NFL, Union to Reconvene After Extending Labor Talks to Avoid Shutdown

National Football League owners and players will resume talks in Washington today after giving themselves another 24 hours to reach agreement on a labor contract and avoid a shutdown of the U.S.’s most-watched sport.

Yesterday’s extension came after 10 days of negotiations involving a federal mediator. It put at least a temporary hold on a work stoppage a month after the biggest television audience in U.S. history watched the Green Bay Packers beat the Pittsburgh Steelers for the NFL’s Super Bowl championship.

“To all our fans who dig our game, we appreciate your patience as we work through this,” DeMaurice Smith, executive director of the NFL Players Association, told reporters after leaving talks at the National Mediation and Conciliation Service last night. “We’re going to keep working, we want to play football.”

NFL Commissioner Roger Goodell and Jeff Pash, the league’s chief negotiator, entered the mediation office around 9 a.m. local time today. Smith and union spokesman George Atallah arrived about two hours later.

“Its worth continuing to talk,” Pash told reporters as he entered the building.

The collective bargaining agreement between the league and the union was due to expire at one second before midnight yesterday. Negotiating issues include the division of $9 billion in annual revenue, the most of any sports league; adding two games to the 16-game regular-season schedule; limiting salaries for rookie players; and health-care coverage for retirees.

“We’re looking forward to another day of discussions and we’re going to keep at it and keep at it as long as it takes,” Pash told reporters last night. “There are a lot of issues. It’s complicated. People are working hard.”

24 Years of Peace

NFL owners had the choice of ending 24 years of labor peace by locking out players, and the union had the option of filing for decertification and thus opening the possibility of the issue landing in federal court.

“The finger is on the decertification trigger, but once pulled there is no going back,” said NFL agent Jack Bechta, who represents players including Al Harris of the Miami Dolphins. “The fact we haven’t seen decertification yet is positive.”

U.S. District Court Judge David Doty, in Minneapolis, ruled three days ago that the league owners didn’t have access to $4 billion in television rights fees they might have tapped in the event of a work stoppage.

A lockout that extends into the season, which begins in September, would empty stadiums financed with a combined $7 billion in taxpayer money, interrupt the schedules of the largest U.S. broadcasters and leave fans without the sport that last season was watched by a record 207.7 million viewers.

Lost Revenue

The league estimates the labor dispute has cost $120 million in ticket sales and sponsorship revenue, and that the total would increase to $1 billion if it takes until the scheduled season-opener to reach agreement.

Every week of lost games would diminish revenue by about $400 million, according to Pash and Eric Grubman, the NFL’s executive vice president of business ventures.

Owners began complaining about the 2006 extension of the collective bargaining agreement shortly after approving it by a 30-2 vote.

U.S. Senator Charles E. Schumer, a New York Democrat, joined Buffalo Bills owner Ralph Wilson in an Oct. 10, 2006, news conference saying the agreement threatened the NFL’s competitive balance because it left small-market teams such as Buffalo with income pegged to the local economy and expenses dictated by teams in bigger markets such as New York or Dallas.

2008 Opt Out

Owners voted in 2008 to opt out of the deal, saying it didn’t account for costs, such as those of building stadiums.

They want to set aside about $2 billion in revenue for expenses before paying players, according to the union. Grubman, a former executive at Goldman Sachs Group Inc. (GS), said the expiring deal gave players too much money before accounting for costs. New stadiums raise league revenue, for example, thus increasing income for players. Meanwhile, owners bear the finance and operation costs.

Grubman also said paying players from the ledger’s top line hurts incentives to build new businesses.

If an NFL team were to sell stadium food itself, rather than hiring an outside contractor, the club would increase revenue and would have to pay players more. At the same time, the team would have to hire workers and buy supplies, increasing costs. In the end, the club may triple revenue, while realizing less profit, Grubman said.

Since the 2006 deal, the league has made $5.5 billion in new revenue, with $3.8 billion going to players, he said.

$1 Billion Deduction

Smith says that the league and players already deduct about $1 billion to pay for some costs related to stadiums, marketing, NFL.com and the NFL Network. Players also accepted an $800 million payroll cut over 15 years, for example, to alleviate concerns about the labor cost of the New York Giants’ and Jets’ year-old stadium in East Rutherford, New Jersey.

The NFL’s popularity has bounced back historically from work stoppages. Attendance rebounded one year after a 57-day strike in 1982 and reached a then-record 13.6 million two years after a 1987 strike was broken by replacement players.

Doty, ruling on March 1, upheld a union complaint that the NFL improperly negotiated to receive about $4 billion from its most prominent television partners -- CBS Corp. (CBS), News Corp. (NWSA)’s Fox, Comcast’s NBC, Walt Disney Co. (DIS)’s ESPN and DirecTV (DTV) -- even if a work stoppage cancels games in 2011.

Doty ordered a hearing to consider the award of money damages and equitable relief to the players.

12 Months’ Liquidity

A day after Doty’s ruling, the rating company Standard & Poor’s halved, to one year, a two-day-old estimate on the impact of a work stoppage on the ability of the NFL to repay stadium bonds.

NFL games accounted for the 19 top-rated shows during the 2010 season, up from 11 the year before. Lou D’Ermilio, a spokesman for Fox, said the network hasn’t made any decision about what to show if football games aren’t available. Jerry Caraccioli, a spokesman for CBS, declined to comment in an e- mail. Fox and CBS carry the vast majority of NFL games on Sunday afternoons.

The Super Bowl on Feb. 6, televised by Fox, drew an average audience of 111 million viewers for the Green Bay Packers’ 31-25 win over the Pittsburgh Steelers. The previous audience record was 106.5 million for the previous year’s Super Bowl on CBS.

The possibility of a lockout leaves governments that have subsidized $7 billion in NFL stadiums wondering if those facilities will stand empty during the season. Mayors and city officials of Houston, Miami, Minneapolis, San Diego and Kansas City, Missouri, have written the NFL saying a lockout may cost millions in revenue and wages for workers at stadiums, hotels, restaurants and other businesses that depend on games.

To contact the reporters on this story: Aaron Kuriloff in New York at akuriloff@bloomberg.net; Erik Matuszewski in New York at matuszewski@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net.

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