Thursday, March 3, 2011

NFLPA's Secret Leverage

Judge Doty’s recent decision to relieve the NFL owners of their $4billion extortion fee from the networks garnered the predictable reaction from the NFL that the decision would have no impact on the ongoing labor negotiations. That reaction is obviously as phony as a tight rope walker suggesting that removing his net would have no impact on his decision to have a shot and a beer before attempting a high wire walk.  The question is not whether this decision would have an impact on negotiations, but rather how significant the impact will be. 

Mark May of ESPN was recently quoted by Wilbon on PTI that while the owners would certainly like to have the cash, their pockets are so deep that it really does not affect their calculus on the labor front dramatically. This comment is born of May’s personal experience as a player negotiating against many of these owners. May’s experience though was at a different time, and the NFL and the US economy have gone through some major transformations since the last time there was a work stoppage in the NFL.

During the first six or seven years of the last decade, while the NFL continued to solidify its position as the most dominant for in professional sports, there was a burst of economic growth and activity across virtually every industry in the US. CEO’s across the country were pushing to realize higher and higher rates of return for their investors and many leveraged their assets to produce those returns. The debt that many of these companies took on finally proved to be too extensive as the economic crisis of 2008 hit. Many previously very successful business were forced either into bankruptcy or to sell out at pennies on the dollar to rivals.

NFL owners were operating in the same economic world as Washington Mutual, General Motors, and hundreds of small businesses that no longer exist. It occurs to me that it may be a bit naïve to believe that none of the NFL owners got themselves over extended and perhaps are carrying far more debt than their fellow owners realize. If any owners are privately facing this situation, they have been able to delay the reckoning that other businesses have gone through because the money tree that is NFL ownership has continued to flower during the economic downturn.

Without the $4billion from the networks though, for the first time, there may be some owners out there that are looking at the money tree and wondering if getting a labor deal done quickly isn’t the best way to get the tree to flower. The alternative may be rather uncomfortable for some of them.

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