What's going on with the TV money?

[get louder at lambeau]

The NFL would pay them back at some point in the future, but not completely. From Doty's initial decision (via PFT):

That's the first I've heard of that. Just goes to show how desperate DirecTV was to keep that contract, if they agreed to fucked up terms like that.

[Tarlam!]

Swede, how the hell is your German so good? Perfect punctuation and use of caps. You flaw me.......

[pbmax]

That's the first I've hear of that. Just goes to show how desperate DirecTV was to keep that contract, if they agreed to fucked up terms like that.

The desperation went both ways (Via PFT):

Quote: “Initially, FOX expressed reluctance to pay rights fees during a work stoppage. The NFL considered opposition to the work stoppage provision a ‘deal breaker[].’”

Interpretation: This wasn’t some ancillary, throw-in term. It was one of the primary motivations for extending the network deals in 2009, and that supports the union’s claims that the NFL has been plotting a lockout for at least two years.

And one of the reasons the League needed the terms was the existence of lockout language in their normal course of business loans (via PFT):

Quote: “[S]ome of the NFL’s loan obligations include ‘average media revenues’ covenants which provide that an ‘event of default’ occurs if average annual league media revenues fall below a specific value.”

Interpretation: The league needs the TV money to keep coming during a lockout to avoid defaulting on some of its loans. Even if the money otherwise can be raised to pay the bills, a significant drop in the TV money potentially becomes a “default,” which triggers all sorts of problems for the league.

So the League not only needed the revenue to survive the lockout amid continuing costs, it needed the revenue to avoid defaulting on their loans by definition, even if they had the cash to continue to make payments.

[swede]

Swede, how the hell is your German so good? Perfect punctuation and use of caps. You flaw me.......

Well, I was going to use Katzenjammer Kids German but it was more confusing than amusing. I went to good old Babelfish for the translation.

As for the capitals, I surmised that there must be a German punctuation rule in which proper nouns are not capitalized but nouns that are modified by an adjective are capitalized. That is an interesting Rule.

[get louder at lambeau]

The desperation went both ways (Via PFT):



And one of the reasons the League needed the terms was the existence of lockout language in their normal course of business loans (via PFT):



So the League not only needed the revenue to survive the lockout amid continuing costs, it needed the revenue to avoid defaulting on their loans by definition, even if they had the cash to continue to make payments.

That's interesting. It makes me think that the NFL wasn't quite as shady as it initially appears with the lockout guarantee stuff. If they need that revenue to avoid defaulting on loans by definition, it would seem like a somewhat reasonable contract provision to include in those TV contracts. I doubt the old CBA mandated that they have to maximize shared revenue in the short term even to the point that it could endanger their financial health in other ways. That would be very short-sighted.

As far as the lockout being something that is done at the discretion of the owners, it is, but it is a tool that they need to have available when dealing with a union. If they can't lock the players out without defaulting on large loans, and the players know they can't, the players can demand anything they want; and the NFL would face the option of either accepting whatever terms the players dictate by the start of the season, or defaulting on their loans. Both are options that could potentially jeopardize the financial health of the league. It seems unfair to allow the players the leverage to put the NFL into a lose-lose situation like that. Assuming those loans are significant, anyway.

[SkinBasket]

Doing this, they violated a legally binding arrangement in which the owners are expected to maximize revenues for all parties in all cases.

Has this point been decided, or is it simply the argument of the [not]union? Because it seems that it would be hard to prove that this wasn't simply a result of negotiations with the networks, which were aware of the costs of a lockout to their own interests, and was, in fact, the best financial decision for all involved. Without another contract that the NFL didn't sign with the same networks they ended up signing with worth more money without lockout provisions, there really isn't any kind of baseline for any kind of "damages." Assuming, of course, that the players can show there are actually any damages to be had and that the contract that was signed didn't lead to the best financial result for all parties. Until then, these are the same ambiguous "damages" as were the ambiguous "harms" that no one can define, much less assess.

When one of the principle reasons that the supposed damages were incurred were the actions/intentions of those seeking the damages, and when the owners were, in fact, trying to protect themselves, and their financial well being against damage, I don't think that this is quite as uncomplicated as you make it out to be.

[get louder at lambeau]

Well said, Mr. Basket.

[pbmax]

That's interesting. It makes me think that the NFL wasn't quite as shady as it initially appears with the lockout guarantee stuff. If they need that revenue to avoid defaulting on loans by definition, it would seem like a somewhat reasonable contract provision to include in those TV contracts. I doubt the old CBA mandated that they have to maximize shared revenue in the short term even to the point that it could endanger their financial health in other ways. That would be very short-sighted.

