Eric Grubman’s style of football won’t be on ESPN’s SportsCenter.
On a November day at the National Football League’s Manhattan offices, Grubman -- a former Goldman Sachs Group investment banker who is the NFL’s executive vice president of business operations -- shuttles between meetings about foreign television deals, overseas games and stadium improvements. Along the way he’s often looking out for the customer. He wants universal Wi-Fi access at the stadiums. He’s also in favor of in-stadium broadcasts of the footage game officials use to review challenged plays.
Grubman, however, may soon become the bane of football fans, Bloomberg Businessweek reports in its Jan. 31 issue. As the league’s top money man, reporting directly to Commissioner Roger Goodell, he’s at the center of a labor dispute that could make the Super Bowl between the Green Bay Packers and Pittsburgh Steelers the last NFL game for a long time. While the Feb. 6 matchup is the biggest date on the football calendar, players and team owners have their eyes fixed on March 3. That’s when their collective bargaining agreement expires. Until a new one is in place, there likely won’t be any more games, raising the prospect of a lost 2011-2012 season.
Grubman, 52, dresses casually, at least by the NFL’s standards. He’s wearing a cardigan and slacks, and his black hair, streaked with silver, is swept back. The overall effect suggests a New England professor more than a U.S. Navy officer-turned-investment banker, which is Grubman’s career path.
Dividing the Pie
Over lunch at the Huddle Cafe, the NFL employee canteen, Grubman says the problem is how labor looks at the situation. “The players are too concerned with how you divide the pie,” Grubman says, “while we’re trying to grow the pie so that there’s more money for everybody.” As he delves into the issue, though, he concedes a larger point. The owners opted out of the current contract because, he says, “They made a bad deal. They realize it now.”
The “bad deal” went down in 2006, when the owners voted 30-2 in favor of the fifth extension of a labor agreement enacted in 1993. The new deal raised the salary cap, allotted almost 60 percent of the league’s total revenue to player salaries, and started a revenue-sharing plan in which the 15 top-earning teams subsidize the 17 less profitable ones. What made sense in the boom times of 2006 soon proved onerous. In May 2008, the owners unanimously voted to end the agreement, setting the clock ticking for March 3.
With time now running out and Grubman and his colleagues negotiating in private with NFL Players Association Executive Director DeMaurice Smith, details of the talks remain sketchy; Grubman declines to fill them in. Smith, however, has highlighted two concessions sought by owners. First, they’re seeking to decrease the players’ share of total revenue. Second, they’re asking for two games to be sliced from the four-game preseason and added to the regular season’s schedule.
Both ideas are hugely unpopular with the union. “We give back $1 billion,” says union President Kevin Mawae, “and increase our risk of injury by playing two additional games.”
In mid-September, just before the kickoff of the season’s first game between the Minnesota Vikings and New Orleans Saints, players from both teams marched to midfield and raised their index fingers in unison -- an unusual display of camaraderie for men paid to knock each other senseless. Three days later, on the NFL’s opening Sunday, the ritual was reenacted in stadiums from Orchard Park, New York, to Seattle. In Houston, four-time league Most Valuable Player Peyton Manning led his Indianapolis Colts to midfield to join in with the Texan players.
The demonstrations were orchestrated by Saints quarterback Drew Brees and Vikings lineman Steve Hutchinson, the union leaders for their teams. “Once they decided to do that,” Arizona Cardinals kicker and union representative Jay Feely remembers, “it was really incumbent on all the other players around the NFL to back them.”
While these were the season’s last on-field references to the dispute, NFL locker rooms have been doubling as union halls throughout the season. On a Thursday afternoon in December, linebacker Scott Fujita gathered his Cleveland Browns teammates after practice for a meeting. Where players would normally split into position groups and talk about blitz packages and pass coverage, Fujita, a member of the union executive committee, spent 90 minutes fielding questions about bargaining proposals, savings accounts, and health-care plans.
“There are a lot of guys on our team who are expecting babies in March and April,” says Fujita, a nine-year veteran with a degree in political science from the University of California at Berkeley. “They were curious about how the lockout is going to affect them.” Fujita and the union representatives on the league’s 32 teams have been handing out the same advice: Start saving now. “We’re really harping on everyone,” he says. “Put that money away.” He even hands out direct deposit slips.
The union has put money from dues and royalties into a fund that amounts to about $60,000 a player. “It won’t be anything compared to what they would be earning if they were playing,” said Feely. “But it would be some cash to pay everyday bills.” For many of the league’s 1,900 players, it could be quite helpful. The average NFL career lasts 3 1/2 years. While the average NFL salary is $1.9 million, that number is skewed by the hefty paychecks of top players. The median salary is $770,000, and for the players on the margins -- those fighting to keep a roster spot from year to year -- almost any offer from the owners beats staying home. “Guys like that, to be honest, are the majority of our locker rooms,” Fujita said. “Someone is going to come to them at some point and try to get them to flip sides. But I know the guys in the locker rooms I’ve been around, and that’s not going to happen.”
Sense of History
In order to keep the rank and file together -- to fight what Feely calls their “natural, selfish” inclinations -- the union representatives appeal to their sense of history. After two strikes in the 1980s, lawsuits brought by players such as Freeman McNeil and Reggie White in the early 1990s paved the way for the free-agent rights that NFL players have today. “The players and the owners have it pretty good right now,” says Baltimore Ravens cornerback Domonique Foxworth.
“A lot of people gave up a lot of money and several seasons and a lot of pain and anguish for us to get to where we are right now,” says Foxworth, a member of the players association’s executive committee . “We refuse to give back on our watch.”
