Book review about sport journalism

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The Business of Sports Part II

Introduction

In 2010, Tiger Woods became the first billionaire athlete. Not bad for a job where you hit a little white ball into 18 holes and then do a ton of “Just Do It” commercials.

Back in February of 2008, MacLean’s Magazine did some number crunching on player earnings and how much a few stars made per hour. The results were staggering.

For example, in 2005, steroid-filled baseball picture Roger Clemens made US$18 million playing for the Huston Astros. He played 32 games that season. According to this magazine’s estimates (based on Clemens playing 5 hours on the pitching mound) he made a cool $3.6M per hour. Using a similar criteria on Indianapolis Colts’ quarterback Payton Manning of the NFL, he made $4.5M per hour. That’s because most QB’s play between 8-12 minutes per game. (“Sleeper Bowl”)

Calculations of today’s players’ salaries are even more staggering. Take for instance, NHLers who receive the league minimum of $650, 000. It would take the average Canadian 17-18 years of working to earn this same sum. 

Forbes’ Top 25 Paid Athletes List

According to the Forbes’ business magazine, in 2016, soccer superstar Christian Renaldo is expected to earn $88M both in salary and endorsements. He earned the number one spot on its Top 25 Paid Athletes List. Right behind him is Lionel Messi at $81.4M and Lebron James at $77.2M. Rounding out the top 5 is Roger Federer at $67.8M and Kevin Durant at a mere $56.2M!

The NFL’s Cam Newton will make $53.1M at number 7. Golfer, Phil Mickelson will earn $52.9M at the number 8 position. Racer Lewis Hamilton polled in the number 11 spot. He will take in $46M.

No baseball or hockey player made the cut. Boxer Floyd Mayweather made a respectable $44M (down from his former number one status a few years ago) placing him in the number 16 spot- time to start stalking-up on Kraft Dinner and tuna. (DeSantis, “The Top 25”)

If you’re interested in reading more about this top 25 list, visit: http://www.forbes.com/sites/nickdesantis/2016/06/20/the-top-25-highest-paid-athletes-of-2016-visualized/#4fa5401921e4

The wealthiest athlete of all time though was Gaius Appuleius Diocles, a chariot racer from the year 200 AD. According to Peter Struck, a professor of classical studies from the University of Chicago, Diocles’ total earnings from prize money during his 20 year career was 35,863,120 sesterces– the equivalent of $15 billion. “The 2nd century “champion of all charioteers” made his fortune even without the sponsorship and marketing fees that bolster the pay of his modern counterparts in the sporting world.” These people were like modern day Formula 1 drivers. (Wardrop, “Wealth of today’s”)

In this unit, we will examine the role of business in professional sports. Do professional athletes deserve the salaries that they earn? What role have players unions played in the escalation of salaries? What role have the owners? And who is that man named Marvin Miller and his “scarcity” principal? We will answer these questions and more.

Another important area in the business of sport that we will cover concerns litigation. Pro athletes earn big money and sustain multi-billion dollar business enterprises. Where there is big money, you usually find big moneyed lawsuits. In the previous units, we partially addressed this issue with regards to performance enhancing drugs and mandatory hiring practices. In this unit, we will expand upon these issues.

Just as we have all had to become instant accountants in order to understand sports management decisions, we will soon also have to take law courses to better comprehend the maneuverings of coaches and general managers. It appears that over the next decade, the face of sport will not be altered on the playing courts but through the courts of law.

Learning Outcomes

By the end of this unit, you will be able to:

· Identify and articulate several key issues related to the business of sports including:

· Whether high player salaries are justified.

· The development and the role of player unions.

· The problems of free agency and salary caps.

· The importance of small market franchises in securing national television contracts.

· The significance of currencies in making or breaking small market franchises. And,

· The growing importance of lawsuits in sports.

Glossary

· Jim Norris

· Jack Adams

· Conn Smythe

· Antitrust Laws

· Marvin Miller

· Free Agency

· Scarcity

· Binding and Non Binding Arbitration

· Guaranteed Contracts

· Collective Bargaining Agreement (CBA)

· Collusion

· Decertification

· Contraction

· Small Market Franchises

· Big Market Franchises

· Litigation

· Canadian Medical Protective Association

· David Babych

· Korey Stringer

Once again, this is just a reminder that whenever you see words that are capitalized, in big letters, have been bolded, coloured, underlined, or highlighted, I am simply trying to emphasize something. Please don’t assume that I’m writing in anger here. Thanks. (

Player Unions

Before there was free agency and pro sports unions, athletes more often than not were grossly mistreated. This was particularly true for those who played professional hockey and football. If you want to understand the militant positions that most modern player’s unions have taken, you need to understand the past. Below is background information highlighting the early years in player association history for the NHL, MLB and NFL.

The Tarnished Norris and Smythe Trophies

The NHL has a long history of mistreating its players.

Back in the 1920s and 30s the NHL was principally controlled by one man: Jim Norris, a tycoon who made his fortune in the wheat trade. Norris owned the Detroit Red Wings, Chicago Blackhawks and the New York Rangers- and for a time, he even floated the Boston Bruins through financial difficulties.

