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Thoughts on impact of TV contract case

Posted by Greg A. Bedard  March 2, 2011 01:35 PM

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CHANTILLY, Va. – Was working on a story yesterday and traveling this morning to the NFL owners’ meeting/CBA talks here in the Washington, D.C. area but wanted to make sure to address last night’s ruling by US District Court judge Doty for the NFL Players’ Association in the television contract case.

You should read it for yourself. It’s fascinating and not too bogged down in legalese.

Basically, David S. Doty, the judge with jurisdiction over the collective bargaining agreement between the NFL and NFLPA, said Stephen Burbank, the special master who presided over the original case, didn’t really know what he was talking about because he was trying to apply business law to a business that functions like no others. The realm of sports is one of the few businesses that prefers its workforce to be unionized. And the relationship between ownership and employees is unique.

The NFL is obligated to negotiate the television contracts for the betterment of the league and the players. And since it was found through testimony and evidence that the NFL used possible payments during a lockout – to benefit only themselves and to harm the players – as part of the negotiations, the league didn’t act in good faith.

So that $4.2 billion the league thought it would have even if there are no games? It can't be touched at this point.

Yes, it’s very significant ruling. How significant? We won’t know that until Doty rules on damages at a hearing which has yet to be scheduled. The players could get money damages, their 59.5 percent cut, or it simply could be put in escrow.

The NFL has said it has been planning for this possible outcome and can weather any storm. What else was it going to say, ‘Man, we’re screwed so we’ll just give in to the players on CBA talks’?

The feeling here is that the owners can withstand upwards of an entire season without football even with this ruling. Beyond that, it’s doubtful. If anything, it gives clubs cover to immediately start layoffs, pay cuts, and/or furloughs for their employees.

The big news to come out of the ruling is the actions of the NFL. It came across as a greedy bully. And this will do nothing but reinforce the notion that the owners are only after profits and are questionable stewards for the game in a time when the public should have good faith that their possible action to lock out the players and possibly halt games is in the best interest of the NFL.

Some of the highlights direct from the ruling (SSA means settlement agreement which was used to form the CBA):

  • "The extended contract provides that DirecTV will pay a substantial fee if the 2011 season is not cancelled and up to 9% more, at the NFL’s discretion, if the 2011 season is cancelled. Of the total amount payable in the event of a cancelled season, 42% of that fee is nonrefundable and the remainder would be credited to the following season. (From Roger Goodell testimony). As a result, the NFL could receive substantially more from DirecTV in 2011 if it locks out the Players then if it does not. DirecTV would have considered paying more in 2009 and 2010 “to have [the work-stoppage provision] go away.” The judge found the NFL basically left money on the table to make sure it had its war chest funded in the case of a lockout. And also that it had built financial incentive to lock the players out.
  • “Initially, FOX expressed reluctance to pay rights fees during a work stoppage. (Goodell). The NFL considered opposition to the work stoppage provision a “deal breaker.”
  • “In extension negotiations, NBC felt that the NFL was “hosing” it by its rights fees demand.”
  • “The record shows that the NFL undertook contract renegotiations to advance its own interests and harm the interests of the players. …the NFL renegotiated the broadcast contracts to benefit its exclusive interest at the expense of, and contrary to, the joint interests of the NFL and the Players. This conduct constitutes “a design ... to seek an unconscionable advantage” and is inconsistent with good faith.”
  • “The NFL gave digital rights in 2009 and 2010 without incremental payments to convince two broadcasters to agree to work stoppage provisions.”
  • “According to one network executive, “you know you’ve reached the absolute limits of your power as a major network ... [when] the commissioner of the National Football League calls you ... and says ... we’re done, pay this or move on .... [the NFL has] market power like no one else, and at a certain point in time, they’ll tell you to pack it up or pay the piper.”
  • “The NFL used best efforts to advance its CBA negotiating position at the expense of using best efforts to maximize total revenues for the joint benefit of the NFL and the Players for each SSA playing season. Moreover, at least three networks expressed some degree of resistance to the lockout payments. As it renegotiated the contracts, the NFL characterized network opposition to lockout provisions to be a deal breaker and “clearly a deal” it would not consider.”
  • “The evidence shows that maximizing total revenues for SSA seasons was, at best, a minor consideration in contract renegotiations.”

One other thing. This ruling was a blow to Patriots owner Robert Kraft. Not only is he on the committee that negotiates the television deals, but he called the original case “bogus” at the Super Bowl and ripped the union for even filing it:

Remember, when the players’ union just lost this case – which was a bogus case to begin with, I had to give a deposition – (union lawyers) collected $15 million of fees that the players pay. I mean, think about that. If it’s coming out of your pocket and I’m managing our lawyers, if they’re not adding value, I tell them to zip it. I need them to protect me from myself but business people do business deals, not lawyers.

Kind of wondering where the league's lawyers were when Kraft and others were doing those TV contract extensions. They needed to be saved from themselves.

And evidently the case wasn't bogus. The playing field is now leveled a bit in the case of a lockout, but the owners will always be able to last longer than the players. TV money or not.

News, analysis and commentary from Boston.com's staff writers and contributors, including Zuri Berry and Erik Frenz.

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