Competing on Wits and Smarts

If you're less a fan of the games on the field and more a fan of what goes on behind the scenes in professional sports, then this is your time.

The NFL and its players have been going at it hammer and tong for several months and just now seem poised to solve their labor problems before anything more than the Hall of Fame exhibition game is lost. The NBA and its players aren't so much going at it hammer and tong as they are attacking each other in a high schoolish passive/aggressive fashion but are likely months before they even start addressing their real problems let alone solving them. Don't bet against an entire NBA season being lost.

And now baseball, with its collective bargaining agreement set to expire on December 11, is set to enter the fray of public negotiations. No one seems to be talking about a strike or a lockout in baseball but yet it has perhaps the most turbulent history of labor relations so don't bet against some sort of labor action in that sport either.

While the issues certainly aren't the same in each sport, they are connected by money or, more specifically, revenue: how much is there and how do we divide it?

If the parties in the baseball and basketball disputes were smart, they'd take notice of what's happening in football and adapt accordingly. But basketball has never been that smart about how they go about their business and baseball even less so. Thus when both of those disputes inevitably conclude, whenever that is, basketball will have found a way to kick the can down the road for a few more years, like the nation's debt problem, while baseball owners will once again knuckle under to the players while convincing themselves that their problems have been solved.

The real lesson emerging from the football negotiations is that the overall health of the league is tied more to cost certainty for all of its owners than it is to allowing a few “super” franchises to thrive. Football has learned that it's not just about the fans in cities with franchises. It's about hooking in the millions of fans outside of these cities and the best way to do it is by forcing the teams to compete on brains and not dough.

For example, in the NFL negotiations the dispute isn't just about dividing the overall revenue pie, although that's certainly been a key topic. It's also about all the little things that have big financial ramifications that have caused the owners angst for years.

It seems like the owners and players solved the big revenue issue a few weeks ago and yet as they put the finishing touches on a new, multi-year agreement the remaining revenue issues were rookie salary caps and how many rights of first refusal the owners could exercise on their potential free agents.

If reports coming from the negotiations are true, it looks as though the players have given in on the rookie salary cap in some fashion and the owners have all but abandoned the concept of right of first refusal, except for one “franchise” player per team. The resolution of both of these issues make sense, at least from a business perspective.

A rookie salary cap does two things. It gets younger players into camp more quickly and it helps keep costs in line while making future increases far more predictable. Understanding your costs not just on a near term but on a long term basis is important for any business. The explosion in rookie salaries has been a thorn in football's side for too long and it looks like the owners will mostly be getting the relief they've long sought.

When it comes to free agency, all the new rules seem to have done is institutionalize the way the more successful teams have operated for years. Every year it seems like both the New England Patriots and the Pittsburgh Steelers turn over half their rosters and let some of their more valuable players leave via free agency. And every year puzzled writers seem to write those teams off as a result only to see them once again deep in the playoffs at year's end.

What those teams learned long ago is that the right mix in football is to concentrate your more expensive investments in just a handful of players and then replace the more fungible aging, expensive veterans with younger, cheaper versions. There may be some production drop off in following that script, but it never seems to be enough to keep either team out of the playoffs for long.

Players always seem to crave absolute free agency as if it's their sport's Holy Grail. But with a hard salary cap in place, an economic recession that caused many teams to realize that the good times indeed don't always roll and a stronger group of owners, there's little likelihood that free agency in football will lead to crippling salary growth.

In the end, what you're left with in football is a a sustainable business model that forces teams to compete on wit and smarts and not on money. If the Cleveland Browns aren't a successful franchise under the coming structure, then it's because they continue to make bad personnel decisions and not because they got out spent. That's how it should be.

As obvious as that lesson is, whether it will take in both basketball and baseball if far less certain. But of the two sports, I hold out more hope for basketball.

If David Stern really does rule his sport with an iron fist, then he'll keep the league in shut down mode until it gets its house in order. What's plaguing the sport is a salary cap that no one can quite fully figure out. It isn't just all the loopholes that's the problem. It's the fact that the cap can be exceeded by simply paying a luxury tax and that's just what the big market teams have been doing for years. The thought initially was that teams wouldn't want to pay the tax. What's played out is that basketball has slowly but surely become a version of baseball where well financed owners in bigger markets are dominating the sport. That's not how it was supposed to be.

