NFL LOCKOUT: DeMaurice Smith Conference Call Wrap-Up

I had the chance to sit in on a conference call with DeMaurice Smith and Takeo Spikes thanks to our network friends at SB Nation. It was a pretty cool opportunity and I enjoyed getting the chance to hear them speak about the current state of things. 

Here's a few things I took from the call, followed by the full transcript:

That was the gist of the conference call and a lot of it was Smith going on long diatribes/monologues about how the owners are liars etc. Spikes barely even got a word in until the very end. In fact, almost no one got a word in besides Smith. I'm sure the players like him because he definitely comes off as a harda$$ negotiator. Ultimately, his way of doing business from what I could tell doesn't bode well for a deal getting done quickly.

To me, both sides sound committed to stalling as long as they can in an effort to sweeten their bottom line. As we know all to well it boils down to this: the owners want more money than they're currently getting but the former NFLPA claims they won't show evidence to justify why they need this. It seems like the players side refuses to negotiate further until they are presented with that information and the owners have yet to agree to do so.

The league's current ploy of dividing up the players will ultimately work, I think, because while guys like Takeo Spikes and Drew Brees can afford to lose a couple of game checks, several players cannot. I'm starting to wonder if the owners are prepared to wait it out until things get that far in an effort to achieve the best deal possible for them long term.

Do you believe any games will be missed in the 2011 season?

DeMaurice Smith and Takeo Spikes with SB Nation

March 18, 2011

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?

On player's reaction to Goodell's letter:

TS: The players that I've spoken with, and the pulse from everybody here, is that's the worse deal probably of the lifetime that was offered to any union. We feel like as players that if that deal was so great, for us to sign it, why would we walk away? It just doesn't make any sense if you look at all the particulars of the deal.

DS: Everyone likes to focus on what happened during the last 15 days. Let me tell you what happened during 15 days of mediation: we had decision-makers in the room virtually every day. We had men from the executive committee, former players that sit on the executive committee, team reps in the room for 15 straight days. For most of that time, the NFL never had a decision-maker in the room. On the last day of mediation, the NFL proposed a deal that is, quote, would be the worst deal in the history of sports. So if it helps you just to run through just the first two years of their deal, I'm happy to do that.

On Jeff Pash comments about players only wanting to talk about money:

DS: Jeff only has a casual relationship with the truth. Jeff knows that the NFL's deal was an all-or-nothing deal. They did not present an a la carte menu to the players of the NFL. They didn't sit down with us and say, 'Why don't you select the things you like, reject the things you don't, and let's move forward.' Jeff knows that their deal was inextricably tied to every point on the deal. Put it this way: if a deal that's being put to you is mutually contingent on all 16 parts, do you have the option of saying 'I like and we accept issues 8-16, but we don't like issues 1-7,' do you have a deal at that point? I'm very careful about language: do you have a deal if you don't like half the points that have been presented to you? You don't. It's not even probably, you don't. The first point of the NFL deal would have been us to accept their economic proposal at the same time we would have to accept everything else. Does that make sense?

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?

On the lateness of the deal:

DS: No, no, no. They came at us with a deal that wasn't good in the first place after two years of negotiation. So if someone comes to you and I say to you 'Hey look, we've known for the past 15 days' - because we extended the deadline twice during the course of mediation. We extended it twice. The league knows that we have to let the court know by 5:00, so after two years of negotiation without one shred of audited financial data for all the teams, you present a deal to the players' association that for the first two years alone mandates that they write a $1.36 billion heck back to the owners. After two years of negotiation. Does that sound like good faith bargaining? Does it sound like, in order to use Jeff's words, we offered to 'split the baby'?

On the league sending letters to fans expressing disappointment toward the union:

DS: I don't spend time trying to crawl into anyone else's brain to figure out what they do or the motivations for what they do. How does it look to you? It's just a fact.

