re not asking for a majority of the revenues, and I believe they’d settle on a 55/45 split for the players.  The problem is that the players have hired an executive director for their union that seems more interested in making a statement than he is in making a deal—the complete opposite of his predecessor.  DeMaurice Smith seems more eager to litigate than to negotiate, which could spell bad news for everyone, especially the fans.

Recent reports have detailed some divisions within the ranks of the players.  Some of the middle to lower tier players are apparently beginning to question whether their representatives are dealing in good faith and truly representing their interests.

Here’s the thing to keep in mind:  What Gene Upshaw understood was that what was good for the league was ultimately good for the players.  He saw it as his job to make sure that as the league prospered, so did the players, and he worked closely with Paul Tagliabue and the owners to make sure that all sides were treated fairly.  The result of his approach was an unprecedented period of labor peace, and an extraordinary increase in wealth and prosperity for the players.  Was he perfect?  No.  Could he have done more, particularly in regards to long term health benefits and retired players?  Absolutely.  But it’s a key issue now, and all sides are willing to tackle it.  Better late than never.

I believe—despite the characterizations by the players’ side that the owners are simply conducting a money grab and are just greedy billionaires—that the owners have dealt in good faith and want to come to an agreement that will be good for both sides.  They merely want to protect their investment, and from what I have seen they have not asked for anything unreasonable.  It’s time for DeMaurice Smith to stop grandstanding and start representing the interests of his clients.  If he does that, then a deal will be reached rather quickly.

To read more from the owners’ side, visit nfllabor.com.

To read more from the players’ side, visit nfllockout.com.

You decide who’s dealing in good faith.