The Business of Sports: A Primer for Journalists (Lea's Communication Series)

THE BUSINESS OF SPORTS

A Primer for Journalists

Mark Conrad

The Business of Sports A Primer for Journalists

LEA’S COMMUNICATION SERIES Jennings Bryant/Dolf Zillmann, General Editors Selected titles in Journalism (Maxwell McCombs, Advisory Editor) include: Friedman/Dunwoody/Rogers • Communicating Uncertainty: Media Coverage of News and Controversial Science Garrison • Professional Feature Writing, Fourth Edition Iorio • Taking It to the Streets: Qualitative Research in Journalism Merrill/Gade/Blevens • Twilight of Press Freedom: The Rise of People’s Journalism Merritt/McCombs • The Two W’s of Journalism: The Why and What of Public Affairs Reporting Roush • Show Me the Money: Writing Business and Economics Stories for Mass Communication Salwen/Garrison/Driscoll • Online News and the Public Titchener • Reviewing the Arts, Third Edition For a complete list of titles in LEA’s Communication Series, please contact Lawrence Erlbaum Associates, Publishers, at www.erlbaum.com.

The Business of Sports A Primer for Journalists Mark Conrad Fordham University

2006

LAWRENCE ERLBAUM ASSOCIATES, PUBLISHERS Mahwah, New Jersey London

Copyright © 2006 by Lawrence Erlbaum Associates, Inc. All rights reserved. No part of this book may be reproduced in any form, by photostat, microform, retrieval system, or any other means, without prior written permission of the publisher. Lawrence Erlbaum Associates, Inc., Publishers 10 Industrial Avenue Mahwah, New Jersey 07430 www.erlbaum.com Cover design by Tomai Maridou Library of Congress Cataloging-in-Publication Data Conrad, Mark, 1958The business of sports : a primer for journalists / Mark Conrad. p. cm. — (LEA's communication series) Includes bibliographical references and index. ISBN 0-8058-5044-9 (cloth : alk. paper) 1. Sports—Economic aspects. 2. Sports administration. 3. Sports journalism. I. Title. II. Series. GV716.C665 2005 796'.06'9—dc22

2005040116 CIP

Books published by Lawrence Erlbaum Associates are printed on acid-free paper, and their bindings are chosen for strength and durability. Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

To Kaz and Josh, the stars of my home team, and to my parents who brought me into the big leagues.

Contents in Brief

Preface

xix

Introduction—What Makes Sports a Unique Business?

xxi

The Structure of Professional Team Sports

The Structure of Individual Sports

The Structure of College and High School Sports

The International Sports System

Sports Contracts

Labor Relations in Sports

108

Sports Agents

158

vii

viii

CONTENTS IN BRIEF

Team Relocation and Facility Issues

178

Sports Injuries

203

10 Drug Testing in Sports

222

11 Discrimination in Sports

244

12 Intellectual Property and Sports

261

13 Traditional and New Media in Sports

277

Glossary

291

Author Index

303

Subject Index

309

Contents

Preface

xix

Introduction—What Makes Sports a Unique Business?

xxi

The Structure of Professional Team Sports

The Leagues

A Short Summary of the Four Major Leagues

NFL

NBA and NHL

Major League Basebal

The Major Character in a Traditional League Structure The Commissioner

7 7

The Owners

Players

11 ix

CONTENTS

Cooperation Versus Competition

Salary Structure

Equitable Draft

Sharing of Merchandising Monies

Sharing of Gate Receipts

Sharing of Revenues From National Broadcasting and Cable Contracts

Restrictions on Franchise Relocation

Rules to Approve New Ownership and Expansion

Fostering Competition

Drawbacks

The Alternative: The Single-Entity Model

Major League Soccer

WNBA

Information Check

References

The Structure of Individual Sports

Tournaments and Tours

Individual Sports Athletes Are Not Employees

Scheduling

Rankings

Examples of Individual Sports Governing Bodies

NASCAR

Tennis

Golf

Information Check

References

The Structure of College and High School Sports

Institutional Control

Governance System

Divisions

Enforcement

CONTENTS

The Rules

Amateurism

Agents

Recruiting

Academic Requirements

Transfers

Financial Aid

Practice Dates

The Role of Coaches

A Final Thought

Athletic Conferences

Championships

Division I-A College Football Bowl Games—Pre BCS

The BCS

High School Sports

Solutions to the Collegiate Sports System

Information Check

References

The International Sports System The International Olympic Committee (IOC)

61 63

Background

Current Structure

Marketing the Event

The Scandals

Professionalism

Dispute Resolution

National Olympic Committees (NOCs)

The United States Olympic Committee (USOC)

History

USOC Structure

Powers

Resolution of Disputes

xii

CONTENTS

Sponsorships

International Federations

National Governing Bodies

Track and Field

Figure Skating

Swimming

Information Check

References

Sports Contracts

What Makes Sports Contracts Unusual

Contracts Involving Team Sports Athletes

Contracts Involving Individual Sports Athletes

Key Clauses in a League–Player Contract

Salary

Services

Expenses

Conduct

Physical Condition

Prohibited Substances

Unique Skills

Assignment (Player Trades)

Validity, Filing, and Commissioner Disapproval

Other Athletic Activities

Promotional Activities

Group License

Termination

Contract Negotiations

Coaches’ Contracts

Collegiate Coaching

Professional Coaching

Insurance Endorsem*nt Contracts

99 100

CONTENTS

xiii

The Marketing Assessment

101

The Key Clauses

103

Endorsed Products

103

Termination

103

Compensation

104

Term

105

Territory

105

Duties

105

Other Provisions

106

Information Check

106

References

106

Labor Relations in Sports

108

The Labor Laws

108

The Leagues

110

Salary Control

113

Major League Baseball

113

The Antitrust Exemption

115

Labor Agreements Make Headway

116

The 1994 Strike

120

The Present CBA

121

National Football League

124

History

124

The Present CBA

125

The Salary Cap

129

A Quick Summary

135

National Basketball Association

135

History

135

The 1999 CBA

139

Exceptions to the Salary Caps

142

The 2005 CBA

144

The National Hockey League The 2005 CBA

145 146

xiv

CONTENTS

Arena Football and the WNBA

149

Major League Soccer

150

Miscellaneous Labor Issues

151

Player Drafts—Age Restrictions

151

States’ Nonresident Taxes on Athletes

152

Summary of Key Information

153

Information Check

155

References

155

Sports Agents

158

The Business

159

Mega-Agencies

161

Duties of an Agent

162

The Rise of Agents

164

Agent Responsibilites

165

Securing Talent and Contracting With Teams and Endorsers 165 Understanding NCAA Rules

167

Understanding the Appropriate Sport’s Collective Bargaining Agreement

167

Understanding Salary Caps

168

Engaging in Damage Control

168

Study: Scott Boras

168

Alternatives to Agents

169

Going Alone

169

Legal Representation

170

Standards and Regulations

171

SPARTA

171

State Statutes

172

Players’ Union Certification

173

NFLPA

173

NHLPA

174

MLBPA

175

NBPA

175

CONTENTS

Information Check

176

References

176

Team Relocation and Facility Issues A Short History of Franchise Relocation

178 179

Waves of Relocation

180

New Stadiums and Arenas

181

Leagues’ Control of Relocation

183

Facility Attempts to Stop Relocation

184

Relocation and Cities

185

Expansion

186

Financing a Stadium

187

Funding Vehicles

187

Public Funding

188

Methods of Public Funding

189

Private Financing

190

The Stadium/Arena Lease

190

Stadium Naming Rights

193

Concessions

196

Seat Licenses

196

Seating Organization/Pricing

197

Advertising

198

Parking

199

Other Revenue Generators

199

Alteration of Existing Facilities

199

A Final Word

200

Information Check

200

References

201

Sports Injuries

203

Legal Theories

205

Who Can Be Liable?

205

Liability

206

xvi

CONTENTS

Limitation of Liability Clauses

211

Strict Product Liability

212

State Law Immunity

213

Medical Malpractice

213

Information Check

216

Risk Management

216

Common Risk Management Issues

217

Alcohol and Public Safety

220

Defamation

221

A Word About Criminal Law and Sports

222

Examples of On-Field Criminal Activity

224

Information Check

225

References

226

10 Drug Testing in Sports

228

NCAA

231

The Olympic Movement

232

USADA

232

WADA

234

NFL

235

NBA

236

Major League Baseball

238

NHL

240

Recent Controversies

240

BALCO

240

Information Check

242

References

243

11 Discrimination in Sports

244

Race Discrimination

246

Underrepresentation of Minorities

247

Title IX

248

Criticisms of Title IX

254

CONTENTS

xvii

Disability

255

Information Check

259

References

259

12 Intellectual Property and Sports

261

Trademarks

262

264

Athlete’s Right of Publicity

265

Licensing Agreements—General Points

266

Professional Leagues and Group Licensing

268

NBA

269

NFL

270

MLB

271

NASCAR

272

Olympics

273

NCAA

274

Information Check

275

References

275

13 Traditional and New Media in Sports

277

The Property Right

278

The Key Audiences

279

Radio

280

Television

280

Types of Television Deals

282

Local Television

285

Media Ownership of Teams

285

The Olympics

286

NCAA

286

New Technologies

287

Satellites

287

Wireless Technology

287

The Internet

287

xviii

CONTENTS

The Future

288

Information Check

289

References

289

Glossary

291

Author Index

303

Subject Index

309

Preface

Professional and amateur sports occupy a prominent place in society, as a dynamic and visible entertainment business with worldwide reach. The numbers of spectators, viewers, and participants run into the billions. Millions of people either read the sports pages of a newspaper, buy a sports-oriented magazine, watch the sports segment of a newscast, subscribe to a cable service offering sports programming, or listen to or call in to a “sports talk” radio station. At one time, sports coverage was quite simply scores, standings, and star performances. However, the continuing popularity and increased complexity of the sports landscape require that sports journalists possess a background on issues more fundamental than mere knowledge of the game. The sports industry is a multi-billion-dollar business that involves many unique and complicated issues—issues that often beg to be discussed and analyzed in an objective and systematic way. Think of the amount of coverage the labor controversies receive, for example. Other issues also abound, including contract rights, free agency, amateur eligibility, drug testing, franchise relocation, stadium construction, and athlete and spectator injuries. There xix

PREFACE

are also the questions of intellectual property rights, racial and gender discrimination, and the use and power of agents and financial advisors. Even seemingly arcane matters such as league governance, calculation of team revenues, salary cap restraints, and taxation of athletes’ salaries result in greater discussion and coverage. Many seasoned journalists do an excellent job covering the business of sports. But others—not only writers and broadcasters, but also many sports talk hosts — do not. Misstatements of facts, improbable assumptions, and other evidence of a lack of understanding occur all too frequently. For students of journalism and communications (and younger practitioners of the craft), this text is a primer to the business of sports and provides a guide to give students and newly minted sports writers, producers, and broadcasters a basic knowledge of the sports business. This text covers many facets of the business. I focus on what I think constitute the main issues of importance to young journalists: professional, amateur, and international sports structure and governance, contract and labor issues, and stadium economics. Agents, intellectual property, drug testing, personal injury, and media issues are also covered, although in shorter chapters. Some readers may be surprised at the paucity of discussion of criminal activity by athletes. Since most criminal cases against athletes involve actions outside of the athletic activity, the issues are no different for an athlete than for a nonathlete. The trials of O. J. Simpson and the charges against Kobe Bryant do not directly bear on the sports business, and there are many sources for learning about the criminal justice system. Many readers will notice that a great deal of the subject matter is complex and very detailed. Topics like salary caps and stadium revenues are difficult by nature, but are crucial to a knowledge of the business of sports. I wish to thank all who contributed to this book — my graduate assistants Hannah Amoah, Benjamin Berlin, Jacob Preiserwicz, Paul Rudewick, Lisa Brubaker, Alyona Teeter, Anide Jean, Hanna Minkin, Jeffrey Franco, Jeff Li, Parandzem Gharibian, and Samuel I. Mok. I also want to thank my colleagues Priti Doshi, Esq.; Marianne Reilly, Associate Athletic Director, Fordham University; and Bob Pockrass, Associate Editor of of NASCAR Scene for all their help. Finally I want to express my gratitude to Acquisitions Editor Linda Bathgate and Senior Production Editor Marianna Vertullo for their patience, encouragement, and guidance. Similar thanks go to Kirsten Kite, who went beyond the call of duty in creating the indices that appear in the book.

Introduction—What Makes Sports a Unique Business?

In what was billed as the most comprehensive study of sporting event attendance in the United States and Canada, The Sports Business Daily, an online journal covering the sports industry, estimated that over 476 million spectators attended sporting events of all types during the 2003–2004 sports year. This marked a 12.8% increase from the 422 million in 1999–2000, the first year of the study. Baseball, football, basketball, ice hockey, and auto racing made up almost 75% of that total. Numbers of this magnitude demonstrate the popularity of sports (SportsBusiness Daily, 2004). To attract such numbers means that sports are not an ad hoc, mom-and-pop operation. Sports make up a sophisticated business, evolving over the last century into a dynamic economic juggernaut of high revenues, lucrative compensation, and high visibility. For anyone seeking to cover sports, their business structure ranks in importance to their on-the-field results. xxi

xxii

INTRODUCTION

Yet the sports business defies easy categorization. Unlike manufacturing, the sports industry does not focus on the manufacture of goods. Unlike real estate, it does relate to the buying and selling of land. Unlike accounting or law, it does not involve licensed professionals charging fees for advice. But an industry it is, evolving into a multifaceted one with tentacles reaching far beyond its original objective. The sports business displays similarities to the entertainment industry. At first glance one may wince at this characterization, but sports have greater similarity to film, theater, and music than to manufacturing or to real estate. Like these entertainment forums, sports provide a form of leisure, not a necessity for survival—a diversion, albeit a passionate one. People pay to attend sports exhibitions because they want to. With sports, as in other aspects of entertainment, the focus is on the person, not the property. Professional athletes (and some would argue collegiate athletes as well) engage in personal services. Star athletes, like star performers, command tremendous public recognition with their on- and off-the-field exploits, often covered by a media thirsty for every angle of their lives. Athletes are frequently public figures, which means that the media has a de facto license to report on their athletic and nonathletic activities. And they are often far better known than the owners who pay them. As in the case of entertainers, agents represent professional athletes. Although differences exist, their basic role is the same: negotiating employment contracts and marketing their clients. As shown later in this book, agents not only do the face-to-face negotiations, but they also have to sell the image of the athlete to the public, much like an agent representing a film or music star. Additionally, both athletes and entertainers work under the rules of their respective unions. For example, actors often have to operate under the rules of the Screen Actors’ Guild (SAG). Similarly, football players have to operate under the NFL (National Football League) Players Association. In the amateur world, fame (but not fortune) greets the top NCAA (National Collegiate Athletic Association) collegiate athletes in football and in men’s and, increasingly, women’s basketball. Better known than the valedictorians of their respective classes, the top players bring considerable publicity and revenues to the institution in terms of ticket sales, broadcast revenues, and merchandising. Note the term revenues, not profits. In most collegiate athletic programs, costs outpace revenue, and therefore the programs lose money. As for entertainers, athletes’ careers and fortunes ride a rollercoaster of highs and lows. A famous star makes three bad films and then no studio may want to deal with him or her. An athlete in the midst

INTRODUCTION

xxiii

of his second disappointing season will incur the wrath of the fans and may be released on completion of his contract (or during the contract, in the case of the NFL). On the other hand, an unsung bench-warming player may lead teammates to a championship and be forever immortalized. Yet differences exist between traditional entertainment and sports. First, entertainers have received compensation for their work for centuries. That was not the case in sports. In the 19th century, sports activities were largely the domain of wealthy men who participated in polo, yachting, and tennis (Thorne & Wright, and Jones 2001). The 20th century brought viability to “professionals” in sports, and the result has been a dramatic increase in the economic effects of sports exhibitions, which by the end of the century generated nearly $400 billion annually in the United States through company sponsorship, stadium construction, licensing, apparel, equipment, media investments, and spectator expenditures (Thorne & Wright, 2001, citing Burton, 1999; Hunter & Mayo, 1999). Amateur sports like the NCAA tournaments and college bowl games also have been revenue raisers. Contrary to the pieties of certain sports writers of yore, sports have been a business for the last century. Today, the industry is simply a bigger one. The increased popularity and complexities of the sports universe have resulted in the expansion of the sports business to include issues like intellectual property, stadium construction, and business governance. Revenue streams have diversified. For example, until the advent of modern broadcasting, gate receipts were virtually the only revenue stream for sports. In the last 70 years, revenues from radio, then television, then cable, and now satellite and Internet have brought billions of dollars to the pockets of team owners, athletes, colleges, conferences, and amateur organizations. Sports marketing evolved into an important specialty, as merchandise sales, sponsorships, and naming rights command an important base in producing revenues and branding the sport. The ownership of sports franchises has changed greatly. Eighty years ago, owners of baseball teams often had a reputation of being “penny-ante” players just one stop to the right side of the law (Fetter, 2003). Today, some of the largest corporations and wealthiest individuals own franchises. And some of the players achieve wealth at the level of successful corporate chief executive officers. All of these considerations result in a complex economic and regulatory structure, with a vast array of rules and a full slate of constituencies that have to be satisfied. Leagues, team owners, coaches, players, colleges, amateur athletic associations, unions, agents, and the Olympic personnel are just some of the players in the business of sports.

xxiv

INTRODUCTION

Until recently, all too many sports writers focused on the hits, runs, touchdowns, and personalities of the players. Today, to be an effective sports writer, one has to know the business behind the scores.

WHAT MAKES SPORTS A UNIQUE INDUSTRY? Today, professional and amateur sports in North America have unique attributes. Although we discuss these characteristics in more detail in the following chapters, a short summary follows here.

A Cartel Structure At the outset, those wishing to understand the professional team sports structure will realize that it is unique in its organization and operation as compared to most other businesses. In a market-driven economy, the goal of a typical business is to achieve success by direct competition with others. Whether the business is automobiles or appliances, most consumers may choose to buy a product from a number of firms manufacturing or selling that item, and their decision to purchase is based on factors such as needs, brand reputation, and/or price. The choice of services is similar. One may choose a physician or a lawyer from a number of practitioners, based on references, training, professional manner, and insurance coverage. This traditional competitive structure is not found in professional sports leagues and amateur organizations. First and foremost, the competition is limited. Almost every sports organization’s structure restricts free and open competition. In the professional sphere, the leagues limit the number of competitors by awarding exclusive franchises in different markets. With a few exceptions, one team occupies that particular market. In doing so, leagues create a limited market and operate as a cartel. In certain respects, this is analogous to the Organization of Petroleum Exporting Countries (OPEC). In both cases, membership is limited and the product is controlled. OPEC countries may control and have controlled the production levels of oil in attempts to dominate the market. Sports leagues regulate which teams may compete, where they can compete, the number of players on a team, and the sharing of certain revenues. This does not mean that competition does not exist. There is direct and often intense competition among the teams in a given league, even resulting in rancor between the owners of those teams. Think of the Boston Red Sox and the New York Yankees. In a competitive atmo-

INTRODUCTION

xxv

sphere, the desired goal (and the hope of its fans) is for that team to win a championship. If they have the resources and the will, owners will acquire expensive free-agent players to increase their chances of success. Yet, on another level, these teams cooperate in very important matters, such as labor issues, broadcasting, merchandising, and revenue sharing. The result is a hybrid identity. The team sells itself as both a local franchise and a representative of the league. As shown later, differences exist among the major leagues regarding the sharing of revenues and salary controls, but the basic organizational plan remains similar. This competition-versus-cooperation dichotomy is explained in more detail in chapter 1. Many of the controversies that have bedeviled sports leagues involve the balance of power between the central office and the team owners. Centralized league control of independent franchises has existed in its present form for over 80 years. Major League Baseball created the position of commissioner to run the league’s affairs. As the CEO of baseball, the commissioner was empowered to set league policy, control discipline, and, in more recent years, spearhead labor negotiations with the players. Other leagues replicated this system. This interplay of a centralized authority with the independently owned teams that compete against each other in that collective has created tension between the players, team owners, and the league commissioners. The courts have had a role in these disputes because the nature of the league structure has raised antitrust law concerns. (A notable exception, however, is Major League Baseball, which has been exempt from antitrust laws.) Because of the often extensive and expensive litigation, an alternative known as a “single-entity” league was created over the last decade. We discuss this in more detail later in chapter 1. Simply put, in a pure single-entity league, no independent owners exist. Rather, the league owns and operates the teams in a single corporation. There may be some advantages in this schema, particularly in salary control, but there are structural disadvantages as well. On the amateur and international levels, the cartel structure also exists. There are exclusive bodies—both national and international—that govern various team and individual sports. The International Skating Union regulates competitive figure skating, and U.S. Figure Skating is its domestic affiliate. The International Association of Athletics Federations (IAAF) and USA Track do the same with track and field competitions. And of course, the NCAA is the body that legislates, adjudicates, and enforces the rules for collegiate sports for most four-year colleges in the United States. Domestically, the NCAA has de facto control of collegiate athletics and produces a tome-like manual of bylaws to ensure

xxvi

INTRODUCTION

that college athletes conform to the organization’s definition of amateur. The enforcement powers of these organizations are tremendous, and their powers are not often subject to challenge in the courts. Members of these organizations, whether they are colleges, affiliates, or athletes, must abide by the often complex rules promulgated by the organization. They must submit to the rules and regulations of the NCAA, or, in the case of non-collegiate but traditionally amateur sports, the national governing bodies and the international governing organizations. A figure skater performs under the rules of U.S. Figure Skating, which is under the jurisdiction of its international parent, the International Ice Skating Union. Often, bureaucratic power struggles erupt. Tensions may occur between individual schools and the NCAA, or between international organizations and their national counterparts, over eligibility and drug-testing issues. Until recently, dispute mechanisms were scattershot or nonexistent. These issues are discussed in detail in chapters 3 and 4.

