Devils in Trouble

August 8, 2013

The New Jersey Devils of the National Hockey League (NHL) are reported to be in severe enough financial trouble that the league is considering taking over the team.  Current owner Jeff Vanderbeek, a former Lehman Brothers executive, was not able to meet payments on his newly restructured loan which was suppose to help ease payments.  Forbes reported earlier this year that the Devils have are more than $230 million in debt, which is around the amount that the Atlanta Thrashers were in debt before they were purchased and moved to Canada.  Curiously, Forbes is also reporting that the NHL does not want the Devils to declare bankruptcy as the Phoenix Coyotes did.  Rather, they are going to try and take control of the team and then help find a new ownership group to takeover the Devils.

The takeover seems to have some logic to it, as we have seen teams like the Los Angeles Dodgers get taken over by Major League Baseball to get rid of incompetent ownership and management.  The Dodgers were bought out at a major profit, and the team somewhat rejuvenated.  While I do not think there will be any “mega” offers for the Devils, the franchise has won Stanley Cups in recent memory, and was once one of the dominant clubs in the NHL.  With the league taking over the team, they may be losing out on the $25 million they are currently owed from Vanderbeek, as well as the $55 million in salaries that are due to players this season.

While it does not surprise me that another team has had such financial troubles in the NHL, to see one in one of the larger markets in the league may be a sign of several things.  It could be poor management from a financial perspective, an owner trying to bite off more than he can chew, or it could be that the metro area cannot support that many professional hockey teams.  In any case, this will probably be another point in the argument by the owners to get an even larger split of the revenue the next time they negotiate a collective bargaining agreement.

Is the NCAA in danger?

January 30, 2013

The NCAA attempted to have a court case filed by former players thrown out in court.  The former players led by Ed O’Bannon want to recoup some of the broadcast right fee revenue that has only been shared by the NCAA and member institutions.  This initially focused on re-broadcasts of games, but now a new ruling from Judge Claudia Wilken is signaling that players (former and current) can go ahead with their antitrust lawsuit against the NCAA.  So what does this mean exactly?  If, and that is still a big if, but if the NCAA loses this lawsuit, it could mean that the face of collegiate sport as we know it could change forever.  It would also mean that the NCAA could be held liable for hundreds of millions (or even billions) of dollars in revenue to be paid back to former student-athletes.  That would be in addition to having to potentially split some of the broadcast revenues from here on out with student-athletes in those events.  If such events were to transpire, this could mean that many programs which need their current level of revenue from broadcast right revenue would find themselves short of money, and that they would probably find themselves in the red.  I would anticipate athletic departments either going into the red, or making cuts to many programs on campus in an attempt to stay financially stable.

What would all of this mean?  It would be a major sweeping change in athletics, and the financial and economic structure of how the NCAA and member athletic departments do business.  It would also make things more interesting as it would push forward the discussion of whether a student-athlete is an employee or not.  Many argue both sides of this, with discussion of whether the National Letter of Intent which all student-athletes sign is a contract or not.

This is still in its early stages, and is sure to be battled in court for quite some time.  With that said, I’m sure many in the NCAA and athletics are probably sweating a bit after today’s ruling.

Quick Update: NHL Lockout Official

September 17, 2012

Greetings, last night the National Hockey League (NHL) officially locked out players, making this the third lockout of Gary Bettman’s tenure as league boss.  I find it absurd that someone would be allowed to be the commissioner of a league after two lockouts, but now his leadership has presented us with a third one.  Of course, he really works for the owners, so as long as he is keeping the thirty or so super rich individuals across North America happy, he will stay in his job.

On Saturday, Bettman continued in doing his work for the owners when the league told the head of the players’ association (Donald Fehr) to not even bother trying to get a last minute face-to-face meeting to try and bring the sides to a compromise.  Granted, this may have been a waste of time as the sides are still too far apart on any deal happening.  The players had already taken a 24 percent cut in salaries to end the previous lockout in 2005, now the owners want the players to drop the percentage of revenues they share by around 8 to 10 percent.  The players weren’t going to agree to this, the Collective Bargaining Agreement was thus allowed to expire, and thus we are now in a lockout.

