NFL Lockout 101

With just two weeks remaining before the current collective bargaining agreement expires, the NFL and its players association are getting closer and closer to a lockout and potential work stoppage. It’s the issue that no football fan wants to worry about. Is there really a chance that there won’t be football in 2011? Let’s take a look at the major issues at hand between the owners and NFLPA and what it means for the future of the most popular sport in America.

Before we get into main issues at hand it is important to recognize that the NFL owners are by far the most powerful union in sports. It is the one professional sport in which the majority of teams are owned by a single owner rather than corporation and the 32 teams work together incredibly well to maximize their profits. Similarly the NFLPA has the weakest standing of the player unions in the four professional sports in the United States. It is the only sport without fully guaranteed contracts for its players (even though it should be the one sport that actually has them) and the players union consistently loses in negotiations with the owners. The owners will win this labor battle, it is only a matter of time and how much they are willing to concede.

When does the current collective bargaining agreement expire?
The current CBA expires at midnight on March 4th. If the two sides do not come to a deal by that deadline the owners will lockout the players association.

Does the March 4th deadline really matter?
Absolutely. The majority of contracts and negotiations go to the 11th hour in sports and two sides normally come to a deal when the pressure is on to meet a deadline. If no deal is in place by March 4th, the owners and the NFLPA can go their separate ways and have no incentive to go right back to the negotiating table.

Commissioner Roger Goodell and NFLPA head DeMaurice Smith have a lot of work to do before the March 4th deadline

Additionally as much as fans might want to think that a lockout wouldn’t matter unless it dragged into September, that is simply not the case.

What happens to the offseason if there is no collective bargaining agreement in place?
If there is no new CBA in place by March 4th and a lockout occurs, the league’s operations essentially go on hold. Players and their respective teams are not allowed to have any contact. That means all mini camps and OTAs are cancelled. If the lockout drags into the late summer months, training camp, preseason, and even the 2011 regular season could be in jeopardy.

Players must find their own means to stay in playing shape. That includes injured players that are currently rehabbing with their teams. They must find a third party training facility not affiliated with the NFL in order to continue their rehab. Additionally, players must pay OUT OF POCKET for any medical expenses or training they receive.

As soon as the league goes into a lockout, players will no longer receive salaries until a new CBA is put in place. With no money coming in and having to pay for all training out of pocket, the longer this situation drags on, the weaker the players stance will become.

Would the players receive benefits during a lockout?
NO. In addition to losing salary, medical insurance and other benefits would not be provided to the players as they are tied to CBA. In fact, each of the NFL’s 32 clubs saves millions of dollars in this situation.

According to a Q&A released by the NFL in 2010, “The union agreed that in the Final League Year, clubs would be relieved of their obligation to fund numerous benefit programs. Examples include second career savings (401K), player annuity, severance pay and performance-based pay. The total league-wide contributions to such plans in 2009, the last capped year, were in excess of $325 million or more than $10 million per club.”

What about free agency and trades?
Say goodbye to the hot stove. As soon as the Collective Bargaining Agreement expires there will be NO PLAYER MOVEMENT. Nnamdi Asomugha? LaMarr Woodley? Chad Greenway? It doesn’t matter that they are unrestricted free agents. They can NOT sign with anyone until the labor situation is resolved.

Players like Nmandi Asomugha will have to wait until there is a new CBA before hitting the free agent market

Now what about players that have recently been released? If a player did not finish the season with a team or was released since the 2010 season ended, such as DT Shaun Rogers of the Cleveland Browns, he is free to sign with any club up until March 4th when the CBA expires. At that point, his status as a free agent is the same as the rest of the league.

Additionally once the collective bargaining agreement expires there will be no trading of players throughout the league.

What is the deal with the franchise tag?
The franchise tag is a tactic used by teams to secure unrestricted free agents for one more season. When a team places the franchise tag on a player, it guarantees that player a salary that is the average of the top five paid players at his position or 20% greater than the amount he made in the previous year. With a cloudy future regarding the CBA it was uncertain whether or not team’s would utilize this tactic when it became available back on February 10th. However we have seen teams such as the Philadelphia Eagles (Michael Vick), Indianapolis Colts (Peyton Manning), and New England Patriots (Logan Mankins) use the franchise tag.

This would seem to indicate that the franchise tag will remain in play after a new collective bargaining agreement is reached. The players union would likely prefer to get rid of this option but one way or another, teams will almost assuredly retain the rights of players that received the franchise tag this offseason after a new CBA is negotiated.

What about the NFL draft?
The 2011 NFL draft is currently set for April 28-30 and will go on as scheduled. However if there is no new CBA in place the draft will be very different than in year’s past. Remember, teams can’t trade players if there is a lockout. For example, if the Philadelphia Eagles wanted to trade backup QB Kevin Kolb for a high draft pick, they can’t.

With the lack of player movement teams will be less likely to move up and down the draft board and will have to rely even heavier on their scouting departments based on where they are scheduled to pick. Additionally, the players association is threatening to boycott the NFL Combine next month which could give team’s less time and opportunity to evaluate draft-eligible players.

The NFL draft will carry extra importance in the case of a lockout

In a normal year teams have the opportunity to acquire veteran players via free agency or trades weeks before the draft. However an offseason lockout would make the draft the first, and perhaps the only, tool for adding new players.

So if a team enters the offseason needing a quarterback, they may have to reach for one in the draft because there may be no opportunity to otherwise get one. That said, the possible absence of team-managed offseason workouts and minicamps will make it even more important to find rookies who could walk right in and be ready to play in September — and who can be trusted to work out on their own without team supervision, until the lockout is resolved.