Key Centralized Operations By agreement, sports organizations and leagues have centralized control over certain important facets of their business. These powers focus on franchising and income-producing possibilities. Exclusive Franchising Authority. In the professional leagues, in order to admit new franchises, an affirmative vote of the other team owners is needed. Usually, a high percentage (known in corporate law parlance as a maxi-majority) of owners in the league must approve any new franchises. For example, in Major League Baseball, that requirement is a three-quarter-majority vote (Major League Baseball Constitution, Article 2, sec. 2). Often the commissioner and the owners (or an appointed committee) screen the applications before making the vote. Marketing and Licensing Control. Each of the professional leagues (often with the respective players’ unions’ approval and participation) have created separate divisions to control the licensing of their trademarks and copyrighted materials. As is explained in chapter 12, although differences exist, the basic agreement is that sales revenues from items containing league and team logos are divided among all the teams and the players. Such rights amount to billions of dollars in the league’s coffers. Similar powers exist in the NCAA, but they are not as encompassing. Member schools and athletic conferences do retain rights involving licensing and merchandising.

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In addition, leagues, representing their teams collectively, make agreements with vendors to license the names of their member teams to apparel and shoe firms and companies making collectables, such as trading cards and bobblehead dolls. Broadcasting. In professional sports, the division of broadcasting rights varies from league to league, but all of the major leagues have the power to negotiate exclusive broadcasting, cablecasting and satellite rights. The scope and amount of these rights differ considerably. In Major League Baseball (MLB), local broadcasting and cable rights are independently negotiated and are not shared by other teams. This results in considerable disparity in revenue streams, as major market teams such as the New York Yankees receive far more revenue than the Pittsburgh Pirates. MLB “national rights,” such as a game of the week and the postseason competition, are part of the national package. With minor exceptions, the teams share those revenues equally. In contrast, the NFL’s broadcasting and cable agreements give the league far more control. The result has been less dominance by large-market franchises. The National Basketball Association and, until recently, the National Hockey League followed a system similar to baseball’s. Amateur sports organizations also negotiate broadcasting agreements. The NCAA contracts to broadcast its championship games in every sport except the highest division of football, which is controlled by the respective athletic conferences. For example, the NCAA has a longstanding contract with CBS to broadcast men’s basketball tournament games. Localized or radio broadcast deals are negotiated by member schools. International sports organizations, such as the International Olympic Committee, negotiate television contracts with broadcasters all over the world. Similar powers, albeit less ubiquitous, exist in international governing bodies of particular sports to broadcast world championship events. The International Olympic Committee agreed to have NBC as its exclusive broadcaster in the United States. NBC secured rights for the 2000, 2002, 2004, 2006 and 2008 games. These contracts include considerable rights fees, which enrich the organizations involved, given the marquis nature of the Olympics. Close Relationships With Government. Nearly every professional sports team is privately owned. Yet, despite the private ownership, franchises become an extension of their communities. Often the team and even the league may negotiate with cities and counties for help in the building of new sports facilities. Many have given incentives to keep teams from relocating, such as Chicago building a new stadium to

xxviii

INTRODUCTION

keep the White Sox from moving to Florida, or the state of Massachusetts preventing the Patriots from moving to Hartford. This largess by governments often cuts across party lines. Politicians who consider themselves fiscal conservatives and are loath to increase spending have nonetheless supported significant public expenditures—through authorization of bonds and even tax increases—to help pay for the construction of new stadiums and arenas (Malkin, 2001; Keating, 1997). Additionally, funds for highway access and other “indirect” support have been approved. And, as we see in chapter 8, favorable lease terms between the stadium owner (in many cases a local or county government or a governmental authority) are frequently negotiated. Restrictions on Player Salaries and Movement. Ever y sports league, including minor leagues, has significant salary controls in place. Although there is no question that elite professional athletes from the major sports leagues command high salaries, the salary structure and right to seek similar employment from another team are far more restricted than found in most industries. It is a myth that all professional athletes have the freedom to work for whatever team they wish. In fact, only a small class of “free agents” fits into this category. Many athletes are restricted from simply signing contracts with rival teams once their obligations terminate. These restrictions are based on the various collective bargaining agreements negotiated between the leagues and the players’ unions. Although most employers cannot limit the choice of an employee to work for whatever firm wishes to hire him or her, athletes don’t have such freedoms. Until the mid-1970s, player restrictions were so absolute that the athletes were virtually indentured servants of their teams. The only way they could join another team in the league was by a trade, a breach of contract, or a contractual release by the team. Not surprisingly, that “reserve” system artificially reduced salaries. Interestingly, a similar pattern occurs in collegiate sports. Even though they are not employees, athletes (officially called “student-athletes”) are restricted from transferring from one school to another in the same division. If they do, they can be barred from participating in varsity sports in the new institution for 1 year, unless an exception is made. Other limitations involve the earning of income from playing the sport or the signing of a contract with an agent. Tax Advantages. Ownership of a sports team has certain tax benefits that are not found in other businesses. When one purchases a sports franchise, the Internal Revenue Service (IRS) allows the new owner to assign a part of the purchase price to player contracts and

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then depreciate them. Bill Veeck conceived this rule when he was in the process of selling the Cleveland Indians to a group headed by his friend (and the great ballplayer) Hank Greenberg in 1950. Quirk and Fort (1997) provide the following example. If someone buys an NFL team for $200 million, the new owner can assign 50% of that amount to existing player contracts and then can depreciate those contracts over 5 years (at $20 million/year). Let’s assume that team revenue is $100 million per year and that costs, exclusive of the contract depreciation, are $90 million. On the one hand, this seems like a minor bookkeeping technique, because no actual cash is expended. But it has an effect on the team’s bottom line in an important way. Based on what was just said, say the team has a profit of $10 million for a year. When one adds that $20 million depreciation, there turns out to be a loss of $10 million per year, saving the owner significant amounts of federal tax. Exclusive Right to Rent or Own Stadiums or Arenas. A boom in stadium and arena construction occurred in the 1990s. Municipalities and counties would assist in funding a facility in the hope of either keeping an existing team or luring a franchise from out of town. The stakes were high. If a team cannot own or lease the stadium on favorable terms, this can severely hurt the team’s balance sheet. The negotiation of stadium agreements is one function that is retained by a particular franchise. Sometimes the franchise will own the stadium outright, such as in the case of the Washington Redskins. More often, the team will sign an agreement to have exclusive rights to use the stadium for a period of time. These agreements are often very specific, with the team often receiving a percentage of parking fees, advertisem*nts, and concessions. We discuss the terms of a stadium deal in chapter 8. Quasi-Public Nature. Nearly every professional sports team is privately owned. Yet despite the private ownership, franchises take on the character of their area and become part of the community. As noted earlier, municipalities have given many incentives to keep teams in the area. The effect on the community psyche from “letting a team go” can be profound. Some say that Brooklyn never recovered from the day the Dodgers moved to Los Angeles—and that was almost half a century ago! Although it is true that a major employer in a town or small city may take on a similar persona, there is a significant difference. Kodak, in Rochester, New York, employs a large number of workers. A professional sports team does not. Employees include the players (many of whom do not live in the area in the off-season), managerial and coach-

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ing staff, front-office staff, and stadium or arena personnel (such as security guards and vendors). Based on the numbers, a sports franchise hardly qualifies as the dominant business in the area. Finally … Fan Loyalty. The factors just discussed derive from an overlooked aspect of the sports business: the loyalty of the fan. The sports fan is an odd consumer, often fiercely loyal and unbusinesslike. Once a person becomes bonded with a particular sports team—professional or collegiate—the connection often becomes extremely powerful and very long term. And the brand loyalty of the team transcends its success. Let’s take this example. If a consumer purchased a product that turned out to be of lower quality than the purchaser expected, most likely that person would abandon allegiance to that firm and would purchase the product made by another firm. Imagine that consumer, after purchasing a poorly made car requiring many unsuccessful repairs, buying a new car of the same brand! Not very likely. But in sports, many fans will continue to support their poorly performing teams. Look at fans of such teams as the Chicago Cubs. The team has not won a pennant since 1945 or a World Series since 1908. Why would these souls spend their hard-earned dollars year after year to subsidize teams that have been less than top-quality? Despite unpopular strikes and lockouts, fans have often come back to root for their teams. Talk of fan unions and of boycotts of particular sports and teams have generally been met with little success. Psychologists have studied the reasons for fan loyalty. Dan Wann, a psychologist at Murray State University, found a number of reasons for being a sports fan. They include:

• Entertainment: watching a game is a form of leisure. • Escape: You can’t yell at your boss. You shouldn’t yell at your spouse. You can, and will, yell at the team you root for. • “Eustress”: The pleasurable combination of euphoria and stress, alternating between the euphoria you feel when Sammy Sosa homers in the first inning, and the stress you feel when a fly ball has him backing up to the wall in the second. • Aesthetic: You appreciate the grace and precision of a well-turned double play. • Family: Going with family members to a game is a bonding experience. • Self-esteem: Your team wins, therefore you win. • Group affiliation: The other fans at the ballpark also want the team to win, validating your own affinity for the team. (King, 2004)

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The dissemination of sports through traditional and new media has created a greater following among existing fans and a potential base for more enthusiasts. At one time, the only way one could view a sporting event was by attending the event in person. Gate attendance was the predominant source of revenue. With the advent and utilization of radio, then television, cable, satellite and Internet, greater opportunities to follow the team or athlete allow more people to become fans, with the ability to view the event from a more comfortable venue. Team loyalty continues even if a fan moves to a different part of the country because of the availability of information and broadcasts about the team. It also results in greater revenue to the team, its athletes (assuming they are professionals) and the particular league or organization. This leads to a unique, often (but not always) profitable industry, a fascinating business—and a great venue for aspiring journalists. Hopefully, the following chapters prove this point.

REFERENCES Burton, R. (1999, December 19). From Heart to Stern: The Shaping of an Industry over a Century. The New York Times, sec. 8, p. 11. Fetter, H. (2003). Taking on the Yankees—Winning and losing in the business of baseball, pp. 28–29. New York: W. W. Norton. Hunter, R., & Mayo, A. (1999, July–September). The Business of Sport. The Mid-Atlantic Journal of Business, 35, 75–76. Keating, R. J. (1997, March–April). We wuz robbed!: The subsidized stadium scam. Policy Review (Heritage Foundation). Retrieved June 15, 2005, from http://www.policyreview.org/mar97/toc.htm King, B. What makes fans tick? (2004, March 1). Street and Smith’s Sportsbusiness Journal, p. 25. Malkin, M. (2001, April 4). Bush’s baseball tax fetish. Capitalism Magazine. Retrieved June 14, 1005, from http://www.capmag.com/article.asp?id=446 Major League Baseball Constitution, Article 2, sec. 2 (2000) Quirk, J., & Fort, R. D. (1997). Paydirt: The business of professional team sports, p. 104. Princeton, NJ: Princeton University Press. “THE DAILY’s turnstile tracker counts 476 million fans.” SportsBusiness Daily (December 2, 2004). Retrieved January 15, 2005, from www.sportsbusinessdaily.com Thorne, D., Wright, L. B., & Jones, S. A. (2001). The impact of sports marketing relationships and antitrust issues in the United States. Journal of Public Policy & Marketing, 20(1), 73.

CHAPTER

1 The Structure of Professional Team Sports

Professional sports leagues are ubiquitous and complex, created as a governance mechanism for a group of competitive teams in a given sport. As multi-billion dollar industries, the leagues govern their sports and create an organizational decision making structure, providing governance on issues as varied as player and owner discipline, revenue control and expansion and relocation of league franchises. Because of the importance of these issues, a working knowledge of the structure and power of professional sports organizations is imperative for any journalist covering this industry. A few basic points: All professional sports leagues and their member teams are private entities and operate with a considerable degree of autonomy. Their internal rules and regulations are generally immune from governmental scrutiny. Because the leagues and, particularly, their teams (with a few exceptions) do not sell shares on a public stock exchange, no public release of financial records and no standardized auditing procedures (in the event the information is released) are required 1

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under the U.S. securities laws. Hence, journalists should exhibit a healthy skepticism of claims of losses made by teams, because it is difficult to have independent verification of that information. Furthermore, the team owners have considerable latitude in running their business. There is no requirement that a team owner must put the best product on the field, and examples exist of unsuccessful yet profitable teams. The Chicago Bulls ranks as a primary example. In the post-Michael Jordan era, the team has languished in performance, but not on the balance sheet. According to Forbes Magazine, the Bulls ranked fifth in franchise value ($368 million) and had an operating income of $36 million, the highest of any team in the NBA. The income even surpasses that of the most valuable team, the Los Angeles Lakers (Badenhausen, 2004). League membership rules and requirements constitute the most important check on a team owner’s powers. As pointed out in the preceding chapter, sports leagues possess many unique attributes, characteristics quite different from other types of businesses and even from amateur sports organizations. (Their attributes and complexities are discussed in chapter 3 and 4.)

THE LEAGUES Traditional professional sports leagues, such as Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA), and the National Hockey League (NHL), serve as hybrid creations emphasizing both cooperation and competition. Unique in their organization and operation as compared to most other businesses, these leagues lack a pure free-market competitive structure. Each restricts free and open competition in a number of ways. The leagues have the inherent power to limit the number of competitors by awarding exclusive franchises in different markets. With a few exceptions, it’s one team to a market. In doing so, the leagues create a limited market and therefore operate as a cartel much like the Organization of Petroleum Exporting Countries (OPEC). In both situations, membership is limited and the product controlled. OPEC countries have controlled the production levels of oil in attempts to control the market. Sports leagues control the numbers of teams, their locations, and the numbers of players on a team. They also mandate the sharing of certain revenues, league-wide merchandising, and a unified negotiation strategy with players’ unions. Thus, cooperation exists—as a condition of membership in the league. League control of independently owned franchises has existed in its present form for over 80 years. In 1920, Major League Baseball became the first “modern” league, with the creation of the office of the commis-

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sioner to run the league’s affairs. As the CEO of baseball, the commissioner was empowered to set league policy, control discipline and, in more recent years, to spearhead labor negotiations with the players. This does not mean that there is no competition between the teams in the league. On one level, direct competition exists. Some team rivalries are quite intense, even resulting in rancor between the owners of those teams. In a competitive atmosphere, the desired goal (and the hope of its fans) is for a team to win a championship. With the resources and the desire, owners will acquire expensive free-agent players to increase their chances of success. The result is a hybrid identity. The team sells itself as both a local franchise and a representative of the league. Differences exist among the major leagues regarding the sharing of revenues and salary controls, as shown later, but the basic organization remains similar among the major leagues. The system is hardly perfect. Many of the controversies that have bedeviled sports leagues involve the balance of power between the central office and the team owners. This interplay of centralized authorities with autonomous teams that compete against each other in that collective has created tension among the players, team owners, and the league commissioners. The courts have had a role in many of these disputes because the nature of the league structure has raised antitrust law concerns. A notable exception, however, is Major League Baseball, which has been exempt from application of antitrust law. Because of the often extensive and expensive litigation, an alternative approach known as a “single-entity” league was created over the last decade. We discuss this in more detail later in this chapter. Simply put, in a pure single-entity league, no independent owners exist. Rather, the league owns and operates the teams in a single corporation. After a flourishing period in the mid to late 1990s, some key single-entity leagues altered their structure to a more traditional league format.

A SHORT SUMMARY OF THE FOUR MAJOR LEAGUES Each of the four major professional leagues is operated as a not-for-profit organization. Of course, the teams themselves are profit-making businesses, but Major League Baseball, the NFL, the NBA and the NHL cannot accumulate capital; rather, they have to distribute any profits among their teams.

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NFL The NFL, established in 1920, is an unincorporated association, akin to a trade association, rather than a standard business (NFL Constitution and Bylaws, Art. VI). Its sources of management authority derive from an executive committee composed of one representative (often the owner) of each club and the commissioner, elected by the executive committee. The commissioner (presently Paul Tagliabue) possesses disciplinary powers, dispute resolution authority, and decision-making authority, including the power to appoint other officers and committees (NFL Constitution, secs. 3.1–3.9). The commissioner has executive power unless the collective bargaining agreement with the Players Association renders specific powers to other authorities. Notably, he has the power to determine and punish conduct “detrimental to the welfare of the league or professional football” by fining any person up to $500,000 or canceling an agreement between such a person and a particular team or the league (NFL Constitution, sec. 8.13). Other powers include suspension and banishment for life from involvement in the NFL. The commissioner possesses considerable power to impose disciplinary action, resolve disputes, and appoint other officers. Although the executive committee has more general decision-making powers, the commissioner wields considerable influence in the decisions of the committee. The creation or sale of a franchise requires a positive vote of three-quarters of the owners (NFL Constitution, sec. 3.2). The NFL permits ownership of teams by corporations, individuals, or partnerships, but limits the “home territory” of a team to a 75-mile radius, with certain limited exceptions, such as the New York Metropolitan area (which has two teams). Presently, the NFL contains 32 teams, of which four are new franchises added during the 1990s. The NFL has the most centralized operations of any traditional league. Notably, it splits $2.2 billion a season in television money, a revenue-sharing arrangement far greater than other leagues. The idea came in the early 1960s from then Cleveland Browns’ owner Art Modell, who convinced owners George Halas (Chicago Bears), Dan Reeves (Los Angeles Rams), and Jack Mara (New York Giants) to join a proposed revenue-sharing plan and give up the ability to independently negotiate TV rights. The shared television rights ensured competitive balance and helped the league immensely. Currently, the league splits 40% of gate receipts equally. More recently, unshared revenues from luxury box seating, stadium naming rights, and stadium signage have created greater economic disparity among the member teams. Franchises with new stadiums tend to receive more such income than older venues. The league is attempting

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to address these concerns and may make changes in the revenue-sharing system to alleviate this problem. At present, the NFL is probably the premier sports league. In a Gallup survey at the end of March 2001, 63% of Americans consider themselves to be fans of professional football, highest among the 11 sports tested. According to one commentator, “the NFL occupies the gold standard position in the sports business on a year-round basis” (Bloom, 2004). Business revenue reached $6 billion in 2004 (Witz, 2004), with ticket sales exceeding $1.5 billion. Attendance has risen 4.7% from 1999 to 2003, which represents over 17 million fans attending NFL games at nearly 95% of stadium capacity (Harrow, 2004). Corporate sponsors pay huge fees to associate with the NFL. For example, in 2004, Gatorade signed an 8-year deal with the league, worth $500 million (Markiewicz, 2004). Visa pays $400 million over 6 years. And those are just two of the NFL’s 20 official sponsors (Rodack, 2004). For the money, sponsors are able to use NFL team, Super Bowl, and Pro Bowl logos in their marketing activities, and they have the right to do promotions surrounding key events. Under Tagliabue, who became commissioner in 1989, the NFL has entered an era of sustained labor peace.

