Think the owners are being the stubborn ones? Think again

[Miguel]

Miguel - I'm not sure I understand what "incremental revenues" refers to. Can you 'asplain?

I think that they are considering revenue over the 6.49 billion received in 2005 as incremental. 1.28 billion in 2006, 2.39 billion in 2009, x billion in 2008, y billion in 2007. I am inferring from the article that 1.28 +2.39 +x+y = 7.2.

I think that they are considering player costs over the 3.32 billion received in 2005 as incremental. 780 million in 2006, 1.18 billion in 2009, z billion in 2008, w billion in 2007. I am inferring from the article that .78 +1.18+ z +w= 3.8.

3.8 divided by 7.2 = 52.78%

Hope that this helps.

 

[Miguel]

If the players are expecting anything resembling a 50/50 split, but with only the owners responsible for costs related to overhead, infrastructure and investment for growth, this is going to drag on a very long time.

Huh, the players have agreed to increase the credit for what is spent on growth. They just disagree with the owners on the size of the credit.

 

[Deus Irae]

If PWC's numbers are correct, then

in 2005 the players' costs took up 51.16% (332/649) of all revenue.
in 2006 the players' costs took up 52.77% (410/777) of all revenue
in 2009 the players' costs took up 50.68% (450/888) of all revenue.

Stephen Ross' comments on the subject are telling:

What the real estate mogul quickly learned the past three years was that the NFL's business model is broken, and needs to be fixed to ensure the long-term stability of the league...

"Anybody who has been in business [knows] you don't pay players the percentage of the gross."

Miami Dolphins owner says NFL's business model is broken, needs fixing - South Florida Sun-Sentinel.com

 

[skinnydog]

Stephen Ross' comments on the subject are telling:



Miami Dolphins owner says NFL's business model is broken, needs fixing - South Florida Sun-Sentinel.com

I didn't see anything telling or even intelligent in that article. First he claims the players are getting 60% of revenue. Look above a couple posts for the truth. Maybe 60% of some revenue, but not all. Then he claims players salaries are going up faster than revenues which seemshard to believe when the cap increases are tied to revenue increases. Again see above. Finally he claims the owners costs are going up. This gets to the heart of the issue and the players want to see proof. I'd also like to know costs have increased so dramatically for NFL owners. We've had a down economy. For most businesses the problem is that revenue drops off and they can't reduce costs enough to offset declining revenue. That's not the problem here.

 

[upstater1]

Interesting comments from Ross. Here's a guy who parlayed his high salary as a worker into a company that built HUD housing. He is so deep in this country's housing mess that he has personally lost a couple billion. Not only are his real estate holdings WAY down, but his company was also financing mortgages and the like.

I found this quote to be very revealing:

"Costs are going up. We're at the point now people can't afford to pay more for their entertainment," Ross said. "Typically, that's what has always happened. You always raised the prices. But we're at the point where you can't raise prices anymore. I think everybody accepts that but our costs keep going up. You have people earning $2 million-plus a year. Where do you think the line of reason falls?"

The NFL has UNDOUBTEDLY had an increase in revenues, not only because of raised ticket prices, but because of a $2 billion increase in the yearly TV packages. So, ostensibly, they are growing at a fair clip. But what happens if you see the country in economic turmoil? And concomitantly your own companies in a bit of a mess? You realize the future is not so rosy. So even though your revenues are rising, you project the future and realize this is no longer the case. His complaint that players are earning $2 million plus a year is weird and totally irrelevant especially given his corporate background where he earned a lot of money.

When you parse this quote, you see the real problem with the owners. This is a classic Wall Street mo-mo story (momentum stock) where the valuation of the company (look at Forbes' astronomic valuations of NFL franchises) is going to get clipped now because future growth forecasts are limited. This means that when Ross put his 1.1 billion down, he expected those valuations to keep rising, but now he sees that he will NOT get the increased valuation that he so desired, not to mention that he's lost 2 billion recently. This happens to momentum stocks all the time. When growth slows, you see a huge revision in their value. A company with a 30 PE (Price to Earnings ratio) because of high growth drops to 15 PE overnight. When you couple this with a tight credit market that makes the prospect of a new buyer coming in much more difficult, then you know why the owners are upset. But here's the thing: most of his fellow owners have already benefited hugely from the increased revenues and increased valuations. They are not underwater like Ross is. They have been the beneficiaries of increased ticket prices, increased TV money, and taxpayers footing the bill for stadiums. So, the fact that their franchise's valuation has been dinged is just a product of the business cycle. To be expected in a country whose middle class incomes have flatlined.

