The Busine$$ of Football

Andrew Brandt By Andrew Brandt
Posted November 17, 2008
Email to a Friend Email to a Friend   Print This Print This  

Monday Money Matters

The 28M award to the retired players in the jury verdict against the NFLPA is still resonating in labor law circles, both in football and beyond.  Many are wondering how such a stunning result for the players could happen in light of the fact there is no legal obligation by the NFLPA to provide any licensing income to retired players.  Although the union lawyers downplayed its significance, the email messages from the union to EA Sports directing them to scramble images of retired players in their “vintage” games was certainly damning evidence. 

 

Beyond the facts of the case, the attorneys for the retired group of players were able to evoke a strong visceral reaction to the disparity of income of the two sides: on one side of the case was the union representing wealthy and healthy active players; on the other side were a group of old players that paved the way for the current riches in the league, with some having physical or mental issues to boot.  Perhaps the biggest mistake was allowing the case to be heard in front of a jury to begin with.  The appellate process now begins (with the clock running on the legal bills) as the NFLPA hopes it does not have to dip into its 121M strike fund to, at some point, pay out on this verdict.

 

Interestingly, the NFLPA Professional Athletes Foundation board passed a measure last week to re-name the Player Assistance Trust Fund to honor the memory of the late Executive Director Gene Upshaw.  The fund – which has distributed almost 7M to players in need of financial, medical and educational assistance – will now be named the Gene Upshaw Player Assistance Trust Fund, a smart measure by the union to both honor Gene and bring attention to the fact that they are – to some degree – helping the retired players….


Amid the haze of the exhilarating win by the Jets over the Patriots last Thursday night was the stellar play of Patriots quarterback Matt Cassel, another game in a series of solid performances from a player the Patriots had faith in from the day they lost Tom Brady (remember the immediate cry from pundits for the Patriots to sign one of the veteran quarterbacks waiting for a call?).  Now comes the discussion of Cassel and the future.

 

Cassel, as a seventh-round pick, negotiated a four-year deal in 2005.  It had become common practice by then for many teams, Patriots included, to negotiate four-year contracts with all draft picks past the first round (2005 was the last year teams could negotiate five-year deals in the second round; that was reduced to four-year maximum lengths in the 2006 Collective Bargaining Agreement).  Thus, Cassel’s contract runs out this year, completing the final year of his rookie deal. 

 

There has been some debate since Thursday as to his worth, factoring in recent deals by Aaron Rodgers, Derek Anderson, David Garrard, Tony Romo and a certain deal to come for Jason Campbell.   That, of course, assumes that Cassel hits the market for unrestricted free agency in March.  Certainly, with the lack of quality young quarterbacks ever hitting the marketplace, he could negotiate that level of contract or higher at that time.  Assuming his continued ascending performance in the next two months, however, I would expect that the Patriots would not let him reach unrestricted free agency.

 

Even with Tom Brady making eight figures, the Patriots would be wise to apply the Franchise Tag to Cassel, a tag price that will be determined in February — the amount was 10.7M in 2008, likely to be slightly above that in 2009.  The Patriots are currently showing 101M of Cap charges for 2009 with an expected Cap of 123M, so they will have the room to use the tag.

 

The application of the Franchise Tag, although Cap heavy for the off season, would allow for the following: (1) retention of a quality quarterback while Brady continues his rehabilitation with the team monitoring his progress, (2) no cash outlay of funds until September, allowing cash, if not Cap flexibility, and (3) the ability to listen to trade offers and potentially consummate a trade that could bring players and/or draft picks to the Patriots (at which point a new deal would be made between Cassel and the trading team).

 

Assuming the Patriots and Cassel could not agree to a contract that would satisfy both parties, there is some real value in placing a tag on Cassel…………

 

The ongoing saga of the sale of one of the game’s most iconic and venerable franchises, the Steelers, appears to be reaching a conclusion that most, if not all parties will be happy with.  With Dan Rooney’s improved offer appearing to satisfy his four brothers, the transaction appears to be headed for approval.  With Rooney remaining as the principal owner, that has always been the preferred choice for the membership of the NFL, as the dramatic fear would have been removing Rooney from control of the team.

 

Having rebuffed a larger offer from Pittsburgh billionaire Stanley Druckenmiller earlier in the year, there were not a lot of suitors coming forward, especially in the present financial environment.  With former Commissioner Tagliabue helping the league and Dan Rooney sort through the web of issues in this case – the lack of a 30% majority owner, as required by the league, the gambling interests in racetracks in Florida – the hope is that this all gets sorted out prior to a league meeting in December.

 

Although Goldman-Sachs estimated the value of the team at around 1B, as did the Forbes rankings, those estimates were before the turmoil of the present economy.  Rooney’s present bid would buy out the four remaining brothers 64%.  The Pittsburgh Tribune-Review reported on its Web site Friday night in a story about the probable deal with a price to the brothers of 750M. The Pittsburgh Post-Gazette reported a price of 800M.

 

Either way, the soap opera-like story full of feuding brothers, racetracks, a venerable owner, an iconic franchise, a billionaire suitor, and a watchful league is nearing its final episode.  We think.

Fantasy Draft Guide

Remarks

11 comments for “Monday Money Matters”

  1. ScottR.
    November 17, 2008
    12:23 pm

    You write that there is “no legal obligation for the NFLPA to provide any licensing income to retired players.” While that might literally be true, the plaintiff was a paying dues member of the NFLPA and, as such, his union was supposed to represent his best interest–not screw him by advising EA how to scramble his image. That’s a clear breach of a fiduciary duty.

    Your view of this lawsuit continues to be very one-sided.

