Opposing View: The Owners MUST Win

18to88.com reader Doug England and I have been battling back and forth for many weeks now over my perception of the current lockout.  As you know, I’ve staunchly defended the players and consider their ultimate victory in the courts to be inevitable.  Doug writes to present a differing view.  I don’t agree with much of what Doug writes here, but he writes it well, and I respect his voice.  18to88.com is a conversation, and in the interests of dialogue and debate, I happily present his essay.

I want to respond to the Mr. Rick Reilly post that you linked to recently.  Unemployment in the United States is officially close to 10% and in reality probably much higher.  There are millions of Americans struggling right now.  Millions.  And that is here, in the richest country in the world.  I guess some people would salute Reilly for trying to personalize the NFL labor dispute.  But, alas, “it’s not personal, it’s business”.

It’s also not about the legal situation and who can win in court.  There are reasons that all the major sports and the larger labor unions of other industries deal through an independent arbiter.  There are reasons that there are anti-trust exemptions for CBAs.

I have seen the NFL owners depicted as stupid, greedy, arrogant…oh, and really stupid.  I don’t know any of them on a personal level, but collectively their actions hint that they may be guilty of all of the above.

Still in the big scheme of NFL things, it does not meant that the owners are wrong.  In fact, for the NFL to continue to exist into the future it is essential the NFL owners win this labor dispute.  I don’t know if it would be two years, five years or ten or more years but at some point the NFL as currently constructed would fail.  How do I know this? 

Two words… General Motors.

Not too long ago, GM was the largest company in the world.  (Not just among auto makers, but of all companies.)  Now it is run by the US government.  There were many factors that contributed to GM’s demise, but at the end their fate was sealed because they could not produce a competitively priced car anymore.

Over the course of many years and many labor negotiations, GM management had agreed to terms that they could no longer adhere to and stay in business.  The United Auto Workers Union had done such a good job of getting pensions, retirements and benefits that the well was dry.  GM’s fixed costs had become so staggering there was no way they could sell enough new cars to make ends meet.

Was it the individual UAW member’s fault who had done nothing but pay his union dues and play by the rules?  Absolutely not.  Somewhere along the line GM management needed to be saved from themselves, but they never were.  The UAW was unrelenting and now they are all suffering.

You may reason that the NFL does not have the competition that GM faces.  True, but like any other enterprise, they still face the inevitable point of diminishing returns.  The NFL will reach a point where fans will only pay so much for a seat license or game ticket.  The NFL will reach a point where the TV networks can only pay so much.  The NFL will reach a point when the creative well of money making ideas runs dry.  And when it reaches that point, they have to be able to control their costs to survive.

And costs can’t be controlled if a “guaranteed” portion of revenue is mandated to be spent a certain way regardless of circumstances.  (In this case, to current player’s salaries.)  Every year the fixed costs of the NFL goes up.  It is unavoidable, even with zero inflation. Every year, just like with GM, the cost to maintain pensions and retirements benefits for retired players will increase.

The bottom line, the NFL can’t survive in the long run with a CBA that guarantees a specific portion of revenue goes to current players for salaries.  This is not economic theory.  It is economic fact.

 And it is not personal, it is just the way business works.