Norris’ right hand man was "Jolly" Jack Adams who was both coach and GM of the Red Wings.

Through both Norris and Adams, players lived in fear of being sent down to the minors knowing that there was a strong possibility that they would again never to return to the NHL. Many would play through or hide injuries to ensure they would remain in this league.

Adams was a master of playing on this fear. Apparently, he sometimes carried in his vest pockets train tickets to the Wing’s minor-league farm club- ready to handout if he felt that any of his players were not working hard enough.

Life in the minors was quite unpleasant- significantly worse than in the NHL. This was especially true if you played for the Springfield Indians of the American Hockey League then under the ownership of former Boston Bruins star Eddie Shore. Shore's reputation was, and still is, infamous.

Hockey Night in Canada commentator Don Cherry, who once played for the Indians, called Shore "the Darth Vader of hockey." His players were poorly paid, and were made to do maintenance chores around the arena which he owned such as sweeping and the cleaning washrooms. There would be little the players could do about their plight, as Shore's son-in-law was also the AHL’s president.

Toronto Maple Leafs owner Conn Smythe worked side-by-side with Adams and Norris in oppressing players. Together, they and other NHL GMs hid from disclosure player salaries. They also worked in unison to keep them as low as possible. And in the area of race, they made sure that the doors of opportunity were locked to members of racial minority groups. As you will see later on in this unit, they successfully practiced the illegal activity of collusion.

Smythe listed player expenses as being worth $100,001 in 1957. The line item hadn't changed since 1931.

Other clubs would allegedly under-report the seating capacity at their arenas.

Through the player’s naivety and gullibility, NHL owners reaped major profits while fooling their players into believing the league was barely surviving.

League finances remained in question into the 1990s. When the players went on strike for the first time in 1992, they argued the 21 teams turned a $20 million profit.

Owners said they faced an average $9 million in annual losses. (“Non-Traditional,” The Associated Press)

In the 1950s and 60s, some player’s wages were so low that it was not uncommon for them to spend their off-season working on construction sites or on beer delivery trucks to make ends meet.

Things finally came to head when Detroit Red Wings star team captain Ted Lindsay and Montreal Canadiens’ legendary defenseman Doug Harvey attempted to organize a player's union to improve their wages. This attempt was ruthlessly smashed by the owners. Lindsay was eventually traded (banished) to Chicago, then the league's worst team, to play out his career. Harvey, was eventually be dealt to the New York Rangers in a move many believed was punishment for his role as Lindsay's "co-conspirator".

Harvey never fully recovered from the Canadiens’ actions. He battled alcoholism right to the end of his life living in a trailer. Fortunately, under the leadership of then GM Serge Savard, decades of ill will between this organization and Harvey was rectified as the former defenseman was given employment in the area of player development with the Habs.

The NHL often boasts about its “silverware” (trophies). The Stanley Cup is famous for its unique design. Perhaps though, it needs to re-examine some its trophy names. In particular: the James Norris (awarded to the league’s best defenseman) and Conn Smythe (awarded to the playoff’s most valuable player).

What’s quite ironic about the actions of both Smythe and Norris is that from an owner’s perspective, they played pivotal roles in creating today’s militant NHL player’s union. Today’s problems were born by the actions of the past.

The greed of owners during this era was not fully disclosed until the late 1990’s where players won major settlements dealing with the embezzlement of their pension funds. Despite the fact that the NHL's pension plan was created in 1948 by former NHL President Clarence S. Campbell, significant benefits were not given to this league’s players until the 1990s. For decades, even NHL Hall of Famers retired on poverty level pensions. For example, from this pension, the legendary “Mister Hockey,” Gordie Howe, would have received a mere $14,000 a year while Bobby Orr a paltry $8,400, Canadian!" As an aside, Gordie Howe, was a great athlete but a very lousy businessman. One year, instead of going after a pay raise, he accepted a shiny new team jacket. Beauty, eh?

One of the reasons that these players were so fleeced was the manipulative, illegal actions of former National Hockey League Player’s Association (NHLPA) head, Alan Eagleson who worked in cahoots with the NHL’s owners. The degree of graft that he was involved with the owners was mind boggling. It was not fully revealed until former player Carl Brewer began investigating the pension plan where it was discovered that Eagleson had withheld millions from players.

Subsequent to this discovery, Brewer headed a lawsuit in 1994. In 1997, NHL players were ultimately awarded by the Supreme Court of Canada more than $40 million for their pension fund. And even with this award, former superstar players like Phil Esposito still only earn $35,000 per year.

One can thus see why players took on greater militancy. The seeds were sown through several generations. The question that remains though is, will this militancy endure as player salaries have sky rocketed over the last few decades? Do the next generation of hockey stars have as much to legitimately gripe about? Do they have the fortitude to undergo protracted strikes? Time will tell.

An excellent movie that you might want to rent on the early days on the union struggles of hockey players is Net Worth. Based on the best selling 1992 book by David Cruise and Allison Griffiths, this film superbly reveals what went on in the NHL’s dark past.