NBA and NHL Like the NFL, the NBA and NHL are unincorporated, not-for-profit associations with centralized offices and commissioners. They share considerable similarities. Like the NFL, membership and the rights thereof are limited. Each entity or each person seeking an NBA or NHL franchise or wishing to buy an existing team must be approved by the affirmative vote of no less than three-fourths of the members. A three-fourths majority is also required to transfer a membership to another entity. Each member of the NBA and NHL holds a franchise from the league to operate a professional basketball or hockey club in a designated city. Also, the commissioners of both respective leagues—David Stern in the NBA and Gary Bettman for the NHL—contain similar powers to Tagliabue. Of the two, the NBA is by far the more popular. The 30-team league flourished in an era of superstars, such as Michael Jordan, Larry Bird, and Erwin “Magic” Johnson, and more recently Shaquille O’Neal. That era of goodwill has been tempered by more controversial stars such as Alan Iverson and Kobe Bryant. One commentator remarked that in his two decades as the head of the NBA, “[David] Stern has single-handedly done more as commissioner of the NBA over a 20-year tenure than any other top executive in sports history” (Rovell, 2004). Stern took over a league with declining at-

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tendance, few recognizable stars, and red ink, as 17 of the 23 teams reported financial losses. Fan apathy had grown rampant. Many believed the league was too black, and drug use was common (Allen, 2004). Stern pioneered the salary cap, aggressively marketed the league, and licensed its product brilliantly. During his tenure, franchise values increased from $15 million in 1984 to as high as $300 million in 2004. Gross revenues from licensed products have increased from a mere $10 million in 1984 to over $3 billion 20 years later. Overall league revenues have increased from $118 million to more than $3 billion, and U.S. television rights averaged $765 million annually, which is up 13,000% since Stern first took office on February 1, 1984 (Allen, 2004). Stern has been known as a powerful manager who has not hesitated to impose disciplinary sanctions for conduct he feels is detrimental to his sport. He imposed long suspensions against Indiana Pacers players Ron Artest (season-long), Stephen Jackson (30 games), and Jermaine O’Neal (25 games) for participation in a melée during a game with Detroit Pistons on the Pistons’ home arena. This melée between the players and fans received considerable coverage and fanned players’ union protests as to its severity (McCallum, 2004). Stern made light of his powers, saying the vote on the penalties was “unanimous … 1–0.” The NHL, on the other hand, has had more difficulty increasing its popularity. A traditionally Canadian sport, which operated with just six franchises until 1967, it expanded rapidly over the last 20 years, resulting in a present total of 30 teams. Franchises moved or were awarded to a number of untraditional Sunbelt markets, such as Dallas and Phoenix. Gary Bettman has been commissioner since February 1993. A protégé of David Stern, Bettman came to the NHL from the NBA. His tenure has been marked by sluggish television ratings in the United States, a lack of marketable superstars, and a lack of success of franchises in key cities such as New York, Chicago, and Los Angeles. Since 1999, salaries have increased faster than revenues, and most analysts have concluded that league-wide, the NHL teams are losing money. For 2003–2004, the team losses ranged from $96 million (Ozanian, 2004) to $224 million (Snavely, 2005), the latter figure claimed by the league. Labor-management tensions over salaries resulted in a league-imposed lockout, resulting in the cancellation of the 2004–2005 season. In July 2005, the NHL and the National Hockey League Player’s Association (NHLPA) agreed to a new collective bargaining agreement which imposed significant salary controls.

Major League Baseball Thirty teams, 16 in the National League and 14 in the American League, make up Major League Baseball (MLB). The structure of MLB is somewhat

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different from the other sports, as its roots derive from a merger of two independent entities, the National League and the American League, in 1903. For decades, its governing document (known as the Major League Agreement) was akin to articles of confederation, rather than a unitary constitution. Before the mid-1990s, each of the leagues had its own president and staff. In a shift toward centralization, the league presidents have been eliminated and instead there is a vice-president and an executive council. The present governing document, the Major League Baseball Constitution, dates from 2000. It gives the commissioner “executive responsibility” for labor relations and maintains the power to take actions deemed detrimental to the sport. Like their counterparts in other leagues, baseball owners retain significant voting rights. To approve an expansion, a three-fourths majority of all member clubs in the league and a majority of clubs in the other league are required. The same ratios are required for the movement of a team. The owners also define the appropriate “home territory” for a particular team. For example, the Los Angeles Dodgers’ and the Los Angeles Angels’ territory includes Orange, Ventura and Los Angeles Counties. (http://www.mlb.com/NASApp/mlb/mlb/team/mlb_team_index.jsp). Bud Selig, an owner of the Milwaukee Brewers, became acting commissioner in 1992 (and commissioner in 1998) after the forced resignation of Fay Vincent. Selig is the first commissioner with a direct ownership interest (although his daughter runs the affairs of the Brewers). His term has been extended to 2009. Selig’s tenure has been marked by labor disputes, culminating in a 1994 strike that canceled the post-season, a newfound popularity due in part to greater long-ball hitting and the breaking of single-season home runs records, and criticism of what some consider a lax drug-testing policy. Major League Baseball exercises control over many minor league teams. Major League teams negotiate affiliation agreements with such teams, which serve as feeders for talented players going to the Major League club. Yet the minor leagues have constitutions and bylaws that delegate decision-making authority to a board of directors and league president. Some decisions, however, require ratification by Major League Baseball.

THE MAJOR CHARACTERS IN A TRADITIONAL LEAGUE STRUCTURE The Commissioner The scandal caused by a number of Chicago White Sox players accepting bribes to “throw” the 1919 World Series was the single event that

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led to the creation of an all-powerful commissioner to run baseball. As many fans know, eight players from the Chicago White Sox were accused, but never convicted, of accepting money to “throw” the World Series. As a morality tale, the story of players such as “Shoeless Joe Jackson” betraying the fans has been retold countless times. However, the “Black Sox” scandal was not the only reason for a drastic change of governance. At the time, baseball was run by a three-member commission, consisting of the presidents of the National League and American League and a third party, usually a team owner. In reality, the American League president Byron Bancroft “Ban” Johnson exercised the most power. The tripartite system was widely disliked, and many found this scandal an excuse to end the system and replace it with a more centralized authority. In November 1920, Kenesaw Mountain Landis, a federal judge who ruled in favor of what is now known as Major League Baseball in an antitrust case a few years earlier, was unanimously selected as commissioner by the owners. Shortly afterward, a charter setting forth the commissioner’s authority was drafted. On January 12, 1921, Landis told a meeting of club owners that he had agreed to accept the position upon the clear understanding that the owners had sought “an authority … outside of your own business, and that a part of that authority would be a control over whatever and whoever had to do with baseball” (Finley v. Kuhn, 1978). Empowered to investigate “any act, transaction or practice suspected to be detrimental to the best interests of baseball,” Landis (and future commissioners) had authority to summon persons, order the production of documents, and “determine, after investigation, what preventive, remedial or punitive action is appropriate in the premises, and to take such action either against Major Leagues, Major League Clubs or individuals, as the case may be” (MLB Constitution, Article I, sec. 2). This “best interests of the sport” clause has been a bedrock section of the NFL, NBA, and NHL league constitutions as well. On paper, it gives the commissioner the right to be a judge, jury, and appeals court in investigating alleged transgressions among owners, players, officials, and administrators. Before the rise of unions and collective bargaining agreements, the commissioner’s power was almost limitless. One court decision described Landis’s mandate as that of a “plenipotentate” (Milwaukee American Ass’n v. Landis, 1931), and during Landis’s term (1920–1944), he indeed ruled with an iron hand. He meted out discipline, sometimes ruthlessly, to maintain what he considered the integrity of the sport. That meant fining, suspending, and even banning players and owners for transgressions, which included gambling and other criminal activity.

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Even today, the disciplinary power of a commissioner is not to be taken for granted. For infractions and violations of policy during competition, the commissioner (or someone in the commissioner’s office) can impose fines and suspensions. Although limited by labor agreements, the commissioner still can mete out punishment, although the precise level of punishment varies among the leagues. In Major League Baseball, the fines are imposed by either Selig or Major League Baseball’s vice-president of on-field operations. For teams, the fines range to a maximum of $2 million for a team (MLB Constitution, Article I, sec. 3). Regarding player discipline, some leagues, like Major League Baseball and the NBA, have a grievance arbitration system in effect where a neutral party can determine the matter if the player appeals the ruling. However, under collective bargaining rules Stern has sole discretion over penalties for on-court behavior, and his actions cannot be appealed to a neutral party. In the NFL, Tagliabue also has broad disciplinary powers. In cases involving conduct detrimental to the league, he can suspend players without pay for a period he deems appropriate and also can fine them up to $500,000 (NFL Constitution, Article VIII, sec. 8.13). Only employees of the league hear appeals (NFL–NFLPA Collective Bargaining Agreement, Article XI, sec. 1). Because the owners elect commissioners, the commissioners frequently (although not always) serve as representatives of ownership interests. Often commissioners will work as part of an owners’ management committee. This committee may consist of representatives of all the teams or a smaller grouping. Although the commissioner has the disciplinary authority and often the final say on governance matters, the owners’ committee will often control decisions involving franchise relocation or the granting of new franchises. In those matters, the commissioner will take a back seat. Depending on the league, the management committee may control labor negotiations (as the case in Major League Baseball) or the commissioner may spearhead them (as in the NBA). Yet fans and even unseasoned journalists think that the commissioner is a lackey of the owners. Not necessarily. Each of the major league commissioners can fine and suspend owners. In 1990, the Yankees’ George Steinbrenner was suspended for 2 years by commissioner Fay Vincent for paying a known gambler $40,000 for information about Yankees’ player Dave Winfield (Weiler & Roberts, 2004). The commissioner runs a central “operations” office, which may include such duties as scheduling, hiring officials, marketing the league, controlling the intellectual property of the teams, negotiating nationwide broadcast and cable casting agreements, dealing with minor leagues, political lobbying, and interacting with other sports leagues or international sports governing bodies, particularly regarding Olympic eligibility (Cozzillio & Levinstein, 1998, p. 21).

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In short, establishing policy, marketing the sport, and building cohesion among the owners and players rank as the principal duties of a commissioner.

The Owners Each league has its own system of selecting team owners. Individuals, corporations, and limited partnerships constitute ownership in most traditional sports leagues. In the past, most owners were individuals; more recently, corporations like Disney and Fox took the reins of ownership—with mixed success. A few franchises remain family businesses. Some individual owners bear the mark of longevity—Connie Mack with the Philadelphia Phillies and George Hallas of the Chicago Bears come to mind. Others have been family dynasties, like the Griffiths (Washington Senators, Minnesota Twins) and the Maras (New York Giants). Certain owners, like the New York Yankees’ George Steinbrenner, have been hands-on managers, whereas others have been less conspicuous. More recently, corporate ownership has existed, as Cablevision (New York Knicks and Rangers) and Disney (Anaheim Angels) have purchased and owned franchises. Even celebrities have taken the ownership route. In past years, Bing Crosby owned small portions of two baseball teams, and Bob Hope once owned 11% of the Los Angeles Rams and a part of the Cleveland Indians (Downey, 2003). More recently, Jon Bon Jovi is an owner of the Philadelphia Soul of the Arena Football League. Often, a managing partner–limited partner relationship exists among many sports franchises. Limited partners usually invest a sum of money, hoping for a profitable return, but do not take an active part in the management of the team. But these investors often invest for the joy (or ego) or having an ownership stake in a major or minor league professional team, as well as for the profit potential. In some cases, limited partners get experience seeing the operations of a franchise, leading them to become managing partners of a team in the future. John Henry, a principal owner of the Boston Red Sox, once owned a small piece of the New York Yankees (Nethery, 2004). Given the autonomy of the traditional league structure, individual teams employ their own personnel—athletes and management—who are paid by that team, rather than by the league itself. Team responsibilities include negotiating stadium leases, practice facilities, local marketing and individual and season ticket sales; leasing luxury box seating; and negotiating local television and radio broadcast rights. Teams have the right to suspend, fine, and even terminate players for breach of contract or for conduct detrimental to the team.

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Players The one group that traditionally had little influence in professional sports governance has been the players. As employees, they occupy positions not as management, but as paid workers performing services for their teams. Until 35 years ago, they had little leverage in the negotiation of their contracts, primarily due to onerous rules like baseball’s reserve clause that depressed wages. Since that time, the players have made significant improvements in their labor contracts and have been active in asserting their powers. The number of strikes and lockouts and resulting favorable agreements with management attest to their power. Yet, even today, the player’s role in the management and operations of the league remains minimal.

COOPERATION VERSUS COMPETITION As we noted earlier, the four major professional sports leagues offer a system that features elements of cooperation as well as competition. A summary of the areas of cooperation follows.

Salary Structure No league has an entirely open market in which every player is a free agent with the freedom to jump from one team to another. Every league engages in salary control, and the nature of the restrictions varies from league to league. In the NBA, NFL, and most recently, the NHL, a salary cap structure prohibits “richer” teams from gaining competitive advantage by signing high-caliber players. Major League Baseball , lacking a salary cap system, employs a luxury tax method to control salary growth.

Equitable Draft Each of the leagues employs a system for drafting players. Usually the poorest performing teams have the right to get the best rookie players. That draft pick is an exclusive one for the team. In the NBA and the NHL, the draft replaced a territorial system whereby players living within a stipulated territory became the property of the team that played in that area. This produced skewed results. There were far more talented young hockey players in Quebec drafted by the Montreal Canadiens than were in the New York Metropolitan Area, where the Rangers played. This could be one reason why the Canadiens won

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more Stanley Cups—particularly in the 1940s and 1950s—than any other team.

Sharing of Merchandising Monies Each of the leagues has a subsidiary involving the sale of league-licensed merchandising. Chapter 12 deals with the subject in detail.

Sharing of Gate Receipts Often the sharing of monies from ticket sales between teams in a given league is limited. The NFL has the most equitable sharing: 60–40% with the home team receiving the larger amount. In the American League, it is 80–20. In the National League, it averages to 95–5 (although based on 42 cents per ticket). In the NHL, the home team does not share any of the gate receipts. In the National Basketball Association (NBA), the home team retains 94% of the gate, with the league receiving the other 6%. (Quirk & Fort, 1997, http://www.irs.gov/businesses/page/0,,id=7095,00.html#RevShare [retrieved January 3, 2005].

Sharing of Revenues From National Broadcasting and Cable Contracts The amount of broadcasting revenues shared between teams in a particular league varies. As of 2001, in the NFL, 59% of income from national TV deals is shared, whereas in Major League Baseball that amount is about 25% (Abrahamson & Farmer, 2001). This NFL revenue-sharing model, as noted earlier, was conceived in the early 1960s and became a brilliant success, “beloved worldwide and year after year of strong competitive balance” (Fisher, 2004). We discuss the revenue-sharing systems in more detail in chapter 6. The other leagues do share some revenue league-wide, although not to the extent of the NFL.

Restrictions on Franchise Relocation Each of the major leagues has limitations on the movement of franchises. Permission must be given by a vote of the other team owners, often in a so-called “maxi-majority” number, such as two-thirds or 75%. Because of legal challenges to team relocations in the 1980s, most team moves have not been seriously contested.

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Rules to Approve Ownership Changes and League Expansion Each league permits ownership changes and the creation of new franchises only by approval of the existing franchise owners.

FOSTERING COMPETITION The traditional league structure also fosters competition among the franchises. The reasons are as follows. Autonomy in Individual Team Operations. Each owner has discretion in operating his or her team. Because teams in each of the traditional leagues earn certain revenues not shared by other teams, the owners have the discretion to use that money for whatever purposes they deem fit. Team owners have the right to hire and fire personnel, usually without league interference, and can acquire players (although within applicable salary constraints and taxes, depending on the league). The teams can market their brand to their particular community in efforts to sell tickets and gain favorable publicity. Competitive Atmosphere. Even with salary caps or luxury taxes, a team owner has considerable discretion in hiring personnel. The leagues normally do not micromanage the owner in terms of personnel decisions, facility deals, and local broadcasting agreements. Because teams in the traditional leagues do retain control of at least some revenues (the amount varies by league), they can use those monies to find and contract with talented, and in many cases expensive, free-agent players. Often, the team mirrors the spirit of the community it represents, with all the hometown pride and competitive juices against teams from rival cities. Some fierce rivalries exist; probably the best example remains the New York Yankees and the Boston Red Sox.

DRAWBACKS Although the traditional league system remains a mainstay of professional sports, it has drawbacks. They include the following. Disparity of Revenues and Payrolls. Allowing teams to keep a large portion of their revenue produces franchises with uneven financial resources. At one time, the disparity was not as great because gate attendance served as the single most important revenue stream. Since the advent of television, the skew became greater, as fees paid for

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broadcast and cable rights varied greatly among large and small markets. As a general rule, owners in lucrative markets have more opportunities to field a successful team than those in smaller, less revenue-friendly areas. A common misperception is that high revenue streams guarantee success. Budding journalists should be careful not to fall into that trap. Examples abound of rich franchises spending money foolishly. The New York Rangers of the NHL serves as a case in point. The team, owned by the media conglomerate Cablevision, had the highest payroll in the NHL from 1998 to 2004, but had losing records and did not make the playoffs during that period (Enquist, 2005). However, a richer team has more leeway and greater ability to absorb high costs than a team that produces smaller revenues. The Specter of Antitrust Litigation. Individual owners, players, and players’ unions have used antitrust theory to institute lawsuits challenging many league policies and determinations over the last two decades. Antitrust cases have involved challenges to prohibitions of team relocations, age restrictions on athletes, and the imposition of labor rules. A series of court rulings in the 1970s concluded that the traditional league is susceptible to antitrust-law challenges. The result was a weakening of central league structure because of the fear of litigation. Although the leagues have emerged victorious in many cases, the time and cost of such litigation can be long and prohibitive. It is not necessary to get into the minutiae of antitrust law. Essentially, section 1 of the Sherman Anti-Trust Law, the basic statute on the subject, prohibits agreements in interstate commerce between two or more parties that “unreasonably restrain trade.” That means that if two or more entities (say, the large automobile manufacturers) get together and agree to limit sales of their cars to specific regions in the United States, that agreement would be an illegal restraint of trade. A key point is what “two or more” means. Let’s examine a hypothetical situation. League X has a franchise, the Ames Athletes. The franchise wishes to move from Ames, where it has played for 60 years, to the bustling new community of Beta, 500 miles away. The league requires a three-quarters vote of the owners to permit the move. Only two-thirds of them approve. If League X is a traditional sports league, the issue becomes whether a Sherman Act violation occurs. If a court concludes that League X is a single organization, no violation occurs. But if that court considers League X to be a confederation of independent businesses, a violation may have occurred, as two or more owners blocked the move. This question has generated considerable debate among both academics and legal

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practitioners. Nevertheless, some have argued that the court rulings in key cases involving the NFL, NBA, and NHL resulted in the weakening of league power (Roberts, 1984, 1988). Labor Issues. Each of the major leagues has suffered through strikes or lockouts with their respective players unions over the last 20 years. These actions often resulted in bad publicity, with a decrease in attendance after settlement. Traditional leagues cannot simply impose salary caps and other controls on compensation because of collective bargaining rules, and even if no union exists, such acts could run afoul of the antitrust laws. Chapter 6 discusses this subject in detail.

