While They Squabble, the Billions Pour In
Before getting to the financial report of the Packers indicating the NFL’s overall unprecedented good health, a note on the league's decision to uphold Tom Brady’s four-game suspension.
It is not hard to see why the discipline was upheld. Despite the lashing out by Brady’s agent Don Yee (“a sham”), the NFLPA (“outrageous”) and even the Patriots (“incomprehensible”), my problem with the Brady defense over the past six months was that, besides an attack on the science used in the Wells Report, there was no defense, nothing to help exonerate, exculpate or free Brady from blame.
Even after the Wells investigation found Brady to be evasive and noncompliant, commissioner Roger Goodell had publicly solicited Brady to offer up something to allow a reduced or removed suspension. Now, instead of receiving new information helpful to Brady, the appeal to Goodell uncovered that: (1) Brady destroyed his cell phone on the verge of meeting with league investigators; and (2) the Brady camp decided not to call the two witnesses at the appeal who could have helped Brady the most, John Jastremski and Jim McNally. How exactly did the Brady legal team think it was going to get Goodell to reduce or remove the suspension?
Now comes Jeffrey Kessler, outside counsel for the NFLPA, to lead another appeal. It costs Brady nothing to appeal; Kessler will just add the charges to his already-bloated invoice to the union. The NFL fired a preemptive strike asking for a declaratory judgment in the arbitrator-friendly Manhattan federal court, while the union seems intent on bringing the case in the player-friendly Minnesota district court.
Judges and lawyers will sort out this next chapter of Courtroom Football, but the question lingers: What exactly are Brady and his army of lawyers going to present to help his case? And even before getting to the merits of the case, it will be an uphill climb because: (1) courts are universally hesitant to overrule arbitrators in an established labor law system; and (2) that system—with Goodell as the judge, jury and executioner—is one that has been long accepted by the union in collective bargaining negotiations.
We can still hold out hope that another round of Courtroom Football brings some new information/evidence/data/facts that helps Brady’s case. However, it does seem we will be back where we started from once again, with the union having piled up more legal fees along the way. The lawyers always win.
As do the owners…
NFL Business is booming
The Green Bay Packers Annual Report, released earlier this month, not only represents the financial statement on the condition of the Packers but also presents a much more impactful financial statement about the NFL as a whole. Based on a single line item in the statement, the NFL has never been more prosperous and the brand only seems to be getting stronger. Despite a year of crises in integrity, domestic violence scandals, questions of leadership at the highest levels, the interminable Deflategate saga and even musings about whether the game can/will survive, business is booming. All of the above were just fender-benders at the side of the road in the NFL’s highway to opulence. Move along, nothing to see here.
Having managed player costs at the Packers for nine years, I vividly remember “Annual Report Day” every year. The public, fans and media could all peer inside the league’s only publicly held franchise and have a glimpse at our revenues, expenses and (inevitable) profit. With the release of the NFL’s only “open book,” that day of the year left us feeling, well, a bit violated.
As to those numbers, total revenue has skyrocketed in the past three years from $300 million to $375 million, a 25% increase. And in the past year team revenue took a 16% jump alone, up from $324 million. As to this year’s profit number of $39.4 million, that is another 16% jump from the previous year. The Packers are in good shape on and off the field.
It was amusing to me that each year on Annual Report Day I would hear from my agent friends with suggestions as to how I could spend some of that profit (on their clients, of course). There were a couple of times where I politely chuckled at that comment and didn’t hear laughter on the other end; the light-hearted conversation turned a bit more conflicted. I would tell them that we certainly had plans for that profit—usually plowing it back into our football operation—but that I appreciated their offer to take that money off our hands.
The conversation about Packer profit and our players was on a micro level. On a more macro level, there is always a deeper conversation between the NFL and the NFLPA about the only team-reported numbers available.
In 2011, NFL owners came to the collective bargaining negotiations requesting (demanding) a new revenue split because of a changed economic environment since the last CBA in 2006. Thus, the NFLPA’s response—“OK, just to verify: show us your books!”—was a reasonable one that was denied by the owners. Thus, in debating league revenues and profitability, the NFL and NFLPA have often been left to debate the only books available for public viewing: those of the Packers.
Of course, the union and the league have different views on the Packers’ success off the field. From the NFLPA’s view, if the smallest market in all of professional sports can show healthy profits, it is not a stretch to project greater profit margins in larger markets. From the NFL’s point of view, the Packers and their fan base are unique and not representative of all teams. Thus, the negotiation as to “what the Packers' books mean” becomes a stalemate, with the truth a mystery due to the owners’ unwillingness to show additional data points.
Although the vast majority of the information in the Annual Report is Packer-specific, the key line item indicative of NFL health is the “League Distribution.” This is the amount each of the 32 teams receives annually from the NFL from shared revenue, primarily broadcast deals and national licensing.
The amount of that check this year was staggering: $226.4 million, an eye-popping 17% increase from last year’s distribution of $187.7 million. In other words, before any team in the NFL turns the lights on, it knows it has $226 million to work with. Putting that number in perspective, the team salary cap for 2014 was $133 million, meaning that if teams on average spent to the cap, they had almost $100 million left over after player costs to use for operations and, of course, profit. And, most importantly, that number is only going up.
As to the cap, it rose 7% while the league distribution was rising 17%. And, as for the commensurate rise in team asset values, well, those are skyrocketing. (The Bills, valued at $700 million to $800 million, recently sold for $1.4 billion.) In case you haven’t been paying attention, these NFL owners are some diabolical negotiators.
As written often in this space, an unofficial and unsung part of Goodell’s job description is to act as human shield for criticism for the NFL owners. That was no better illustrated than over this past year, when he received loads more criticism about levels of discipline for players involved in domestic violence than the owners of the teams, who applied no discipline. Owners are thankful to have Goodell as their piñata when necessary. Conversely, when they receive their $226 million check this year from the league, he will get the credit. This is yet another reason why the debate about Goodell losing his job was more an academic discussion than a practical one.
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These are truly salad days for NFL owners. The league distribution virtually ensures a profit even from the most mismanaged of teams. Record-level broadcast contracts are now kicking in, amplified by the recent manifold increase in the DirecTV deal. The threat of billions of dollars in exposure in a concussion lawsuit has been largely quelled with final approval of a settlement, pending some lingering appeals. A team-friendly CBA is in place for another half-decade, ensuring labor costs at a reasonable level. And the owners are led by a stone-faced commissioner willing to take the hits for them at all turns.
As we open training camps in the NFL, already a time for each team’s fans to look at their squad with rose-colored glasses, the view from an NFL owner’s chair is plenty rosy even without those glasses.