In my opinion the league has continued to slash costs, the previous time the league had some good arguments to reduce costs, but this time around it seems as if they just want to slash costs because they can.  The NHL is scheduled to begin play in October, but that seems to be in doubt as there is no way a deal will get done in time to get players to training camp and ready for the season by then… unless those players bolt to Europe.  The exodus has already begun, Evgeni Malkin has already left to play in the KHL in Russia.  The KHL was well prepared and set out rules about the number of players from the NHL a team can sign during a lockout, and that the salaries can’t exceed 75% of what the player makes in the NHL.

Already several players are headed over to play in Europe which makes me think that with other revenue sources for many players readily available, this lockout could last a long time. One wonders if this could be the end of the NHL as we know it.

The NBA looks like it will be back just in time for Christmas

November 26, 2011

That’s right, after all the fighting between various groups that was highlighted in several posts here at the blog, the NBA owners and players association has come to a handshake deal after a 15 hour bargaining session lasting Friday and Saturday morning.  If the deal is accepted (they only have a handshake deal at the moment), the league is scheduled to begin play on December 25th, Christmas Day.  Reports coming in are saying that the first game will be a rematch of the finals, with Dallas playing Miami.  I don’t know if it the Holiday season that got the two groups together again to get a deal, but the owners are claiming that it wasn’t time or the calendar which was forcing them to get things done.  Really, it seems that the mounting financial pressures on both sides was what really helped get to the point where they are at now.  As ProBasketballTalk (NBC Sports) notes, the owners were not looking forward to losing an entire season of revenue, and the players were not looking forward to losing an entire season of salary.

So now that it looks like the NBA will be back, there is still the question of how long it will take for fans to get back into the league.  Research shows that attendance and fan interest in professional sport leagues tends to drop off after the league goes through a lockout.  And this was no short lockout, it lasted 149 days, and was the end point of almost two years of negotiations.  The NBA looks to overcome one big hurdle, but the new obstacle which may cause a drop in revenues is the lack of interest from consumers.  I’ll be curious to see how many people show up to games once it starts back up.

Will the new NBA season proposal hurt London Olympics Basketball?

November 11, 2011

The final deadline that David Stern put into place for the union to accept the owners proposal about the CBA or else things would get progressively worse.  Yet, the two sides are still at the table, which seems to indicate either than David Stern’s threats convinced the union, or that this was a shallow threat and that both sides have ignored as they made progress in talks.  In either case, things seem to be moving in a positive manner in the NBA CBA negotiations, though both sides still have distance between them.

The players are still moving towards decertifying the union today, and agents don’t like the new proposal either because it takes away their power.  Of course this means that many agents are telling the players to not agree to the new deal, and keep fighting the owners.

David Stern has proposed that if the deal gets done soon, the NBA could play a 72 games season (only losing 10 games off the schedule), including full playoffs, and would end only about a week later than the previously proposed season.  So how do you get in that many games in that little of time?  You obviously give players a much tougher and grueling schedule.  As ProBasketballTalk notes, its pretty much a schedule packed like sardines in a can.

This causes some issues I think.  First, with a tight schedule and shorter rest periods, players are likely to be more prone to injuries and fatigue.  This could actually be costly for some players who are required to play certain number of games for bonuses in their contract.  Really by playing a 72 game season, the NBA owners really look like they are trying to recoup as much lost revenue as possible.  If you look at tennis this year, there has been an increase in the number of injuries because of them playing one of the toughest schedules in history.

Then comes the Olympics.  Now that NBA stars play in the Olympics, it becomes worrisome that some NBA players might have to play a very hard schedule and then head to the Olympics with less time to rest and prepare.  I wonder if this might effect basketball at the Olympics in a negative manner.  Many star players might choose to sit out (or be injured) to just try and recover in time for the next season.  While it is only one week in difference from the previous cycle, the scheduling and number of games in such a short amount of time is the real issue.  The body can only handle so much.