THE ALTERNATIVE: THE SINGLE-ENTITY MODEL In the 1990s, newly created sports leagues have eschewed the traditional system in favor of a far more centralized one. The concept, known as a “single-entity” league, creates a unitary entity, which, according to its advocates, makes governance easier and negates the threat of antitrust litigation. The “single-entity” league, if created properly, avoids costly and time-consuming litigation because as a “single entity” its decisions would be not be subject to antitrust challenges. Basically, this structure is a shield against the use of antitrust lawsuits by owners and players. In a single-entity league, owners own stock in the league, which would be a for-profit corporation. The principal common feature of all single-entity leagues is one central entity with which all players in the league contract, and which in turn allocates talent to the respective teams. Such a league consists of investors who buy shares in the league, rather than owning a particular team in the league. These investors, in return for their investment, have the right to operate individual teams and have limited autonomy in running those teams, which includes local promotions and marketing. In the middle to late 1990s, single-entity leagues were popular. The three most notable single-entity leagues were Major League Soccer (MLS), the Women’s National Basketball Association (WNBA), and the Women’s United Soccer Association (WUSA). Other single-entity leagues have included the Major Indoor Lacrosse League (MILL), the World League of American Football (WLAF), the Continental Basketball Association (CBA), and the now-defunct American Basketball League (Lebowitz, 1997). The key advantage is direct and centralized management resulting in quick decisions. For example, in 1996, Major League Soccer had

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problems in its Tampa Bay franchise. Problems of financial mismanagement occurred, as the finance director embezzled hundreds of thousands of dollars in ticket sales. MLS fired the offending individual and reorganized the team’s front office to prevent these acts from occurring in the future. In a traditional league, the team owner, not the league, had to take such action. Although in theory the commissioner of the traditional league could sanction the owner for acts detrimental to the sport, such a determination would be unlikely unless the actions were egregious. The advantages of a pure single-entity league include: Unilaterally Imposed Salary Minimums and Maximums. The league may impose salary caps unless the players unionize and engage in collective bargaining negotiations. In a single-entity league, the directors can decide on salary restraints by fiat and don’t have to worry about conflicting ownership interests. If the players organize a union, the negotiations with the players can, theoretically, be smoother, for the same reason. “Pure” Sharing of Profits. As stated earlier in the chapter, no traditional league shares all profits. A single-entity league shares all profits and expenses equally, regardless of the size of the market. Competitive Parity. Because of the salary structure and the control of player trades, the league ensures that one or two “rich” teams won’t dominate the sport. Fewer Problems With Team Relocation. If a team is not profitable, it affects every owner, and relocation is easier. The league directors can decide to move the team, with little objection from the manager running the team. Franchise Expansion Is Easier. If the league feels a viable business opportunity exists, it can create a new franchise far more quickly than in a traditional league. No owner is needed, and fees from ticket sales, stadium deals, and broadcast agreements can be drawn into the coffers of the league for all the investors to share. More Innovative Agreements With Television Networks, Cable Companies, and Sponsors. Because these leagues are younger and do

not involve individual team ownership, broadcast and cable rights agreements are simpler to negotiate and can be based on different revenue models than the traditional league “rights fee” arrangement. In a single-entity league situation, the league may either buy the time from

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the network or enter into a co-sponsoring agreement whereby revenues are split in some manner. No Antitrust Problems, as the League Is One Business. This is probably the single biggest reason for the implementation of this model. It avoids complex, time-consuming and expensive litigation.

Yet the existing single-entity leagues have some significant structural problems. These include: Lack of Owner Autonomy to Make Innovative, Locally Oriented Decisions. Because each investor is a shareholder in the league, the au-

tonomy to make such decisions with regard to team personnel, salary structure, and overall management is severely compromised. All major decisions come from the league office, even if they involve mundane matters that would not occupy the time of a traditional league office. This may stifle creativity and limit the ability of franchises to make decisions based on the particular aspects of their given markets. Restrictions on Sale and Relocation. Owners of teams in traditional leagues have sold or relocated their teams for a potential improvement in business opportunity. A single-entity league can easily block sale of the investors’ stock and can prevent the movement of an existing team. Note that it’s not as important to the single-entity league for a particular team to “find” a better market, because the value of the investment is more dependent on the financial value of the league as a whole, rather than that of a particular team. Less Incentive to Improve the Product. The goal of many owners in a traditional league is to produce a winning team, even a dynasty. In the case of a single-entity league, a dominant team or two may hurt the league, and the investors may take steps to weaken the team by forcing player trades to preserve parity for other teams. That kind of action may anger fans of the dominant team and create a backlash. In such a structure, the owner-investors may not have as much of a “winning attitude.”

In part due to the problems just described, none of the present socalled “single-entity” leagues are pure single entities. Rather they are hybrids, primarily because of the difficulties in finding investors to support an organization in which their individual rights are limited. When covering these organizations, journalists should ask about the status of the league and not simply rely on statements claiming “single entity.” To demonstrate the complexity of the “single-entity” structure, we next examine Major League Soccer (MLS) and the WNBA at the time of their inception, and review the recent changes that the WNBA underwent.

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MAJOR LEAGUE SOCCER Many writers have referred to MLS as a single-entity league. However, under a purist definition this is not true. When the league was conceived, its creators sought true single-entity status. It would solicit investors (“investor-operators”) to contribute as shareholders in the league, and the league would oversee all policies and would centrally control all earned revenues (Weiler & Roberts, 2004). MLS revenues would pay all costs incurred by each team for players, staff, stadium leases, and travel. Any profits would be distributed as dividends to the investor-operators, similar to the way a standard corporation operates. Under the original proposal, investors would contribute a $5 million fee into a pool with other investors. This pooling arrangement gave the investors minimal control over their contributions. Ultimately, the idea proved unsuccessful in attracting the required amount of capital needed to fund the league. An altered business model resulted, combining elements of a pure single entity and a more traditional league. This meant seven investor-operators each contributed a $5 million fee and received a special class of stock to operate seven teams in major cities. The other three teams were owned and run by the league. Since then, two more teams have been added, which are also operated by owner-investors. Despite the semi-autonomous nature of the majority of teams, the MLS system does have a very centralized approach. All investors are represented on the MLS management committee, the functional equivalent of a board of directors. The management committee hires, fires, and trades players. It also controls player trades, owns all MLS trademarks and copyrights, executes all stadium leases, and controls all radio broadcast rights, advertising, and sponsorship agreements. The investor-operators, however, are responsible for negotiating local sponsorship and broadcast agreements for their own teams. How well this system works is a matter of debate. Spectator soccer is a secondary sport in the United States and Canada, and MLS has, by most standards, lost money (Hannigan, 2004). But although it is not thriving, it continues to function. The reason is that MLS has been able to impose salary restraints, and the right to do so has been upheld by two federal courts, which rejected antitrust challenges to MLS’s salary restraints (Fraser v. Major League Soccer, 2000, 2002). Recently, it has had more favorable publicity due to the star status of some of its top players (Fisher, 2003).

WNBA The Women’s National Basketball Association (WNBA) was formed in 1997. Although not the first women’s professional league, nor even the

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first women’s professional basketball league (the defunct American Basketball League has that honor), the 8-team league had the advantage of the publicity and the marketing juggernaut of its venerable brother, the NBA. The WNBA’s original business plan tried to use the NBA’s large number of season ticket holders to its advantage by trying to sell itself to those ticket holders. That marketing did not prove successful. The WNBA estimated that a large portion of its fans would come from NBA season ticket holders, but that did not turn out to be the case. Only 10% of its fan base came from that source. The base became women aged 18 through 49 years and their children, particularly their daughters (Heath, 2003). The WNBA was originally conceived as a single-entity league. All the 29 NBA teams owned an equal share of the women’s league and shared in the WNBA’s costs and losses. The league was run by a board of governors representing the investors. Sixteen WNBA teams played in NBA cities and were operated by the NBA teams, arguably an advantage over the teams from non-NBA cities. As in the case of MLS, the advantage was the unitary policy that can result in salary restrictions and centralized control over all operations. By 2002, the WNBA’s board of governors, faced with stagnant or declining attendance and lack of profitability, the folding of two franchises (one of which was in Miami, a city with an NBA team), and the relocation of two more teams (one moving from Orlando to play at a gambling casino in Connecticut), was forced to significantly change the league’s structure. In what amounted to an admission that the governance system failed, the board eliminated the single-entity organization and allowed individual owners to buy teams and assume the financial risk. One important reason for the change was the potential value increase of the franchises. If the WNBA became a traditional league, an incentive would exist for an owner to sustain short-term losses to make the team competitive so that team’s value would increase. The purchase of the Orlando Miracle by the Mohegan Tribe (a Native American tribe that owns a gambling casino in Connecticut) for a league record $10 million confirmed the benefits of individual team ownership. The WNBA experience illustrates the possibility that the overemphasis on centralized control and the lack of competitive owners may ultimately doom the 1990s experiment with single-entity leagues. Although the traditional league possesses elements of a cartel, the single-entity league displays an idealistic but impractical cooperation model. Also, the creation of a business model for the primary purpose of providing a legal defense against antitrust lawsuits does not result in economic success. What may work as a legal tactic does not result in a

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positive bottom line. It will be interesting to see how future leagues organize and whether MLS continues its present system. At the time of this writing, the WUSA, the defunct women’s professional soccer league, originally structured as a single-entity league when it debuted in 2001, has attempted a comeback as a traditional league.

INFORMATION CHECK When covering organizational issues involving a professional sports league, a journalist should determine: 1. Is the league a traditional league, a single-entity league, or a hybrid? 2. Who runs the league and what governance powers does that person or group have? 3. Which ownership structure is utilized by a particular team? Corporation? Limited partnership? Sole owner? 4. What rules exist regarding procedures for expansion of franchises? Relocations? 5. How does the league investigate prospective team owners? 6. If the league is a single entity, how is the stock ownership structured? How “pure” is the single entity? 7. What are the backgrounds, terms, and salaries of league officials? 8. Who possesses the disciplinary powers for on- and off-field incidents involving owners, team managers, or players? Is there any right of appeal and if so, to whom?

REFERENCES Abrahamson, A., & Farmer, S. (2001, May 13). NFL ledgers reveal profits depend o n n e w s t a d i u m s . L o s A n g e l e s T i m e s [ o n l i n e ] . Av a i l a b l e a t www.latimes.com,ID0010040338. Allen, P. (2004, February 10). David or Goliath? Stern turned around a league, but some see him as a dictator. Seattle Times, p. C6. Badenhausen, K. (2004, December 10). Special report: The business of basketball. Forbes. Retrieved May 30, 2005, from www.forbes.com/2004/12/08/04nbaland.html Bloom, H. (2004, January 20). Sports Business Journal. www.sportsbusinessjournal. com. Cozzillio & Levinstein (1998). Sports law. Durham, NC: Carolina Academic Press. Downey, M. (2003, July 29). Hope’s legacy goes beyond making sport. Chicago Tribune, p. 1. Enquist, E. (2005, July 18) Skating on thin ice; Rangers must win back fans after strike, 7 losing seasons. Crain's New York Business, p. 3. Finley v. Kuhn, 569 F.2d 527 (7th Cir. 1978).

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Fisher, E. (2003, November 30). MLS lures new investors. Washington Times, p. C05. Fisher, E. (2004, February 22). NFL to re-examine successful revenue-sharing plan. Washington Times, p. C05. Fraser v. Major League Soccer, 97 F. Supp. 2d 130 (D. Mass, 2000), affirmed 284 F. 3d 47 (1st Cir. 2002). Hannigan, D. (2004, April 29). Football: Not much Adu leaves America waiting: 14-year-old prodigy has not revolutionized US soccer just yet. Manchester Guardian, p. 34. Harrow, R. (2004, January 21). NFL—$5 billion annual business. Retrieved June 28, 2005, from www.nclax.net/sports%20Business012104_NFLBusiness.html Heath, T. (2003, April 1). WUSA, WNBA’s plan: To market, to market; Timing, new audiences key to success. Washington Post, p. D01. Lebowitz, L. (1997, April 20). Sports Inc. Leagues are forming as “single entities” where decision and profits are shared by all owners. Ft. Lauderdale Sun-Sentinel, p. 1F. Markiewicz, D. (2004, February 24). Gatorade pours $500 million into NFL. Atlanta Journal-Constitution, p. 2C. McCallum, J. (2004, November 29). The ugliest game. Sports Illustrated, p. 44. Milwaukee American Ass’n v. Landis, 49 F.2d 298 (N.D. Illinois, 1931). MLB Constitution, Article I, sec. 2, Article I, sec. 3. (2000). Retrieved July 1, 2003, from http://www.mlb.com/NASApp/mlb/mlb/team/mlb_team_index.jsp Nethery, R. (2004, September 27–October 3). Limited partnership, unlimited goals—Investors in pro teams spend big for a small piece of the action. Street & Smith’s SportsBusiness Journal, p. 19. NFL Constitution and Bylaws. Sec. 3.1, 3.2, & 8.13, found in Weiler, P., and Roberts, G. (2004), Statutory and Documentary Supplement to Sports and the Law (3rd ed.), p. 65. St. Paul, MN: West. NFL–NFLPA collective Bargaining Agreement. Retrieved January 15, 2005, from www.NFLPA.org/members/mnl.asp?/subpage=CBA&complete Ozanian, J. (2004, February 29). Pro hockey is hemorrhaging money. But owning a team is still good business. Forbes, p. 124. Quirk, J., & Fort R. (1997). Paydirt: The business of professional team sports. Princeton, NJ: Princeton University Press, p. 101 Roberts, G. R. (1984). Sports leagues and the Sherman Act: The use and abuse of Section 1 to regulate restraints in intra-league rivalry. UCLA Law Rev. 32:219, 241 n. 72. Roberts, G. R. (1988). The evolving confusion of professional sports antitrust, the rule of reason, and the doctrine of ancillary restraints. S. Cal Law Rev. 61:943, 954 n. 34. Rodack, J. (2004, August 6). Trade on their name and the NFL will come calling. Florida Times-Union, p. B-1. Rovell, D. (2004, January 22). How Stern showed NBA the money. Retrieved February 17, 2005, from http://spurs.espn.com/NBA/columns/story?id=1714434 Sharing of league gate receipts (n.d.). Retrieved January 3, 2005, from www.irs.gov/businesses/page0,,id=7095,00.html#RevShare Snavely, B. (2005, February 21). Match penalty; labor experts look at where NHL talks went offside. Crain’s Detroit Business, p. 1. Weiler, P. C., & Roberts, G. R. (2004). Sports and the law (3rd ed.). St. Paul, MN: West. Witz, B. (2004, November 6). If money is there, NFL players to seek fair share. Los Angeles Daily News. Retrieved June 28, 2005, from www.dailynews.com/stories/ Q,143,200%257E29554%257E2518421,00.html

CHAPTER

2 The Structure of Individual Sports

While professional team sports leagues involve similar governance systems, the business operations of individual sports differ greatly among themselves and from the league paradigm. Often Byzantine, an individual sport’s decision-making structure, compensation, sponsorships, and tournament characteristics are not easy to determine and do not receive the amount of coverage that team sports governance does. At one time, individual sport competition was limited to amateur athletes. Until the 1960s, professionals were generally prohibited from competing in leading tennis and golf tournaments. At that time, a “professional golfer” meant someone who taught golf in a country club. In the modern era of “open” competition, few, if any, of the top tournaments are closed to professionals. To gain an understanding of the organizational structure of individual sports, it is crucial to understand the basic characteristics of individual sports competition and the organizations created to regulate it. 22

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TOURNAMENTS AND TOURS In the world of individual sports the central mode of competition is a “tournament” or “event.” Although a team-based league like the NBA schedules and controls all matches, preseason games, and playoff series, individual sports events are often conceived and promoted by an independent owners or presenters, with the backing of one or more sponsors. Frequently these parties create the event, obtain a venue (if they do not own a facility), and offer prize money to entice individual athletes to compete. The producer is responsible for the event’s ticketing, parking, and security, and receives revenues derived from ticket sales, parking, concessions, sales of licensed products, and, in many cases, broadcasting rights. Sponsorships are central to event presentation, because the fees paid help defray the costs. Sponsorships vary, and the types of arrangements range from expensive naming rights (where the sponsor often earns some revenue), to more modest promotions like sponsored entertainment and the right to demonstrate a product during the event. From the point of view of the sponsor (usually a business), the sponsorship offers opportunities to communicate with current and future customers and to generate favorable goodwill. Sponsors utilize a full range of marketing techniques, including advertising, personal selling, sales promotion, and public/community relations. Generally, sponsorships are divided into two categories: primary sponsors and secondary sponsors. The primary sponsor often makes a long-term financial commitment to the event and sometimes receives a stipulated percentage of the gross revenues. That sponsor will often have “title rights” to the event. An example would be the “Buick Classic” golf tournament. Sometimes the term primary is eschewed in favor of “presenting sponsor,” which also receives title rights. Although primary sponsors play a crucial role, secondary sponsors may also be solicited, especially if the tournament has a track record of success. Sometimes known as “official sponsors,” secondary sponsors may be entitled to some (although more modest) percentage of revenues, but more often exposure is key. Although primary or presenting sponsors pay for the “title sponsor” association with the event, the secondary sponsors may not pay fees, but provide free lodging, transportation, or clothing. This system results in a very diffuse series of events. Unlike a professional team sport whose events remain under its league’s control, most organized individual sports lack direct control from its governing body. Every sport has such a body, such as NASCAR or the Professional Golfers Association Tour (PGA Tour). These organizations sanction

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tournaments, and without that sanction an event producer and sponsor lack legitimacy. In an attempt to gain more control over events, sports organizations attempt to establish a “tour” or a “series.” This is done in NASCAR with its Nextel series (formally known as the Winston Cup). A series of events increases the brand identification of the organization and requires producers to pay certain fees to the organization and, more importantly, surrender broadcast rights to the “tour” to the organization (e.g., NASCAR). The tour gives the organization more control over eligibility by imposing a ranking system and gives control over scheduling, so that the tour events are in a certain sequence. Finally, the organization often will choose or approve the officials for the event (Cozzillio & Levinstein, 1998).

INDIVIDUAL SPORTS ATHLETES ARE NOT EMPLOYEES Athletes who compete in tournaments sanctioned by the organization are independent contractors, not employees. That means that participating athletes are not employees of NASCAR, the PGA, or the United States Tennis Association (USTA), and, unlike their counterparts in the NFL or the NBA, these individual athletes must absorb the considerable expenses of training, travel, and lodging. In addition, the athlete does not enjoy union benefits because no unionized players’ associations exist to bargain for wages and working conditions. This financial responsibility imposes hardships. Touring costs are considerable, and a young or lower-ranked athlete may have to pay those costs (travel, hotel, or equipment) out of pocket. On the other hand, top-ranked individual athletes often have endorsem*nt agreements that give them the financial means to travel (with the costs of equipment and clothing paid for by the endorsing company). The method of compensation differs between team athletes and individual athletes. Team athletes, as employees, are paid based on a contract individually negotiated and (where a union is involved) subject to the collective bargaining agreement between the players’ union and the particular league. Whether the team wins or loses, the player receives a paycheck, with taxes deducted. As an independent contractor, the individual athlete receives prize money based on his or her success in the tournament. Fees are generally calculated by the tournament’s producer or, in the case of a tour, with input from the sanctioning organization. The major exception to the success-based payment system is the practice known as appearance fees. Defined as a sum of money to en-

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tice an athlete to come and play at a tournament, appearance fees have had an “under-the-table” quality. Often unpublicized by the tournament presenter or the sanctioning organization, appearance fees may, in some minds, negate an incentive to win. On the other hand, valid business reasons exist for a presenter to pay appearance fees. The participation of a top-ranked athlete to a tournament often stimulates public interest, resulting in increased publicity, media exposure, and ticket sales. For example, if a presenter pays $200,000 for an athlete to appear, but that results in a $500,000 increase in revenues, the appearance fee results in a very profitable return. This not only contributes to the increase in revenue, but also lays the groundwork for the continuation of the tournament in the future and the possibility that more top-quality athletes may participate (without the need for appearance fees) (Cozzillio & Levinstein, 1998). Journalists covering a particular tournament—especially a relatively new event—should ask whether an appearance fee was paid as consideration for a well-known player to participate.

SCHEDULING A team player plays a set schedule of games per season. His or her unexplained and unjustified failure to do so results in a penalty by the team. Individual athletes, on the other hand, make their own schedules. They are not required to play in every tournament in a given season. Although certain sports may require participation in a specified number of matches to maintain ranking, an athlete with enough clout can hold owners and presenters of matches hostage by picking and choosing the events the athlete plays. Although only a very, very few achieve this kind of power, those who do achieve it possess a great advantage. Individual athletic bodies often compile this kind of record, and journalists should look to compare the number of events particular athletes participate in.