The Replacements

For most of you, the National Football League appears to be the most stable sports league in North America. Historically though, this league has encountered the greatest degree of labour unrest.

The development of the National Football League Players Association (NFLPA) was principally shaped through a series of very complex legal decisions handed by the United States’ Supreme Court and bitter labour battles principally focused on the issues of free agency and pension plans.

The National Football League was organized in 1920, but players had no representation until more than 35 years later. Free to do as they wished, owners gave the players no benefits at all—no health insurance, no life insurance, no pension, no minimum salary, no pay for pre-season games. Even worse—no salary protection for injured players. The straw the broke the camel’s back on labour strife happened in 1956 when the owner of the Green Bay Packers refused the team player’s request for clean jocks, socks and uniforms for two-a-day workouts. This action led players to organized by seeking the leadership of Creighton Miller, an attorney, former Notre Dame player and the first general manager for the Cleveland Browns.

For many years, Nation Football League Player’s Association (NFLPA) was the most militant player’s union in sport. After numerous strikes and work stoppages, though, the league’s owners had had enough and hired replacement players during the 1987 strike. This action literally brought this player’s union to its knees. Today, the NFLPA is the least militant union among the top 4 North American sports leagues. The biggest reason for this is that the average NFL player career is just 3.5 years. (Nelson, “The longest professional,” 2013) If a strike lasts one year, that is nearly 30% of his total earnings. The owners with deeper financial pockets know this and use this to their advantage.

Everything That You Ever Wanted to Know About Antitrust Laws, CBA’s, and Collusion But Were Afraid to Ask

When it comes to the law, Major League Baseball (MLB) is in a completely different ballpark of its own. Antitrust laws were created to prevent monopolies in industry. In a bizarre U.S. Supreme Court decision back in 1922, baseball was allowed to be exempt from many of these laws.

Believe it or not, MLB can and has blacklisted players who moved to rival leagues. For example, in the 1950's, several players signed with the new Mexican League. MLB’s Commissioner barred any Mexican League players from playing in his league for five years, and this was upheld by the courts even though it’s a flagrant violation of antitrust laws. MLB’s antitrust exemption can be likened to a permanent “Joker card.”

When the baseball owners colluded (secretly agreed on how much they would spend on free agents so as to control salary costs and who they would and would not acquire) from 1985-1987, they paid their penalty under the terms of the CBA- which was three times less than what it would have cost them had the players' union been able to sue under anti-trust laws. (“Frequently asked,” Grabiner)

Collusion by baseball owners would normally be forbidden by the anti-trust laws. Again, though, they do not apply to baseball. This issue had to be negotiated by the baseball player’s union and team owners though their collective bargaining agreement (CBA).

A CBA consists of negotiated items between a player’s union and a league’s owners such as wages, games played, trade limitations, suspension being placed, how players can be called-up or drafted on waivers, draft eligibility, free agency rights, etcetera.

MLB’s antitrust exemptions, allow this league to get away with many labour practices that are forbidden in all of the other major league sports. Clearly in 1957, the U.S. Supreme Court realized the folly of the previous Court’s decision back in 1922.

Anti-Trust Legislation and Decertification

It's unlawful for competitors to get together and fix the marketplace. The presidents of Coke and Pepsi, for example, can’t meet and decide on what price and what territories they will sell their products. If they were caught doing such things, they would be held in contempt of anti-trust laws. These laws are enacted to protect us the consumer from monopolistic abuses.

Now sport is a different animal. True, each team in a league financially competes against one another. However, unlike the Coke and Pepsi analogy, clubs cooperate on a number of things and abide by a series of league rules. In addition, each member franchise is also given territorial rights to curtail competition. Toronto for example, could easily have a second if not third hockey franchise. The NHL prevents this from happening.

The reason that they can do this is because to a large degree, the players do not object to these restrictions and governments, except in the case of baseball, have not bothered to step in. Politicians know that fans would not be happy if business people from random cities put together say an NFL football team and demanded that they play in this league. It would create all kinds of chaos and seriously water-down the quality of the on field product. Politicians live to be re-elected. That’s why they dole out billions for stadiums to subsidize franchises. Doing so gets them votes. So they let this sleeping anti-trust dog to lie.

Now if a player’s union decided to sue a league on some of its anti-trust violations, they would likely win. Things such as a salary cap, free agency restrictions, rookie pay and the like must be negotiated by a league’s owners and a players’ union. They can’t just impose them on players. Again, if the owner’s did, they would be shut down by the courts for breaking the law.

Now this is where the fancy word of the day, “decertification” kicks in. If a players’ union decides to decertify- i.e. cease its existence then the owners could not implement a salary cap. They wouldn’t dare because the players could then successfully sue the league for engaging in anti-trust activities (fixing the marketplace). Desertification then could literally put a league on its knees begging for mercy. It is the “nuke button” that players use to threaten the owners with.

The owners best counter weapon is locking-out their players- which means that they do not have to pay them. They can also bring in replacements (scab workers) but only the hardest of hard core fans would be willing to watch second rate talent over the course of a full season.