Not only interested in the deal, but most importantly does it sound like the process of good-faith negotiation? So now let's work backwards, the last point to early 2009, before I'm elected as the executive director. I don't know whether you have that decision tree document in front of you... So now if you go back to early 2009, before I've been elected, the owners have opted out of the deal, they've notified everybody that they intend to not renew the CBA under the same situations, and now you have an internal NFL document that nobody was supposed to see. It was supposed to be kept silent and kept quiet and kept in the dark. At just about the same time that I'm sending Roger Goodell letters to engage in good faith negotiation, at virtually the same time two months earlier, you're looking at an internal document where the central focus, the central question they are raising about the new TV contracts is that circle in the middle. So at a time when we are thinking about how to engage in good faith negotiations, they're thinking about how to game the TV contracts to do just the opposite. If you look under that circle that you just read - I apologize, I don't have it in front of me - if you look right under that circle, my recollection is there's a line that says key factors, and my recollection that is the first key factor. The first key factor for them even before I was elected was cash needs during a lockout that only they can impose. So now you know why they did what they did on the last day of mediation, at a time when they knew that we had to notify the court with our intentions about whether we'd renounced.

I know our fans are frustrated, I know our fans are mad, I know they love football like I do. We're gonna work hard to make sure that the court knows all of the facts and hopefully the court will step in and lift this lockout from the owners.

On if the players plan to negotiate before April 6:

DS: No, not at all. Negotiations can still continue, they continue where because every player is represented now as a class, and class council, of which I'm one of them, class council can continue to negotiate with the league as representatives of the class any time.

On if that means that they don't plan to negotiate as class council:

DS: I didn't mean anything. We can continue to negotiate with the league as members of the class, and that can happen at any time.

On if negotiating as class council is off the table:

DS: Absolutely not. As class council we can sit down and negotiate with the league at any time, and I think instead of Roger sending a letter to players referring to us as a union, my guess is he's got a couple of lawyers who are smart enough to read the complaint, and call the lawyers who are on the complaint, and ask to sit down and negotiate. My guess is Jeff can probably figure that out.

On players' reaction to holding the draft someplace else:

TS: Every player here, our main concern is making sure that all of the guys, the draftees, who are getting ready to be drafted understand it's their decision. Also making them aware that once you become, you step on the other side of the fence as far as becoming an NFL player, you have to look at it in this manner. It's not just a game that you play. It's business. It's very important that you understand that. The decision is really totally up to them, but we want to make sure that they make an informed decision.

On his message to fans:

TS: We're working hard and diligently on it. When you look at the deal, and you see that those guys put their numbers out there, I like to call them smoke and mirror numbers, we as the players, the representatives, the guys who sit on the board, we relayed them to all of our teammates, it's not true. We have a problem with that, because I've been sitting in negotiations starting over the past two years, and for them to be thrown out at the 25th hour, knowing that we only had a certain amount of time to do what needed to be done as far as decertifying as a union at that time, it really, as players, we really felt like it was insulting our intelligence.

On if there's an effort to not negotiate publicly:

TS: Yeah. Exactly. We're not into getting players negotiating in the public eye. One of the things that we do believe in is giving the true facts, which you just heard De and myself give out a few minutes ago. That's what we're gonna stick by. It's sad that numbers are thrown out there, and then it's getting misconstrued with the fans and the fans think that players are greedy. One of the main points I think that we always have to emphasize is that we're locked out right now not because the players locked themselves out, but because the owners locked us out. We want to play. We cannot, and we will not, take a deal that's the, quote, worst deal that I've ever been associated with, especially dealing with the union (prior to decertifying).

On his prediction if games will be missed:

TS: To be honest with you, the people who can answer that are the owners, or the decision makers, who will allow us to play. We want to play. The message from us, going back to players, is we truly don't know. As of right now when that deal was presented on the table, it looks like it's gonna be a long time. We're telling all the guys to prepare as you're ready to report on time, but just know that with the numbers that's been put out there, it's not gonna happen any time soon.