2011 NFL Lockout: DeMaurice Smith, Takeo Spikes Conduct Conference Call With SB Nation

Yesterday afternoon NFL Commissioner Roger Goodell and lead negotiator Jeff Pash took half an hour to chat with some of SB Nation's football bloggers about the 2011 NFL Lockout issues, as well a variety of other pertinent league issues. Thanks to come quick turn around, SB Nation was able to schedule a conference call this morning with the NFL Players Trade Association Executive Director DeMaurice Smith and player rep Takeo Spikes. I was unable to take part but I did email in some questions to be asked. We'll have audio and a full transcript at some point, but for now here are a few excerpts.

Smith was asked about the letter Roger Goodell sent to the players the other day, discussed by smileyman this morning. Smith had this to say:

On Roger Goodell's letter to players sent on March 17:

DS: The league had intent to lock our players out since at least early 2009, and probably 2008. To the guys who are on the call, I'm sure you've seen the decision tree that came from an internal NFL document from early 2009, have you seen that? The document is called their decision tree. Roger's letter to the players - in that short letter, Roger said more words than he said throughout the entire mediation process. You can quote that. For a guy who spent more time writing a letter to the players than he spent engaging in good-faith negotiations during 15 days, does that sound like a true intent on behalf of the National Football League to reach a deal during the final 15 days of mediation?

The decision tree he mentions is this jpg file at nfllockout.com. I've generally sided more with the players but this answer seems to bounce around a bit. I suppose the question itself is kind of asking for that though. DeMaurice Smith is not one to shy away from expressing what he thinks with some colorful language. For example, yesterday Jeff Pash mentioned the union only wanting to talk about money towards the end and not some of the other issues. Smith's response today started with "Jeff only has a casual relationship with the truth."

There were several other questions, but one of the most pertinent that I wanted answered was the idea that the NFL's offer near the end that the league released to the pubic seemed to indicate some movement from the owners. It's a lot of detail, but worth post in its entirety.

On league's offer being starting point to further negotiations:

DS: That's easy to dismiss, because while everybody wants to focus on 15 days of mediation, my first letter to Roger Goodell after I got elected was May 18th of 2009. That's when negotiations started - May of 2009. So my question for the National Football League is as follows: from May 2009 up until the last day you proposed the worst deal in history, did you offer any audited financial statements to justify the worst deal in sports history? That's question one. From May 2009 until the last day of mediation, did you offer any economic justification for the players taking less than fifty percent of all revenue. From May of 2009 until the last day of mediation, how come the total amount of time players spent negotiating face to face with owners was less than three hours over 15 days? So for the assembled people who are on this call, does that sound like good faith negotiation to you?

If it helps, let's run through the numbers of the first two years. Let's have some ground rules so that we stay philosophically consistent where we're comparing apples to apples, oranges to oranges. The NFL's deal would have been a 10-year deal. That is the first unassailable fact. Second unassailable fact: the NFL wanted us to take this deal without offering any audited financial statements of the teams so that we could understand the true financial picture of the NFL. That is unassailable fact number two. Unassailable fact number three: the NFL made their presentation on the last day of mediation, where they knew that the players union had to notify the courts by 5:30 about whether it was going to take advantage of its option to renounce. Before I go through the numbers, my guess is that when you spoke to Pash, my guess is he didn't lead off with those three unassailable facts. He's smart enough not to forget them. The reason why number one is critically important, number two is critically important, and number three is critically important, is right now I just want to run through the economic effects of the first two years of the deal alone. Not the last eight, just the first two.

In 2011, if we would have stuck with basically the same fifth-fifty split of all revenue, in 2011, revenue would be projected at $10.2 billion. Keeping that fifty-fifty split of all revenue, the cap would be approximately $155 million. That's assuming only a five percent growth of all revenue. Let's not get too technical; he league has been averaging about eight to nine percent growth per year, but for the sake of argument, let's just assume that football going forward isn't as popular as it's been for the last 50 years. Let's just assume only a five growth instead of an eight percent growth. The cap in 2011 would be $155 million. The cap under the league's proposal would be $141 million. That's a decrease of $14 million. Times 32 teams. I think you come up with $448 million in year one. Again, remember the three things we started with: the first year check that the players are writing to the richest men in the world is $448 million in year one. Does that sound like a good deal?

Under year one of the league's deal, the players are writing a check to the owners of $448 million. Our share of all revenue before the ink is dry on that deal now drops to 45% of all revenue. Last year we were at 48.9%. We've had a fifty-fifty split of all revenue with the NFL since approximately 1991. 60% is after they take their billion off the top. Once you include all revenue, it's been a fifty-fifty split since about 1991.

Year two of the NFL's fantastic (that is sarcastic) deal, the cap would have been approximately $163 million in 2012. The cap under their proposal would be $147 million. That's $16 million per team, times 32. That's an additional $512 million that the players are writing to the owners. The share of all revenue would drop to approximately 45.3% in year two. So we've got two sets of numbers that we need to look at and make sure that everybody understands right away. 448, 512, and then a drop immediately to 45% of all revenue.

In the uncapped year in 2010, you all understand that the NFL took $10 million from the players for each team. In the uncapped year, the NFL did not pay benefits to the players. In the uncapped year, there were unfunded benefits of $10 million per team. $10 million per team in the uncapped year. So the owners stuffed $10 million per team in their pockets in the uncapped year. This is critically important, it's progressive economics, so obviously if you disagree with anything I've said so far, if you don't understand it, tell me. I'm assuming the other folks on the phone are with me and understand it.

So you take $320 million from '10, $448 million in year one or 2011, $512 million in 2012 - I come up with $1.36 billion. By the time you get to 2012, that's the first two years of the deal. $1.36 billion out of the first two years alone. Progressively worse from there after. Going back to the three points where we started, the reason why I believe it's the worst deal in the history of sports is - you know what, there's one more thing I've got to do. I hate to stay in economics land, but the reality of the business of football is it's actually a fairly complex macro-economic model. That is $1.36 billion that does not include the stadium credit for new stadiums that the NFL had as a part of their deal. When you were with Jeff and he laid out his 16 points, do you remember where they included a credit for new stadiums, or stadium renovations? It was just an unfortunate detail for Jeff. The league wanted to include additional credits for stadium renovation and new stadiums. Their stadium credit proposals were in addition to what the cap number would be. They would fix the cap at $141 million, but nonetheless continue to take an additional credit for new or renovated stadiums. It would be taken off the top against the cap in the new deal.

For the first two years, I gave you the first two year numbers without the stadium credit. Now I'm going to give you the first two year numbers with the stadium credit. In 2011, with the stadium credit, the actual cap number would be $133 million. In year two of the deal, the cap would be $140 million. We did the math and came up with $1.36 billion without stadium credits; do you really have to do the math? With al due respect to Jeff, we may have been born at night, but not last night. When you take an economic look of the impact of this deal on the players of the NFL for the first two years alone, it's the worst deal in the history of sports. But then factor in the first three things that we started off with: it's a 10-year deal. The shares of all revenue would continue to go down throughout the course of the term of the deal. So if you factor in the stadium credits alone, by year two, the share of revenue is down to 42%. Assuming a five percent growth.

In reality, after two years of negotiations, two years - two years - after making multiple requests for audited financial statements, we came down to the last day where the league knew that we had to let the court know what we were gonna do by 5:00, and after two years of negotiation, they presented us this deal. Does that sound like good faith  negotiations?

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