Limited Financial Information
It’s only possible to talk about NFL team revenue in the aggregate. With the exception of the publicly owned Green Bay Packers, franchises don’t release financial statements. The Packers posted an operating profit of $9.8 million in the fiscal year that ended on March 21, 2010, down from $20.1 million in the previous one. The team’s net income rose 30 percent, to $5.2 million.
Players say a full picture of the league’s fortunes will only come when each team opens its books. “It’s one-thirty-second of the financial information we’ve requested,” says the union’s Mawae, a 16-year veteran who retired last year. Feely points to the National Basketball Association -- another league in the throes of a labor standoff -- which has turned over its books to the players. “They are having legitimate issues with money, and so they turned over their financials,” he says. “The NFL won’t do that.”
According to Grubman, such calls are a ploy. “The players already have audit rights to the revenue, he says. “What they’re looking for is information on the costs.”
“They want to uncover stuff like private jet fees or other expenses that they can use to embarrass the owners with the public,” he said. The players insist they simply want a full accounting of each team’s balance sheet. “But that’s not relevant,” Grubman continues. “The league doesn’t ask to see the players’ tax returns. Or those of their agents -- I’d love to see those.”
One thing everyone can agree on is that a lost season would be a financial disaster. Even if a deal is struck by Sept. 1, in time for the regular season, the NFL could lose up to $1 billion -- including up to $100 million a weekend at the gate for canceled preseason games. Sponsors, who plan their ad campaigns more than a year in advance, already have safer options for their budgets, starting with the 2012 Summer Olympics.
The union says a lost season could cost every NFL city $160 million in jobs and revenue. The 1,900 players would lose a combined $4.5 billion in salary and bonuses, while the league concedes it might have to impose pay cuts for its own 1,000-odd employees. Then there are the thousands of sports bars that will struggle to pay the rent without the NFL.
“Our business would be one-third depleted just from the Packers not playing,” said Jerry Watson, owner of Green Bay’s Stadium View Bar & Grille.
If negotiations end up coming down to a test of wills, the owners are sitting on $900 million -- a potential “lockout fund,” says union spokesman George Atallah -- composed, in part, of life insurance and pension payments withheld since the salary cap expired last March.
The league’s TV deals with the networks also pay more than $4 billion for next season, even if not a single game is played. (For any canceled games, the broadcast companies -- CBS Corp., General Electric Co.’s NBC, Walt Disney Co.’s ESPN, News Corp.’s Fox, and DirecTV -- would receive credits for future contests.) The NFL’s general counsel, Jeff Pash, has compared the arrangement to “borrowing on a home equity line,” but the players union describes it as an insurance plan for a lockout. Last month, the NFLPA filed a complaint against the league over the TV agreement that will be adjudicated by a federal-court-appointed special master, who will also decide a separate complaint alleging that league owners colluded to restrict player salaries.
Decertifying the Union
However, the players may have legal means to fight a lockout. According to former player and current agent Tom Condon, the co-head of Creative Artists Agency’s football unit, the NFLPA could abandon its status as a union. Players could then sue, arguing that the NFL’s 32 teams are independent businesses colluding to restrict players’ pay. Just last year the U.S. Supreme Court argued that, for licensing purposes, the teams should indeed be treated as separate entities. “If the owners make the determination to proceed with the lockout,” says Condon, “you can anticipate the players responding by trying to get an injunction.” It’s a move that has proven effective in the past. After a strike broken by replacement players, in 1987, the union decertified two years later. The move triggered approximately 20 lawsuits--including the one that helped create free agency in 1993.
The NFL had $8 billion in revenue in 2010, and it is committed to increasing it, Grubman says.
Even in the almost-saturated domestic market, the NFL is trying to reach outside the male demographic with a clothing campaign targeting women. The biggest opportunities, however, may be outside the U.S. The NFL has been staging exhibition games abroad since 1976 -- the year the Cardinals beat the Chargers in Tokyo -- and, like any globally minded business entity, has its eyes on China. Two million Chinese citizens already identify themselves as NFL fans, Grubman says. Buffalo Bills offensive lineman Ed Wang, the first NFL player of full Chinese descent, was among the White House guests during Chinese President Hu Jintao’s recent state visit. “Teams and team values and team profits -- according to every other indicator-- continue to increase over the decades that owners own teams,” says the union’s Smith. “I think that’s good. But that’s juxtaposed against a player who plays for 3 1/2 years.”
By objecting to the owners’ proposed terms, the players say, they’re not inhibiting league growth but looking out for the health and security of future colleagues. Atallah points out that the players don’t really receive the almost 60 percent of revenues stipulated in the current agreement; they get closer to 50 percent. The owners, he says, currently take about $1 billion off the top each year for overhead costs, including financing stadiums and the NFL Network. “What other company taps its workers to pay for overhead,” Atallah asks.
Meanwhile the business of football is proceeding as usual. The NFL’s college draft, which is the next signature event after the Super Bowl, will occur on schedule. The concern over a lockout hasn’t had much effect on the college ranks. So far, 56 players have renounced their remaining college eligibility to enter the draft, more than in any previous year. Without a new labor agreement in place, however, teams won’t be able to sign these players. And with no official training camps, all players would be left to stay in shape -- both physical and financial -- on their own.
Some are already venting their frustration. On the day after his team lost to the Pittsburgh Steelers in the AFC Championship Game, Jets cornerback Antonio Cromartie lashed out at both sides. Standing by his empty locker, Cromartie, who earned $1.7 million this season, said: “They need to get their s--- together and get it done.” The five-year veteran has reason to complain. As a free agent, a lockout would prevent him from signing a new contract. “You don’t get no information about nothing from the union or the owners,” he continued. “To tell you the truth, they need to get their damn minds together and get this s--- done.”