NFL Lockout Ruling Foreshadows Eventual Defeat for Owners

WASHINGTON, DC - MARCH 08:  National Football ...U.S. District Judge Susan Richard Nelson ordered an immediate end to the lockout Monday.  The NFL will certainly seek to stay this ruling.

Her ruling shouldn’t surprise anyone, and it may foreshadow an eventual victory for the players.

ECONOMIC INTERPRETATIONS OF JUDGE NELSON’S RULINGS

In her ruling, Judge Nelson wrote “The plaintiffs have made a strong showing that allowing the League to continue their ‘lockout’ is presently inflicting, and will continue to inflict, irreparable harm upon them, particularly when weighed against the lack of any real injury that would be imposed on the NFL by issuing the preliminary injunction.”

To paraphrase aspiring lawyer Vinnie Gambini from “My Cousin Vinnie” fame, Judge Nelson’s assessment is “dead-on balls accurate” because it is consistent with 3 undeniable economic truths in the NFL:

(1) The average NFL career is approximately 3.5 years.

(2) The median NFL salary for the 2010-11 season was approximately $770,000.

(3) The median NFL operating income is near $30 M.

Translation?  Judge Nelson recognizes that:

a)  Many NFL players have short careers, and the money they earn during these short careers is likely 50-75% of their overall lifetime earnings.

b) With most NFL teams earning double-digit operating incomes and with median franchise values at $1 B, there is no Greek tragedy that will suddenly emerge if the league were to re-open for business immediately.  To avoid the chaos everyone is talking about, simply agree to a one-year extension of the rules that governed the 2010-11 season, set September 1, 2011 as the deadline for a new CBA to take effect as of March 1, 2012, and move on from there.

She further ruled, “The public ramifications of this dispute exceed the abstract principles of the antitrust laws, as professional football involves many layers of tangible economic impact, ranging from broadcast revenues down to concessions sales…And, of course, the public interest represented by the fans of professional football—who have a strong investment in the 2011 season—is an intangible interest that weighs against the lockout. In short, this particular employment dispute is far from a purely private argument over compensation.”

In this passage, it’s clear Judge Nelson understands that the lockout could eventually impact everything from TV contracts, employment of full-time and seasonal staff, and ‘psychic income’.

Aside from the media and concessions revenues, it’s clear she recognizes the social and cultural importance of the sport.  Its power as a common identification symbol.  An entity which creates ‘psychic income’ that one doesn’t assign with your typical Fortune 500 company or major industry.

PLAYERS’ GAMEPLAN WORKING THUS FAR

The players are the ones used to having a gameplan handed to them which they must learn and execute.  So it seems fitting that, to this point, the players’ legal gameplan seems to be working beautifully.

Recall that, with the expectation of getting locked out, the NFLPA had to decertify before the lock out was imposed so that they would be able to more expeditiously address the collective negotiations with owners in court.

Given that the courts – based on Judge David Doty’s precedent – were likely to be ‘pro-player’, decertification was the best strategy for players to follow.  They knew NFL owners were hell-bent to lock them out and blow-up the current economic structure of the NFL.

In the courts, it would appear that the owners may find very little sympathy for their arguments given the profitability of the league, most teams within the league, and the relative wealth position of the owners compared to the average player as cited above.

The owners best hope in these labor wars was for player fragmentation.  Keep the issue in the courts long enough and close enough to the beginning of the regular season that the ‘rank-and-file’ non-millionaire players start getting nervous and itching to strike an inferior deal.

Some rumored that this was in the midst of happening as recently as last week, though it appears now that these reports were overblown.

In late February it was U.S. District Judge David Doty (who has presided over cases involving the NFL, the NFL Players Association and the collective bargaining agreement for nearly two decades) who ruled that the NFL would not have complete access to $4 billion in television revenue during a lockout.

Strike 1 for the owners.

Now Judge Nelson has ruled for the lockout to be lifted.  Strike 2.

Though the owners have brilliant lawyers, access to an appeals process, and the hope of ‘player fragmentation’ on their side, perhaps it’s time for them to ‘play ball’ in order to avoid ‘Strike 3′.

In other words, realize that ’sunk costs’ are indeed ’sunk’ , suck up their overblown bellies and pride, and get back to some meaningful negotiations rather than playing a legal game of ”Doe-See-Doe”.

Unfortunately, as much as I’d like that to happen for all the reasons Judge Nelson so eloquently articulated, these negotiations are ’hard-ball’ not ’slow-pitch’.

For football fans, this process is going to feel like a late-night extra innings affair.  Like an NHL playoff multi-overtime game that seemingly has no end.

But if the players can avoid fragmentation, the rulings of Judges Doty and Nelson will ultimately pave the road to legal victory over the NFL owners.

By Patrick Rishe (Forbes)

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