As for the players, they simply are getting and are expecting have of the revenues. If the revenues don't increase at a go-go momentum rate as Ross is predicting, then so what? The NFL will be just like thousands of great companies out there, still growing above the rate of inflation, still deserving of a 10-15 PE. And the players will not be making a ton more money than they are now either. Why am I supposed to sympathize with the owners?

The point is, Ross made a bad bet. His fellow owners have gotten in early. he's late to the game. It's his fault. Why should the players cover the losses of a billionaire when the other owners are doing MORE than fine. Even Ralph Wilson is going to get out with a $500 million profit if he sells before they raise the estate tax.

So many are saying that the players are not sharing the risk. Well, the vast majority of owners are risking little at this point since most of them have owned their teams for more than 5 years. Their investment has grown at a VERY healthy clip even given the economic environment. A guy like Stephen Ross, a guy who made millions as a worker, then benefited from the government programs in housing, a guy whose fortune exploded do to a very loose regulatory structure in real estate, has absolutely nothing to complain about. He wants to lock in his gains. And I want my portfolio to look like what it did at its height.

I'm sorry, no sympathy for you Ross.

 

[lamafist]

I didn't see anything telling or even intelligent in that article. First he claims the players are getting 60% of revenue. Look above a couple posts for the truth. Maybe 60% of some revenue, but not all. Then he claims players salaries are going up faster than revenues which seemshard to believe when the cap increases are tied to revenue increases. Again see above. Finally he claims the owners costs are going up. This gets to the heart of the issue and the players want to see proof. I'd also like to know costs have increased so dramatically for NFL owners. We've had a down economy. For most businesses the problem is that revenue drops off and they can't reduce costs enough to offset declining revenue. That's not the problem here.

I assume that by telling, Deus meant inadvertently revealing of one of the owners' real motivations, because you're right - there's such a conspicuous lack of intelligence in what Ross was saying that you'd have to assume either he's a fool, or (more likely) that he thinks we're all fools.

The first thing he expects us to believe is that just three years ago, he spent $1.1 billion dollars to buy into a "broken business model." This guy's been a seriously shrewd investor his whole career; he's not going to suddenly decide to blindly throw a billion dollars into a business he sees coming to a revenue plateau with an unsustainable compensation system for its labor force and an inability for the owner to employ any unilateral structural changes. And there's nothing going on with the league now that wasn't already obvious and inevitable when he bought it in 2008.

The next doozy of his is saying that the leagues revenues are plateauing because they've raised the ticket prices to as high as they can go because "people can't afford to pay more for their entertainment." This is both wrong and a patronizing head-fake towards populism. If the owners cared about being affordable to the average fan, they wouldn't have pushed all the tailgaters out of the parking lot to better cater to the 8 different types of 'premium' seating, where your wife can get an in-stadium mani/pedi while your kids run around a vaguely football-themed play center, and you wait back at your leather reclining seats and have hors d'oeuvres and a glass or merlot.

But beyond that, the real whopper in his claim is that raising ticket prices has been the way the NFL has kept up revenue growth. WRONG. First of all, we all know that the NFL's ticket revenue make up a significantly smaller portion of total revenue as compared to the other major sports, both of which have many times more games in a season. The NFL's major source of revenue is the TV rights contracts, and that revenue stream has seen serious growth with every passing contract. What's more, the NFL figures to net its biggest windfall in the upcoming network contract renewal - an unprecedented 28 of the 30 highest rated shows on television in 2010 were NFL broadcasts. And what's more, whereas all other programming has been hemorrhaging 18-34 year old males, the NFL is gaining in that demo, making them one of the only games in town in terms of hitting that quadrant. The other reason the next network contract talks should be so interesting (and lucrative) is the rapidly expanding adoption of new-media content. Whether it's tv on-demand, web streaming, mobile streaming, etc, the technology finally has both the quality and penetration to figure to be a serious new platform for content delivery that, right now, the NFL is totally under-tapping, and it knows it.