The NBA season is slipping away…

November 9, 2011

Today is supposedly the deadline for the owners and players union to come to an agreement over a new Collective Bargaining Agreement (CBA).  The talks have been going on, with the owners having made what is said to be their final offer.  The union side said they would like to negotiate some more on this final offer, and the league (aka David Stern) flat out told them that they accept this or else the owners will start making progressively worse offers as the season gets shorter and shorter, and the pool of money becomes smaller.  The players’ union did not take too kindly to this, and one of the lawyers even said that David Stern was running the players and the league like it was a “plantation.”  David Stern fired back in a brief war of words, the players union lawyer eventually made a public apology and called Stern to apologize in person.

This is just the tip of the iceberg in what seems to be a battle which is really becoming more and more malicious.  Players going after owners (Derek Fisher essentially said Michael Jordan should sell his team if he can’t make money), owners attacking players, players attacking each other, things seem to get worse with each moment.  Now, while Stern has said that they will not move away from the final offer, it has been reported that Stern does have the authority to tweak the deal somewhat.

Really, it would seem that with such a large pool of money at stake (literally billions of dollars for both the owners and players side), they have come down to arguing over about $100 million worth of difference.  Of course this is a large sum of money, but if this was split among players, it would be about $250,000 a player.  We are now entering the final hours before the league potential cancels more games (they are saying you can wave goodbye to the Christmas Day games now) and even just flat out cancel the entire season.

Many more players are said to be preparing to go play overseas as the situation is rather dire.

College Basketball may be the big winner out of all of this.  Everyone looking for their basketball fix will probably tune in to NCAA games, especially as the NCAA basketball season is ready to tip off this week.

Will the NBA close down for a year?

November 4, 2011

I’ll be honest, I don’t things are looking good for the NBA right now with their lockout situation.  As you can read in previous posts here at the IJSF blog, the NBA collective bargaining agreements (CBA) negotiations have been at a deadlock.  All indications from the talks that are going on today is that the owners are angry over having lost a lot of money, and that they want to make up this money by sticking to their guns and having a 50-50 revenue split with the players.  Included in this group of hardline owners is former NBA great himself, Michael Jordan who is now a franchise owner.

50 of the leagues 400 players are preparing to start the process of decertifying the union over the weekend if the talks are still stalled.  This would mean that the labor talks would basically be hitting an end, and the legal battle which would most likely follow, would probably end up canceling the season.

Of course, this is not the best scenario, so a federal mediator will be in the negotiation room on Saturday to try and help them work out a deal.

One interesting post I read was from ProBasketballTalk, which noted several hockey players talking about the NHL lockout and the regrets they had.  Players in this article discuss the lost wages and playing time, and how many of their careers were never the same after the lockout.

People are saying “get it done”, but it doesn’t look good for the NBA, and both sides are set to lose out on a lot of money.

NBA Lockout Breakdown

November 3, 2011

Welcome to day 126 of the NBA lockout.

I feel a bit guilty about not having discussed the NBA lockout in greater depth, as I spent many posts discussing the NFL lockout.  The NFL lockout was settled in time for the season to begin on time, and while there seemed to be some bad blood between the players and the owners, the scope of the NFL lockout pales in comparison to the NBA lockout.

We are now several months into the lockout (the lockout is just over four months old) and the talks between players and owners hit a deadlock over splitting the revenue.  The owners want a 50-50 split of revenues, the players were willing to go as low as 52.5%, but have yet to say they will go any lower.  Not only has the talks between players and owners been heated, but some of the players have expressed anger at the union as well.  The big split seems to be between union head Billy Hunter and player rep Derek Fisher who seemed to have come to a disagreement over the revenue split.  It is reported that Kobe Bryant and Derek Fisher were pushing to accept the 50-50 split, and that Billy Hunter actually confronted Derek Fisher about this.  It came to the point where Derek Fisher had to bring in the lawyers and publicly make a statement that there is no split in the union.  Officially there is no issues in the union.