Usually when tensions are building between owners and players during a collective bargaining agreement (CBA), the “desertification card” is brought to the negotiation table for intimidation purposes.

Baseball’s Checkered Past

To trace the history of unions in professional baseball, we have to go back, back, way back, to 1885. That's right, the first players union was founded nearly 120 years ago- just nine years after the creation of the National League and six years before the American League came into existence.

Like all of the other professional sports leagues, baseball players were mistreated- though in MLB the main area was in earnings. This sport, unlike hockey or football, though does not exact as much from a player’s body. “Playing hurt” in baseball is seldom the same as in these two contact sports. The main area where great risk might happen is in pitching where players can suffer permanent damage to their throwing arms.

Angry at High Player Salaries? Blame This Guy

When the players of Major League Baseball joined the United Steel Workers of America, that they began their long and productive relationship with an economist named Marvin Miller. Miller served as the MLBPA's executive director from 1966 through 1983. His greatest achievement was in the area of free agency rights- the ability of players to play on whichever team offers the highest bid for their services.

Back in the 1970’s owners were frustrated at a court decision that allowed for player free agency. This decision created great tensions between them and their players and a protracted lockout was looming. Owners were so focused on this issue that they were vulnerable to a “compromise” offer made by Miller.

Here’s how James Fitzpatrick describes what happened during the intense negotiations:

“‘Okay,’ Miller told them, in so many words. ‘You guys drive a hard bargain. This crazy idea I have about all players going on the open market just isn't gonna fly. So how about you throw me a bone? How about every off-season we let just a few veterans become free agents, say, guys who have been around for more than six years?’

Miller crafted his so-called compromise carefully. He knew scarcity was the key to bigger salaries. Every commodity, from oil to oranges, rises in price during a shortage. So it follows that the bidding for a second baseman will be more vigorous if there aren't a lot of second basemen available. Miller also knew that all players would benefit from the system as other salaries gradually came into line with the new standards set by big free agent contracts. To this day it works like a charm.” (Fitzpatrick, “The NHL's Season.”)

So if you want to blame anyone for escalating player salaries, the first person that you should consider is that “evil?” genius named Marvin Miller. (Now you know who he is.)

Fight Free Agency with Free Agency?

With player salaries seemingly spiralling out of control, Jamie Fitzpatrick offers a very radical solution:

“If the owners of professional sports franchises really want to achieve "cost certainty" as NHL Commissioner Gary Bettman calls it, they should forget about salary caps, payroll taxes, revenue sharing and other such schemes. They should simply declare every player a free agent at the end of his contract. That would turn signing season into a buyer's market, slowing the salary spiral.” (Fitzpatrick, “The NHL's Season of the Chequebook.”)

What he is arguing is that professional sports leagues need to fight free agency by making it more “free.” This would eliminate scarcity by having the market flooded with a greater supply of talent. With more talent on the market, the less money players will be able to demand- since the supply will be higher. This solution literally fights fire with fire. Fitzpatrick’s idea is quite intriguing from an owner’s and fan’s perspective. However, if the league tried this move, you would certainly see the union respond with the nuke button of decertification.

Binding and Non Binding Arbitration

Free agency can also be a problem for franchises if there is “binding arbitration.” Arbitration involves a club and player going to an arbitrator (a neutral third party) to ultimately decide what the player’s salary should be. The arbitrator, who has been chosen by both the players and team’s management, has to decide either with what the team has offered or what the player demanded. There is no room for negotiation or give-and-take here. It’s an all or none scenario. This decision then is final- that is, “binding.” This is the complete opposite of “non-binding” arbitration which allows an arbitrator to pick and choose the “fairest” components of what both sides have asked for. In this scenario though, teams are not “bound” to sign a player based on what he asked.

More often than not, binding arbitration works against franchises since players and their agents are usually smart enough to ask for something relative to that of a free agent with skills comparable to their own client. This is a bit unfair for the owners since there will always be a team that overpays a free agent- making his salary not truly representative of most players with comparable skill sets.

For leagues with hard caps, binding arbitration forces them to overpay players and thus raise team payrolls- a deadly problem in terms of holding on to some of its talent. Binding arbitration also eats away at any additional monies that could be used in trades or late season acquisitions for playoff runs.

Most teams under non-binding arbitration do not bother to sign their players when they lose an arbitration meeting because they will ultimately be forced to raise other player’s salaries on their team who have comparable stats.

Young Free Agents

There are other weaknesses to salary caps. Some leagues allow free agency very early on. For example, players under the NHL’s new collective bargaining agreement can get free agency as early as 26 years of age. Teams now have to make several risk assessments.

Do they sign players to short term deals to have extra money to pay emerging young stars on their rosters? Do they sign emerging young stars to long term deals in the hopes that several years in the future, their deals will be of “bargain value” when compared with going after comparable free agents? Most defensemen do not fully develop until the age of 26. Is it worth drafting a defensemen, paying him $1-4M in salaries and training costs by developing him from the draft age of 18 or do you wait for a developed one through free agency? Conversely, do you run the risk of not having “inexpensive” 3rd to 4th line young players on your roster who earn the league minimum of $650,000?

