Tuesday, January 20, 2015

Millionaire Underdogs

Many sports fans blame "greedy" star athletes for chasing high-paying contracts and for high ticket prices to games, but that anger is better directed at far-wealthier owners taking advantage of players and fans.

An NFL star is a "greedy, me-first diva" if he holds out of training camp to protest being paid far below market worth, and is selfish if he doesn't emulate Tom Brady1 by agreeing to take less money "for the good of the team". Yet in a league where contracts are not guaranteed, on the frequent occasions when teams cut players under contract it is a smart "business decision" and no one howls about "not honoring an agreement".

Professional athletes who sign big money deals based on their accomplishments are often looked at as sullied. They play a game, goes the common gripe, and being paid $100 million -- or poo-poohing that amount as too little -- to play a game is ridiculous. That's why ticket prices are too high for the average fan to attend, laments the typical ESPN talking head, newspaper "hot take" sports columnist, or pugnacious radio caller. The assumption is always that star players make too much money -- when actually, given the enormous value they generate for their franchises, the best talents often should be paid far more than they are.

Marquee athletes are millionaires and because of that they may not engender sympathy with the public -- until you consider that in their world, they are small fries compared to the billionaire owners. It's actually counter-intuitive that the average sports fan has been conditioned to root for more dollars in the pockets of tycoons in suits rather than the players responsible for generating that lucre. The jump shots, fastballs, and tight spirals of the highest-performing athletes are what generates the money which pours into owners' coffers from ticket and concession sales at taxpayer-funded ballparks, apparel and other license goods sales, corporate sponsorships, and cash-cow broadcasting contracts. Team owners know this, and that's why wealthy moguls will pay stupendous amounts to get their hands on a team and start raking in profits2.

Last year, the NBA's Los Angeles Clippers came on the market after the controversy over their racist owner, Donald Sterling. Despite the urgency of that transaction, the team -- which has never won a championship and long played second banana to the Lakers -- still sold for $2 billion3. That's because new owner Steve Ballmer surely knows that his team's new TV rights deal alone could bring in $150 million per year. Across town, MLB's Dodgers signed a 2013 deal with Time Warner worth well above $300 million/year for the next 25 years! It has enabled them to not sweat (at least financially) their latest attempts to put together an "expensive", star-studded roster. And while reports of LeBron James' recent return to Cleveland being a gigantic economic stimulus to the region are far-fetched, there's no question that the salary owner Dan Gilbert pays James is covered many times over from the massive surge in attendance at Cavaliers games, from the rush on #23 jerseys, and yes, an impending new local TV contract.

Despite all this, in recent years, ownership has only furthered its control over players. The 2011 NBA lockout resulted in owners reducing players' share of the league's "basketball-related income" (paid out as salaries) from 57 percent to 50 percent. When the NFL locked out that same year, “the owners used the bad economy to cry poor, and then they took everything” in a hugely favorable collective-bargaining agreement. So while Americans may think athletes are well-off because today's Stan Musials and Roy Campanellas aren't working regular-joe jobs in the offseason, they are missing the bigger picture: in a world of much, much bigger dollars, more of those dollars are flowing to the very top. Like with so much else in the sports world, this isn't just about sports.

1. Sort of. Mechanics of Brady's restructured contract aside, the QB has been a well-paid star for years and receives plenty of endorsement money to cushion the blow of a salary cut.

2. Sports teams don't make their financial records public, but Forbes estimated, probably conservatively, last year that 31/32 NFL teams and 26/30 NBA teams made money; estimating MLB is considered tougher since "team owners do things like create management companies consisting of the owners and their families as a means of taking untold amounts of money from the club and putting it in their pockets", and small market teams additionally benefit from sharing in the local revenue of large market teams.

3. Similarly, another "second banana" NBA team is about to go on sale, and could fetch a similar $2 billion price tag -- or 10x higher than what owner Mikhail Prokhorov paid less than five years ago to buy the team.


Noah S. said...

[JN: This comment was originally posted to my Facebook and imported by me here to add to the discussion.]

Why can't both star athletes and team owners be considered overpaid?

Jay said...

Haha, ok, now that is fair. But the demonization of athletes exclusively to me is representative of a broader disdain for laborers in favor of (capital) owners

Andrew T said...

I'm curious what prompted this. Personally it's a no brainer to me that big money investors are one of the most absurdly overpaid classes of society.

But maybe I'm just not in touch with sports fans frequently enough to have a good read on the public vibe. Who is demonizing the athletes these days? (Aside from Fox News, who'll demonize anyone if it means they can further extol the virtues of billionaire greed, obviously.)

Jay said...

Andrew, no specific recent incident prompted this, just an observation I've long had as a sports fan. As stated in the post, in the past few years, in both the NFL and NHL owners have successfully wrested away a larger share of revenues than before. Fans buy into the "overpaid" star routine, instinctively willing to criticize players who "get paid millions to play a game".

Andrew T said...

[JN: This comment is excerpted from an email I received in response both to this post and this story about Julius Thomas' contract situation with the Broncos.]

I guess when I first read your post, I focused more on the broader bargaining picture, for instance the 2011 CBA, because I tend to follow those stories more than the gossip about any individual player's negotiation. In that context, I do feel like the average person tends to favor the players (despite the actual negotiations going the other way entirely, boo). Given the choice between the owner class and the performer class, it's pretty easy to pick the 99% of the 1% over the 1% of the 1%. I felt the same way with the replacement ref debacle - though probably everyone's instinctive hatred of refs caused some inertia, which finally broke when we saw how bad it could really get haha.

But perhaps I missed your point - that it IS easy to back the players when the classes are broken down so clearly, but in most cases they AREN'T. I certainly appreciate that when you're hearing about the player's salary without also getting a peek at the owner's tax return, people will quickly forget half of the equation.


Final thing: "Financial security." To me, invoking this is a dishonest argument, and dishonest arguments are the fastest way to undermine advocacy, so easy for the other side to call out and taint your entire agenda with bad faith. I feel like I see it far too often, some well-meaning writer pushing the rhetoric just a bit too far in the name of a good cause, and it makes me crazy. Thomas's last 4 years earned him over $2 million, and he could've had $8 million more for the next year alone. Let's say next year is all he gets and he somehow only takes home a third of that total. Sorry, Deadspin, but $3 million is STILL financial security. Yes, it's possible to fritter it all away in a heartbeat*, and it's possible you might have to go back to college or get a job, but I don't think most people's definition of "secure" is "never have to work another second". And if $8 million a year somehow isn't financial security, I don't really see how $10 million is. He's not looking for financial security, he's looking for financial luxury.

And that's fine! The players deserve it! (At least, they deserve it more than the owners.) Why not have luxury, when a fair share of the profits of the industry is unquestionably luxurious? That was the argument you made, and I agreed. But Deadspin recognized that negotiating for luxury, even completely justifiably, doesn't sound as good as "financial security", so they recast the argument, and now they sound like assholes, in the name of a good cause.