The short-sighted union sees the huge salary growth and doesn't want it to be checked in any way. But watching how all the small market teams are struggling and will continue to do so should be enough of an incentive to recognize that their long term future is tied more to the health of the league overall and less to the health of a few key franchises. In more ways than a few, basketball has essentially morphed into a winter version of major league baseball.

And baseball? Don't get your hopes up. The best way to illustrate baseball's financial problems is to look in our own backyard, at the Cleveland Indians. For many of the right reasons, the Indians are well into July and still fighting for first place. But anyone who pays attention at least a little understands that the holes in the Indians' roster are going to keep it from getting over the threshold unless they're addressed.

The problem that club president Mark Shapiro and general manager Chris Antonetti face is that baseball's lack of financial controls makes it difficult for teams like the Indians to make a push late in the season. Sure, the Indians can go after a handful of free-agents-to-be and rent them for a stretch run. All it costs is money.

But the Indians, as one of the many small market teams with owners who aren't nearly as well off financially as others, can't just toss around money without consequence. Spend now and it will have an impact on next year's budget. An even worse scenario is to make a trade for a productive big name that will cost you the lifeblood of the future—your key minor leaguers.

Everyone wants to make a run now, including Shapiro and Antonetti. But it's they and not the fans that have to live with the consequences if that run isn't successful. And even if it is, it still comes at the expense of the future. They sit in a perpetual “no win” situation.

Teams like the Yankees, on the other hand, can and have papered over their multitude of mistakes with even more money generated by operating in a major market in a league without any real restraints. It's been that way for years, of course and baseball, under Bud Selig, has always paid lip service to the problems.

What's really happened in both basketball and baseball is that some teams, meaning those in small markets, are forced to try and compete on wits and smarts while other teams, meaning those in major markets, get to add an open checkbook to the equation. It has hurt the competitive balance of both leagues and ultimately has hurt the experience for the fans.

If you want to root for the right outcome in each of these sports' labor disputes, then don't focus on the near term games that might get canceled. Focus instead on an outcome that assures that each team in the league can compete on the same terms as the others. It's the only way to give every team a real chance at success.

Lingering Items--Laboring Edition

For those who hate the business side of professional sports, the news that the NBA owners are spoiling for a lockout as much as the NFL owners did probably isn’t all that welcome.

The NBA’s collective bargaining agreement expires at the end of this month and for now the players and the owners are getting nowhere fast. There are plenty of similarities between the NBA’s labor issues and those in the NFL, but central to it is the straw that always stirs the drink: money. Would you expect it to be about anything else?

According to a recent article about the negotiations from the Associated Press, the NBA owners are claiming losses for this season at $300 million and an anticipation of 22 of its 30 teams losing money. That’s pretty dramatic if true.

The players don’t necessarily agree with that assessment because they say that television ratings have increased along with ticket prices and merchandise sales. They don’t have any more access to the owners’ books than the NFL players and thus can only speculate on how much the league might be losing. As an aside, why isn’t anyone complaining that NBA owners won’t open their books?

In any event, like their brethren in the NFL, NBA players seem to understand that the economy has changed, at least for their fans, and are willing to make some compromises but it’s the scope of those compromises that are the sticking point. Again, would you expect it to be anything different?

The lynchpin to these negotiations is likewise similar to that in the NFL: the owners’ desire to get better cost certainty. In the NBA the chosen vehicle is the revision of their currently byzantine salary cap into a more straightforward version. But since it’s the NBA where exceptions dwarf nearly every rule, don’t be misled into thinking that it’s a hard cap the owners want in the same way that the NFL has a hard cap. That would be too radical of a change and, frankly, would make too much sense.

If you listen to the players, who claim they’re united just like any labor group claims unity among its troops, they’re willing to give some money back presumably in the hope of having a larger pie to divide down the road. The owners have scoffed, yes scoffed, at what they call the modest moves of the players to this point, but so much of that is just posturing anyway.

Still there is less than a week before the contract expires and while much can happen between now and then, in all likelihood not much will happen. This is the owners’ first real chance since the economy cratered to address their issues and they won’t let go of that opportunity lightly.

In other words, don’t be surprised when the NBA owners do lock out the players, possibly as early as July 1. Like the NFL’s lockout, it probably doesn’t mean much with the season months away but it means enough to label the situation serious, assuming you care whether there is another NBA season ever.

What’s far less certain is whether the NBA players will pursue a litigation strategy. It’s mostly been a failure for the NFL players in that it hasn’t given them the perceived leverage they thought they would have, but that doesn’t mean the NBA players are any brighter than their counterparts in the NFL.

