Lockout Insurance: Did The NFL Try To Use Television To Screw The NFLPA?

Lou DiPietroAnalyst IJune 11, 2010

FORT LAUDERDALE, FL - FEBRUARY 04:  DeMaurice Smith, NFL Player's Association Executive Director, looks on during the NFL Player's Association Press Conference held at the Fort Lauderdale Convention Center as part of media week for Super Bowl XLIV on February 4, 2010 in Fort Lauderdale, Florida.  (Photo by Doug Benc/Getty Images)
Doug Benc/Getty Images

For all the talks of big television contracts for college and professional sports, there are a lot of facts that the laymen aren’t privy to. Unfortunately, one of those dark clauses came to the light this week when the National Football League Players' Association (NFLPA) fought back against their parent organization.

On Wednesday, the Players’ Association filed a complaint with the Special Master, intimating that the league basically bought itself some “lockout insurance” to guarantee themselves a profit even if the 2011 season doesn’t happen (as has been rumored for quite some time).

What happened is this: The league reworked its television deals so that the owners will be “making money” in 2011 and beyond, regardless of whether or not games are played. The NFLPA alleges that this violates their agreement with the league, which can’t breach its pledge to the players in order to strengthen bargaining position.

Ostensibly, that’s what the NFL did, as they can now prove that they can still turn a profit without the players—a ludicrous, yet feasible idea, at least for one year. This excerpt, from the NFLPA website, sums up the details of that pact with DirecTV (owners of NFL Sunday Ticket):

“The DirecTV deal may be the most glaring example of the NFL’s “financing” strategy in the event it locks out the players. The league opted not to allocate any of the increased revenue from the deal with the satellite service during the 2009 and 2010 seasons, moving all of that money into 2011 and beyond, after its current contract with the players expires. So DirecTV was given immediate new broadcast benefits for two seasons with no price increase for those two seasons. These immediate benefits included access to a new REDZONE channel and the right to sell access to broadband and mobile phone transmission of games.”

Basically, it seems like a case of free content now and money later, all done in the event that they need it come 2011—something the NFLPA claims is the league acting in bad faith.

“It appears that the Owners bought a strategy to lock players and fans out and nonetheless financially protect themselves,” said NFLPA Executive Committee member and Baltimore Ravens cornerback Domonique Foxworth. “The players want to leave no stone unturned to make sure that CBA negotiations proceed in good faith and that next season is played in its entirety.”

According to the NFLPA, the league’s inclusion of lockout provisions (in the DirecTV deal, at least) is a violation of their contract, alleging that the league didn’t use its best efforts to maximize total revenues from DirecTV, Fox, CBS and NBC—and reports indicate the upcoming re-negotiations with ESPN will likely include a similar pact.

“The NFL gave [its television partners] immediate and new valuable media benefits in 2009 and/or 2010 for nothing,” wrote NFLPA counsel Jeffrey L. Kessler in the complaint. “In essence, the NFL knowingly left money on the table … at the expense of the players. The NFL thus has acted in bad faith.”

During a conference call to discuss the matter, NFLPA Executive Director DeMaurice Smith followed that up by saying, “It will not be enough, according to the players, for any party or owner to say, 'Yes we maximized revenue'. If it is the case that networks have obtained digital right or other media rights for free, in exchange for the promise that the full funds will be available to the teams even if the games aren't played, that means that [they've] left revenue on the table. If there are facts from which a reasonable person can conclude that they undertook these agreements with the idea of gaining a bargaining advantage, the players would argue that this would specifically be in violation of the White stipulation (results of a 1993 class action lawsuit on behalf of Reggie White) and settlement agreement."

I have to say that Foxworth, Kessler, and Smith are absolutely right.

Sure, for the owners, it would be nice to get paid for doing nothing, right? The owners would already stand to benefit from a lockout, as they wouldn’t have to pay the 2011 salaries on their payroll—a total of $4.4 billion. Now, the league would add in roughly $4 billion in guaranteed TV revenue with or without a season, meaning a virtual gain of more than $8 billion for the “bosses.”

So what to do about it?

Basically, the NFLPA wants the Special Master to find in their favor, and they want the “lockout insurance” to be placed in an escrow fund—which would prevent the league from using it during any work stoppage.

That may not fully fly, as “any work stoppage” would also include a strike or any other player-based stoppage. But as Smith also said in the conference call, “[The Special Master] could make specific findings of fact in regard to the absence of good faith and give the players certain contractual remedies. He could make a decision to place some or all of those funds in escrow until further discovery, or there could be damages resulting from the conclusion that money was left on the table and revenue was not maximized as obligated by the stipulation agreement.”

As long as they win, I think the NFLPA will be happy, because they truly appear to have been wronged on this issue. Seattle special-teamer Sean Morey, also an NFLPA Executive Committee member, summed it up best to NFLPLAYERS.com writer David Elfin when he said, “(The owners) went out and obtained financing to take a whole year off.”

And that, to me, is not fair if done at the expense of the men who make them their revenue in the first place. At the very least, this should give the NFLPA some leverage in getting a provision in any new CBA that is reached that would be able to stem this.

What do you think?