RANKINGS Instead of standings, individual athletes are ranked. The ranking system quantifies the athlete’s success, thereby creating fan interest in a particularly successful athlete. Ranking also serves to retain competitive spirit and to increase athlete winnings in competition and/or endorsem*nt deals. Ranking systems vary from sport to sport, but because individual sports lack a “playoff ” structure, ranking is the only way to assess the success of a particular athlete. It is one thing to say that player X is a great player who won two tournaments in the last

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three months. It’s more effective to give that player a number one ranking. It gives the player a “seal of approval” of that success. High rank has an important effect on endorsem*nt contracts. If an athlete maintains a particularly high ranking, the endorsem*nt agreement often mandates that the athlete receive a bonus or extension of the contract, or both. Additionally, a high rank results in greater demand for that athlete by owners and tournament presenters, with the possibility of large appearance fees (when allowed). The ranking system, however, is far from perfect, and some of the problems are similar to those of ranking NCAA Division I-A college football teams for late-season bowl games. The ATP (the men’s tennis tour), for example, has a ranking system that does not “penalize” a player if he does not play well. The system only helps a player who won or placed well in tournaments. Thus, a skewed result occurs, because a top player’s early elimination in 2 of 15 tournaments played in a given season does not negatively impact his ranking. Significantly, for presenters and sponsors, the ATP’s ranking system encourages male players to play more tournaments without threat to their rank and resulting endorsem*nt deals. The PGA and LPGA both have the winnings, scores, and positions of major players available at http://www.pga.com/tournaments/money-leaders/. The USTA has the rankings (within the top 500) of each player available at http://dps.twiihosting.net/usta_master/usta/doc/content/doc_13_2442.pdf?1/ 27/2004%209:22:19%20PM (men) and http://dps.usta.com/usta_master/ usta/doc/content/doc_13_4815.pdf?3/9/2004%207:41:13%20PM. For NASCAR, the source is http://www.nascar.com/kyn/nbtn/.

EXAMPLES OF INDIVIDUAL SPORTS GOVERNING BODIES Although many such organizations exist, we focus on the organizational structure for three well-known individual sports: automobile racing, tennis, and golf. However, journalists covering other sports in detail should find as much information as possible about the structures of a given sport. The availability of information on the Web makes research easier, but still not simple, especially for lesser known sports. As you read through the following examples, note the considerable differences in their organizations.

NASCAR The organizational structure of the National Association for Stock Car Auto Racing (NASCAR), the central organization overseeing stock car racing in the United States, is unique because one family has domi-

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nated the organization since its inception in 1947. William Henry Getty “Bill” France, Sr., brought together racing promoters throughout the southeastern region of the United States and created a unified organization in an attempt to “legitimatize” the sport, which had a sordid reputation derived from the days of dirt track racing by rum runners. France was a racer and understood the need for an organization to establish rules of competition and meet the needs of drivers, car owners and track owners (Hangstrom, 1998). NASCAR has achieved phenomenal success, in large part due to France and other family members who guided the organization over the last half century. The sport moved from dirt tracks to paved state-of-the-art racetracks located throughout the United States. NASCAR expanded the reach of the sport from a regional one to a nationally recognized brand with lucrative television contracts and $2 billion in revenues. In 2003, NASCAR reached a 10-year, $750-million sponsorship deal with the wireless company Nextel, at that time the most expensive package ever for a U.S. sports property. In addition, NASCAR consolidated a fragmented licensing business to one now worth about $2 billion a year. NASCAR currently has a $2.8 billion television rights deal with Fox, NBC, and Turner. NASCAR has also been able to receive revenues from racecar advertising requirements. Many of the ads on these vehicles—especially in key sections of the car—are NASCAR approved. Part of this success came from the changing demographics of NASCAR’s audience from a regionally based, white, male, working-class grouping to a more family-based and nationwide one. As of 2003, 42% of race fans have an annual income of over $50,000 (phone interview with Bob Pockrass, April 26, 2004). The same could not be said 52 years ago when the fan base primarily consisted of farmers and bootleggers (co*kley, 2001). When Bill France, Sr., retired in 1972, his son Bill, Jr., became president. He remained at the helm until 1998. Mike Helton became the first non-family-member president in 2000, and in 2003, Bill France, Jr.’s son Brian became chairman and CEO. NASCAR’s five-member board remains solidly under the control of members of the family. This arrangement is unusual, as there are few sports organizations (not including particular teams) that maintain such family control. NASCAR utilizes a complicated point system to determine success. The winner of a NASCAR race pockets 180 points. For places 2 through 6, the totals decline in 5-point increments. For positions 7 through 11, the points awarded drop 4 points, then 3 point for finishers in 12th place or lower. Similar point totals are awarded to owners. Racing fees and bonuses are based on a complex formula that factors in performance,

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past performance, and bonuses. More information is found on the NASCAR Web site, http://www.nascar.com/kyn/nbtn/.

Tennis In contrast to the power of NASCAR, the structure of tennis is quite diffuse. “Tennis is the only major professional sport in this country that does not have a governing body solely dedicated to the sport,” said Arlen Kantarian, chief executive of professional tennis at the U.S. Tennis Association, as quoted in the SportsBusiness Journal (Kaplan, 2001). One might think the USTA would be that body, but in reality it possesses relatively little power. The USTA owns and runs the U.S. Open, the leading U.S. tennis tournament and one of the four “Grand Slam” events. It also organizes and manages grass-roots tennis programs and oversees the selection of U.S. team in the Davis and Fed cups. The USTA also runs a “professional circuit” for the development of professional players, allowing these players to gain the experience and ranking points necessary to qualify for the grand slams. In additional to the U.S. Open, the USTA owns the men’s clay court championships and the women’s hard court championships (http://www.USTA.com). The limited powers of the USTA result in a professional tennis structure consisting of a hodgepodge of various organizations with different jurisdictions. Players’ groups, tournament owners, and sponsors have more control. Companies such as IMG and Octagon frequently own tournaments, and at the same time represent players, as well as sit on the tour boards. In addition to the USTA, tournament owners, and presenters, separate governing bodies exist that represent men’s and women’s tennis players. The ATP is the governing body for men’s tennis. It sanctions about 70 events and works in the players’ interest. Essentially, it sets rules regarding prize money and tournament qualification. It also allows management companies to sit on its board of directors. The ATP permits and encourages the use of appearance fees, a practice that has drawn criticism. The Sony Ericsson WTA (Women's Tennis Assocation) Tour is the women’s counterpart. Similar to the ATP in structure, the WTA sanctions about 60 events. However, the WTA prohibits appearance fees (Smith, 2000). The 6-year, $88-million sponsorship agreement made in January 2005 is the largest such deal in the history of women’s sports. In the summer of 2004, sensing the need for more presence in the tennis landscape, the USTA started a 6-week tennis season known as the “U.S. Open Series.” It includes 10 ATP and WTA Tour professional tournaments in North America leading up to and linked to the U.S.

THE STRUCTURE OF INDIVIDUAL SPORTS

Open. The series offers the potential for the top three men’s and women’s finishers to earn up to $1.3 million in U.S. Open bonus prize money. The top men’s and women’s finishers of the series get 50% more of whatever they win in singles in the U.S. Open. The second-place finisher receives 25% more, and the third-place finisher will receive 10% more (http://www.usopenseries.com/). To add to the mix, while the USTA runs the U.S. Open, other organizations govern the three remaining Grand Slam events: Wimbledon, the French Open, and the Australian Open.

Golf Founded in 1916, the Professional Golfers’ Association (PGA) has served as an umbrella organization for the sport. Presently, the PGA works as a trade association, promoting the game to people of all ages and skill levels (http://www.pga.com/home/pgaofamerica/about-the-pga.cfm). The PGA Tour, once a part of the PGA, but independent since 1968, represents professional male golfers who play more than 100 “official-money” tournaments. The PGA Tour split from the PGA in 1968, so that the players could gain more control of their financial benefits and tournament schedule. Although the two organizations work closely together today, the PGA Tour and PGA remain separate entities (Gabriel, 2001). Tour players compete on one of three levels: the PGA Tour (for the very best players), and the Champions Tour and Nationwide Tour for good players not quite to the level of the PGA Tour. Although the original PGA is less involved in professional competitions, it still sponsors four major golf events: the Ryder Cup, the PGA Championship, the Senior PGA Championship, and the PGA Grand Slam of Golf. In 1994, Timothy W. Finchem became the PGA Tour’s third commissioner. The next year he undertook a restructuring program designed to strengthen its competitions, (which is the PGA Tour’s core business), to expand the PGA Tour’s international scope, and to prepare it to enter the 21st century. Due in part to its present TV deal, the PGA Tour has been enjoying a financial bonanza. TV revenue for 2004 was projected to climb nearly 42% from 2002—the last year of the old contract—to $229.8 million. Even the 125th-ranked player in terms of tournament winnings may earn $500,000 in official prize money. Like Michael Jordan in the NBA, the tour has its superstar, Tiger Woods. In the late 1990s and early portion of this decade, Woods boosted TV ratings and increased public interest in the game. Tournaments became media events.

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The Ladies Professional Golf Association (LPGA) serves as the umbrella organization for women’s competitive golf. Despite a talented pool of players, the LPGA does not command the popularity or the sponsorship of its male counterpart, and therefore only obtains a fraction of the prize money of the PGA Tour. The group also lacks a comprehensive network television contract and receives a fee only from the tournament sponsors. Most of the LPGA’s media deals involve splitting of profits, rather than a predetermined amount up front (Cassidy, 2001).

INFORMATION CHECK When covering business issues involving individual sports, a journalist should determine: 1. What is the scope of the organization’s power over the sport? 2. Is the event in question run by the organization or by independent sponsors? 3. Does the organization permit professionals and/or amateurs to play? 4. What are the eligibility rules? 5. How are rankings calculated? 6. What disciplinary powers does the organization have over its members? Is there a right of appeal? 7. Who owns the broadcast rights to the event? 8. Are there primary and secondary sponsors for the event? 9. Are appearance fees allowed?

REFERENCES Cassidy, H. (2001, January 22). LPGA’s Durkin focused on new messaging. Brandweek, p. 58. co*kley, M. A. (2001). In the fast lane to big bucks: The growth of NASCAR. Sports Law Journal, 8:67. Cozzillio, M., & Levinstein, M. (1998). Sports law, p. 48. Durham, NC: Carolina Academic Press. Gabriel, M. (2001). The Professional Golfers’ Association Tour: A history. NC: McFarland. Hangstrom, R. G. (1998). The NASCAR way: The business that drives the sport. New York: John Wiley & Sons, Inc. Kaplan, D. (2001, August 27). Can tennis mend its fractured world? Sports Business Journal, p. 23. Smith, D. (2000, November 15). Williams calls for appearance fees. USA Today, p. 2C.

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3 The Structure of College and High School Sports

Many, if not most, institutions of higher education have sports programs allowing intercollegiate competition. Often, colleges and universities place considerable importance on their sports programs because a school with a successful program gains a number of tangible benefits. One benefit is the sheer joy of victory. Winning boosts the morale of team members and their respective school, and a cohesive school spirit and camaraderie often results. Other benefits center on economics. Success often translates into increased donations by alumni. Also, success leads to the branding of the school as a top competitor to a potentially nationwide audience. National attention tends to raise awareness of a school’s programs and expands the pool of potential applicants. A frequently cited example is Boston College (BC), a respected Jesuit institution. In 1984, BC quarterback Doug Flutie won the Heisman Trophy and the national championship on a late “Hail Mary” pass. The 31

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following year, applications to Boston College increased 25%. This result became known as the “Flutie effect.” Yet some people question the “Flutie effect.” A survey by The Chronicle of Higher Education concluded that among 21 goals for colleges, “playing athletics for the entertainment of the community” was found to be the least important. Other goals, such as preparing students to be future leaders and presenting cultural events, were deemed more important. Only 35% of respondents said sports were somewhat or very important for colleges (Scruggs, 2003). Collegiate athletics are often associated with profitability for the schools served—a major misconception. Athletics expenses have outpaced revenues in Division I-A (the top division in the collegiate system) throughout the 1990s and early 2000s, even among conferences that comprise the lucrative Bowl games played to national television audiences. The study noted only one athletic conference where schools averaged a profit during the 10-year period of the study. Athletics expenses gobble up revenues (Sylwester, 2004). As for their professional counterparts, an umbrella body governs collegiate sports. However, with thousands of schools and dozens of sports, the regulatory structure of collegiate sports is more complex and more controversial. The chief regulator is the National Collegiate Athletic Association (NCAA). Many writers, administrators, fans, and athletes have criticized the NCAA’s policies. Before any journalist takes out a rapier pen or engages in a verbal attack, that reporter should have at least a working knowledge of the NCAA goals, policies, and the scope of its powers. The NCAA exercises jurisdiction over many different college sports, from golf to swimming. The so-called “big-money” sports, Division I-A football and college basketball (male and female), are only a small portion of its mandate. Essentially, the NCAA system creates a social contract: “student-athletes” participate in intercollegiate sports, receive an education, and often (but not always) receive a partial or full scholarship to an institution. In return for these benefits, student-athletes are bound to accept a series of restrictions to maintain their “amateur” status. For many of the 360,000 student-athletes involved, this system works well. For college students talented enough to play a sport on a competitive level, the opportunity to play intercollegiate sports (often with an accompanying scholarship), under fine coaches and in up-to-date facilities, coupled with the opportunity to receive an education, is a wonderful experience. The difficulty with the system involves student-athletes at a minority of schools in a very small number of sports.

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INSTITUTIONAL CONTROL The NCAA was formed in 1906, as a result of President Theodore Roosevelt’s concern over the high number of injuries and deaths in college football. The NCAA is not a governmental agency, despite the fact that public universities are part of its membership. The NCAA’s nongovernmental status weighs significantly in the organization’s procedures and gives it considerable latitude in enforcement. The organization seeks to “maintain intercollegiate athletics as an integral part of the education program and the athlete as an integral part of the student body” (http://www.iupui.edu/~athlete/handbook/ rules.html, 2004). Its principal goals are to promote intercollegiate athletics, administer national championships, and maintain integrity and standards of fair play. Although the NCAA employs personnel to enforce its complex rules, it is neither a police force nor a district attorney. It mandates that member institutions report violations, and failure to report results in even greater punishment based on its internal rules and regulations. This concept, familiar in academic circles, is known as “institutional control.” Every 5 years an NCAA institution must conduct a self-study on its methods for controlling collegiate athletics. The study includes the governance of the institutions and the roles of the president, athletic director (AD), and compliance officers, and issues of fiscal responsibility, academic rules, and gender equity. Problems often occur when institutional control breaks down. A particularly sad example of the breakdown of institutional control occurred at St. Bonaventure University, a respected institution located near Buffalo, New York. The NCAA placed the school on 3-year probation for violations in the men’s basketball program, specifically concluding that the stiff punishment was justified due to the breakdown of institutional control. The case focused on the eligibility of a particular men’s basketball player who transferred to St. Bonaventure after spending 2 years at a junior college. The student came to the university after receiving a “Certificate of Welding,” a designation that clearly did not meet the requirements for academic eligibility under the NCAA’s rules. This violation was serious enough, but the conduct of the thenpresident, and an assistant men’s basketball coach made the situation far worse. The assistant coach communicated directly with the president (who happened to be his father) and convinced the president that the student was eligible, despite advice to the contrary from the athletic director. Compounding the problem, the institution changed the grade of the student-athlete from an incomplete to a

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“withdrawal” in a particular class taken during the student-athlete’s first term at St. Bonaventure so that he remained eligible to travel to “away” games. (The university had a policy denying such travel for those with “incomplete” grades under its institutional policy.) The violation occurred after the president’s son asked his father to “request” that the vice-president for academic affairs reconsider his initial decision on a strict withdrawal date deadline. The result of this hubris was 3 years of probation (from 2003 to 2006), no postseason competition in either the 2003 NCAA tournament or the Atlantic 10 Tournament (the conference St. Bonaventure belongs to), limitations on recruitment, and developing a new system of governance during the probationary period. The NCAA found it “extremely troubling that a university president would assert independent interpretive authority with regard to NCAA legislation despite the repeated advice of the Athletic Director. Such lack of judgment … [was] at the root of why this case occurred.” (www.ncaa.org.releases/infractions/2004, retrieved March 20, 2005). As a result, the president, athletic director, and the entire basketball coaching staff resigned. Even though the athletic director objected to the policy, he did not take enough steps to prevent it. That fact marks the core aspect of institutional control—an effective structure must be in place to avoid transgressions and to resolve them effectively when they occur. If the NCAA has to take unilateral action, the severity of the penalties and sanctions increases. Journalists should ask serious questions about how the athletic program was governed (or not) when cases like St. Bonaventure’s occur. The case just described also highlights the importance of the role of the athletic director. The AD controls the athletic department budget, which often ranges in the tens of millions of dollars annually. Construction of new facilities, fund-raising efforts, Title IX compliance, and a thorough knowledge of NCAA rules are under the aegis of the AD and his or her staff. ADs often aid in obtaining sponsorship deals. An ideal athletic director must possess knowledge of finance, marketing, and fund raising. He or she must interact with upper administration such as the president and the board of trustees. The AD must posses skills necessary to answer questions posed by the media. Some ADs have even perused Internet chat rooms to quell rumors and criticisms of the athletic program of their particular college or university (Lee, 2004).

GOVERNANCE SYSTEM The NCAA’s governance emanates from an association-wide executive committee, consisting of 11 members from various colleges and uni-

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versities. The executive committee is charged with ensuring that each division operates consistently with the basic purposes, fundamental policies, and general principles of the association (Executive Committee Documents, retrieved 2004). Although the members represent all three divisions, the majority comes from Division I-A schools. In sum, the executive committee is a de facto board of directors. Additionally, considerable powers are given to committees governing the various divisions. Although committees representing Division II and III schools serve important roles, we focus here on Division I’s intradivisional governance system. The Division I board of directors has 18 members. Directly underneath is a management council of 49 athletic directors, faculty, athletic representatives, conference commissioners, and senior women’s administrators, which has the power to develop and pass legislation involving Division I athletics (www.friars. collegesposts.com, retrieved June 15, 2005). The committees on infractions are independent bodies composed of individuals from NCAA member institutions. The management council is basically the day-to-day operating arm of the NCAA with final approval for all decisions being up to the board of directors. Each division (I, II and III) has its own infractions committee. The Division I Committee on Infractions currently has 10 members, composed of 7 individuals from NCAA member institutions and 3 from the general public. The infractions committee has the authority to determine what findings (if any) should be made and what (if any) penalties should be assessed upon a member institution. This committee meets up to six times per year and committee members serve 3-year terms, for a maximum of 9 years (NCAA Division I Committee on Infractions, retrieved 2004). The duties of this committee include determining the merits of complaints filed with the NCAA; charging members with the failure to maintain academic or athletics standards required for membership; determining facts related to alleged violations; making findings of violations of NCAA rules; imposing appropriate penalties on member institutions found to be involved in major violations; and carrying out any other duties directly related to the administration of the enforcement program. Other Division I committees include a student-athlete advisory committee, made up of student-athletes “assembled to provide insight on the student-athlete experience,” and men’s and women’s basketball issues committees (www2.ncaa.org/legislation_and_governance/committees/ division1.html, retrieved June 1, 2005).