Are Player Salaries Justified?

In 1947 the average baseball player earned $11,000 per year, a little over four times the average U.S. worker's pay. By 1999, this figure had skyrocketed to $1.57 million, while the average worker earned $28,000--a ratio of 56 to one. (qtd. in Lambert) This ratio has continued to dramatically increase. As it soars, the obvious question to ask is, “Do pro athletes deserve the money that they make?” The answer is, yes and no.

When players like, Lebron James or Connor McDavid come to town, the Air Canada Centre is full. When neither of these two gentlemen are not present, this venue typically houses 14-15,000 (or a full house of people given freebee tickets by season ticket holders). James and McDavid ARE the event. They are like a music group that is the main act. And as such, should therefore get the lion’s share of the gate receipts as would the geriatric money making machine, The Rolling Stones.

Putting our emotions aside for a moment- and in sports this is a very difficult thing to do- anyone that can help draw 20,000 people a game at $100-1,000 a head deserves to earn big money. Yes, these people are not brain surgeons or members of a community making an important difference in the lives of others. This is like comparing apples with oranges.

Anyone who can draw the types of crowds on the same level as star athletes, should earn a significant percentage of the gate receipt. When a brain surgeon can draw 20,000 people 80-160 nights a year, he or she should earn more. It may appear unfair- given what such surgeons contribute so greatly to society but the reality is that professional sport is a multi-billion dollar business and at the heart of its success is its players.

Ego is also involved when it comes to salaries- particularly for superstar players. Labour lawyer and athletes' agent Richard Moss explains that, "from the player's point of view, it's not a question of money anymore, it's a question of status. You don't need $20 million a year to live well, you can be perfectly content with $3 million or $4 million. But when some other guy is making $20 million, and you think you're a better player than he is, then you want to get more than $20 million, to reflect your status." (qtd. in Lambert)

As mentioned earlier, endorsement deals have also been a huge factor in increasing the wealth of athletes. This is how future billionaire Lebron James is “just doing it.”

Player agents also sell “service days” where they make their clients available for film commercials, personal appearances and the like. Some athletes can make as much as $30,000 for a 20 minute appearance at a trade show or product launch. They’re “loving it.”

Finally, let’s keep in mind that players have a very limited window of money making opportunity. The average career in the NFL, for instance is just 3.5 years. Now throw in the fact that the average lifespan- due to the amount of multiple concussions and rampant use of performance enhancing drugs- is just from 51-55 years of age, and you can see why players in this league want to extract as much money from the owners as possible. Hockey players can make similar arguments.

Owners Deserve Profits on Their Businesses Investments

Conversely, the owners are business people. Sports is a business enterprise that is part of the “entertainment industry.” Teams are “franchises” not not for profit community organizations. Franchises that are purchased for billions of dollars. Shouldn’t it be the objective of every owner to make as much money as legally and ethically possible? Without such people, there would be no leagues. They are the ones who invest their capital in player salaries. They are the ones who negotiate television deals. They are the ones who hire managers and support personnel who develop player talent. They are also the ones who hire marketers that build fan interest in their sports. They are the ones lobby with local politicians to build stadiums. And they are the ones that lose millions on bad player contracts.

When the profit scales tip in favour of owners, the players will naturally look after their vested interests and demand more. When the scales tip in favour of the players, the owners will likewise, demand changes. It’s just business.

Solutions?

No Guaranteed Contracts

When a player no longer draws crowds; grossly underachieves because he is a cry baby; or because he no longer is in a “contract year;” teams should have the right to “fire” such an individual and let him go the route of free agency. The biggest financial problem in the NBA, MLB and NHL has to be guaranteed contracts. Teams should have the right to get rid of expensive underachieving players so that can free-up salary cap space and in order to improve their rosters. Clubs should not have to wait two to three years to get rid of a useless player who is basically stealing money by deliberately underperforming. Now if the reason for their underperformance is due to injury, that’s a totally different matter. Basically, I am simply arguing that athletes be treated no differently than poor employees in the regular workforce.

Now I know that many of you are probably saying that this will never take place. Players would go on a super long strike to prevent owners from doing such a thing. Probably. Here’s a sneaky way to get around this:

Perhaps the various players unions would agree to the implementation of non-guaranteed contracts, if their league’s “grandfathered” all of the current ones. That is, anyone who is playing in the NHL, NBA or MLB can sign a guaranteed contract until he retires. All rookies entering these leagues though, would fall under the no guaranteed contract rule. In time, all players would not be under guaranteed contracts- meaning that they would have to earn their salaries each season.

Again, though, when this grandfathering would begin to take hold, the union might then be forced to press the decertification button.

How about this option then?

Only a certain amount of a contract can be guaranteed. That is, if a club signs someone for say, $50M, only $20M or 40% of the agreed contract will be paid out if things don’t work out. This way, the player can leave as a free agent, receive less pay from another club but have his earnings subsidized by this pretty sweet exit package. This suggestion is a more generous modification of the one used by the NFL. It’s not too extreme from a negotiating perspective with the player’s unions.