As far as the lockout being something that is done at the discretion of the owners, it is, but it is a tool that they need to have available when dealing with a union. If they can't lock the players out without defaulting on large loans, and the players know they can't, the players can demand anything they want; and the NFL would face the option of either accepting whatever terms the players dictate by the start of the season, or defaulting on their loans. Both are options that could potentially jeopardize the financial health of the league. It seems unfair to allow the players the leverage to put the NFL into a lose-lose situation like that. Assuming those loans are significant, anyway.

Your first paragraph is the most interesting remaining question in this case. The old CBA did not say they needed to maximize short term revenue at any cost. It stipulates good business practices and emphasizes the interests of both the players and the League need to be considered. So the question becomes how do you square keeping the loans in good standing with labor disruption preparedness?

PFT skips over the details of this question in its breakdown of the ruling, but it seems to suggest that there was labor disruption language in the previous TV deals. But that the precise language of the old deals would not have covered the owners in a lockout. The inference I take is that the owners got something if there was a strike or replacement games, but that an owner declared lockout wasn't covered. Its going to be a little thorny to get the players to agree to language that would allow TV payments in a lockout.

Your second question is even more intriguing, but likely won't get answered clearly. Exactly who has loans that go bad by definition when TV revenues drop to a certain level?

Is it teams who are under that gun or the League? And how common is it? Is it stadium loans or the NFL line of credit? Are poorly run teams placing the League in that bind or is it common for well run teams/other leagues?

Because if it is financially troubled teams that have these loans, then the League really has itself in a pickle.

[pbmax]

Has this point been decided, or is it simply the argument of the [not]union? Because it seems that it would be hard to prove that this wasn't simply a result of negotiations with the networks, which were aware of the costs of a lockout to their own interests, and was, in fact, the best financial decision for all involved. Without another contract that the NFL didn't sign with the same networks they ended up signing with worth more money without lockout provisions, there really isn't any kind of baseline for any kind of "damages." Assuming, of course, that the players can show there are actually any damages to be had and that the contract that was signed didn't lead to the best financial result for all parties. Until then, these are the same ambiguous "damages" as were the ambiguous "harms" that no one can define, much less assess.

When one of the principle reasons that the supposed damages were incurred were the actions/intentions of those seeking the damages, and when the owners were, in fact, trying to protect themselves, and their financial well being against damage, I don't think that this is quite as uncomplicated as you make it out to be.

According to DirecTV, that lockout language came at a price:

Quote: “DirecTV would have considered paying more in 2009 and 2010 ‘to have [the work-stoppage provision] go away.’”

Interpretation: The league left money on the table with DirecTV that could have and would have been shared with the players.

While it certainly is in the League's interest to keep payments coming in the event of the Lockout they were planning, it came at a cost from the networks. A provision that could only have benefited owner's coming at the expense of the players (and owners).

And its clear the Networks had nothing to gain in this negotiation other than a lower price because DirecTV and Fox, among others, wanted no part of it until it was made clear it was non-negotiable.

I think damages could be calculated to a reasonable degree with the following information:
1. Previous contracts prior to extension (TV contracts didn't expire in 2009, they were renegotiated, so figures exist for TV revenue without lockout protection in 2009 and 10)
2. New contracts since lockout language first added (for instance ESPN's new deal)
3. Whatever proposals were traded prior to the parties agreeing to include lockout language

But what to do with the $4 billion is still an open question, because that money exists outside the damages award. And only part of it would have been available in the first two years (09 and 10) of the new deal. And even that calculation is tough because while $4 billion is the lockout protection, the amount of actual broadcast revenue left on the table for that provision is likely very different. If for no other reason, the payback provisions of a portion of it.

Then think about this: how do the players and owners differ in their view of the payback dollars? Will that be part of the costs deducted before the calculation of Total Revenue? Or do the owners foot that payback with the money left after the salary cap calculation?

[get louder at lambeau]

While it certainly is in the League's interest to keep payments coming in the event of the Lockout they were planning, it came at a cost from the networks. A provision that could only have benefited owner's coming at the expense of the players (and owners).

I wonder if the league could argue that the prospect of defaulting on those loans wouldn't benefit anyone, league or players, so it was in the interest of both parties to have a provision in the contracts that would avoid those defaults in any possible situation, including either lockout or strike.

[Tarlam!]

It seems easy enough to play the season as per last year all tghe while the litigation goes on. Obviously some provisions need to be made. And I'd like a rookie salary agreement to protect the clubs from Russell types deals.

