NFL Lockout FAQ

This answers most of the questions surrounding the current NFL labor situation and is an attempt to consolidate what I've already written.

Why is there an NFL lockout?


In January, I wrote a post that outlined the key issues between the players and the owners in order to back up my prediction that a lockout would occur.  Most of the issues outlined there led to the eventual lockout.  I later posted an update that tracked the progress to that point.

If you want to read through all that, you can.  The Cliff notes version is that the players and the owners both wanted more money, but there was only so much money to go around.  The owners realized that they got the short end of the stick when the last Collective Bargaining Agreement (CBA) was signed in 2006 and wanted a better deal, while the players were seeking the same percentage of revenues that they were already getting, but wanted to add revenues from tickets, concessions, t-shirt sales, Internet subscriptions, licensing, all the other streams the owners were keeping from themselves.

The CBA was set to expire on March 4th, but the two sides extended the deadline and continued to negotiate with federal mediator George Cohen.  Ultimately, they were still too far apart -- to the tune of about $750 million -- to come to an agreement.  At the 11th hour, the players decided to decertify the union, meaning that the NFLPA was no longer representing the players in negotiations with the owners.  When that happened, the owners locked the players out, meaning that they wouldn't open their facilities to the players and coaches so they they could hold practices, OTAs, and mini-camps.

As soon as the owners locked the players out, the players filed an anti-trust suit against the owners, claiming that the NFL was using its power as a monopoly as a weapon against the players in negotiations.

Serves those greedy owners right.  Stupid monopoly.  I always wanted to be the race car, but my brother took it before I had the chance.

That's not a question and it's kind of off topic, but it does bring up an interesting point.  Since about 1950, the NFL enjoyed some exemptions from anti-trust laws.  They were allowed to operate as a monopoly as long as they acted in the best interest of the game and made games available to NFL fans.  That helped the NFL, their fans, and the television networks, since the NFL got TV money, the fans got to see their teams play, and the networks didn't need to negotiate with 32 different teams in order to get a deal done.  Each market got served, everyone was happy, and everyone made money.

Monopolies aren't inherently bad things.  The government has established forced monopolies for public services, such as water, utilities, and mass transit, since it would be a major pain for consumers otherwise.  Imagine if there were six electric boxes on the side of your house that weren't compatible with each other because of proprietary parts.  If a transmitter went down on your street, all six companies would argue about which one of them was supposed to fix it.  If one of those companies was mismanaged and went under, you'd be without power for an extended period of time.  Or, imagine trying to keep six bus schedules straight in your head, each with different times and route combinations, then standing at a stop and hoping the company didn't go out of business the night before without warning.

If NBC had to negotiate with the owners separately and the owners competed with each other for air time and different markets, the NFL may not have gotten off the ground.

Monopolies are only bad if they're abused to hurt another party.  The NFLPA kept the owners in line all these years because they balanced the power -- the Player's Association had a monopoly on NFL talent.  When the union decertified, that meant that the players were vulnerable and the owners were using their monopoly to lock the players out and improve their negotiating position.  That's not very nice, but it's also not legal.

That sounds intense.  What happened with the lawsuit?

There was a hearing on April 6th where the players stated their case and the owners stated theirs.  The problem is that both sides have a point.  The players play the games and put in the work, so they deserve more money.  The owners build the facilities, keep the lights on, hire coaches and front office staff, and pay all the bills, so they're also entitled to earn a living.  It's difficult to say whether or not the owners would have locked the players out if the players hadn't decertified first.  They probably would have, but the players moved first.

There's no disputing that the owners have a monopoly on NFL football, but arguments have gone back and forth about whether or not they're abusing that power thoroughly enough for an injunction to be placed on the lockout by the courts.

Since the arguments are so complex, the judge ruling on the matter said that she would need a "couple of weeks" to rule definitively on the injunction.  She then urged both sides to work this out for themselves, being that they'll need to negotiate a new deal at some point anyway.

I think that makes sense.  Are the owners and players working it out for themselves?

Kinda.  They started meeting with a state-appointed mediator in Minnesota, starting on April 13th.  They needed two weeks with Cohen to close the gap by $75 million, so my guess is that more time in a room won't fix this mess too quickly.

