Why Fiesta Bowl shenanigans might benefit Jerry Jones

The CEO of the Fiesta Bowl, John Junker, was fired for paying employees to make political contributions and then covering it up. This is in addition to a host of other offenses, like using Fiesta Bowl money to pay for a strip club visit (pdf of full report). Junker was already a popular target for his nearly $600,000 per year compensation at a tax-exempt, non-profit organization. Who might stand to win from this executive shake-up? Cowboys' owner Jerry Jones.

Already talk has swirled about the Fiesta Bowl losing its place among the BCS bowls. Should that happen, the Cotton Bowl is well positioned to take its place (the game, not the facility). The Cotton Bowl Classic is played at the palatial Dallas Cowboys stadium, and prior to the BCS, was one of the highest prestige bowls.

Some (including your author) have felt it would work its way into the BCS mix somehow even before the Fiesta Bowl scandal - now it might have an even easier path. Or the BCS committee (made up of the six BCS conference commissioners and the Notre Dame A.D.) may just use its leverage to negotiate concessions from the Fiesta Bowl to stay in the mix, such as a more generous pay out to participating conferences.

The benefit of having the Cotton Bowl as a desirable alternative is the same benefit that professional sport leagues see to having "open markets" for teams: leverage. For example, the NFL benefits by not having a team in Los Angeles because it can use that as a bargaining chip when trying to get public funding for stadiums in existing locations. "If you Minnesotans don't pay more in taxes to fund a new stadium for the Vikings, we'll just move the team to L.A." (hey, it's happened before).

This idea, part of the larger topic of franchise free agency, is how one party can gain negotiating power (i.e., leverage) over another. If there weren't viable places into which teams could move, the threat of them leaving town is an empty one. For the Fiesta Bowl, the threat of losing its BCS status is very real because of the attractiveness of the Cotton Bowl Classic as a bowl destination.

Leading to a lockout? NFL vs NFLPA collective bargaining negotiation

Guest post. This post is part of series of posts written by my sport management students and is cross-posted on the UMass Center for Spectator Sport Research blog. The authors of this post are Lilah Brown, Dan Hatman, Oleg Kamenetsky, Miha Kline, Ariel Weisman.

To put the current negotiations in perspective you need to look at the last 20 years.  The Reggie White vs NFL antitrust case led to NFL players gaining free agency, while the owners gained a salary cap and floor.  The salary floor was based on the players having access to 58% of broadcasting and attendance revenue.  Subsequent renegotiations of the CBA led to increases in minimum salaries and increased contributions to pensions and 401K’s.  In 2006, the owners’ in-fighting over revenue sharing allowed the NFLPA to gain tremendous leverage in the negotiation.  This led to the players gaining access to 59.5% of ALL football revenues.  In 2008, the owners opted out of the CBA saying that the 2006 agreement increased salaries to the point that the owners felt they were not making the same profits.

The owners said after opting out that they wanted to renegotiate the CBA with an 18% revenue exemption that the players would not have access to. The NFLPA expressed concerns over justifying this cut, when NFL teams average $31 million in profit.

The NFLPA has said publicly that they have no intention of accepting an 18% pay cut and are preparing for a lockout in 2011. To protect the players, the NFLPA has saved $200 million as a lockout fund by increasing dues by $5,000 per player and the players signing over their royalties from group licensing rights to the NFLPA.  From this fund, the NFLPA hopes to pay each player $60,000 in 2011 if a lockout occurs.  The NFLPA has made their perspectives public, hoping fans and lawmakers put pressure on the owners to lower their demands.  One such strategy is to remind the public that the NFL is a non-profit and does not pay taxes on its $8 billion of revenue.  Another move has been to highlight the NFL’s reluctance to open its books to the NFLPA or the public in order to prove that they are actually hurting financially.

The NFL owners have countered many of these points.  The NFL argued that their non-profit status should remain as they do not collect the $8 billion in revenues, but rather pass those profits on to the 32 teams, who in turn, pay taxes on that money.  Furthermore, several NFL owners have made multi-million dollar investments into new stadiums to grow revenues for both owners and players.  The owners want players to contribute to these projects and share in their risk.  The NFL also clarified the 18% cut.  This would not be a straight 18% reduction in player salaries, but rather the NFL would take 18% of the total pie, before revenue sharing, to cover operating expenses. The remaining 82% would be shared with 60% going to the players and 40% going to the owners. The players would end up only seeing around 5% less than they currently do and the owners argue that this 18% ($1.4 billion) would be used to grow league revenues, allowing for higher player salaries in the future.

As fans, we see this as an argument between millionaires and billionaires but this potential lockout also impacts local government (less tax revenue), corporate sponsors (less funding), stadium development (suspended), NFL employees in both the league and team offices, coaches, transportation groups, and stadium & media employees (unemployment).

Scheduled sponsorship revenue for the 2011-2012 season

Revenue Source	Value (in millions)
Visa	$30
AB InBev	$50
Verizon	$187.5
EA Sports	$30
Reebok	$30
Other sponsorship discounts	$125
Preseason	$500
Potential league-wide losses	$952.5