But, I want my Packers to repeat and threepeat! they have a legitimate chance!

[SkinBasket]

While it certainly is in the League's interest to keep payments coming in the event of the Lockout they were planning, it came at a cost from the networks. A provision that could only have benefited owner's coming at the expense of the players (and owners).

The fact that the networks didn't want the provisions demonstrates that the league was probably acting in it's best financial interests. You say they have to act in the best interests of all parties. They're still one of those parties. You'd have to demonstrate that the damage outweighed the benefit to all parties involved as a collective. You can't ask the league to work in the interests of everyone while splitting off the parts that don't benefit the other parties and weighing them independently. Otherwise acting the interest of everyone simply becomes acting in the interest of everyone but themselves. In other words, the players.

[MJZiggy]

The fact that the networks didn't want the provisions demonstrates that the league was probably acting in it's best financial interests. You say they have to act in the best interests of all parties. They're still one of those parties. You'd have to demonstrate that the damage outweighed the benefit to all parties involved as a collective. You can't ask the league to work in the interests of everyone while splitting off the parts that don't benefit the other parties and weighing them independently. Otherwise acting the interest of everyone simply becomes acting in the interest of everyone but themselves. In other words, the players.

Don't jump down my throat because this is a question I actually want the answer to. If the league is the negotiator with the networks, then isn't it the league's responsibility to either work for what's best for both the league and the players or at least give the NFLPA a voice while bargaining for a contract that affects the players as well?

[pbmax]

The fact that the networks didn't want the provisions demonstrates that the league was probably acting in it's best financial interests. You say they have to act in the best interests of all parties. They're still one of those parties. You'd have to demonstrate that the damage outweighed the benefit to all parties involved as a collective. You can't ask the league to work in the interests of everyone while splitting off the parts that don't benefit the other parties and weighing them independently. Otherwise acting the interest of everyone simply becomes acting in the interest of everyone but themselves. In other words, the players.

Perhaps, but who was holding the gun to the team's head that made them take out loans that had an "average media revenue" threshold and default? Forbes rated the teams to be able to last one season with no game/TV revenue, but I doubt at the time they knew of loans with that stipulation. Without those loans, the league would still be able to stand a lockout longer than the players. We may never find out, but I would love to know who put the league in that kind of bind. I could be wrong and those types of loans may be typical, but I have never heard of a team (or League) having loans like that.

Giving the players a seat at the table does not mean giving up. No one expects the League to angle it's contract negotiations for revenue to fuel an NFLPA strike fund. And the players have passed (or perhaps lost a previous case) on objecting to the League having a strike fund in its TV deals, which it did.

The owners signed onto this deal and didn't abandon it until they had to add a formula for revenue sharing. Don't forget, this battle about cost reduction is being fought without anyone knowing the future of the supplemental revenue sharing. While those loans changed the landscape of what the League could do to prepare for a lockout, I think the major factor here is revenue sharing and low revenue teams. If the owners get the kind of deal they wish to get, supplemental revenue sharing will likely get gutted. I suspect this is the very reason Upshaw and Tagliabue pushed for revenue sharing to be added before the last CBA was hammered out. Because it pitted teams against each other.

If supplemental revenue sharing goes away, the entire league gets to pay what the least successful franchise can afford to pay for salaries.

Ironically, the test of all this conjecture is to take the League to bare bones agreements and fight for all resources as 32 individual clubs. It would look more like baseball, but it would weed out weaker teams and markets and probably finally put a team in LA.

[SkinBasket]

Don't jump down my throat because this is a question I actually want the answer to. If the league is the negotiator with the networks, then isn't it the league's responsibility to either work for what's best for both the league and the players or at least give the NFLPA a voice while bargaining for a contract that affects the players as well?

Any decision a business owner makes affects their employees. Does your question infer that you believe employees should have a say in any decision that affects the finances of the business? If a consumer goods company contracts a PR firm to make ads for that company, should they allow their employee unions to dictate the terms of the contract with the PR firm?

I believe the league makes decisions based on whats best for the league, the growth and popularity of the league is ample evidence of that - what will lead to financial success, growth, and stability. The players have no such interest. Their interest lies solely in making as much money for themselves as possible without regard for the success, growth, or stability of their respective team or the league. If they have any such interest, either individually or collectively, I haven't seen it.

As I've said, the league makes the decisions that are best for the league as a whole. Isolating the decisions that don't favor the players over owners and attempting to have a court change those decisions so that they favor the players hardly seems like a sound way to grow, or even maintain, the success of the league.