One of the issues identified in the January lockout post was the existence of bad blood.  I wrote about that before the decertification/lockout and I doubt everything that has transpired since has done anything to alleviate the bad blood.  I'm thinking there's an outside possibility the bad blood got worse.

Then why doesn't the judge rule in favor of the players and take that negotiating power away from the owners?

Because she really, really, really wants the two sides to work it out on their own.  Seriously.  She knows that, regardless of how she rules, the losing side will appeal.  When that appeal happens, you get more bad blood.  This whole mess stretches out further.  A ruling on the appeal probably won't happen until the summer -- we're probably looking at July at this point, unless she makes a decision in the next couple of days.

If everything stretches out until then, one side gains the upperhand in negotiations, but that doesn't mean everything gets put to bed quickly.  It means more meetings and more mediation and probably the cancellation of at least a few games, if not the entire season.  If that happens, the networks will get involved, attempt to pull out, and the owners and players will tolerate each other long enough to get something done.

Who does the lockout hurt?

Right now, here's the list, in order of most hurt to least hurt:

1. The fans.
2. Undrafted free agents.
3. Players that will be drafted at the end of the month, since they have an uncertain future and no paychecks or signing bonus to count on.
4. Bad teams that are in transition.

No NFL fan needs an explanation for #1.  For #2, no player can sign with an NFL team until there's a CBA in place.  The drafted players are hurt because of their uncertain future, but they still know who they'll be playing for once the dust settles.  Undrafted free agents are free agents like anyone else and can't be signed in the days following the draft like in previous years.  They can't be signed, so they'll walk the Earth, or maybe get real jobs.

They could, also, very possibly get jobs with Arena League teams.  That's a lower paycheck than the NFL and there is always an injury risk, but they'll still play football and get paid to do it, all the while auditioning for NFL teams that will want to sign them once they're allowed to sign them.

Bad teams are trying to break in new players, they'll need to lean on their draft picks more than good teams and will miss the offseason practices to acclimate those players, and they're trying to break in new coaches and new offensive/defensive systems.  Usually, they'd have seven months to do that.  This year, none of the players are allowed to talk to their new coaches and they won't be able to communicate with each other until a CBA is in place.  If that happens in July, that's five valuable months that will be lost.  Teams that are already bad can't afford to lose that time.

In the long term, young veterans that weren't able to sock away enough money from their last three game checks -- or the fund that was set up by established veterans that allows young players to withdraw up to $60,000 in order to meet expenses -- will run out of money.  That will hurt.

In the coming months, you'll see a lot of human interest stories about how the common man is being affected by the lockout.  Joe the Ticket Broker that had to sell his house because there were no tickets to broker.  Joe the Ticket Taker who couldn't send his son to Math Camp this year because he couldn't supplement his income by taking tickets on Sundays.

Well, that's a load of crap.

The ticket broker can broker other kinds of tickets.  If the ticket taker can't find another way to make money than working 24 hours each fall scanning tickets, maybe his kid won't do so well at Math Camp (provided bad math skills are hereditary).  People who sell tickets to sporting events are still sales people.  They will find another job.  The NFL will keep all their back office people and front office people because they legitimately believe there will be football soon.  It would be a bigger deal in Pittsburgh if PNC or Ariba shut down for a year.

Then there will be talk of how the local economies in NFL precincts will suffer because the average football game pumps $XXX million into the local economy.  That's a load of crap, too.

There have been no valid economical studies that have proven conclusively that professional football helps any local economy in any way.  The games are played in publicly subsidized stadiums, roads are closed down on Sundays to accommodate pedestrian traffic, unnecessary traffic jams are caused, and public transportation efforts need to be boosted on a day that is usually slow for public transit.  If anything, professional football games take from the local economy.  If you don't blow $200 on a ticket, parking, food before and after the game, and beer at a Steelers game, you will blow that $200 somewhere else.  Maybe at the casino, which is heavily taxed and funds public works programs.  Maybe at Home Depot, which employs people locally and pays local taxes.  The point is that you'll spend that money somewhere and you'll probably won't all do it in a concentrated area in a five hour period that will clog highways and spike drunk driving.

