MINNEAPOLIS — With millions of people glued to NFL games every fall weekend, the league’s broadcast rights are worth billions of dollars — even if the 2011 season is wiped out by the ongoing labor dispute with the players’ union.
The union contends over $4 billion in TV, digital and wireless revenue was carved out by the owners as a financial cushion in case of a lockout, and they want that money escrowed so it can’t be held as leverage against them in collective bargaining talks.
The NFL argues it shrewdly maximized the revenue for all to share back in 2009 and 2010, and that lockout protection has been a normal part of broadcast contracts — the league’s economic engine — for years.
The two sides took their fight before a federal judge in Minnesota on Thursday, a potentially critical issue just one week before their current labor pact expires.
U.S. District Court judge David Doty in Minneapolis, who has had jurisdiction over NFL labor matters since a 1993 settlement he presided over that paved the way for the existing free agency system, unsealed some documents in the case with financial details redacted in many cases.
Doty did not immediately rule, however, on the NFL Players’ Association appeal of a special master’s decision earlier this month that lets the league keep the $4 billion or so in broadcast rights fees. (Networks would get a refund with interest if games are lost.)
Doty said he didn’t want to put his “thumb on the scale of the collective bargaining” process, as NFL attorney Gregg Levy contended union lawyers are asking. Levy said “it would be repugnant to federal labor law” for Doty to intervene in this issue.
NFLPA attorney Jeffrey Kessler countered that it’s the league’s “thumb on the scale” in the labor talks, saying the billions in leverage was part of a long-devised lockout plan and that the NFL didn’t act in good faith.
“We’d like the thumb removed,” Kessler said.
The collective bargaining agreement expires next Thursday. Lawyers for both sides, citing a gag order, declined to comment on the negotiations as well as how the case could affect the talks.
The union contends the NFL failed to secure “maximum” revenue, as it is required to do, in both 2009 and 2010 when it re-negotiated broadcast contracts with Fox, NBC, ESPN, CBS and DirecTV that included revised “work stoppage” plans. The NFLPA said the work stoppage clauses in particular were struck to guarantee “war chest” income for the NFL, giving it an unfair advantage in the labor talks.
“Leverage, leverage, leverage. They said it to themselves over and over again. And why? To inflict economic harm on the players,” said Tom Heiden, another attorney for the NFLPA.
The league claims that seeking more revenue for existing 2009-10 deals would have been unsuccessful and angered the broadcast partners already dealing with a “depressed advertising market.” Levy said the league believes it followed sound business principles that brought in “hundreds of millions of dollars in additional revenues,” citing specifically the creation of the new Red Zone channel that scratched an itch for fantasy football-hungry fans eager for updates on their players.
Levy’s argument was backed Feb. 1 by the special master, Stephen Burbank.
In Burbank’s decision, released for the first time Thursday, he said he couldn’t believe the NFL had a duty to the union to “throw budgets and business plans in the wastebasket” even as he acknowledged the sharp disagreement between the two sides over how much the NFL can pursue its own business interests while following requirements of the labor pact.
NFL Commissioner Roger Goodell testified that the work stoppage fees “could be used to meet” NFL debt obligations and cover operating costs, the decision said.
The decision also confirmed that Burbank had awarded the NFLPA $6.9 million to settle a dispute over revenue from an “extra” game granted by the NFL to NBC last season. The Oct. 31 game, between the Saints and Steelers, drew better ratings on a Sunday night than a competing World Series game between Texas and San Francisco.
Because the union asked for about $60 million in damages, Levy called the appeal bogus.
“The union took a big gamble. It didn’t pursue damages in a coherent way,” Levy said. “It seeks a remedy intended to pressure the league in collective bargaining.”
The Star Tribune of Minneapolis and St. Paul Pioneer Press asked that all the evidence be made public, but Doty only agreed to a redacted release out of respect for commercial confidentiality of the TV contracts. Many figures and details are blacked out, though a few noteworthy nuggets emerged from the unsealing.
The NFLPA’s objection to Burbank’s ruling includes testimony from Dallas Cowboys owner Jerry Jones that says the league needed to “realistically assume” a lockout to get a CBA it wants. It also includes chart-style NFL memos that acknowledge a “strengthened position in labor negotiations” as reasons for redoing the broadcast contracts.
Lawyers on each side made impassioned arguments, but the tenor in the room during the nearly three-hour hearing was civil. Doty noted his long history with the league’s labor issues and his familiarity with many of the attorneys in front of him.
“We all think of ourselves as old friends, at least I do,” Doty said, later adding: “I’m one of those odd judges who still likes lawyers.”