DIVISIONS As noted earlier, the NCAA consists of three divisions. The criteria for a school’s membership in the appropriate division include the number

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of sports the school sponsors, the average attendance for home games, and the number of home games played. College football is further subdivided into Division I-A, I-AA, and I-AAA. The requirements for division membership are intricate, but the basics follow: • Division I schools are required to sponsor a minimum of 7 men’s teams and 7 women’s teams, all of which are required to play a high percentage of their contests against other Division I opponents. • Division II schools must sponsor four men’s and four women’s sports. • Division III schools are required to sponsor five men’s and five women’s sports. Athletic financial aid is more limited in Division II than Division I and is prohibited at Division III schools (NCAA Division I, II, and III Membership Criteria, retrieved 2004). In 2002, the NCAA altered its requirements for admission into Division I-A. Effective August 1, 2004, five conditions must be fulfilled: • A school must provide an average of 90% of the maximum number of football scholarships allowed over a rolling 2-year period. • Each school must play at least four home games each season against another Division I-A opponent. In 2006, that number increases to five. • The school must sponsor at least 16 varsity sports, 2 more than the normal Division I minimum, with a minimum of 6 men’s sports and 8 women’s sports. • Fourth, the school must offer a minimum of 200 athletic scholarships or offer $4 million in athletic financial aid. • Last, the school must average 15,000 in attendance for all of its home football games (www.NCAA.org/releases/divi/200204090idl. htm, retrieved March 15, 2005). Presently, Division I-A includes schools from 11 athletic conferences and 7 nonaffiliated schools (so-called “independent schools” like Notre Dame). Schools align themselves into conferences to operate more efficiently. The conference structure provides for cooperative scheduling, negotiation of television contracts, and other similar endeavors. The athletic conference system, not part of the NCAA but an important player in the college sports system, is discussed in detail later in this chapter.

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Division I-AA institutions field a football team, but scholarship requirements are more limited and scheduling requirements differ from Division I-A. Division I-AAA schools do not field a football team. However, schools in these subdivisions otherwise meet all the requirements for Division I membership.

ENFORCEMENT The most vital cogs in the association’s attempts to achieve and maintain integrity are its member schools, which are charged with carrying out NCAA rules (NCAA Div. I Bylaws sec. 2.8). The NCAA manual states that each school “shall monitor its program to assure compliance and to identify and report to the Association instances in which compliance has not been achieved.” This self-regulation provision means that member institutions are required to report transgressions. If they fail to do so and the transgressions are subsequently discovered, the penalties against the school’s athletic program increase in severity. On the other hand, self-reporting of violations will be considered a mitigating factor in determining the penalty (NCAA Div. I Bylaws 32.2.1.2). The self-enforcement mechanism varies from school to school, depending on factors such as the mission of the school administration, the determination and aptitude of compliance personnel, and—most of all—the honesty of those they oversee (Gregorian, 2003). Universities often employ compliance officers to ensure that the rules are followed. The NCAA employs a 53-person “membership services” staff, which works with schools to help interpret rules. The enforcement staff has the power to investigate complaints, based on information received from self-reporting by the school or other methods of information gathering. It has the responsibility to gather “basic information” regarding possible violations and, in doing so, may contact individuals to solicit information. If the enforcement staff has developed “reasonably reliable” information indicating that an institution has been in violation of the association’s governing legislation that requires further in-person investigation, the enforcement staff shall provide a written notice of inquiry to the enforcement staff ’s chief executive officer. If the investigation develops significant information concerning a possible major violation, the institution will be notified. To the extent possible, the notice of inquiry also shall contain the following information:

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• The involved sport. • The approximate time period during which the alleged violations occurred. • The identity of involved individuals. • An approximate time frame for the investigation. • A statement indicating that the institution and involved individuals may be represented by legal counsel at all stages of the proceedings. • A statement requesting that the individuals associated with the institution not discuss the case prior to interviews by the enforcement staff and institution, except for consultation with legal counsel or reasonable campus communications not intended to impede the investigation of the allegations. Hearings by the infractions committee of the appropriate division (I, II, or III) then occur. These committees have the authority to determine what (if any) findings should be made and what (if any) penalties should be assessed upon a member institution as a result of involvement in major violations of NCAA legislation. The NCAA differs between “major” and “secondary” violations in assessing punishment. For secondary violations, a hearing is often waived. Similar to an administrative hearing or arbitration procedure, each side presents its case in front of the entire committee. After the hearing, the committee issues a report summarizing its findings and the recommended penalties (if any) (NCAA Div. I Bylaws sec. 32.9.1). The aggrieved party may appeal to an infractions appeals committee. The most severe penalty is the repeat-violator legislation (so-called “death penalty”), applicable if a major rules violation occurs within 5 years of another major violation. The second major case does not have to be in the same sport as the earlier case to affect the second sport (NCAA Div. I Bylaws sec. 19.6.2.3.2). The result: termination of the school’s program in that sport for 2 years. In only one case has the death penalty been instituted. Other penalties for repeat violators of legislation include: • Prohibition of some or all outside competition in the sport involved in the last major violation for one or two seasons. • Prohibition of all coaching staff members in that sport from involvement directly or indirectly in any coaching activities at the institution during that period. • Elimination of all initial grants-in-aid and recruiting activities in the sport involved in the last major violation in question for a 2-year period.

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• All institutional staff members serving on the NCAA Presidents Cabinet Council, executive committee, or other committees of the association resign their positions (www.ncaa.org). The NCAA is a private organization, not a governmental agency or an organization with direct connections to a governmental agency. In 1988, the U.S. Supreme Court concluded that the NCAA was not a “state actor” and therefore not subject to Constitutional requirements of due process in its enforcement procedures (NCAA v. Tarkanian, 1988). Therefore, it can fashion a system of discipline and enforcement less stringent than that of a government agency. Also, the NCAA does not have to fear lawsuits for alleged violations of fairness and due process. However, since the ruling in NCAA v. Tarkanian, the NCAA has improved its system of hearings for cases involving allegations of major violations.

THE RULES The substantive rules are contained in the NCAA’s Manuals, a must-have reference work for journalists, which either can be purchased or can be viewed on the NCAA’s Web site (www.ncaa.org). Written like a statutory code, the Division I manual, for example, has 32 separate articles and many accompanying sections and subsections. Like federal or state laws, the manual has its minute details, and many look at those rules when criticizing the NCAA. For example, one clause requires laundry labels on a school uniform to be no more than 2¼ square inches within a four-sided geometrical shape (i.e., rectangle, square, parallelogram) (NCAA Div. I Bylaws sec. 12.5.4.1). Criticisms may be valid, but before totally assailing the organization, note that many sections of the bylaws contain important standards applicable to many different sports, not just the “big-time” ones. A journalist who wishes to write an opinion piece attacking the NCAA will have far more credibility if he or she understands the major requirements and the reasons behind them. We summarize some of the key provisions in the Division I manual, as Division I schools are most frequently covered. Because the manual is over 500 pages, the following summary will give readers a basic idea of the key provisions.

Amateurism Article 12 of the NCAA’s Division I manual discusses the requirement that all student-athletes must be amateurs. The NCAA holds to a tradi-

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tional definition of amateurism, one that prohibits most forms of compensation for services. The concept dates back to the 19th century, where upper-class gentlemen had the time and means to participate in sporting events for the pleasure of doing so. The manual notes that an athlete becomes ineligible to play for his or her school if that athlete “directly or indirectly” receives pay “in any form in that sport” (NCAA Div. I Bylaws sec. 12.1.1). The section further prohibits receipt of any compensation from a professional sports organization and even bars playing for a professional team without compensation. The proscription extends to contracting with an agent or signing a contract with a professional team while playing at school. The major exception to the no-compensation requirement is the athletic scholarship that some student-athletes receive as consideration for attending the school. But other exceptions exist, although more limited. An individual may receive “actual and necessary” expenses from a professional sports organization to attend an academy, camp, or clinic, provided that no NCAA institution or conference owns or operates the academy, camp, or clinic and no camp participant is above the age of 15. Basketball players may accept actual and necessary travel and room-and-board expenses from a professional sports organization to attend that organization’s predraft basketball camp. Student-athletes participating in the Olympics whereby prize bonuses are awarded for medaling will not have their eligibility revoked, but they cannot accept the monetary prize (NCAA Div. I Bylaws sec. 12.1.1.48–49). In most cases, a player who seeks to enter a professional league draft loses eligibility (NCAA Div. I Bylaws sec. 12.2.4). However, there are some important exceptions to this rule. A student-athlete playing basketball may enter the NBA or other professional league draft. If the player is not drafted, he or she may seek to return to intercollegiate participation within 30 days after the draft date. A similar rule is in effect regarding Division I-A and I-AA football. An enrolled student-athlete (as opposed to a prospective student-athlete) in Division I-A or I-AA football may enter the National Football League draft one time during his collegiate career without jeopardizing eligibility in that sport, provided the student-athlete is not drafted by any team in that league and the student-athlete declares his intention to resume intercollegiate participation within 72 hours following the National Football League draft declaration date (NCAA Div. I Bylaws secs. 12.2.4.2.1 and 12.2.4.2.3). Many have criticized the strict application of the amateurism rules. One particularly egregious rule states that if a student is a professional athlete in one sport, but wishes to compete as a student-athlete in another sport, he may neither receive an athletic scholarship nor accept

COLLEGE AND HIGH SCHOOL SPORTS

any compensation from the professional team or companies seeking endorsem*nt deals (NCAA Division 1 Bylaw 12.1.2). This situation occurred when Jeremy Bloom, a successful mogul skier, sought student-athlete status to play football at the University of Colorado. As a condition, he was forced to give up endorsem*nt opportunities based on his success as a participant in a very different sport (Bloom, 2003). A more outrageous example involves Alan Adair, a third-baseman for the University of Oklahoma who survived brain cancer. He wrote a book about his recovery intended to help others with the disease, only to receive a call from a compliance officer informing him that his college baseball career was over because his name was attached to a “corporate product.” Some argue that Division I players should be paid outright for their services (http://www.collegian.psu.edu/archive/2004/02/02-17-04tdc/ 02-17-04dsports-07.asp). On one level, the idea has some appeal. Because big-time college athletes may earn direct or indirect revenues for the school, why should they not receive compensation? But this idea raises difficult, even insurmountable, issues. How would “pay” be defined? What monetary limits, if any, should be imposed? What effect would payments have on the often limited budgets of many colleges and universities? Would other sports have to be cut? Would rules violations still occur? Finally, NCAA member schools would have to comply with state and federal laws regarding issues such as Workers’ Compensation and computation of taxes.

Agents The NCAA and its member schools do not look with favor on sports agent solicitation of student-athletes. Vulnerability to possible exploitation serves as the official reason, but cynics can point to the loss of a talent pool as well. Whatever the motive, the NCAA manual states that “an individual shall be ineligible for participation in an intercollegiate sport if he or she ever has agreed (orally or in writing) to be represented by an agent for the purpose of marketing his or her athletic ability or reputation in that sport.” Further, an agency contract not specifically limited in writing to a sport or particular sports shall be deemed applicable to all sports, and the individual shall be ineligible to participate in any sport (NCAA Div. I Bylaws sec. 12.3). Additionally, “an individual shall be ineligible if he or she or his or her relatives or friends [emphasis added] accepts transportation or other benefits from: any person who represents any individual in the marketing of his or her athletic ability, or an agent,” even if the agent has indicated that he or she has no inter-

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est in representing the student-athlete in the marketing of his or her athletic ability or reputation and does not represent individuals in the student-athlete’s sport. This means a prospective agent or someone working for that agent (known as a “runner”) cannot give benefits to a student-athlete (NCAA Div. I Bylaws sec. 12.3.1.2). The role of agents and their powers and limitations are discussed in detail in chapter 7.

Recruiting Intricate and limiting characterizes the rules regarding the recruitment of student-athletes by member schools. These rules cover such issues as restrictions on times and number of trips and places of recruitment. The rules intend to equalize recruitment opportunities. Without them, wealthier schools possess the resources to wine and dine a prospective student-athlete and can more easily tap into the most talented athletes. Beneath this noble basis rests the nitty-gritty of the recruiting standards. Access to the NCAA manual (and to a calendar) is necessary to have the information handy. The following serves as an example of the minutiae found in Article 13 of the bylaws. High school prospects cannot be contacted before July 1 following the student’s junior year (NCAA Div. I Bylaws sec. 13.1.1.1). Similar rules apply to telephone calls made by authorized staff members of the school’s athletic department. The frequency of the calls cannot be more than once per week (NCAA Div. I Bylaws sec. 13.1.3.1). For Division I-A and I-AA football, the contact may be made in May of the junior year and then again in September of the senior year. Time exceptions also exist for men’s and women’s basketball (NCAA Div. I Bylaws sec. 13.1.3.1.2-3). The number of visits to recruits by staff members is limited to three in-person, off-campus contacts (except in cases of football and basketball, when the total is six and five, respectively) (NCAA Div. I. Bylaws sec. 13.1.6). No offers or transfers of any financial aid or other benefits to the prospect are allowed, whether directly or indirectly. Specifically prohibited are financial aid, benefits, and arrangements including an employment arrangement for a prospect’s relatives, gifts of clothing or equipment, cosigning of loans or providing loans to a prospect’s relatives or friends, cash, merchandise and low-cost housing (NCAA Div. I Bylaws sec. 13.2.2). If this occurs, the potential student-athlete will be ineligible until he or she pays that amount back (NCAA Div. I Bylaws sec. 13.2.1). The institution also suffers sanctions. Entertainment expenses must be “reasonable” and only for on-campus recruits. The expenses specifically cannot include tickets to athletic contests (NCAA Div. I Bylaws sec. 13.5.1). A member institution may pay

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the prospect’s actual round-trip transportation costs for his or her official visit to its campus, provided a direct route between the prospect’s home and the institution’s campus is used. Use of a limousine or helicopter for such transportation is prohibited (NCAA Div. I Bylaws sec. 13.6.2.1). There is a limitation of one sponsored visit to each school per prospect. A prospect may visit a member institution’s campus at his or her own expense an unlimited number of times (NCAA Div. I Bylaws sec. 13.7.1). The manual also notes the time periods permissible for recruiting in a given sport (NCAA Div. I Bylaws, sec. 13.01.06).

Academic Requirements The debate surrounding academic criteria for student-athletes’ admission and eligibility has been a battleground between those who feel that standards are too minimal and need tightening, and those who feel that increasing standards unfairly discriminates against many of those students who lack skills due to their socioeconomic upbringing. Lawsuits have delayed or stymied attempts to impose new standards. To be eligible to represent an institution in intercollegiate athletics competition, a student-athlete must be enrolled in at least a minimum full-time program of studies, be in “good academic standing,” and maintain progress toward a baccalaureate or equivalent degree. Note the lack of a graduation requirement. The rules only require that the student-athlete must be “making progress” toward a degree at a prescribed schedule. Also, these standards are minimums. Particular conferences and individual schools often impose higher admission and matriculation standards. As of 2005, entering freshmen must have successfully completed a high school core curriculum of at least 13 academic courses, including: • • • • •

Four years of English. Two years of math (at the level of Algebra I or higher). Two years of natural or physical science. Two years of social science. Additional academic courses in any of the above areas or foreign language, computer science, philosophy or nondoctrinal religion (over a period of three years) (NCAA Div. I Bylaws sec. 14.3.1.1).

A much-debated issue involves minimum SAT or ACT scores. The NCAA handles this issue based on a sliding scale that factors in the student’s high school grade point average. For students entering college in 2005, the following scale applies:

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Core GPA

SAT

Sum ACT

3.550 & above

400

3.500

420

3.400

460

3.300

500

3.200

540

3.100

580

3.000

620

2.900

660

2.800

700

2.725

730

2.600

780

2.500

820

2.400

860

2.300

900

2.200

940

2.100

970

2.000

1010

(NCAA Div. I Bylaws sec. 14.1.1.1).

For students entering college in 2008, the bylaws make minor changes. Additional academic courses are to be taken over 4 years, not 3. The sliding scale GPA/SAT-ACT standard remains the same. Once the student is admitted, the NCAA requires adequate “progress” toward a degree to maintain eligibility. The requirements are back-ended. Before 2004, a student-athlete entering his or her third year of collegiate enrollment must have successfully completed at least 25% of the course requirements in the student’s specific chosen degree program. A student-athlete who is entering his or her fourth year of collegiate enrollment must have successfully completed at least 50% of the course requirements in the student’s specific degree program. A student-athlete who is entering his or her fifth year of collegiate enrollment shall have completed successfully at least 75% of the course requirements in the student’s specific degree program (NCAA Div. I Bylaws sec. 14.4.3.2). The NCAA enacted newer, tougher standards for students entering college, starting in the 2005–2006 academic

COLLEGE AND HIGH SCHOOL SPORTS

year (http://www.ncaa.org/releases/divi/2004/2004042901d1.htm). After 2 years, a student-athlete must have completed 40% of the school’s requirements for graduation, as opposed to 25% under the old system. At the end of 3 years, student-athletes must have completed 60%, and by the end of four years, the figure is 80% (Blaudschun, 2004). The NCAA requires that a student-athlete entering the third year of collegiate enrollment shall have completed successfully at least 40% of the course requirements in the student’s specific degree program. That percentage increases to 60% in the fourth year, and a fifth-year student’s percentage of completion is a minimum of 80% (NCAA Div. I Bylaws sec. 14.4.3.2). A student-athlete must maintain a grade-point average that places the individual in good academic standing, as established by the institution. The NCAA requires that the student-athlete maintain a GPA of at least 90% of the school’s minimum in the sophom*ore year, 95% in the third year, and 100% in the fourth and fifth years (NCAA Div. I Bylaws sec. 14.4.3.3.1). In the past, the academic eligibility rules have caused considerable controversy and legal challenges from individuals who feel that they discriminate against African-American students. The claim has been that an “adverse impact” results because a higher percentage of African-American student athletes come from backgrounds where educational opportunities were lacking and therefore have greater difficulties in maintaining the minimums. One federal appeals court rejected this argument (Cureton v. NCAA, 1999). In 2004, the NCAA’s Division I board approved additional requirements in order to track the “academic progress” of all scholarship athletes. Specifically, the board created a system where penalties in the form of one lost scholarship for every player who could not return to school due to academic ineligibility (Alesia, 2004). Critics of academic standards point to this example. Say a student who attains a low SAT score needs a GPA of 3.55 to fulfill the minimum entrance standards. What stops the student from going to a favorite teacher and explaining that his chance of making it to college depends on whether he gets a B or a D in class? Peter Boone, the athletic director of the University of Mississippi, said “What does it mean if more kids get degrees but they are in basket-weaving?” (Blum & Lederman, 2003).

Transfers To prevent students from shopping their talents around, and to prevent schools from trying to steal away talented athletes from other schools, the NCAA has devised rules that prohibit transfer students from playing

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on a team for 1 year (NCAA Div. I Bylaws sec. 14.5.1) and limiting transfer of students from 2-year (or Junior) colleges, with the exception of a student who had maintained a 2.0 average with 12 credits per semester (NCAA Div. I Bylaws sec. 14.5.4.1). If a student violates one of these rules, that student cannot play for his or her new school’s team (a category knows as “redshirting”) for a period of 1 year. A significant exception occurs where the student transfers from a school after the discontinuance of his or her athletic program. So student X, a member of the men’s swim team at a particular Division I school that discontinued intercollegiate swimming, may transfer to another Division I school and need not sit out the year.