NOTE: I am not saying that football games are bad or that anyone who goes to a football game is an idiot.  I love football games and I love going to football games.  It's my second-most favorite thing in the world.  I'm just saying that anyone who claims that NFL games add value to their respective local economies is full of bullcrap.

The only economy that could potentially be hurt is the City of Indianapolis.  They're progressing as though next year's Super Bowl will actually happen and it will happen in their city.  They've already invested money in fixing up the city and building facilities and have allocated resources in anticipation of the event.  If the Super Bowl doesn't happen -- and that's way, way long term -- the City of Indianapolis gets hurt.

Who does the lockout help?

For right now, in order of helped the most to helped the least:

1. All other sports.
2. Good teams with consistency at coach and coordinator (yes, this means the Steelers).
3. The owners.
4. Older veterans. 

Arena ball and the UFL are helped by the fact that they're the only pro football out there.  They're not seeing a huge uptick in interest, but the Game of the Week for the AFL is still playing on NFL Network and more fans will flock to other forms of football -- any other forms of football -- as this labor dispute drags on.  If the AFL and UFL can continue to churn out a quality product, fans will move over to them in droves.

The Penguins have a license to print money in Pittsburgh, but the Pirates are the red-headed step-child of Pittsburgh sports.  If we reach July and there is no end to labor issues in sight, sports fans will start coming out to the yard no matter how bad the Buccos are at that point.

In major markets that have lots of options such as New York, Philly, Phoenix, Atlanta, and the Bay Area, basketball, hockey, and baseball will see boosts in attendance.

Any NFL team that has employed the same offensive and defensive system for a while will be helped pretty considerably and will have a tremendous advantage over teams in transition.  The Steelers aren't usually big players in the free agent market and have a veteran roster that has been in the same system for the past four years (even longer on the defensive side of the ball).  The Packers will get all the guys back that were on IR last season and the Patriots have 23 picks in the first 45 of the draft (estimated).  Basically, the rich will get richer and teams like the Colts, Chargers, and Saints, which have consistency at quarterback, will thrive after the lockout as well.

Ownership benefits because they don't have to pay to keep facilities open in the offseason and run offseason programs, which all cost money but don't add any tangible value or revenue.  Older veterans benefit from this provided they can keep themselves in shape.  They can take the offseason to rest, heal, and condition, getting themselves ready for the regular season.

In the long term, the lockout only benefits sports other than the NFL and only hurts the bottom line of the players and the owners.  Both parties know this, so they will get something done at some point.

When can we expect this to be resolved?

It depends on whether or not the judge comes to a decision and when the appeal is heard.  Both sides were preparing themselves for a lockout and the players have been surprisingly resolute.  No one will really start losing serious money until regular season games are wiped off the schedule.  The NFL has a tendency to wait until the last minute on all decisions, which means that negotiations could last deep into August.

I don't think either side is dumb enough to allow the 2011 season to be canceled, but you never know. 

Lockout Update

The original deadline for extending the Collective Bargaining Agreement between the NFL owners and the players was March 3rd, by midnight. They extended that deadline 24 hours last Thursday, then extended it another week last Friday. That means that the new new deadline is tonight at midnight.

Both parties decided to extend the deadline because negotiations were going fairly well and they felt as though things were headed in the right direction.

As of today, it seems, negotiations are not headed in the right direction. The players have flat-out decided that they don't want to go to an 18-game schedule and the owners have decided that they don't want to share a high level of financial data with the players.

I've already outlined the issues with an 18-game schedule, so I'm more interested in the issue with sharing financial information. Right now, you can get a general idea of how each NFL team is doing by taking a look at the Forbes list that comes out every year that values each team and shows basic financial information (debt, operating income, franchise value, stadium value, revenue), but that doesn't tell the whole story.

There's no access to information on cash flows or net income, which are two basic statements that any publicly traded corporation has to provide to its shareholders, nonetheless its employees. The issue there is that the NFL is definitely not a publicly traded corporation, it's a private enterprise with 32 owners that are mostly private people.

