United States District Court Judge David S. Doty compiled a 28-page court document Tuesday that was completely damning of the NFL's business practices while renegotiating its broadcast contracts, to the point where it looks like the NFL spent two years setting itself up with leverage in a lockout.
For starters, in May 2008, the NFL opted out of the final two years of the collective bargaining agreement, which was initially set to run through the 2012 season. After that, the NFL renegotiated its broadcast contracts with CBS, FOX and NBC, which were all set to expire after the 2011 season. At that time, DirecTV's contract ran through 2010, and ESPN's contract ran through 2013.
Through a series of negotiations, the NFL's deals with CBS, FOX and NBC were extended through 2013 and DirecTV was extended through 2014, and the NFL added work-stoppage provisions that caused the broadcast companies to pay the NFL during a potential lockout in 2011. ESPN's contract remained through 2013, but the NFL added a work-stoppage provision in exchange for other concessions, including a series of added Internet rights to its Monday Night Football broadcasts. The NFL also negotiated a new deal with Verizon Wireless to become the league's wireless partner, and Verizon had to agree to the same work-stoppage provisions.
In total, the NFL negotiated access to more than $4 billion in rights fees for 2011 if it locked out its players.
But check out the NFL's bargaining power. According to Doty's court document, "Initially, FOX expressed reluctance to pay rights fees during a work stoppage. The NFL considered opposition to the work-stoppage provision a 'deal breaker.'"
So, basically, the NFL would not grant FOX a television contract unless FOX was prepared to show blind faith that the NFL would work to negotiate a new CBA that would prevent a lockout. Clearly, FOX was skeptical of that faith.
The document also noted at least three networks expressed some degree of resistance to the work-stoppage provisions, but the networks all recognized the NFL had all the leverage it needed. After all, it's the NFL.
The court had no problem with the NFL's strategy to lock out its players because it recognized that was a bargaining chip in business strategy, but the court's issue was with the way the NFL renegotiated its broadcast contracts. In fact, the court deemed the NFL completely ignored the players' interests while negotiating these broadcast rights.
The NFL is expected to negotiate broadcast contracts on behalf of both the NFL and the Players Association, but the court ruled the NFL did not act in the legal definition of "good faith" in its business practices. Once the NFL opted out of the CBA, it negotiated contract extensions that protected the NFL in the event of a lockout — to the tune of $4 billion — while it knew the players wouldn't see any money during a work stoppage.
In fact, Doty's court document claimed the NFL turned down more money in broadcasting contracts for the 2009 and 2010 seasons because it preferred to negotiate the work-stoppage provisions.
Think about that. The NFL turned down more money for two seasons for the sole purpose of setting itself up on a $4 billion cushion in a lockout. When breaking that down, there's almost no other way to look at it: The NFL has been setting itself up for a lockout for two years.
"The NFL made no effort to maximize total revenues in 2009-2010 in exchange for those rights," Doty wrote in the document.
Because Doty ruled against the NFL's business practices, the NFL lost its leverage against the players, which will likely prevent a long-term work stoppage.
Due to Doty's document, though, the damage has been done, as it explicitly showed the NFL's strategy to set itself up to make $4 billion during a 2011 lockout.