Financial Aid Division I schools often offer financial aid, in the name of an athletic scholarship, to student-athletes. Under the NCAA Div. I Bylaws, “financial aid” includes scholarships, grants, tuition waivers, and loans (NCAA Div. I Bylaws sec. 15.02.4.1). The maximum amount allowed (known as “grant-in-aid”) covers tuition, fees, room and board, and required course-related books (NCAA Div. I Bylaws sec. 15.02.5). If the student receives anything above this amount, the student is ineligible to compete in intercollegiate athletics. In recent years, the NCAA liberalized the rules regarding earnings from a student-athlete’s on- or off-campus employment. Such earnings are exempt, without limitation, and not counted in determining a student-athlete’s full grant-in-aid or in the institution’s financial aid limitations. This exemption applies only if the student-athlete’s compensation is not based on the reputation, fame, or following of that athlete and the student-athlete’s compensation constitutes work actually performed at the “going rate” for that locality for similar services (NCAA Div. I Bylaws sec. 15.2.7). Financial aid may be reduced or canceled if the student loses eligibility (NCAA Div. I Bylaws sec. 15.3.4.1). The bylaws limit the number of scholarships available, depending on the sport (NCAA Div. I Bylaws sec. 15.5.3). Additional awards, benefits, and expenses to student athletes are severely restricted under NCAA rules. These monies, defined as allowance beyond the NCAA maximum amounts, result in the student-athlete’s ineligibility for intercollegiate competition. If the student-athlete receives an extra benefit not authorized by NCAA legislation, the individual is ineligible in all sports (NCAA Div. I Bylaws sec. 16.01). Of particular interest is the prohibition on so-called “extra benefit” awards. Defined as compensation from the school or representative of

COLLEGE AND HIGH SCHOOL SPORTS

the institution’s athletic interests to provide the student-athlete or his or her relatives or friends with a benefit not expressly authorized by NCAA legislation (NCAA Div. I Bylaws sec. 16.12.2.1), such benefits include discounts and credits on purchases (such as airline tickets) or services (laundry), telephone cards, credit cards, and entertainment services such as movie tickets and the use of a car. Even a car ride home with a coach or staff member is prohibited in most instances (even if the student-athlete reimburses the costs of gas) (NCAA Div. I Bylaws secs. 16.12.2.2.1–2.2.3, 16.12.2.3). Student-athletes may not receive cash or cash-equivalent awards, such as gift certificates, merchandise, or services (NCAA Div. I Bylaws sec. 16.1.1.2). One minor exception: A maximum of $300 can be disbursed for winning Conference or National Championships (NCAA Div. I Bylaws sec. 16.1.4.2). Regarding noncash goods, the NCAA permits housing and meal costs to be paid by the school. Certain preseason practice expenses and meals incidental to competition are permitted (NCAA Div. I Bylaws sec. 16.5.2). Not surprisingly, the school covers travel costs for trips to road games. A per diem award of $20/day is allowed for student-athletes at NCAA championship tournaments (NCAA Div. I Bylaws sec. 16.8.1.6). Also, a student-athlete may request additional financial aid (with no obligation to repay such aid) from a fund established pursuant to a special financial need program approved by the NCAA Management Council. The institution may provide reasonable local transportation in conjunction with financial assistance approved under this program (NCAA Div. I Bylaws sec. 16.13.2).

Practice Dates The bylaws provide a detailed listing of the prescribed dates and range of practice sessions for various NCAA sports. Practice dates are limited to particular times of the year, and violations of such schedules can result in sanctions for the school. The schedules are found in Article 17 of the NCAA Division I Bylaws.

The Role of Coaches Professional athletic coaches have specific goals: to motivate, strategize, and inspire athletes to win games. Collegiate coaches have more varied duties and more constraints under the NCAA system. They must be familiar with the NCAA bylaws, particularly restrictions on practice time and recruiting. Also, they have to build a rapport with the student-athlete, sometimes becoming a confidant, role model, and

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even surrogate parent. Often these young people, some away from home for the first time, go through a major life transition. College coaches “mold” these student-athletes, and their guidance may help or hinder their maturity. Coaches also spend a great deal of time recruiting. The NCAA allows football and basketball coaches to travel a total of 40 days over two periods of time during a year. Coaches of other sports may travel to recruit during the whole year, except for specified “dead periods” (interview with Marianne Reilly, assistant athletic coordinator, Fordham University, Bronx, NY, March 15, 2004). Spotting talent, traveling, and interviewing are very important aspects of the job. In professional sports, general managers, not coaches, usually do these tasks.

A Final Thought The NCAA policies generate considerable controversy and debate. Many changes and solutions have been proposed to rectify what is wrong about collegiate athletics. Some have proposed paying players a salary (Whiteside, 2004). Others would permit signing endorsem*nt contracts and dealing with agents (Zoppo, 2004). Others opine that colleges should get out of the big-time athletics. Some coaches favor a new rule that calls for lesser penalties when athletes leave school early for financial opportunities in, say, the NBA or NFL and when they transfer to other schools (Blum & Lederman, 2003). Specifically, those coaches favor amending the old rules—which mandate that losses of student athletes who go pro count against a school’s graduation record—to a rule that states if athletes leave in good academic standing—for whatever reason—the penalties are much less severe. Some of these ideas may merit consideration.

ATHLETIC CONFERENCES In addition to the NCAA, the organizational structure of intercollegiate athletics includes conferences (Masteralexis, Barr, & Hums, 1998). Conferences serve as “minileagues” in which collegiate teams compete. Although there is no mandate that a college or university join a conference (Notre Dame football is one example of an “independent” school), the overwhelming majority of colleges and universities do. Schools gain a variety of benefits from conference membership. Most conferences have signed television contracts, which provide exposure to their member schools. This also creates the potential for more revenues shared through broadcasting and sponsorship agree-

COLLEGE AND HIGH SCHOOL SPORTS

ments. Scheduling is easier with conference membership because of the designated number of competitors. Some larger conferences hold championship tournaments, giving teams more exposure and potentially more revenues, and winning a conference championship usually gives that team the opportunity to compete in the NCAA championship competition. For example, in 2003, the revenue distribution for the NCAA Men’s Basketball tournament was as follows: Conference

Amount Received From NCAA Basketball Fund

Big Ten

$13.2 million (most of any league for 3rd consecutive year)

Big 12

$10.9 million

Southeastern Conference

$10.7 million

Big East

$10.4 million

Pac 10

$10 million

Atlantic Coast Conference

$9.8 million

Conference USA

$4.9 million

Atlantic 10

$4.4 million

Total distribution from the fund in 2003 was $264.2 million, up from $260 million a year before (Oakland Press, 2004). These shares were based on the number of tournament games played by its teams during the previous 6 years (Lance, 2004). The six major conferences and their participating schools are described next. Atlantic Coast Conference (ACC):

Boston College (Eagles) University of Charlotte (Hornets) (joined in 2005) Clemson University (Tigers) Duke University (Blue Devils) Florida State University (Seminoles) Georgia Tech University (Yellow Jackets) University of Maryland (Terrapins) University of Miami (Hurricanes) (joined in 2004) University of North Carolina (Tar Heels) North Carolina State University (Wolfpack) St. Louis University (Billikens) (joined in 2005) University of Virginia (Cavaliers) Virginia Tech (Hokies) (joined in 2004)

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Wake Forest University (Demon Deacons) The Atlantic Coast Conference was founded in 1953, and had seven members until 1978, when Georgia Tech was admitted. With the addition of Florida State in 1991, the ACC expanded to nine members (www.acc.com). The planned expansion of the Atlantic Coast Conference has affected the groupings and revenues in other conferences, most notably the Big East. In 2004, Miami and Virginia Tech left the Big East and were added to the ACC. In 2005, St. Louis University and the University of Charlotte joined. Boston College also plans to join the ACC, although its entry year has not been determined. The likelihood of a football conference championship game for a 12-school ACC would add substantial revenue. This system is currently being used in other 12-school conferences, such as the Big 12 and Southeast Conferences. Big East Conference:

University of Connecticut (Huskies) Georgetown University (Hoyas) University of Notre Dame (Fighting Irish) (excluding football) University of Pittsburgh (Panthers) Providence College (Friars) Rutgers University (Scarlet Knights) St. John’s University (Red Storm) Seton Hall University (Pirates) Syracuse University (Orangemen) Villanova University (Wildcats) Virginia Tech (Hokies) (until 2004) West Virginia University (Mountaineers) Temple University (Owls) (football only) The Big East began in 1978, primarily as a basketball conference. Football was added in 1990. In 2003, several schools broke from the Big East to the Atlantic Coast Conference. In an attempt to retain its status, at the time of this writing, the Big East plans to add five schools: the University of Cincinnati, DePaul University, the University of Louisville, Marquette University, and the University of South Florida. All five universities came from Conference USA. The teams that are leaving the Big East are required to pay a termination fee of at least $1 million per team.

COLLEGE AND HIGH SCHOOL SPORTS

The Big Ten Conference:

University of Illinois (Fighting Illini) Indiana University (Hoosiers) University of Iowa (Hawkeyes) University of Michigan (Wolverines) Michigan State University (Spartans) University of Minnesota (Golden Gophers) Northwestern University (Wildcats) Ohio State University (Buckeyes) Pennsylvania State University (Nittany Lions) Purdue University (Boilermakers) University of Wisconsin (Badgers) Formed in 1896, this conference predates the establishment of the NCAA and created eligibility rules that became the basis of the NCAA’s amateurism standard. Big Ten universities provide in excess of $63 million in athletic scholarship aid to 7,500 male and female student-athletes who compete for 25 championships, 12 for men and 13 for women. Conference institutions sponsor more than 250 athletic programs (www.BigTen.org). The Big 12 Conference. The teams in this conference are divided into two groups, North and South:

North: University of Colorado (Buffaloes) Iowa State University (Cyclones) University of Kansas (Jayhawks) Kansas State University (Wildcats) University of Missouri (Tigers) University of Nebraska (Cornhuskers) South: Baylor University (Bears) University of Oklahoma (Sooners) Oklahoma State University (Cowboys) University of Texas (Longhorns) Texas A & M University (Aggies) Texas Tech (Red Raiders)

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Given the large number of member schools, this conference has a football championship game. PAC-10 Conference:

Arizona State University (Sun Devils) University of California Berkeley (Golden Bears) University of Oregon (Ducks) Oregon State University (Beavers) Stanford University (Cardinals) University of California at Los Angeles (Bruins) University of Southern California (Trojans) University of Washington (Huskies) Washington State University (Cougars) The roots of the Pacific-10 Conference date to 1915. Currently, the Pac-10 sponsors 11 men’s sports and 11 women’s sports. Southeastern Conference (SEC). The teams in this 12-school conference are divided into two groups, the Eastern and Western divisions.

Eastern Division: University of Florida (Gators) University of Georgia (Bulldogs) University of Kentucky (Wildcats) University of South Carolina (Gameco*cks) University of Tennessee (Volunteers/Lady Volunteers) Vanderbilt University (Commodores) Western Division: University of Alabama (Crimson Tide) University of Arkansas (Razorbacks/Lady Razorbacks) Auburn University (Tigers) Louisiana State University (LSU) (Tigers) Mississippi State University (Bulldogs) University of Mississippi (Ole Miss) (Rebels) However, Vanderbilt is in the process of eliminating Division I sports, and its future in the SEC is questionable. The SEC , founded in 1933, currently contains 9 men’s sports and 11 women’s sports (www.secsports.org). As is the case in the Big 12 Conference, a football championship game is needed to determine the

COLLEGE AND HIGH SCHOOL SPORTS

conference winner. In 2003, the SEC distributed over $100 million to its member schools.

Championships The NCAA has conducted national championships in various sports since 1921 and currently administers 87 championships in 22 sports for its member institutions (www.ncaa.org). The top team in each conference is invited to participate, along with selected other teams. The chosen teams compete against each other in single-game elimination contests until there are two teams left. Those two teams compete for the championship (Hales, 2003). An exception is in football. Although the NCAA sponsors football championships in Divisions I-AA, II, and III, it does not control those of Division I-A teams. Instead, a long-standing system of independent bowls invites specific teams to play in postseason games. The Bowl system has generated considerable controversy and many have sought to change it. Absent NCAA administration of Division I-A football, various postseason bowl games and polls (generated by sports writers, selected NCAA head football coaches, and computers) have been used to determine the national champion. This process, influenced by various opinions and biases of individual teams and conferences, has led to legitimate criticisms of inherent subjectivity. A poll or computer ranking creates a “hypothetical” situation and cannot replicate a one-on-one playoff match. In the 1990s, an attempt to make the system more objective resulted in the adoption of the Bowl Championship Series (BCS).

Division I-A College Football Bowl Games—Pre-BCS The Bowl system dates back decades, and over the years different Bowl games have been created and disbanded (Sports Fans of America Association, n.d.). Currently there are about 25 postseason Bowls. Bowls began as a method to attract tourists to warm-weather climates between Christmas and New Year’s Day (Hales, 2003). In more recent years, Bowl game administrators have become more market savvy. The major Bowls enjoy financial success, which has spawned sponsorship agreements from various businesses. Today, just about every Bowl has a sponsor that makes payments to the Bowl organization for permission to advertise using Bowl logos and other trademarks.

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Initially, each Bowl negotiated participation agreements with individual teams. Eventually, some of these agreements gave way to multiyear contracts with particular conferences for a specifically ranked team from that conference. For example, the champions of both the Pac 10 and Big 10 were obligated to participate in the Rose Bowl (McCarthy, 1991). Other Bowls chose to remain free to negotiate with any team, which led essentially to a bidding process where available teams would choose between multiple Bowl invitations. Not surprisingly, this process made it difficult to decide who had won the national title. Due to the locked-in contractual obligations, the various Bowl games rarely produced a national championship game between the two highest ranked teams. Most often, the strongest teams were dispersed among multiple Bowls, and the mythic “national title” was often split between two teams. In the history of the independent Bowl system, the top two ranked teams met each other in a Bowl only nine times. Thus, there has been a consensus “national champion” only seven times in over 50 years of Division I-A football.

The BCS In the past 15 years, four different systems have been developed in an attempt to create a true National Championship game. Such a game would be an economic bonanza, highly marketable to advertisers because of the resulting high television ratings. Revenues from sales of licensed merchandise would also be considerable. The first attempt to organize bowl selection began in 1992 with the advent of the Bowl Coalition. Under this plan, the champions of five major conferences joined with the Fiesta, Cotton, Orange, and Sugar Bowls. The champions of the Southwestern Conference would play in the Cotton Bowl, the SEC in the Sugar Bowl, and the Big Eight in the Orange Bowl, while the Fiesta Bowl received two open bids (Hales, 2003). This system resulted in some success. In 1992, the coalition produced a national title game between Big East champion University of Miami and SEC champion University of Alabama. In 1993, a national title game was held between Florida State University of the ACC and the University of Nebraska of the Big Eight. A more formal arrangement of conferences and games occurred in 1998 with the creation of the Bowl Championship Series, which consists of the six most dominant groups of schools in Division I-A. The champions of the six BCS conferences are guaranteed slots. Participation in the title game, which rotates among the four bowls, goes to the top two finishers in a computer ranking managed by the BCS. The last two Bowl berths go to other highly ranked teams in the BCS standings.

COLLEGE AND HIGH SCHOOL SPORTS

A problem occurred regarding the lack of inclusion of schools from the five “non-BCS” conferences. The BCS computer—which factors a number of polls, a team’s losses, and the strength of its schedule—severely discounted non-BCS teams’ weaker regular-season opposition (Fatsis, 2003). The arrangement was lucrative, as it resulted in a $730 million contract with ABC over 8 years. As a result, the BCS increased revenue from the four affiliated Bowls—Fiesta, Orange, Rose and Sugar—by 60% in the first year. By the end of ABC’s contract, BCS games, including ticket and sponsorship sales, will have generated a total of around $900 million. What has angered non-BCS conference schools is not only the lack of access to the “playoff,” but also the lack of revenue. Under the funding formula, nearly all the revenue from the BCS Bowls goes to the BCS conferences, a major difference from NCAA-run tournaments, which distribute revenue more evenly among all NCAA member schools. The 63 BCS schools to date have shared a total of $466 million in revenue from the Bowl games, an average of $7.4 million each (Fatsis, 2003). The alliance has given the remaining 54 Division I-A schools $17 million, or roughly $315,000 each. Non-BCS institutions say the BCS money and brand cachet have widened the gap between the haves and have-nots. According to the Department of Education filings, BCS schools generated an average of $16 million in football revenue on $8.9 million in expenses in 2001, compared with $3.2 million in revenue on $3.3 million in expenses at non-BCS schools. Tulane University’s President Scott Cowen has been particularly distressed at this disparity and has considered the idea of suing the BCS and its schools on antitrust grounds. “The BCS schools have essentially banded together to prevent any other school from ever competing against them,” said Gary Roberts, a Tulane law professor who studies sports and has informally advised Dr. Cowen (Fatsis, 2003). At the time of writing, there has been talk of reforming this Bowl system yet again.

HIGH SCHOOL SPORTS In the mid-1990s about 6 million youngsters participated in organized high school sports activities (Masteralexis, Barr, & Hums, 1998). Governance of these competitions also exists, but without an NCAA-like national organization. Rather, governing bodies regulate local, school district, or independent youth league competitions. These tend to be local in nature with a statewide umbrella organization. This system

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marks a change from the privately controlled (often by the YMCA) system found in the 19th century, The statewide associations administer high school sports programs and run state championship tournaments. Committees consisting of coaches, administrators, and parents often set the rules for eligibility. With laws prohibiting discrimination against students with disabilities, these committees often have to draft rules with the goal of inclusion, or face potential lawsuits. What makes this issue problematic is the less than clear guidelines often mandated in laws such as the Americans with Disabilities Act. Another important issue is liability for injury. The associations (and their local affiliates) have (or should have) drafted risk management procedures to prevent injuries and minimize risk of injury-producing events during competition. Chapter 9 provides more discussion on this issue. These students receive the experience of learning teamwork and discipline, but rarely do they see athletic glory. According to the NCAA, less than 1 in 35, or approximately 2.9%, of high school senior boys playing interscholastic basketball will go on to play men’s basketball at a NCAA member institution. Less than 1 in 75, or approximately 1.3%, of NCAA male senior basketball players will get drafted by a National Basketball Association (NBA) team. Therefore, approximately 3 in 10,000, or approximately 0.03%, of high school senior boys playing interscholastic basketball will eventually be drafted by an NBA team. But in all too many cases, high school stars who hope to attain greater glory “are quickly forgotten, left to show up at the playgrounds where they curl their fingers around the chain-link fencing and peer at their younger selves out there on the asphalt, wondering what happened to them at such a tender age in their lives” (Frey, 2004; http://www.ncaa.org/research/prob_of_competing/probability_of_competing2.html). The same can be said of football. About 5.8%, or approximately 1 in 17, of all high school senior boys playing interscholastic football will go on to play football at a NCAA member institution. About 2.0%, or approximately 1 in 50, of NCAA senior football players will get drafted by a National Football League (NFL) team. Approximately 9 in 10,000, or approximately 0.09%, of high school senior boys playing interscholastic football will eventually be drafted by an NFL team.

SOLUTIONS TO THE COLLEGIATE SPORTS SYSTEM Changes to the NCAA rules regarding amateurism have been debated for decades. Although the organization has loosened some of

COLLEGE AND HIGH SCHOOL SPORTS

the rules, others seek greater institutional changes. Ideas include paying players a salary for their work, permitting contracts with professional teams while still playing in college, sharing revenues earned from television rights fees and gate receipts, permitting endorsem*nt contracts, and permitting NCAA status to an athlete who is a professional in a sport other than the one in which he or she is playing. All too many seize on the idea of “deregulating” the NCAA as a quick and easy fix. The idea of professionalizing student-athletes has considerable appeal, especially when a top-rated NCAA men’s basketball player brings in between $700,000 and $1million in revenue per year for the school, whereas the value of his compensation is $30,000 (Just, 2002). But understanding the difficulties of such proposals is necessary to engage in a more sophisticated analysis when writing about proposed changes in NCAA issues. For example, paying players and treating them as employees result in significant costs for the school—in many cases far more than tuition, books, and room and board. For employees, the institutions would have to pay workers’ compensation insurance, state and federal taxes, and a negotiated salary. Does that mean that agents would play a direct role in negotiating contracts for star (or potential star) 19-year-olds? Then comes the question of the application of the “pay-for-play” arrangement. Does it apply to every collegiate athlete? Just those from certain sports? Just certain players? Presently, schools award scholarships in many different sports, even those that lack popularity. A negotiated pay-for-play system contradicts the idea of sharing of scholarship money and puts additional strains on already tight university athletic budgets. Allocating revenues to paying athletes likely leads to Title IX problems if women’s teams get less money because some of it goes to male basketball or football players salaries. Litigation is almost guaranteed. Permitting athletes to sign professional team contracts while still eligible also has risks. Say star player X of the basketball team enters the NBA draft at the end of his junior year and is chosen. However, the player decides to complete his senior year and play on the college team in order to finish his degree. Injury concerns could limit effectiveness on that team. The same result may occur if the player signs with an agent but continues to play (another reform discussed). The agent may also have qualms about the risk of injury and, not surprisingly, may hint that the player “go easy.” Collegiate sports, especially so-called “big-time” programs, raise a societal question of whether athletics should be cast further away from the educational mission of a college or university. Blue-ribbon

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panels have been convened to make changes in the system, in the hope of preventing college sports from spinning out of control. One commentator concluded that “Chasing after sports revenue and athletic prestige, schools admit more and more athletes, in the process sapping resources from the schools’ academic mission and send the message to young people that sports is the best way to get into college” (Just, 2002, p.15). The system, according to the authors, leads to students who are balkanized from the rest of the student body and who consistently perform more poorly. James Shulman and William Bowen (2001) researched the academic records of 90,000 students who entered 30 selective schools in 1951, 1976, and 1989, and found that the college sports system has a significant impact on the schools’ admissions and the academic performance of their students. They, and many others before and after them, seek changes. The biggest question for our society is, what changes can be accomplished and when those changes will occur?