The other thing to keep in mind is that if DeMaurice Smith is the worst head of a professional sports union then Billy Hunter, the executive director of the National Basketball Players Association, is a close second.

What makes Smith inept is his abject lack of experience. He’s a litigator by training and brought that mentality to the NFL players, hence the massive amount of litigation taking place that has bogged down negotiations. What makes Hunter inept is just a general lack of competence and gravitas.

But in fairness to Hunter, he probably understands that David Stern controls the NBA with an iron fist to the point that Hunter would never be willing or able to effectively challenge that authority anyway. Stern is more Kenesaw Mountain Landis and less Roger Goodell and as long as Stern’s in place the players are only going to get as far in these negotiations as he’ll let them.

Whatever union president Derek Fisher’s claims of unity among the players may be, they’ll never effectively challenge Stern’s control or break his will to shape the game as he sees fit.

You don’t have to be fully versed in tea leaf reading to conclude that unless the players knuckle under between now and June 30th, Stern will lock out the players. The only question is whether the players will be as pig-headed as their counterparts in the NHL and let a full season pass until they figure out that for however popular their sport might be in China, in the United States whatever fan uprising might occur will be drowned out by the otherwise massive fan indifference.

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As for a sport the fans really do care about, football, the good news is that the owners and the players are finally negotiating in earnest. For the most part the posturing that inevitably arises at contract expiration time has given way to the realities that whatever else the courts could do for either of them, the one thing they can’t do is the one thing they need the most: a new labor contract.

The lack of real substantive news coming out of these negotiations is actually a very positive sign. The less the principals talk publicly the more likely it is that they are getting things done behind the scenes.

The average fan, even the average fan who’s in a labor union, probably doesn’t fully appreciate the complexity that is the NFL’s collective bargaining agreement. Much of that complication comes from the provisions dealing with the division of revenue, but the contract is also so much more than that.

The other thing the average fan may not realize is that although the re-slicing of the financial pie is a major issue, there is a laundry list of other items the parties are working their way through, including retiree health care, injury pay and the like. These take time as well.

But the real complication stems from the nuclear approach the union took to these negotiations. It’s not just about reaching a new labor contract. It’s also about resolving the pending lawsuits, particularly the underlying class action lawsuit that was filed.

Without going into the rather mundane details of class action law, the resolution of that lawsuit is subject to both the approval of the court and the prospective class members. Then there is the not so small matter of the union re-certifying as the collective bargaining representative for the players. Although the NFLPA is calling itself a trade union and its attempt at decertification has been disputed by the owners, ultimately this issue needs to get resolved and the union needs to re-form as part of what will surely be a global settlement. Without the re-certification, the negotiated collective bargaining agreement cannot technically be approved by the players.

In short, the parties could reach a deal on the new contract but the process of approving it and living by it could take months to work through. That doesn’t mean that the lockout would need to remain in effect until that happens. But rest assured that unless the owners have very good assurances that everything will get resolved they will be reluctant to open the doors.

It seems like a very good chance that a tentative agreement will be in place in the next few weeks. Whether that means football will ultimately start on time is hard to say. But if it forces a delay in the season, the NFL probably won’t complain anyway. With the way they run the league, nothing would please them more than to play up until the day that baseball’s spring training starts in mid February.

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A few quick words about Travis Hafner and the Indians.

As frustrating as the Indians recent slump has been, what’s more frustrating is that their highest paid player literally cannot play a position other than designated hitter. For a team that has trouble generating offense, the fact that Hafner is irrelevant for the 9 games in National League cities is a cause for real concern.

Basically the Indians go into this stretch fielding a team with 7 legitimate bats, given that the pitcher will have to hit as well. Everyone saw how moribund the Indians’ offense looked when Hafner was on the DL. The likelihood now is that it will be worse for this stretch in large part because it’s as if Hafner is back on the DL.

It’s nice to see that Hafner has regained most of his batting eye after walking through the desert the last few years. But it’s not so nice that the Indians are paying the kind of money they are paying Hafner and have to endure similar stretches of their schedule when he simply can’t play.

Nine games may not seem like a lot given a 162 game schedule, but going 2-7 instead of 5-4 against the National League could very easily be the difference between making and not making the playoffs.

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With all the frenzy surrounding the Cavaliers’ just completed draft, this week’s question to ponder arises: How many of those fans either praising or bitching about the Cavs’ picks can honestly say they’ve seen Kyrie Irving or Tristan Thompson play enough to have an informed opinion?