Does a lockout really matter before September?
ABSOLUTELY. As much as fans might want to think that a lockout wouldn’t matter unless it dragged into the regular season, that is simply not the case. A lockout would completely wipe the offseason out. No free agency, no trades, no OTAs, no minicamps, no training camps, no preseason. Nothing, with the exception of three-days in April for the draft.

Let’s not downplay just how important the offseason is in the NFL. The league has become a 12-month of the year enterprise. Any lost time will have a significant impact on the quality and ability of the league to properly function during the 2011 season.

If your team hired a different head coach or coordinator this offseason, good luck installing a new system or terminology without any offseason programs. It will be very difficult to integrate rookies and other young players into your plans for the future when the opportunity to teach them the necessary skills and basics is taken away. Not to mention with upwards of 490 players set to become unrestricted free agents, players will have much less time to sign on with new teams and learn new systems if the league tries to rush into a season after striking a deal.

How does television impact the lockout?
Television networks (NBC, CBS, Fox, ESPN/ABC) will have a tremendous impact on the outcome of these labor negotiations for one reason. All four stations and DirecTV have fully guaranteed their contracts with the NFL regardless of whether or not football is actually played in 2011! That means that the owners will make money this year even if they don’t have a product to sell to the general public.

Annually, the NFL pulls in more than $4 billion in television network rights fees (see table below). For all of the network partners, they have agreements in place with the league in which the NFL would be paid these fees, even if games are not played. Roger Goodell has said that the league will have to rebate the networks, with interest, when play resumes, but that’s only half true. The DirecTV fees for NFL Sunday Ticket, which are now almost $1 billion, would not have to be returned.

Network            Annual Rights Fee
ESPN                            $1,100,000,000
FOX                              $720,000,000
CBS                               $620,000,000
NBC                              $603,000,000
DirecTV*                     $1,000,000,000
* Approximate

TOTAL: $4,043,000,000

Additionally, even with the league on the verge of a work stoppage, John Ourand of the SportsBusiness Journal reported last month that ESPN has approached the NFL about renegotiating their contract to carry Monday Night Football. According to the SBJ:

“ESPN and the NFL have agreed to broad terms on a new media rights deal that will be worth nearly $2 billion per year. Specific numbers still are difficult to confirm, but multiple sources say ESPN has told the NFL that it will increase its annual rights fee by 65% to 70%%, which means it will pay the league a record fee, between $1.8 billion and $1.9 billion a year.”

Are any other business partners reaching lucrative deals with the NFL?
In May of last year, Anheuser-Busch replaced Coors out as the Official Beer of the NFL in a six-year, $1.2 billion deal that begins in 2011 regardless of the current labor situation.

What are the owners looking for?
In terms of economics, a rookie wage scale and increased “expense credits”, both of which would reduce total revenues (the amount of revenues after the owners take their cut off the top before it gets to the players) by approximately 18 percent.

How much do the players currently take in?
Players receive approximately 50 percent of all revenues in the NFL. Looking at it another way, the players receive about 59% of “Total Revenue” – the amount of revenues after the owners take expense credits off the top. The owners association is adamant that they want an increase of the pie which would reduce the players cut to about 41% of total revenues.

What are the players looking for?
Nothing. Technically, they are seeking an extension of the current CBA reached in 2006. To date, the owners have rejected the proposal 5 times.

Are the players willing to bend on any issues?
Yes. The NFLPA proposed changes to the rookie wage scale that has been in the works for over a year. The union for the players offered up what they call a “Proven Performance Plan”.

The players union is willing to concede to a new rookie wage scale

The proposal would reduce rookie contract lengths to a maximum of 3 years and put a slotting system in place that would determine how much a player could be paid based on where they were selected in the draft. No longer would you see situations like Sam Bradford getting the most guaranteed money in NFL history before he ever took a snap on the field or rookies holding out for more money during training camp.

According to the NFLPA, that would reduce spending on rookie salary by approximately $200 million. The proposal would then take those savings and divert $150 million to players who signed relatively low contracts either as rookies or veterans, but whose performance has been much greater. The rest of the balance (approximately $50 million) would be devoted to a fund for new retired player benefits. The proposal is also seeking the league to match those funds creating a $100 million pool for retired player benefits.

Did the league accept the “Proven Performance Plan”?
Since the NFLPA’s proposal has the savings from the reduced length of player contracts going into funds for other players and retired player benefits, and not coming back to the owners, unsurprisingly, the owners rejected the proposal.

What about an 18-game schedule?
Commissioner Goodell has been adamant over the past year in his stance on expanding the season from 16 to 18 games. The players union is against this move citing the health concerns of adding two more games to the schedule. There are several questions that must be addressed before this move happens. How will the money be divided between the owners and NFLPA by adding two more games? Will more players be added to game day rosters to compensate for additional injury risk? What impact will this have on past contracts negotiated based on a 16-game format?

The bottom line is the NFL is a business driven by its bottom line. Goodell and the owners can continue to talk about the importance of player safety but ultimately money will cause the league to expand its season.

When will there be a new CBA?
Things are looking very grim for the NFL at the time being. The league and its players association have not met since February 9th and there are currently no negotiations scheduled over the next two weeks. However real labor negotiations will likely begin once we get closer to the March 4th deadline. The week beginning on February 28th will be critical for the future of the 2011 NFL season.

Based strictly on a gut feeling I believe an agreement will be reached at some point in the near future. There is simply too much money to be lost for both parties in the situation of a labor stoppage. The longer this drags on, the weaker the players stance will become. At some point they will cave to the owners demands. It’s just a matter of how long their pride forces them to holdout.

If you have any additional questions regarding the current CBA, feel free to e-mail me at mwledere@syr.edu.