  2. dan
    November 17, 2008
    2:09 pm

    Yep, while I recognize that the union might not be contractually obligated to the retirees, or whatever term you’d use, the fact is that they ARE obligated to them in reality. Come on, you know that. We all know that.

    The union’s got control of all these billions…give some to the old guys.

  3. Peter
    November 17, 2008
    2:49 pm

    Andrew, as always, great insight. With the Franchise Tag for Cassel, the downside I am seeing is that they ahve to tie up close to 20% of their cap money on 2 players - if Cassel would decide to play for the Patriots for one year under the tag, and they’d have other injuries, they’d pretty much be in a bind, paying large money for both Brady and Cassel.

  4. BigJohn
    November 17, 2008
    3:49 pm

    This may be romancing the rules just a bit, but:

    –IF EA Sports would owe the Retirees for using their “unscrambled” likenesses, pursuant to:

    (a)A licensing agreement between EA and the NFLPA;

    (b)Which was intended to benefit the Retirees;

    –THEN, a legal obligation in favor of the Retirees arguably arose.

    The NFLPA implicitly acknowledged as much when it directed EA to scramble the Retiree likenesses, to avoid having to pay Retirees on sales of “vintage” EA games.

    I don’t think Mr. Brandt has been overly pro-union in his statements. Obviously, this was a difficult case for plaintiffs, and their counsel was able to sell it. The punitive damage award is especially stunning.

  5. Mack
    November 17, 2008
    10:53 pm

    Just playing it straight with the former players would have been so much easier in the long run. EA could have afforded to pay it and the games would be better with actual names and likenesses of the greats.
    I am not a litigious individual by nature but the NFLPA got what they deserved.

  6. Local Pittsburgher
    November 20, 2008
    1:02 pm

    The difference in the Trib and the PG was disclosed in a previous story. For the readers, the Trib always has explained the need of subtracting out business debt, a concept the PG doesn’t seem to really understand.

    For the $750 million pricetag, it’s less the estimated business debt held by the brothers, mostly in connection with the stadium financing. Obviously, neither the brothers nor their other relatives would pocket the full proceeds of the sale. They would need to pay off their creditors.

    I read both papers, and the PG has been out of its depth on business issues. The Trib seems to make a stronger effort to understand these concepts and translate them to the layreader.

    For a long time, the PG continued with an erroneous evaluation price for the team based on Druckenmiller’s offer. They didn’t seem to know the real value of his cash tender, and instead relied on speculation.

    On Tuesday, I was quite surprised to read in the PG’s business page the following retraction:

    On the first page of the Business section of the Sunday, Nov. 16, 2008, Post-Gazette we printed an article about Stanley Druckenmiller and his company Duquesne Capital Management. The article included headlines that suggested that the funds which Mr. Druckenmiller and Duquesne Capital manage had suffered significant losses and that Mr. Druckenmiller had been “sacked” and “took it on the chin” in the financial markets. Unfortunately, the author of the article did not check the accuracy of the facts with Mr. Druckenmiller or Duquesne Capital. According to Mr. Druckenmiller and other published reports, all of the funds managed by him and that organization have had positive returns for the year. In addition, the headlines that accompanied the story were, in hindsight, misleading and did not reflect the more qualified points made in the story itself. Simply put, we did not adhere to our own standards. We sincerely apologize to Mr. Druckenmiller and Duquesne Capital for these lapses.

    I hate to say it, but that sort of reporting on these issues has been unfortunately par for the course with the PG during this entire episode. When it comes to reading about the potential sale of the Steelers, I now just read the Trib.

  7. Andrew Brandt
    November 20, 2008
    1:25 pm

    Interesting stuff about the coverage there; competition for getting the story first often leads to not getting it right. Appreciate hearing your perspective; I am writing something on the Steelers sale for the Sports Business Journal and will heed your remarks.
    Andrew

  8. Zack in Santa Barbara
    November 21, 2008
    3:21 pm

    How would you guys ranked the aforementioned QBs, in terms of who you would want to be your franchise guy? My list would be:

    1. Romo
    2. Rodgers

    3. Campbell
    4. Cassel
    5. Garrard
    6. Anderson

    I’m a homer, but I think Rodgers is a very close second to Romo, and think the rest drop-off significantly. Those are the only two guys that I feel can CONSISTENLY throw for alot of production. Anderson was a 1/2 year wonder and Garrard had a great year thanks to a strong line and running game.

  9. Miguel
    November 22, 2008
    9:44 am

    Peyton Manning Indy $18,700,000
    Tom Brady Patriots $14,620,000
    Carson Palmer Cincy $13,980,000
    Aaron Rodgers Packers $13,952,500
    Brett Favre NY Jets $12,000,000

    based on these 2008 cap numbers I project that it will cost
    $14,651,000 to tag Cassel in 2009.

  10. Andrew Brandt
    November 22, 2008
    12:54 pm

    Miguel-
    Good work, although there may be another one or two to put in there. I would think there may be one or two more that get done before February.
    Andrew

  11. Mr.Murder
    November 22, 2008
    3:30 pm

    Most of those names will renegotiate as well, so the team can retain other players crucial to the success of the big five.

    That might drop his total number down a couple of million(1.5 range for certain), especially with players perhaps not reaching incentive, two of which are certainties at this time. The teams will probably expect them to restructure, look at anyone past year three of a current deal to do so anyways.

    They get a little less money now, but often add an additional year or two of bonus, and still retain what bonus they’ve already inked.

    The numbers always change, but it’s a good idea of ballpark figures for what it would take to pony up that much. How many teams want to give up 10% of the cap for someone else’s system guy?

Add a Remark

(required)

(won’t be published)