Judge's Ruling on NFL's TV Contract Could Save Season

Broadcasters Don't Have to Pay League $4 Billion in Rights Fees

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Did a federal judge in Minnesota just save the 2011 National Football League season?

U.S. District Judge David Doty on Tuesday overturned an earlier ruling and said the league's TV contracts with CBS, NBC, ESPN, Fox and DirecTV -- which allowed the NFL owners to still be paid a combined $4 billion in rights fees even if there were no NFL games next season -- violated the NFL's collective bargaining agreement with the NFL Players Association.

In his decision, Mr. Doty wrote that the "record shows that the NFL undertook contract renegotiations to advance its own interests and harm the interests of the players."

That's a big win for the union and a blow to the league. But, winners and losers aside, Mr. Doty might have just equaled the playing field and hastened a settlement. The league's CBA with the players expires at midnight Eastern on Thursday. It was expected that if no agreement was reached, the owners will lock out the players. But the ruling could compel both sides to agree to extend the CBA's deadline.

A cancellation of the 2011 NFL season would mean more than $12 billion in collective losses, so the ruling gives a glimmer of optimism to everyone from the TV networks, sponsors and agencies that create ads that run during games and on NFL shoulder programming to fantasy football players and even stadium workers.

"If the ruling stands, the likelihood of a settlement, or at least games taking place under labor impasse rules in 2011, has risen and the odds have a lockout have dropped," said Robert Boland, clinical associate professor of sports management at New York University who also teaches a class on collective bargaining. "We aren't home free yet, but this could be the moment that brings the sides together and certainly undermines the economic utility of a lockout."

Indeed, all 10 members of the NFL owners' labor committee are at today's Federal Mediation and Conciliation Service session between the league and the players' union in Washington. All 32 league owners are also currently gathering for a meeting in nearby Chantilly, Va.

Still, labor negotiations can turn tricky -- and contentious -- in a hurry.

"As we have frequently said, our clubs are prepared for any contingency, this decision included," NFL spokesman Brian McCarthy told AdAge.com. "[The] ruling will have no effect on our efforts to negotiate a new, balanced labor agreement."

Sports business expert David Carter, principal of the Los Angeles-based Sports Business Group and executive director of the University of Southern California Sports Business Institute, said not to expect a miraculous, overnight agreement.

More likely, the two sides will agree to extend the CBA's deadline while they continue to negotiate.

"The judge's ruling adds yet another piece to puzzle that will take a while yet to complete," Mr. Carter said. "Advantageous timing and leverage will change at multiple points along the way, and what may seem critically important at one point may have less impact over time as other material issues and developments emerge."

But Mr. Boland remains optimistic.

"The decision neutralizes the most powerful economic weapon the owners had in their arsenal -- that even if they locked out their players they would still get that $4-plus billion in television revenue," he said. "So any members of the management constituency thinking about what could be gained from a lockout now must also consider what could be lost. This ruling probably has the television networks jumping for joy today. They were willing to go along, perhaps grudgingly, with the plan to pay the NFL whether there were games or not because the NFL is such a singularly powerful force in both ratings and attention. But the networks privately had to be nervous that they were passengers along on Mr. Toad's Wild Labor Ride."

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