The two sides are still about $750 million apart, which is a huge number. In the 16 days that they've been working with federal negotiator George Cohen, they've only narrowed the gap by $160 million and they haven't made much progress this week. What stalled things this week was that they players keep asking for hard financial data and the owners continue to refuse those requests. According to reports -- Cohen has asked everyone involved to not provide any information to the media, so concrete details have been hard to come by -- the owners have opened up the books to some degree, but have not provided the players with sufficient data.

It makes sense. The owners are asking for more money to cover expenses, so the players want to follow the money. The players are asking for more money and to see the books, so the owners don't want someone who chases a ball for a living to tell them how to run their business. If this were a factory outside Hattiesburg, the owners could fire everyone and hire new guys that wouldn't ask any questions. It's a private business, so they're not required to share anything with anyone. The trouble there is that there are more people out there that are qualified to work in a factory than there are people who are qualified to play quarterback in the NFL (or running back, or cornerback, or any of the positions, really). Just firing everyone and getting new guys isn't an option and both sides know it.

In the past few weeks, the players have strengthened their position and have banded together, which is awful news for the owners. Sure, there were articles about how the owners are swimming in money like Scrooge McDuck and a number of players live paycheck-to-paycheck. There have also been mentions of disenfranchised office workers and ticket attendants that will get laid off if there's a lockout. But, the Court of Public Opinion had always sided with the players, so that wasn't a huge victory for the NFLPA.

Where the players were suffering in the past was that they were in a horrible negotiating position. Players were calling each other out on Twitter, everyone was complaining that a deal couldn't get done, and the owners were fully resolute in their decision to lock the players out, buffered by some guaranteed money from the television networks even if the 2011 season didn't happen.

Two things happened:

1. A judge in Minnesota overruled the contract the owners signed with the networks, which took away the guaranteed revenue stream.
2. The players realized they were all in this together, stopped bickering, and started supporting each other. Veteran players with plenty of money in the bank have started an emergency fund for young veterans that can't meet expenses. Stars like Drew Brees have been attending the negotiation sessions. Other stars like Brees and Peyton Manning have agree to represent the players in a class-action anti-trust lawsuit if it comes to that.

Before that happened, the players could either take what they were given and be happy, or refuse, then get locked out, then be forced to accept a crappier deal later as the lockout dragged on and they ran out of money. Now, the players have options. They're ready to decertify the union.

I'm not 100% sure what decertifying the union means, but I know it's the biggest card the players can play and is similar in severity to the owners locking players out. Basically, a lockout or a decertification would cause negotiations to break down and would cause a ton of bad blood -- as if there weren't enough of that already.

As I understand it, decertifying the union means that the contract between the players and the owners is null and void and that the union is being wiped out, which would leave all players unemployed. They would then be able to file an anti-trust lawsuit against the NFL since they could make a case that they needed to fire themselves because the owners were using a monopoly to stifle negotiations and bust up the union. That means two things: Congress gets involved and the owners need to open up their books. Both those eventualities are bad for the game, but worse for the owners. They'd be the defendants in a lawsuit and they'd need to show the players all the financial data they've been fighting for the last two weeks.

For obvious reasons, the owners want to avoid this, which is why negotiations have been extended.

Here's the BIG thing: The deadline for the union to decertify is COB today, which is 5 p.m. Eastern time. The deadline for the owners to lock out the players is midnight. As far as I know, this is a one-or-the-0ther situation. Either the players say, "You can't fire me! I quit!" Or the owners say, "You can't quit. You're fired!" At this point, the players hold the advantage because they can quit seven hours before the owners can fire them.

I think the situation has reached the point where one side has to make a move. That means I was wrong about a lockout in 2011, because the players will probably decertify first.

A decertification is much worse than a lockout, because it means a lawsuit and a bunch of hearings in front of a federal court. The federal government is dealing with a lot of stuff right now. My guess is there's going to be more important fish to fry for the men and women of Congress. My guess is also that, even if a case gets settled, that won't necessarily lead to an NFL season in 2011.

So... that tells you negotiations are bad when the owners locking out the players is the better option.