I think that this is a reasonable idea. There are a lot of overpaid athletes who are shackled to teams with “golden handcuffs.” They carry the huge burden of knowing that they don’t deserve to earn such ridiculous amounts of money but some owner or manager in a moment of stupidity offered it their way. So now they’re shackled. No one wants their huge contract- meaning that they can’t be traded away. And retiring is not an option. After all, who in their right mind would give up such a huge amount of money? So they are stuck playing or bench warming on teams that neither they nor the fans and management want them to be on. Psychologically, this is not a good place to be in.

Such an option is truly a win-win scenario. Clubs get punished for being stupid. Athletes get a second chance without the psychological burden of trying to play like super duper stars when they are simply just good players. Teams mired in bad contracts have shorter waiting periods to get themselves out of the messes that they created. And fans obtain greater hope. Not bad an idea eh?

Tiered Salaries?

If you buy into my reasoning that star players deserve huge salaries because of their draw factor, how much should “lower tiered” players make? That is, “non star” players.

I would argue that players- especially those who are one step better than a minor leaguer should get paid one step above a minor league player’s salary. All right, I’ll be generous. They should earn about a $200K a year. Why? Because fans are not paying to see “peripheral” players. A fourth line hockey player for instance, should not earn a league minimum income of $650,000.

If peripheral players are unhappy making as much as some executives do for the privilege of playing a game, then let others take their jobs. A no-name “back-up” player does not deserve to make rock star money.

Team Or Individual Bonuses?

On the topic of debate concerns whether there should be team bonuses or individual bonuses. My answer to this depends on what sport you are talking about. For individual sports such as tennis or golf or quasi-individual team sports such as baseball where almost every move is basically one player against another (for example pitcher vs. batter vs. fielder) I believe individual bonuses as incentives for better play will work. For “team” sports such as basketball, hockey, soccer, and football, team bonuses are a better idea. Individual performance bonuses in these types of sports incentivize players to pad their stats in order to earn more money. In the process, they are less inclined to do unselfish things that will benefit their clubs. Individual bonuses just promote selfishness and this seldom translates well for team oriented sports. Also, teams may bench players to prevent them from reaching their bonuses.

Small Market Franchises

The reason players earn what they earn is the result of huge TV rights deals with networks. In order for this to happen, each league needs strategically picked franchises spread out throughout the United States. Why? National television contracts happen when advertisers believe that they can reach vast amounts of people. Small market franchises accomplish this as not everyone wants to see the same 5-6 super teams go at it each week. Someone in “small market franchises,” like the Green Bay Packers and Columbus Blue Jackets wants to see his or her own team play. And these same fans want their franchises to be able to compete with the “big market” teams from places such as New York. For the greater good of ALL leagues then, the New York’s of the sporting world need to put aside their self-interests and work with their smaller (population and wealth) counterparts. Without television, professional sports leagues would have to contract in size and no longer be multi-billion dollar enterprises.

Contraction is also not in the best interest of players. Less teams means the need for less players and fewer television markets; meaning lower revenues generated from television network contracts. Lower earnings in TV deals would result in less multi-million dollar player contracts. The lower the exposure that a sport has, the lower the earnings of the Lebron James’ of this world would be in terms of advertising endorsement deals. Most superstars in sports make more in this area than they do playing their sport. It has been estimated by some industry analysts that Lebron James will become a billionaire by the time he retires- principally through endorsements. Wow!

In a perfect world, all leagues desire expansion for expansion’s sake as it brings huge entry fees. These added revenues line the pockets of owners and trickle their way down into increased salaries for players. But this strategy is short term gain as with every new team that comes into a league, the owners then have a smaller piece of the revenue sharing pie to eat. So growth in this area is limited. The big bucks principally come through league TV deals, ticket and marketed product sales.

But what about the fans? What’s in their best interest?

If you live in the bigger markets, contraction would be a great scenario. Less teams means that there are more players to play on the remaining ones and thus, talent will be less watered-down. There likely would be no salary caps as the super rich could spend their money like drunken sailors. If you are in a small market though….

And Now A Few Words On Currencies

A few years back, a number of Canadian franchises were knocking on death’s door. With a 62 cent dollar back in January of 2002, teams in Canada had to pay a whopping 38% more than their U.S. counterparts. In an environment where MONEY is critical to a sport’s franchise’s success, and there was no salary cap, most clubs here in the Great White North had little to no hope of winning a championship- heck, making it into the playoffs was a real struggle.

Every Penny Counts

We may no longer have the penny but when it comes to currency exchange rates, every penny truly counts. Former Toronto Blue Jays president Paul Godfrey once said his team profits rose about $750,000 every time the Canadian dollar went up just a penny against its U.S. counterpart. "Every time the dollar goes up a penny, I do a victory lap of the stadium," he said. (“Soaring Dollar Changes”)

Prior to its new collective bargaining agreement, the NHL had a form of revenue sharing with regard to its smaller-market Canadian franchises. Several years ago, in recognition of the undervalued Canadian dollar, the league, instituted the Canadian Assistance Plan, through which clubs such as the Ottawa Senators, Calgary Flames and Edmonton Oilers divide-up a special $10-million fund by virtue of hitting set targets in season-ticket sales or corporate support.

