1. Are You Ready for Some New Collective Bargaining Agreements?
As record-setting temperatures continue to grip much of the U.S. this week, it's hard to imagine putting on full pads and hitting the line of scrimmage at a remote training camp under the blazing sun. But for those of us whose patience with birdies, bats, and bikes is reaching its outer limits, it's time once again to breathe a sigh of relief, pop a cold one, and exclaim, "Are you ready for some football?"
The Cleveland Browns are the first NFL squad to hit the field this week, with rookies and select veterans reporting to the team's Berea (Ohio) camp on Friday, July 23. The Browns are followed by three other NFL teams that open camp this weekend—the Dallas Cowboys on July 24 (once again in Oxnard, Calif.), the San Diego Chargers (San Diego), and New England Patriots (Foxborough, Mass.) on July 25.
As longtime NFL factory USC welcomes its new athletic director, Pat Haden, and as NFL teams scramble to get their rookies under contract—no first-round pick had been signed as of Tuesday—they know full well that the 2010 preseason and regular one could be the last stretch of business as they know it. The way high NFL first-round draft-pick contracts have been structured in recent years, with a relatively low guaranteed salary buoyed by huge playing-time bonuses and contract extension options, has allowed teams to circumvent the mandatory rookie salary pool.
But that second-year (and third- and fourth-year) option bonus could mean zip if a new collective bargaining agreement isn't signed and the NFL faces a lockout in 2011. Moreover, NFL Commissioner Roger Goodell has made it clear he wants a shorter preseason and longer regular season to be key components of a new CBA—meaning that even if camps are in session during the summer of 2011, teams may have a shorter amount of time to prepare for "real" games.
Packers as Proxy
As anticipated, the Green Bay Packers last week disclosed financials for their most recent fiscal year. As the only nonprofit, community-owned professional sports team in the U.S., the Packers are required by law to release financial data to the public. Since the NFL never publicly opens its books, the Packers' balance sheet is the only real barometer by which sports economists can estimate the relative franchise values and incomes of the league's 31 other teams.
On the surface, the Packers appear to be relatively healthy. The team reported record revenue of $258 million, an operating profit of $9.8 million, and net income of $5 million. Operating expenses, however, jumped $20 million from last year, to $248 million. Of that amount, $161 million went for player costs, up from $139 million. According to Packers Chief Executive Mark Murphy, player costs are increasing at an average of 11 percent annually, while revenue has gone up just 5.5 percent.
Escalating player costs is the biggest reason why NFL owners decided to opt out of the current CBA, and the Packers' disclosure indicates why. As the league and its players' association continue their heated labor negotiations, the NFLPA undoubtedly will scrutinize the Packer's financial statements closely to see if owners' cries of poverty ring anywhere close to true.
In the latest twist to the ongoing negotiations, the NFLPA in late June served subpoenas on the league, Goodell, and Troy Vincent, a former NFLPA president and current NFL vice-president for player development, compelling them to produce all documents related to allegations that Vincent and other player leaders were colluding to undermine the NFLPA's collective bargaining stance. The subpoenas are part of an ongoing lawsuit filed by Mary Moran, former head of NFLPA human resources, against the union—Moran sued the organization last summer, claiming she was fired because she's a witness in the U.S. Labor Dept.'s investigation into whether the actions violated federal labor law.
And while it may shake up the established routines of training camp, sportswriters and industry executives generally agree that playing two preseason games and an 18-game regular-season schedule, as opposed to the current four preseason games and a 16-game regular-season schedule, would go far in solving the NFL's current labor dispute, because it would produce more revenue for everyone. For us, the earlier the NFL contests football games that matter, the better.
2. New Warrior-in-Chief Is Named Lacob, not Ellison
After a long bidding process in the San Francisco Bay Area, venture capitalist Joseph Lacob agreed to pay a record $450 million for the Golden State Warriors basketball squad. Lacob, managing partner for the Sand Hill Road venture capital firm of Kleiner Perkins Caufield & Byers, last week teamed up with Mandalay Sports Entertainment Chairman and CEO Peter Gruber to buy the franchise. Lacob, currently a minority owner of the Boston Celtics, outbid several other groups to buy the Warriors from Chris Cohan, who paid $115 million for the team in 1995. Oracle (ORCL) CEO Larry Ellison, long considered the favorite to buy the team, reportedly submitted a bid in excess of Lacob and Gruber's but failed to land the team.
The sale price far exceeds the previous record of $401 million paid by Robert Sarver to buy the Phoenix Suns in 2004 and is widely perceived to reflect Bay Area demographics, the Warriors' large fan base, and the ever-escalating popularity of the NBA. The deal must still be approved by NBA owners. No reason was given why Cohan spurned Ellison's offer, but Ellison responded in a written statement: "Although I was the highest bidder, Chris Cohan decided to sell to someone else. In my experience this is a bit unusual. Nonetheless, I wish the Warriors and their fans nothing but success under their new ownership."
Once the paperwork is completed, the new ownership group must turn its attention to finding the Warriors a new arena. Built in 1966, Oracle Arena is the oldest home court for an NBA team (beating Madison Square Garden by two years), and it would be generous to say the facility is showing its age. Ongoing discussions by Guber and Lacob with limited partner candidates, including Major League Baseball's San Francisco Giants, could put a new Warriors arena on land near AT&T Park or move the team elsewhere in the Bay Area.
The Warriors' high-digit sale price could play a role in the NBA's next round of agreements, since it could undoubtedly dilute NBA owners' complaints of economic hardship. At the NBA's just-completed Las Vegas Summer League, notes TrueHoop's Kevin Arnovitz, most participants feared a lockout, and "the NBA has an impossible sales job to perform."
Rick Horrow is a leading expert in the business of sports. As CEO of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports (February 2010).