Which gets to the real reason why Ross' statement is so absurdly wrong -- the way that NFL franchises have kept revenues growing is NOT by raising ticket prices, but by finding ADDITIONAL STREAMS of revenue. This is why Ross comes off as such a backwards-thinking tool in this story - it reveals him to be thinking like one of the clueless, unimaginative deadbeat owners stubbornly trying to squeeze a few more gallons out of a tapped well rather than put the energy into tapping a new vein. This explains why HE might be having trouble growing revenues faster than costs, if he doesn't have any interest in diversifying his business.

But plenty of other owners have, which is why the average NFL franchise takes in over $30 million in operating income, after expenses, and his francise is one of only 2 that lost money this year. Which is why the value of the NFL's 32 francises has increased over 350% in the past 10 years -- as in, the owners have had the value of their biggest asset more than triple. And then you have guys like Robert Kraft, who took the land around his stadium and turned it into a giant commerce center, the proceeds of which, for the most part, as non-football revenues, and legally and fairly devolve 100% to the Kraft Group.

So when Ross complains about stagnant revenue growth compared to costs, what he's really saying is that he's bad at his job, and he thinks the league's players should have to pay for it.

 

[PatsWickedPissah]

"And then you have guys like Robert Kraft, who took the land around his stadium and turned it into a giant commerce center, the proceeds of which, for the most part, as non-football revenues, and legally and fairly devolve 100% to the Kraft Group."

Not according to Vrable and other members of the NFLPA*. Like many in the country they view "what you think is yours, is mine". Entitled.

 

[townes]

"And then you have guys like Robert Kraft, who took the land around his stadium and turned it into a giant commerce center, the proceeds of which, for the most part, as non-football revenues, and legally and fairly devolve 100% to the Kraft Group."

Not according to Vrable and other members of the NFLPA*. Like many in the country they view "what you think is yours, is mine". Entitled.

Once again ignoring the FACT that the players were not asking for more.

 

[PatsWickedPissah]

Once again ignoring the FACT that the players were not asking for more.

You are an idiot with a typing finger larger than a brain. I did no such thing. I am well aware that the players did not initiate the CBA changes.

 

[lamafist]

"And then you have guys like Robert Kraft, who took the land around his stadium and turned it into a giant commerce center, the proceeds of which, for the most part, as non-football revenues, and legally and fairly devolve 100% to the Kraft Group."

Not according to Vrable and other members of the NFLPA*. Like many in the country they view "what you think is yours, is mine". Entitled.

The NFLPA has never maid any claims to non-football revenue. Nobody is going after Kraft's money from NE Revolution games or his rent from the stores and restaurants in Patriots Place.

The NFLPA feels that the players are entitled to a cut (around 50%) of all revenues "arising out of the performance of players in NFL football games."

How you get from "a cut of the proceeds of our labor" to "what you think is yours, is mine" is a mystery to me.

 

[PatsWickedPissah]

Vrable and other members of the NFLPA*
Reading skills are critical

 

[townes]

Vrable and other members of the NFLPA*
Reading skills are critical

So is the truth.

 

[BradyFTW!]

News from The Associated Press

So, it basically comes down to: "The players got 70% (if you ignore a billion dollars of what we got)"?

And people still wonder why the players don't trust the owners to be honest about their financial situation?

 

[townes]

So, it basically comes down to: "The players got 70% (if you ignore a billion dollars of what we got)"?

And people still wonder why the players don't trust the owners to be honest about their financial situation?

I find it incredible anyone could side with the owners given their behavior throughout this. The owners geared up for the last 2 years specifically to stop football cold in it's tracks so they could take a larger share for themselves, they set up deals to ensure they would be fine financially while shutting the game down, screwed around instead of negotiating in any kind of good faith, and now are doing everything they can to get the courts to allow them to lock out the players and keep the games from being played. The game has been thriving financially and all of them are making out big time, yet the owners are so greedy they are willing to shut it down so they can make more. There is simply no question who is to blame here, and it clearly isn't the players.

 

[JMarr]

I find it incredible anyone could side with the owners given their behavior throughout this. The owners geared up for the last 2 years specifically to stop football cold in it's tracks so they could take a larger share for themselves, they set up deals to ensure they would be fine financially while shutting the game down, screwed around instead of negotiating in any kind of good faith, and now are doing everything they can to get the courts to allow them to lock out the players and keep the games from being played. The game has been thriving financially and all of them are making out big time, yet the owners are so greedy they are willing to shut it down so they can make more. There is simply no question who is to blame here, and it clearly isn't the players.