Taxes: Where To Play And Where Not To Play

I started this lecture with the Forbes list of top paid athletes. These are gross revenues- that is, how much athletes make prior to taxes. How much though do they truly make? Well, depending on where they perform, some take home a lot less money than they actually earn. Still, no one would feel very sympathetic to their economic plight.

Did you know that a player in the NHL making $7 million a year on one of the teams in Florida (lowest state tax) is only getting $4,290,503 after taxes. The worst two cities to play for and file taxes during tax season are Toronto and Montrealwith compensation after tax being $3,692,866 and $3,640,313 respectively on this same $7 million figure.

No wonder Steve Stamkos chose to stay in Tampa Bay rather than join his boyhood favourite team here in Toronto.

If you are interested in more information on tax rates in North American states and provinces, check out the following link: http://www.tsn.ca/taxman-wins-when-contracts-are-signed-1.322654

Liabilities and the Sports Law

Back in December of 2002, the Canadian Medical Protective Association, which handles insurance for about 62,000 doctors in Canada, was ready to end coverage for those who work for the NHL and other major professional sports. The association said that the growing number of million-dollar lawsuits launched against team doctors by athletes made the coverage too expensive.

Professional athletes earn tremendous sums of money. If their careers are cut short due to poor medical attention, it seems inevitable that some form of compensation will be demanded.

Doctors in Canada and the United States were particularly frightened after ex-NHL player David Babych was awarded more than $1-million (U.S.) in a malpractice suit against a Philadelphia Flyers’ doctor.

Babych’s lawsuit pales in comparison with the $100 million wrongful death suit filed by the widow of Minnesota Viking offensive tackle Korey Stringer who died of complications due to heat stroke during training camp in 2001. Stringer along with the rest of his teammates was forced to do drills in weather that had a humidex of 43degrees Celsius. His wife, Kelci as you will see, has been suing on a multiple of fronts. She settled legal claims in 2003 against the Minnesota doctor who treated him. She also settled a lawsuit in 2009 against the NFL. How much she got was not disclosed. The only thing that we do know is that the National Football League agreed to support the creation of a “heat illness prevention program for athletes of all ages.”

That’s not where this story ends though. In a very bizarre legal decision in the summer of 2009, a judge found that equipment manufacturer Riddell failed in its duty to provide warnings on its products concerning heat. You heard me. Riddell and its non- air conditioned helmets and shoulder pads should take some blame.

We are also seeing players suing fellow players for deliberate injuries. Former Colorado forward Steve Moore sued then Vancouver Canuck forward Todd Bertuzzi, his team and ex-coach Marc Crawford for $38M as a result of the career ending injury that he sustained after Bertuzzi broke several vertebrae in his neck. In December 2006, Bertuzzi offered a $350,000 settlement to Moore. In separate affidavits, Bertuzzi blamed coach Crawford for this incident. Crawford claims that his former player “disobeyed instructions.” Ten years after the incident, an undisclosed settlement was reached.

As mentioned in a previous lecture, in the summer of 2011, 75former National Football League players sued both this league and helmet manufacturer Riddell, claiming that for decades, the NFL concealed information about the dangers of concussions. The lawsuit was sparked in part, due to the death of the late great NFL star Dave Duerson , who was found to have chronic traumatic encephalopathy from repeated brain trauma from playing football. Don’t be surprised if former NHLers test these same legal waters. Equipment manufacturers like Riddell helmets may also have to pay huge court settlements to those who have played in the Pee Wee, college and CFL ranks. And if Riddell has to pay out here, then why shouldn’t the various school boards and colleges that had players wearing these helmets? Things could get very ugly here. Don’t be surprised if this goes all the way to the U.S. Supreme Court. If it does, sadly, most of the players involved in this suit will likely be dead or suffer from significant degenerative brain disorders. Their widows may have to continue this cause.

Another area where potential litigation may be just around the corner involves owners suing fellow owners if their star players are deliberately injured. Such injuries can easily be likened to industrial sabotage?

For instance, if Pepsi Cola Limited hired someone to destroy some of Coca Cola’s manufacturing equipment, not only would the law intervene for corporate sabotage but a jury would slap Pepsi with a huge multi-million dollar settlement in favour of Coke. Is it too much of a stretch to foresee the day when a team paying its star player millions of dollars to win a championship sues a rival club if he is deliberately injured by an opposing player? Isn’t he as important to the economic viability of his team as a vital piece of industrial equipment? Is it not the job of coaches and management to restrain their players? What if there is documented evidence that a player was told by management to “take out” an opponent?

Don’t be surprised if such a scenario will take place. People have successfully sued and won big settlements because they lost their psychic abilities after having an x-ray. Surely, losing a star athlete and the likely loss of millions of dollars in potential earnings that he could generate for the franchise is worth suing over. Such a scenario is just one maverick owner away.

