Millionaires vs. Billionaires: Five things you don’t know about the NFL labor standoff.
Are you ready for some … labor negotiations? Yes, the National Football League held a nice Super Bowl just a couple weeks ago – the Green Bay Packers beat my beloved Pittsburgh Steelers, sadly. Still, it was the most-watched TV program in U.S. history. So: everyone in the NFL family must be happy, right?
Not quite. The owners have opted out of their collective bargaining agreement with the players and are threatening to lock out the players for the upcoming season. At issue: money, of course. The league produced about $9 billion in revenues last year. The owners think the players get too big a share. So, for now, they’re taking their ball and going home.
That’s the topic of our latest podcast episode, “Billionaires Vs. Millionaires.” (You can download/subscribe at iTunes, get the RSS feed, listen live via the link in box at right or read the transcript.) Our mission was simple: whether you’re a football fan or don’t know the first thing about the game, we wanted to tell you five interesting things you probably don’t know about this most unusual labor standoff.
As of this writing, team owners and the players’ union are behind closed doors with a federal mediator. And nobody’s talking to the press. Fortunately, we spoke to everyone last week. So in this podcast, you’ll hear from a variety of NFL insiders, including: DeMaurice Smith, the head of the players’ union; Mark Murphy, the president and CEO of the Super-Bowl champion Packers; Richard Trumka, biggest labor leader in the country (he runs the AFL-CIO, with whom the players’ union has strongly aligned itself); Eric Grubman, the NFL’s executive vice president for business ventures and finance; and a couple of NFL players: Drew Brees, the MVP of last year’s Super Bowl (and a member of the union’s executive committee), and Brandon Jackson, who has spent four seasons with the Packers but currently has no idea what his future holds — and is expecting a third child in a few weeks.
The arguments that unfold in the podcast are both very blunt and very nuanced. The blunt part: the owners argue that the players got too good of a deal last time around, and with costs rising, they need to get some money back. Here’s Murphy from the Packers:
Murphy: [A] couple things have changed that have impacted the current agreement. I think the biggest thing is stadium financing. It used to be that municipalities, and cities, and communities would pay for the building of stadiums. And you go way back and, you know, they were combination baseball-football stadiums that cities would build. Now, there are football-only stadiums, and they’re being built by the individual owners. So that’s a big expense that, you know, we didn’t have in 1993 when the agreement was, our system was agreed to. …
You know, the current agreement started in 2006 — and I don’t want to get into too many of the details, it will just bore everybody to death — but just from a broad perspective, our player costs have grown at eleven percent from — well, since 2006, while our total revenue has grown at an annual rate of about 5.5 percent, so just about twice the rate of the growth in player costs relative to revenue. It’s obviously not a healthy situation, it’s not sustainable.
Here’s how the owners and players currently split revenues: the owners get $1 billion off the top; of the remainder, roughly 60 percent goes to player salaries and benefits. What the owners want in a new agreement is another $1 billion off the top every year, over a seven-year term. Here’s Smith, head of the players’ union:
Smith: The owners have asked me to put my name on a $7 billion check back to some of the richest people in the world. My guess is that if I had the choice between being vilified for not having football or for writing a $7 billion check without any economic justification, I’d choose the former and not the latter.
I then asked Smith to describe the league’s business model:
Smith: It’s a monopoly. It’s a non-profit monopoly. The National Football League is a 501(c)(6) non-profit entity, that has been able to enjoy substantial benefits, and every player would admit that it’s a phenomenal business model. Revenue in the National Football League was an astounding $9 billion last year. We had record viewings for not only the Super Bowl, but regular season games. More people watched the NFL draft than playoff games in other sports. So, you know, for people who watch football on TV and love it like I do, there is an economic juggernaut that continues to operate both before and after you turn your TV off.
SJD: What does the public think about the players that from your perspective now you think is all wrong?
Smith: I think there’s a misperception about the business of football. And that cuts across two or three general categories. One, our players only play for an average of 3.4 years, and most of our fans actually think that our players play for a longer period of time. Second, virtually all of our fans believe that if you get hurt playing football, you have post-career health care to take care of the injuries that you suffered as a direct foreseeable consequence of engaging in the business of football.
So the owners claim to need a bigger share of the revenue pie to keep things working for them. The players claim they’re happy with the old deal but, now that the owners are asking for a give-back, their union makes the case that the players deserve and need every dollar they’ve been getting, in part to deal with life after football.
The most interesting moment of the podcast, to me at least, is when I asked Packers CEO Murphy about life after football. Murphy is in an unusual position: he spent eight seasons as a player (with the Redskins) and even worked for the players’ union — but now he’s on the owners’ side. Here’s his quote:
Murphy: You know, right now our current players if they’re vested, and you vest if you play three or more seasons, you get health insurance coverage for five years, which is great. But I look at it, too, and the transition for players from playing in the NFL to finding another career and establishing themselves is very difficult, and I really wonder, sometimes, if we do too much for the players. They’ve got severance pay and a 401(k) plan. I guess what I’m saying is that sometimes it’s not all bad, and going back and talking to some of the players who played for Lombardi in the ’60s — you know, they worked in the off-seasons, and they made a very smooth transition into their second careers because they had to. And so I’m a little worried that if we do too much for players in terms of compensation after their career’s end, and health insurance — it’s not all bad to have an incentive to get a job. And, so those are just some of the things we’re thinking through and talking through.
If I were a betting man, I’d say it’s likely there’ll be a lockout (Vegas and InTrade think so, too), but with so much money on the table, I’d be surprised if it lasted very long. There are 9 billion reasons to reach an agreement relatively soon. Have a listen and let us know your thoughts.