But, but....didn't you know that the owners got shafted *bigtime* by the last CBA?

Poor fellers--they're just trying to recover financially from that catastrophic agreement in 1993 that has clearly put all the owners in the poorhouse for the last 18 years. What a joke. F*** those billionaire scumbags, most of who care NOTHING about the game itself.

 

[BradyFTW!]

I find it incredible anyone could side with the owners given their behavior throughout this. The owners geared up for the last 2 years specifically to stop football cold in it's tracks so they could take a larger share for themselves, they set up deals to ensure they would be fine financially while shutting the game down, screwed around instead of negotiating in any kind of good faith, and now are doing everything they can to get the courts to allow them to lock out the players and keep the games from being played. The game has been thriving financially and all of them are making out big time, yet the owners are so greedy they are willing to shut it down so they can make more. There is simply no question who is to blame here, and it clearly isn't the players.

Some people have been thoroughly conditioned to believe that unions = evil. That's really the only explanation that I can come up with.

 

[dhamz]

I honestly find it incredible that anyone falls for either sides public relations BS and chooses either side.

The owners opted out of the deal with the intention of getting the givebacks they want. If they got it through negotiations, great. If not they have always been prepared to shut the game down. They are right where they knew they would be today.

The players association have been planning to decertify and sue from the day Smith was elected. You can't get elected as a guy who was going to fight the owners to the death and give away things without a fight. Negotiation would defintiely mean real givebacks and Smith can't do that unless someone in a black robe forces him to. This situation is right where Smith always planned to be.

 

[Ring 6]

I find it incredible anyone could side with the owners given their behavior throughout this. The owners geared up for the last 2 years specifically to stop football cold in it's tracks so they could take a larger share for themselves, they set up deals to ensure they would be fine financially while shutting the game down, screwed around instead of negotiating in any kind of good faith, and now are doing everything they can to get the courts to allow them to lock out the players and keep the games from being played. The game has been thriving financially and all of them are making out big time, yet the owners are so greedy they are willing to shut it down so they can make more. There is simply no question who is to blame here, and it clearly isn't the players.

Isn't that what they are supposed to do, as business who's motivation is profit?
This is the part i don't understand of many of these arguments. You are clearly stating that they made decisions in their best self-interest to run their business in the most profitable way possible. Yet you assail them for it.
What motivation are you expecting them to operate with?

 

[Ring 6]

I honestly find it incredible that anyone falls for either sides public relations BS and chooses either side.

The owners opted out of the deal with the intention of getting the givebacks they want. If they got it through negotiations, great. If not they have always been prepared to shut the game down. They are right where they knew they would be today.

The players association have been planning to decertify and sue from the day Smith was elected. You can't get elected as a guy who was going to fight the owners to the death and give away things without a fight. Negotiation would defintiely mean real givebacks and Smith can't do that unless someone in a black robe forces him to. This situation is right where Smith always planned to be.

Both sides are playing the cards they have.
To think that either will change 'our best interest' to 'what is fair' is ridiculous. No one who would approach negotiation that way would ever be a negotiator.
Once the injunction, and the 'sham' cases are heard, negotiating power will sway in one direction or the other, and a deal will be much closer.
A deal isn't going to be done because one side 'proves' the other wrong, such as the ludicruous idea that showing financials would serve any purpose in getting an agreement done, but by one side having an upper hand to start moving the bargaining point in one direction or the other.

 

[Deus Irae]

I honestly find it incredible that anyone falls for either sides public relations BS and chooses either side.

The owners opted out of the deal with the intention of getting the givebacks they want. If they got it through negotiations, great. If not they have always been prepared to shut the game down. They are right where they knew they would be today.

The players association have been planning to decertify and sue from the day Smith was elected. You can't get elected as a guy who was going to fight the owners to the death and give away things without a fight. Negotiation would defintiely mean real givebacks and Smith can't do that unless someone in a black robe forces him to. This situation is right where Smith always planned to be.

So Smith always planned to agree to give back hundreds of millions of dollars before ever seeing the books?