Super Bowl XLV: The NFL's Last Game?

Eric Grubman's brand of football isn't meant for SportsCenter's highlight reel. Yet it tends to be fan-friendly in its own way. On a November day at the National Football League's Manhattan offices, Grubman—a former Goldman Sachs (GS) investment banker who is the NFL's executive vice-president of business operations—shuttles between meetings about foreign TV 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. ("You could order food right over your phone," he says.) He's also in favor of in-stadium broadcasts of the footage game officials use to review challenged plays. ("The fan at home sees every angle of the disputed calls," he says. "Why shouldn't the fan at the game?")

Grubman, however, may soon become the bane of football fans everywhere. 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 Super Bowl XLV the last NFL game for a long time. While the Feb. 6 matchup between the Green Bay Packers and Pittsburgh Steelers is the biggest date on the football calendar, most players and team owners have their eyes fixed on Mar. 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 corporate standards. Today 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 actual career path.

When he describes the standoff between owners and players, however, Grubman is all business. Over a light lunch at The Huddle Café, the NFL employee canteen, he explains that the problem, as he sees it, is one of labor myopia. "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 collective bargaining agreement 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 first enacted in 1993. The new deal raised the salary cap, allotted nearly 60 percent of the league's total revenues to player salaries, and inaugurated 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 pull out of the two-year-old agreement, setting the clock ticking for Mar. 3.

With time now running out and Grubman and his colleagues negotiating in private with NFL Players Assn. Executive Director DeMaurice Smith, details of the talks remain sketchy; Grubman declines to fill them in. Smith, however, has highlighted two particular concessions sought by the league and its 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 NFLPA President Kevin Mawae, "and increase our risk of injury by playing two additional games." Meanwhile, the two sides are fighting over what a potential lost season, with its billions of dollars in forfeited salaries and revenue, should be called—and who would be to blame. "Work stoppage" is the term the NFL prefers. "Lockout" is what the players call it. After all, "it's the owners who opted out of the contract," says George Atallah, the NFLPA assistant executive director. "The players want to play." The owners say missed games are inimical to their interests, too.

In mid-September, just before the kickoff of the season's first game, a Thursday night contest 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, N.Y., to Seattle. In Houston, four-time league MVP 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 respective teams. "Once they decided to do that," Arizona Cardinals kicker and union rep Jay Feely remembers, "it was really incumbent on all the others 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 coverage schemes, Fujita, a member of the NFLPA 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 mop of brown hair and a degree in political science from the University of California at Berkeley. "They were curious about how the lockout's going to affect them." Fujita and the union reps 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 per player. "It won't be anything compared to what they would be earning if they were playing," says 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 3.5 years. While the average NFL salary is $1.9 million, that number is skewed by the hefty paychecks of Peyton Manning and other stars. 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," says Fujita. "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. They understand that if we fold and accept the deal currently on the table, it's going to be devastating for players forever."

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 enjoy 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, who was tapped to be a union rep in 2006 by veteran Denver Broncos receiver Rod Smith. "You're carrying a torch. … We refuse to give back on our watch."

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 Mar. 21, 2010, down from $20.1 million in the previous one. (However, the team's net income rose 30 percent, to $5.2 million.) The Packers' CEO has blamed the decline on rising salaries, but 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 NFLPA's Mawae, a 16-year veteran who retired last year. Jay Feely points to the National Basketball Assn.—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 for financial transparency are a ploy. "The players already have audit rights to the revenue. What they're looking for is information on the costs," he says. "They want to uncover stuff like private jet fees or other expenses that they can use to embarrass the owners with the public." 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 per 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 NFLPA 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 with pro bowling on TV during Sunday afternoons. "Our business would be one-third depleted just from the Packers not playing," says Jerry Watson, owner of Green Bay's Stadium View Bar & Grille.

If negotiations end up coming down to a game of chicken, the deep-pocketed owners are much better prepared than the players to prevail. They're sitting on $900 million—a potential "lockout fund," says Atallah—comprised, in part, of life insurance and pension payments withheld since the salary cap expired last March. (Such withholdings comply with the current collective bargaining agreement.)

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 (CBS), NBC (GE), ESPN (DIS), Fox (NWS), and DirecTV (DTV)—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.

However, the players may have legal means to fight a lockout. According to former player and current power 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 NFLPA decertified two years later. The move triggered approximately 20 lawsuits—including the one that helped create free agency in 1993.

In a sense, the rise in NFL team fortunes over the past two decades can be traced through the career of Eric Grubman. After graduating from the U.S. Naval Academy, serving four years, and attending Harvard Business School, he went to work for Goldman Sachs's mergers-and-acquisitions department. In 1994, he helped paper mogul Robert Kraft buy the New England Patriots for $175 million, then the largest team purchase price in league history. "I'd never worked on a sports deal before," he says.

In subsequent years, Grubman was called upon to work on several other NFL transactions, including the $535 million deal that brought the Browns back to Cleveland in 1998. Two years later, he handled Woody Johnson's $635 million acquisition of the New York Jets. A gift from Johnson—a Jets jersey bearing the number 635—now hangs in Grubman's office, alongside other football and Navy memorabilia.

In 2004, after having left Goldman, the NFL offered him the executive vice-president position. Since then the league has continued on its growth path. Between 2006 and 2009, team values rose 16.2 percent and player salaries rose 9.4 percent. In a pair of transactions in 2008 and 2009, real estate developer Stephen Ross paid about $1 billion to acquire 95 percent of the Miami Dolphins. In 2010 the league—which Grubman calls a "magical, resilient business"—brought in $8 billion in revenue.

Right now the league remains committed, as Grubman says, to growing that $8 billion pie. Even in the nearly 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 NFLPA's Smith. "I think that's good. But that's juxtaposed against a player who plays for 3.5 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 nearly 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 fear of 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, a father of nine 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."

Grubman won't discuss his talks with the union or hint at how close a new deal might be. This is his first major test at the NFL, and if he passes it, he could one day end up succeeding Goodell. Since he still cites his naval experience as the touchstone of his career, it's worth recalling his role in another standoff, serving on a fast-attack submarine in the waning days of the Cold War. That confrontation ended not with the stroke of a pen or the firing of a missile but when one side crumbled from within.

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