(BTW: I always wondered why the lawyers defending the x-ray machine company didn’t ask the plaintiff “If you were psychic, why were you unable to predict that you would lose your psychic abilities by having an x-ray taken?” ;-))

Another area of future law suits may come from players either suing their teams or unions for their weak position on the use of steroids. Sooner or later, the wife or spouse of an athlete is going to demand legal compensation for the wrongful death of her husband or spouse for allowing him to take illegal performance enhancing substances.

Forget the individual or personal responsibility arguments here. When a ladder company can and indeed was successfully sued for millions of dollars for not slapping a warning that stated: “placing your ladder on dog excrement may cause the ladder to slip,” personal responsibility is meaningless.

One last potential lawsuit may come in the form of “unfair playing time” or roster cuts. Members of the U.S. Olympic team that failed to make the final cut successfully sued their governing body and were added back onto the roster. What’s to stop a player from suing his coach for being demoted to the minors and thus suffering a salary cut? What’s to stop a player from suing his coach for denying him sufficient ice time to meet some of the bonus provisions in his contract?

Summary

One of the joys of professional sports is that it has traditionally been an oasis in which we can escape from the “reality” of the world around us. For a few hours everyday, we are permitted to enter a simplified world were the rules are so clear that even a child can understand them. It’s a world with certain black and white win/lose outcomes- a place far different from the gray one that we reside in throughout the day. It’s also a world where we are free to release our emotions.

Since the 1990’s, this once wonderful refuge from reality has slowly come to mirror the outside world. The gray clouds of business have covered the once sunny landscape of professional sports.

Do professional athletes deserve the salaries that they earn? Sure they do. Will this lead to the demise of franchises? Most likely. Are unions to blame? Yes but only because a select few owners are looking after their own interests rather than their leagues’ as a whole. In the sports world- which now mirrors the business world, “market forces” “correct” themselves. These corrections will lead to either the contraction or relocation of small market franchises. Now with the specter of some big moneyed lawsuits on the horizon, sports fans may need to find a new oasis to escape from reality.

Works Cited

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< http://www.canoe.ca/TelevisionShowsN/networth.html >.

Cruise, David and Alison Griffiths. Net Worth: Exploding the Myths of Pro Hockey Toronto: Viking, 1992.

Costaris, Terry. “Justified Salaries?” A Transcript of. TeleDirect 22 Jul. 1998.

DeSantis, Nick, “The Top 25 Highest-Paid Athletes Of 2016, Visualized” Forbes Magazine. June 20, 2016.

< http://www.forbes.com/sites/nickdesantis/2016/06/20/the-top-25-highest-paid-athletes-of-2016-visualized/#4fa5401921e4 >.

Dodd, Mike. “Malpractice hits sports.” USA TODAY 9 Mar. 2003

< http://www.usatoday.com/sports/2003-03-09-cover-malpractice_x.htm >.

Fidlin, Ken. “Spotlight on docs: Team doctors defend their honour.” Toronto Sun 24 Oct. 2002 < http://jam.canoe.ca/Slam021024/col_fidlin-sun.html >.

Fitzpatrick, Jamie. “The NHL's Season of the Chequebook.” About Sports 2 Jul. 2002

< http://proicehockey.about.com/library/weekly/aa070102a.htm >.

Fitzpatrick, Jamie. “A Wakeup Call for the NHL.” About Sports 21 Mar. 2002

< http://proicehockey.about.com/library/weekly/aa010603a.htm >.

David Grabiner, "Frequently Asked Questions about the 1994 Baseball Strike," [date under " Last Modified "], available electronically < http://remarque.org/~grabiner/strikefaq.txt >.

Letters to the Editor, “The Globalization of Baseball :

Critical Analysis of Major League Baseball's Official Position on Use of Performance-Enhancing Drugs by Minor League Players and Prospects in the Dominican Republic.” Center for the Study of Sport in Society 27 Jun. 2003 < http://www.sportinsociety.org/mlb2.html >.

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< http://bigleaguers.yahoo.com/mlbpa/history.html >.

Net Worth. Film. Dir. Jerry Ciccoritti. CBC Television Productions. 1995.

“National Foot Ball League Players Association History.” National Football Player’s Association Official Website < http://www.nflpa.org/aboutUs/main.asp?subPage=History >.

“Non-traditional NHL cities on thin ice: Shutdown could hammer fan bases in already-faltering markets.” The Associated Press 14 Sept. 2004 < http://www.msnbc.msn.com/id/6000935 >.

Teitel, Jay. “Sleeper Bowl: For 1 minute of action, an NFL game inflicts 14 minutes of inaction.” MacLean’s Magazine. February 4, 2008. Pp. 65-66.

Wawrow, John. “Soaring dollar changes NHL's economics ” Associated Press June 27, 2008.

< http://www.usatoday.com/sports/hockey/2008-06-26-725748245_x.htm >.

Did you:

· Read the online materials for this unit?

Are you now able to:

· Identify and articulate several the key issues related whether high player salaries are justified?

· Identify and articulate several the key issues related to the development and the role of player unions?

· Identify and articulate several the key issues related to the importance of small market franchises in securing national television contracts? And,

· The growing importance of law and its influence in sports?

If so, you are now ready to proceed to the next unit.