NBA veteran Jerry Stackhouse came out and disagreed with this on ESPN Wednesday, he stated:

“Not to say anything against Derek Fisher, it’s not that I don’t think he’s a great guy,” Stackhouse said, “But I don’t want him negotiating my contract. I want an agent who knows the lingo negotiating my contract. Derek Fisher, he doesn’t negotiate his own contract. He has an agent. So why would I want him negotiating something even bigger than his contract? This [Collective Bargaining Agreement] is something more important to everybody…

“David Stern, he’s made this league what it is,” Stackhouse said. “He’s one of the greatest commissioners in sports. He’s got that title, he’s got the NBA at the place where it is because he’s a shrewd businessman and knows how to work his way, play the media, play things up to get what he wants. We don’t do that. Players are emotional. Players get emotional. So no, I don’t necessarily, particularly want Derek Fisher or any of the executive committee negotiating a contract for me.”

So clearly there is a rift in the NBA lockout, which would seem to give some more power to the owners.  The NBA is also trying out a new tactic in the labor agreements: Twitter.  The NBA has a twitter handle now dedicated to posting the ownerships point of view in the labor lockout.  One player (Nazr Mohammed) pointed out that the players can’t talk to coaches or workout at facilities, but the NBA can send them harassing messages about the lockout through twitter (though it is Mohammed’s choice to receive these messages as well).

The lockout has carried on so long to this point, that the league was forced to cancel games all the way through the end of November.  Each day that ticks by is another day lost, as realistically, to get players through camp and have the season ready to go would take about a month (30 days).  So while November is already cancelled, you can pretty much start ticking off the days in December.  The Christmas day NBA games are usually pretty popular, so I wonder if the the two sides might try to push for some resolution.  We know the season will already be shorter, and there is no way they can extend it with the 2012 London Olympics looming in the summer, I begin to wonder if there will even be an NBA season at this point.  While I have pointed out that the owners have stood strong, and there is fractions in the union, it is important to note that many NBA players are currently making money playing basketball overseas.  Utah Jazz point guard Deron Williams began the exodus of NBA players by signing to play in Turkey, and slowly players have moved to teams all over Europe and China.  So while the NBA has suffered bad PR form this lockout, many overseas teams have had the bonus of having the services and star power of some NBA players on their team so far this season.  The NBA has always looked to try and build a bigger global brand, and it is curious to see whether this lockout causing players to go overseas may help/hurt the league trying to become even more popular overseas.

Yesterday, Chauncey Billups had some strong words trying to show the solidarity of the players.  Billups said he was willing to forgo his $14.3 million contract for this season and sit out the entire year to make sure that there is a fair Collective Bargaining Agreement (CBA) in place for the future.  Billups noted that fair means that it would be economically fair to the players.

NBA players are the highest paid players on average than any other professional sport league in the world.  Their salaries have been the big target point of this round of CBA negotiations, as the owners feel they are taking a big hit having to pay such high salaries.  At the same time, the high salaries and lower number of players in the league seem to have created a case where many of the players can actually afford to sit out a season, where NFL players were not able to.  The availability of leagues overseas providing another avenue for players to earn money for NBA players has been another factor which has probably caused the lockout to be so drawn out.  To be honest, the NBA players are in a much better situation for the NBA players, and seem to be willing to take a loss for the time being in order to get a fair contract.  Both sides are losing money, and right now it almost seems to be a game of chicken to see how will flinch first.

Also, I would like to point out this post about the lockout over at The Sports Economist, another great read and take on the lockout from University of Chicago economist Kevin Murphy.

Major changes in the NCAA

October 27, 2011

Today the NCAA passed legislation that will surely have some major ramifications for college sport in the U.S.  Just yesterday I discussed some big potential changes in the NCAA.  The new legislation as reported by the Division One Board of Directors has many important changes for schools.

First, athletic departments will be able to give up to $2,000 in aide to scholarship athletes who are receiving full scholarships for their playing a sport for a university.  This means that schools can choose whether to give the smaller of the full cost of attendance or the $2,000.  This means big schools which can afford this have a new recruiting tool, and that is the ability to give more money than smaller schools might be able to.  Of course this is only for D-I, so it will be curious to see if there is  going to be a major divide with some schools giving the full amount, and others giving less.  Notably, this increase doesn’t help athletes who only get partial scholarships, and thus will mostly affect basketball and football programs most likely (though others will benefit as well).

