Recent lockouts in pro leagues offer a window into the business of sports


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You saw the weekend's big match-ups? The Pirates vs. the Cubs, the Steelers vs. the Jets -- and the hockey players vs. the team owners?

Two ongoing sports labor disputes have been a factor in how professional sports games are being played, or even whether they will occur at all. National Football League owners locked out their professional officials, represented by the NFL Referees Association, during the off-season and have gone ahead with the season without them; National Hockey League owners locked out their players, represented by the NHL Players' Association, on Saturday.

Professional sports lockouts are occurring with regular frequency. The NHL last had a lockout during the 2004-2005 season. The 2011-2012 National Basketball Association season was delayed due to a lockout, and the NFL experienced one during the 2011 offseason. (Major League Baseball has not had a lockout since 1994-1995).

This proliferation of league lockouts signals a shift in the economic relationship between sports management and employees. And those changes have important implications for the business, safety and popularity of professional sports, experts say.

"It's a leverage game," said Edward Abes, a managing partner at Abes Baumann, a Downtown law firm. Mr. Abes is a member of the NFL Players Association workers' compensation panel, representing injured professional athletes. Though he declined to mention his clients' names, he said he has worked with players in the NFL, NHL, MLB and smaller professional hockey leagues.

Lockouts occur when collective bargaining agreements expire and the parties involved aim to renegotiate the terms of the new contract. If the sides do not agree terms, the management can lock employees out -- or literally prohibit them from working.

While the actions are sometimes conflated with labor strikes, lockouts result from essentially the opposite process: employees are unable to work until a new agreement is negotiated.

Players unions began to appear in the 1960s and 1970s, according to Jay Reisinger, a partner at Farrell & Reisinger, a Downtown law firm. That unionization process lent itself to economic gains for athletes.

The proliferation of lockouts in the past few years reflects the managerial response to those gains.

"Management in sports has begun to utilize the lockout [to] revise the economic landscape between owners and players," said Mr. Reisinger, who has represented baseball players Alex Rodriguez, Sammy Sosa and Andy Pettite, in addition to working with athletes in other professional sports leagues and performing outside counseling for the MLB Players Association.

The NFL dispute resulted from a desire among referees to increase their salary, pension and other benefits, while the team owners wanted to contain costs. Because NFL games have become increasingly popular, the referees feel they should get a bigger cut, according to Mr. Reisinger.

"Referees have a role in that success, and their contract demands are seemingly reasonable given the NFL's economic position," he said.

The league's revenues were $9.5 billion in 2012, according to Plunkett Research, growing from about $9.1 billion in 2010.

By comparison, MLB revenues were $7.7 billion in 2012, and the NBA and NHL earned $4.3 billion and $3 billion, respectively, in 2010-2011.

Both Mr. Reisinger and Mr. Abes believe the referees and the NFL will settle early in the season. Since the league has replaced professional referees with less experienced ones in the interim, there are concerns about safety and the integrity of calls. That will likely expedite the negotiations -- especially for a league that has received flak in recent years for not adequately protecting players from concussions.

"There's going to be some bad or missed calls by the [amateur] referees, where the players or the fans are not going to respect the referees or the game, and that's the last thing the NFL wants," said Mr. Abes.

"If they don't [control] the game, there are going to be more injuries and that's not good for anybody," he added.

On their end, the professional referees may also be worried that amateur officials could eventually take their jobs, especially after getting some playing time in real NFL games.

"[The two sides are] going to have to meet in the middle. From what I understand, they're not too far apart," said Mr. Reisinger.

Without these pressures, the outlook on the NHL season is less optimistic.

Additionally, the proposed shifts to that league's collective bargaining agreement would be more dramatic, including limitations on contract length and changes to free agency, according to Mr. Reisinger.

As the Pittsburgh Post-Gazette reported in August, Penguins center Evgeni Malkin has agreed to play for Russian team Metallurg Magnitogorsk in the Kontinental Hockey League for the 2012-2013 season, if a new CBA is not negotiated. Penguins captain Sidney Crosby is reported to be considering playing in Europe, as well.

The recent success of the NFL and the NBA in containing costs and weakening unions has caused NHL management to wield a heavier hand, according to Mr. Reisinger.

In the past, the NHL has yielded more revenue to players -- 57 percent versus 43 percent to the owners, he said. In recent talks, the owners essentially proposed to switch that ratio, so the players would take a 43 percent cut of so-called hockey-related revenue.

The players so far have bumped their share back up to 46 percent of hockey-related revenue. While they proposed to play for a year under the expired contract, the owners did not agree to those terms.

"They have an opportunity that may not present itself again, to tilt the economic scale in their favor," said Mr. Reisinger.

Beyond renegotiating the contract or canceling the season, another option is to decertify the union, or disband it, as the NFL Players Association did during the 2011 lockout.

With decertification, individual players represent themselves and can take the league to court for monopolistic behavior. If players win, they receive damages. Mr. Reisinger said this option is unlikely for the NHL for several reasons, including the complicating factor of Canadian jurisdictions.

Despite the current face-off, Mr. Reisinger predicts the hockey season will start by December. That way, the NHL would be able to keep its popular Winter Classic, scheduled to take place on Jan. 1, as well as the playoffs in the spring.

The implications of a delayed season would extend beyond a mere work stoppage. Related business, such as television contracts, advertising and concessions, would take a hit. Though the NHL is now bigger than ever, its brand was diminished after the last lockout, according to Mr. Reisinger, and it has the weakest TV ratings of the major sports leagues.

Because the NHL has a weak revenue-sharing program, smaller clubs may not withstand another lockout.

Given the strength of their fan base in the Pittsburgh area, the popularity of Steelers and Penguins brands is unlikely to be damaged, according to Mr. Reisinger. But other markets, such as the Florida Panthers, Nashville Predators or Columbus Blue Jackets, may lose popularity, attendance and revenue.

"Those fans may not come back," said Mr. Reisinger.

Dave Morehouse, president and CEO of the Penguins, could not be reached for comment.

"Management in sports has begun to utilize the lockout [to] revise the economic landscape between owners and players."

Jay Reisinger, a partner at Farrell & Reisinger law firm

penguins - businessnews - legalnews

Elizabeth Bloom: ebloom@post-gazette.com or 412-263-1410.


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