Second, the NCAA has now changed the rules to allow multiple year grants.  While the minimum still remains one-year, schools can now offer a multi-year grant to a student athlete.  This may be an even more powerful recruiting tool, as currently all student-athletes get only one year grants.  By having multiple years, schools will probably now be in a bidding process of trying to offer more guaranteed years to athletes they are going after.  The question is whether this might help the smaller and less powerful schools in Division-I.  If you have the choice of doing four years guaranteed at Purdue or one year guaranteed at Michigan, the Purdue offer might start to look a lot better.  Of course, big schools can give multi-year deals, so the best athletes will probably get multiple multi-year grant offers, it will probably be the mid-range athletes who really get help from these deals.

Clearly these two things can effect not only the strength of teams, but also the overall competitive balance of NCAA sport.  The final change I wanted to touch on (there are more than three) is that the NCAA will soon be requiring higher Academic Progress Rates (APR) in order to be able to compete in post-season play.  The new numbers would be:

For access to post-season competition in 2012-13 and 2013-14, teams must achieve a 900 multi-year APR or a 930 average over the most recent two years to be eligible.

In 2014-15, teams that don’t achieve the 930 benchmark for their four-year APR or at least a 940 average for the most recent two years will be ineligible for post-season competition.

This would mean several programs may lose the chance at post-season play.  Putting this in perspective, if the numbers for 2009-10 don’t change by 2014-15, there will be a number of teams that could not make post-season play.  Just looking at Conference USA basketball for example, 6 of the 12 men’s basketball programs have had APR’s low enough that they would not be allowed to play in the postseason.

This last change seems to be putting more emphasis in the “student” in student-athlete.

The NCAA wrap-up

October 26, 2011

So much news on the NCAA front, that I have decided to try and condense all of it into a single post.  Where to start?

Yesterday, it was announced that the Big 12 was on the verge of accepting West Virginia University (WVU) into their conference.  Then we wake up this morning, and Louisville, who is currently in the Big East with WVU, has made a quick play overnight and is now being said to be just as strong a candidate to get the Big 12 invite.  The New York Times’ sources says its a 50-50 thing, either school could be the one to be picked.

In a post earlier this month I discussed Missouri as being the domino which makes everything fall in the conference realignment game (actually the New York Times said that).  Well, Mizzou voted last week to look around and have the option of leaving the Big 12.  They have yet to make any decision or announcement, but many think that it is only a matter of time before they leave.  Most likely they are headed to the SEC, but there is thought that Mizzou might be trying to through their weight around in get some games in Kansas City, such as a premier football or basketball match-up which could mean more revenue for all schools involved.

So the conference realignment dance/soap opera looks to be on the verge of having some dramatic twists.  Stay tuned, as we will try to update regularly as to how it all plays out, and the economic and financial implications of all the moves.  To be honest, it is no surprise everyone is running from the Big East, as that conference seems to be slowly falling apart.

While all of this is going on, the pay-for-play debate for college student-athletes is raging strong.  The NCAA was considering the potential of increasing the stipends that players could receive.  NCAA President Mark Emmert told the Knight Commission that he would like conferences to have the ability to increase stipends by $2,000 per student-athlete.  Of course the big issue here is that only some schools can afford to give the extra stipend, and those are of course the schools who have stronger programs and more revenue.  This of course could lead to the best athletes going to these schools, and cause a situation with the rich getting richer in terms of both talent and revenue, and lead to an increase in competitive imbalance in NCAA sports.

The student-athletes don’t like the idea of $2,000, they think that $3,200 is more along the lines of what an increase should be if schools really are going to cover the true cost of living and going to school.  300 men’s basketball and football student-athletes from five major schools have already signed a petition asking for exactly that.  They want a bigger cut of money, basically asking that the increases in television revenue be passed down to the student-athlete.  This would of course mean a bigger bill for schools, and potentially more schools in the red.  I personally don’t think the petition will do much, but it does send a strong signal to the NCAA that something needs to be done.


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