INFORMATION CHECK When covering issues involving collegiate sports, a journalist should possess a copy of the NCAA Division I Bylaws and, if possible, the equivalents for Divisions II and III. For high school sports, a copy of the respective organization’s rules and regulations would also be helpful. Additionally, some pertinent questions to ask are: 1. What organization or conference governs the particular collegiate or high school sports issue? 2. What violations are alleged? 3. Who reported the violations? The institution or an outside party? 4. How were the student-athletes recruited? 5. What was their educational background and previous academic record? 6. Was institutional control maintained or did it break down? How many knew about the violations? 7. Was a hearing held and who participated in it? 8. Is an appeal available? 9. What is the range of penalties for the violation(s)? 10.What is the total athletic budget and how much of that budget is taken for a particular sport?

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REFERENCES Alesia, M. (2004, April 30). NCAA chooses reform; Penalties for academic failure will be in place by end of year. Indianapolis Star, p. 1D. Big Ten could be shortchanged. (2004, March 16). The Oakland Press. Retrieved May 24, 2004, from www.oaklandpress.com/stories/031604/col_20040316088 Blaudschun, M. (2004, May 19). Reformed parties engage in debate; New NCAA academic guidelines cause a stir. Boston Globe, p. D1. Blum, D. E., & Lederman, D. (2003, November 19). NCAA plans new way to keep score. USA Today, p. D1. Bloom, J. (2003, August 1). Show us the money. New York Times, p. 21. Cureton v. NCAA, 198 F.3d 107 (3rd Cir. 1999) Division I Management Council endorses academic enhancement packages, takes action on amateurism. (2002, April 1). Retrieved March 15, 2005, from www.ncaa.org/releases/divi/2002040901di.htm Executive Committee Documents. Retrieved April 5, 2004, from http://www1.ncaa. org/eprise/main/membership/governance/assoc-wide/executive_committee/ index.html Fatsis, S. (2003, November 25). In college football, also-rans fight for bigger share of the pot. Wall Street Journal, p. A1. Frey, D. (2004, February 15). Betrayed by the game. New York Times, sec. 6, p. 14. Gregorian, V. (2003, July 20). The NCAA honor system. St. Louis Post-Dispatch, p. D1. Hales, M. (2003). The antitrust issues of NCAA college football within the Bowl championship series. Sports Law Journal, 10:97. Just, R. (2002, March 11). Can the next NCAA president reform college sports? The American Prospect, p. 15 [citing Robert Brown, an economist at California State University–San Marcos, from a 1990 study]. Lance, D. (2004, March 31). Tourney jackpot for A-10; Conference share of NCAA piece more than $4 million. Dayton Daily News, p. C1. Lee, J. (2004, June). Old school, new school—The role of the athletic director changes with the times. Street & Smith’s Sports Business Journal, p. 23. Masteralexis, L., Barr, C., & Hums, M. (1998). Principles and practice of sport management. Gaithersburg, MD: Aspen, p. 138 McCarthy, M. J. (1991, April 24). Keeping careful score on sports tie-ins. Wall Street Journal, p. B1. NCAA Division I Committee on Infractions. (n.d.). Retrieved April 5, 2004, from http://www1.ncaa.org/membership/governance/division_I/infractions/index.html NCAA Division I, II, and III Membership Criteria. (n.d.). Retrieved February 9, 2004, from http://www.ncaa.org/about/div_criteria.html NCAA Division I Student Advisory Committee. (n.d.). Retrieved June 1, 2005, from www2.ncaa.org/legislation_and_governance/committees/division1.html N C A A Ru l e s H a n d b o o k . ( n . d . ) . R e t r i e v e d J u l y 9 , 2 0 0 4 , f r o m http://www.iupui.edu/~athlete/handbook/rules.html NCAA v. Tarkanian, 488 U.S. 179 (1988). Scruggs, W. (2003, May 3). Sports as the university’s “front porch”? The public is skeptical. Chronicles, p. 17. Shulman, J., & Bowen, W. (2001). The game of life. Princeton, NJ: Princeton University Press.

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Sports Fans of America Association. (n.d.). Retrieved May 15, 2004, from Extinct College Football Bowls, http://www.sportsfansofamerica.com/index.htm St. Bonaventure placed on probation for violations in men’s basketball (2004, February 1). Retrieved March 20, 2005, from www.ncaa.org/releases/infractions/2004 Sylwester, M. (2004, April 16). Athletics expenses gobble up revenues. USA Today, p. 19C. Whiteside, K. (2004, September 1). College athletes want cut of action. USA Today, p. 3C. Zoppo, T. (2004, September 1). Hypocrisy now spelled N-C-A-A. East Carolinian, via university wire.

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4 The International Sports System

Journalists in the United States tend to cover international sports cyclically. Blockbuster events, such as the Olympics, garner huge coverage, whereas other events, such as regional or even international championship tournaments, do not enjoy the public interest that domestic major leagues or college sports do. Unfortunately, the lack of interest means that important controversies and issues arising from international sports are ignored or not adequately reported. When they are—such as testing for performance-enhancing drugs—the flavor of the coverage takes on a nationalistic tinge (Lenskyj, 1998). Covering the workings of international athletic organizations is difficult. They are private entities, not subject to any legal requirements to release documents under a Freedom of Information Act type law. Also, most reside in countries that shelter them from lawsuits. Add to that the often autocratic leadership and relative inexperience in dealing with the press. The sheer pettiness and outright corruption exhibited by these bodies can be startling. Witness this example: Primo Nebioli, the president of 61

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track and field’s international federation, an Italian, arranged with Italian field judges to add almost one-half meter to the long jump of an Italian competitor in the 1987 World Track & Field Championship (which conveniently took place in Rome) so that he could win a bronze medal ahead of an American. This stunt was apparently concocted in retaliation for what the Italians thought was a bad call against the Italian competitors at the prior year’s world championship (held in Indianapolis). A videotape inadvertently running evidenced the tampering, and the federation was forced, over the great resistance of its president, to strip the bronze medal from the Italian competitor (Weiler & Roberts, 2004). In essence, international sports are governed by a system created at an earlier time for a different clientele. Based on the notion that only amateurs compete in international events for the glory of their respective sport and country, the structure remains quite different from the professional leagues found in the United States. This system—replete with multiple layers of governing organizations and complicated and sometimes arbitrary rules of governance—does not receive adequate journalistic scrutiny. Operating in relative secrecy and often under the control of autocratic leaders, these organizations are difficult nuts to crack. That may be changing. More recently, controversies involving international sports governance have become more frequent and more public. Questions of professionalism, substance abuse, and questionable judging have made headlines as allegations of corruption have surfaced. In response to unfavorable reports of bribery of Olympic officials and event judges, some international athletic organizations, such as the International Olympic Committee (IOC) and the International Skating Union (ISU), have changed their structure, eligibility rules, and scoring systems in competitions over the last quarter century. Allegations of use of performance-enhancing drugs have been another source of major concern. In track and field, for example, the drug testing issue has frayed the relationships between the domestic affiliates and international bodies for certain sports. The international sports structure differs greatly from the league and collegiate structure. The setup, often perplexing, falls into several categories and levels of power. At the apex sits the International Olympic Committee (IOC), the umbrella organization for the Olympic movement. Under the IOC, each country participating in an Olympic games competition (known as an “Olympiad”) has a national Olympic committee (NOC), the organizing committee for each Olympic games. In addition, international athletic federations (IFs) regulate particular sports which compete internationally. Although not directly part of the Olympic organization, they wield considerable power. Finally, there

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are domestic organizations affiliated with the international federations, known as national governing bodies (NGBs). The jurisdiction and powers of these entities create an interlocking relationship that sometimes becomes tangled. Let’s use the sport of figure skating as an example to illustrate. Although the IOC is the international governing body of the Olympics, the United States Olympic Committee (USOC) is the national Olympic Committee. The International Skating Union is the international federation and U.S. Figure Skating and U.S. Speed Skating are the national governing bodies. Each organization has its role in regulating the sport, choosing Olympic athletes, and regulating both international and Olympic competition. Often an athlete is subject to rules and regulations of more than one governing organization. As a result, the chain of command may blur, and the individual athlete can be at a loss as to which rules must be followed.

THE INTERNATIONAL OLYMPIC COMMITTEE (IOC) Background From modest beginnings as a revival of an ancient Greek tradition, the Olympics has become one of the most prestigious events on the world stage and possibly the most prestigious brand in sports (Bitting, 1998). It is watched by billions of people. Broadcast rights bring substantial sums to the International Olympic Committee (IOC) and some fees to the host cities. For example, NBC has paid $2.2 billion for the rights to broadcast the 2010 and 2012 Olympics. Hosting the Olympic games may bring prestige and positive publicity to the host city, but often results in considerable costs and controversy. Some cities, like Montreal, are still paying the costs of hosting the games (Merron, 2003), whereas others, like Salt Lake City, ended up with a small profit and positive feelings (Kemp, 2003). The recent Athens games will cost the Greek taxpayers over $11 billion (BBC News, 2004). The Olympic Games are governed by the IOC, the best known and most powerful body in international sports. Headquartered in Lausanne, Switzerland, the IOC is a nonprofit, nongovernmental entity that serves as caretaker of the modern Olympics. Founded in 1894 by the French educator Baron Pierre de Coubertin, the IOC’s original mandate was to produce a revival of the ancient Greek games. According to IOC rules, the organization grants rights to stage summer and winter games quadrennially. Since 1994, the summer and winter games alternate ev-

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ery 2 years. For example, the 2006 Winter Games were held in Turin, Italy, and the 2008 Summer Games will take place in Beijing, China. The IOC serves three major functions. First, it is an umbrella organization for the various domestic affiliates known as national Olympic committees (NOCs). Second, it interacts with the international sports federations (IFs), which control particular sports and are discussed in more detail later in the chapter. Third, the IOC owns and controls the intellectual property rights, such as copyrights, trademarks, and other intangible properties associated with the Olympic games. These include such familiar symbols as the five interlocking rings, the Olympic motto (“Citius, Altius, Fortius,” which translates to “swifter, higher, stronger”), and the flame (Masteralexis, Barr, & Hums, 1998). The IOC has used legal means to protect those marks by suing alleged infringers. Although the IOC is a nongovernmental organization, the Olympic charter states that any person or organization involved with the Olympic movement “shall accept the supreme authority of the IOC and shall be bound by its Rules and submit to its jurisdiction,” thereby creating a powerful mandate for compliance. The IOC is a United Nations-like organization governing the premier event in international sports competition, but inherently more powerful. The United Nations is a confederation of nation-states that exhibit autonomy and national self-interest in the debates involving political questions. The Secretary-General, the U.N.’s equivalent of a Chief Executive Officer, cannot impose his or her values unilaterally. The IOC, on the other hand, has traditionally selected powerful individuals to serve as presidents, aided by a compliant board often made up of allies of that president. The president traditionally carries the authority vested in professional league commissioners but is not subject to checks and balances of constituencies such as players’ unions (because none exist) or general public scrutiny. One commentator said, “Although the IOC cannot compel governmental compliance, the Olympic Charter reflects current international practice and is thus almost as binding as the law itself ” (Ansley, 1995).

Current Structure Currently, the 115 active members of the IOC meet at least once a year. The members elect a president for an 8-year term, renewable once for 4 additional years, and also elect an executive board whose members serve 4-year terms. The term of the current president, Jacques Rogge, ends in 2009, although he could be reelected for an additional 4 years

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after that. IOC members include 15 active Olympic athletes elected by their peers at the Olympic games. Another 15 members come from international federations, 15 from the national Olympic committees, and 70 others as individual, non-affiliated members. The mandatory retirement age for IOC members, including the president, is 70 years (it was 80 before December 11, 1999). The Executive board is the backbone of IOC governance, akin to a board of directors in a corporation. Among other powers, the board assumes the “ultimate responsibility” for the administration of the IOC, the management of the IOC’s finances, preparing annual reports, conducting the procedure for acceptance and selection of candidates for the organization of the Olympic games, and enacts “all regulations necessary” to ensure the proper implementation of the Olympic charter and the organization of the Olympic games (http://www.olympic.org/uk/organisation/ ioc/executive/index_uk.asp.). The procedures for selecting host cities for future Olympic games have received considerable attention in the wake of recent scandals involving the selection process. At this time the rules are still evolving, but one major change is the abolishment of visits by IOC members to candidate cities.

Marketing the Event Every Olympiad is held at a different city. Therefore a different organization plans the event. Known as an “Olympic organizing committee,” it controls the facility construction, living arrangements, transportation, and media services. The committee must also “sell” the event to the public. If the particular Olympics are successful, then the resulting favorable publicity promotes tourism and leaves that city with new facilities for sports and other functions for future years. Olympics preparations become an urban renewal project. The “selling” of the event is crucial because the host keeps about 95% of the revenue from ticket sales, but obtains little from the lucrative broadcast rights and corporate sponsorships, the major sources of income. Certain cities hosted successful games—Los Angeles in 1984, Barcelona in 1992, Sydney in 2000 and Salt Lake City in 2002. Others were a financial disaster, such as Montreal’s games in 1976, which almost bankrupted the city and province of Quebec. The Munich Olympics in 1972 were marred by the murder of 11 Israeli athletes by Palestinian terrorists. Moscow’s games in 1980 were hurt by the boycott by the United States and other nations protesting the Soviet invasion of Afghanistan. In the post-9/11 environment, host cities have to pay far more for security than in the past. This expense—$1.2 billion in Athens, as com-

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pared with $200 million in Sydney—is often paid by the host city. Even with tight security, the fear of possible terrorist incidents could also deter people from attending the games, therefore hurting the bottom line. Because of the prestige of the event, the IOC has been highly successful in attracting blue-chip sponsors, who pay large sums to attain the designation of “Olympic sponsor.” Generally, these sponsorships cost between $60 million and $70 million, money mostly channeled to the IOC’s coffers, although a portion is ultimately dispersed to the host country. Although there are several classes of sponsorship, the worldwide sponsor role, through the “The Olympic Partner” program, is the most important. According to the IOC Web site, “such sponsors receive exclusive marketing rights and opportunities within their designated product category. They may exercise these rights on a worldwide basis, and they may develop marketing programs with the various members of the Olympic Movement—the IOC, the national Olympic committees, and the Olympic sites organizing committees” (http://www.olympic.org/uk/organisation/facts/programme/sponsors_uk.asp). As part of their sponsorship, these companies receive rights to use Olympic trademarks, showcasing of their products at Olympic locations, and protection from ambush marketing (a technique where competitors attempt to market their products near the official Olympic sites).

The Scandals The present IOC structure reflects the changes implemented after a pattern of improper conduct between IOC members and the local organizing committee was revealed in 2002. A Salt Lake City television station received documents outlining a payment made by the Salt Lake Olympic Organizing Committee (SLOC) to the daughter of an IOC member from Cameroon for her university expenses. Another example of unsavory activity involved the daughter of an IOC executive board member, a concert pianist of reputedly modest ability, who was hired as a guest artist with the Utah Symphony for a fee of $5,000. SLOC bought more than $3,750 worth of tickets to watch her perform. Her brother received a job with Keystone Communications, a Salt Lake City telecommunications company. The job was organized by SLOC, which also paid him a salar y of more than $100,000 (http://sportsillustrated.cnn.com/olympics/news/1999/02/09/saltlake_ report). An ad hoc committee investigated the scandal, which led to the expulsion of six IOC members. Nine others were censured and four others resigned (Longman & Thomas, 1999).

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It turned out that the payments before the Salt Lake City games were not isolated events. Evidence of corruption in the bid for the 1996 Summer Games has also been exposed (Rose, 1999). It has been revealed that in their unsuccessful effort to win the bid for the 1996 games, representatives from Athens, Greece, gave gold and diamonds to the wife of an Australian IOC representative (Saloufakos-Parsons, 2001). The Atlanta Bid Committee offered then IOC President Juan Antonio Samaranch’s wife an “all-expenses-paid $12,000 trip to [Atlanta] Georgia,” which she accepted. Investigative hearings revealed that corruption has been a “long-standing practice” in the international search and subsequent selection of Olympic host cities (Saloufakos-Parsons, 2001). As a result, in 1999 the IOC voted to ban all-expenses-paid visits to cities bidding for the Olympics. Also, as part of those reforms, the IOC established a new ethics watchdog, made up of three IOC delegates and five independents (Shipley, 1999). Notably for journalists, the reforms include a release of financial reports on the sources and uses of the Olympic movement’s income, an important window into the fiscal policies of the IOC. The 1999 reforms also helped create the World Anti-Doping Agency (WADA), which has become a very important in combating the use of performance-enhancing substances by athletes. Chapter 10 examines WADA’s drug testing standards. Despite the controversies and the changes, the IOC’s power remains largely intact and is felt by national Olympic committees, international sports federations, and domestic affiliates of those sports federations.

Professionalism At one time, only nonprofessionals were eligible to compete in the Olympic games. An athlete receiving any compensation for athletic competition was ineligible. Jim Thorpe, one of the great all-around athletes of his time, won the gold medal in the decathlon at the 1912 Summer Games in Stockholm. When it was discovered that Thorpe played semiprofessional baseball, the IOC stripped him of his medal (http://espn.go.com/classic/biography/s/thorpe_jim.html). The strict amateur policy dates to a different era. In that period, working-class people did not have the time for or access to sports facilities. The amateurism requirement meant access only by the wealthy, because the average laborer could not afford to train, travel, and compete. The amateurism requirement became perverse when Communist states used it to great advantage. During the Cold War, athletes

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from Soviet-bloc countries often had government or military positions, but devoted much if not all of their time to training and competing in athletic events. For example, the hockey players in the Soviet Central Army team worked in the military, but of course never served in any infantry position. The United States and other non-Communist countries accused the Soviets and other Soviet-bloc nations of de facto compensation of their athletes. In response, the Soviets alleged that the United States college system, whereby athletes often received full scholarships, was a similar de facto compensation. Regardless of who was right, the IOC relaxed the strict amateur standard in 1986. Presently, professional athletes are permitted to compete under rules stipulated by the particular sport’s international federation. Amateurism versus professionalism has not been a controversial Olympic issue since that time.

Dispute Resolution Arbitration is the IOC’s preferred method of dispute resolution, and all Olympic disputes fall under the jurisdiction of the Court of Arbitration for Sport (CAS), formed by the IOC in 1983. When an athlete signs the entry form into the Olympics, he or she consents to the court’s jurisdiction to arbitrate disputes arising during the games. When a dispute occurs, an application is submitted to the CAS and the arbitration panel is required to render a written decision within 24 hours. The ruling is final and binding, and may not be appealed or challenged (McLaren, 2002). The CAS procedure applies even if the athlete participates in a sport whose international federation has its own arbitration system for resolving disputes because the IOC’s rules take precedence. Many CAS disputes involve performance-related substances allegedly found in an athlete’s system after a drug test. No matter where the arbitrations are held, they are governed by the CAS rules, which state that arbitrators base their decisions on the Olympic charter and “general principles of law” (CAS Rules, Article 17).

NATIONAL OLYMPIC COMMITTEES (NOCS) Each nation that competes in the Olympics must have a national Olympic committee. The NOCs “shall be the sole authorities responsible for the representation of their respective countries at the Olympic Games as well as at other events held under the patronage of the IOC” (Bitting, 1998). In the United States, the NOC is the United States Olympic Committee.

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THE UNITED STATES OLYMPIC COMMITTEE (USOC) History Created in 1896, the year of the first modern Olympic Games, the United States Olympic Committee (USOC) is a nonprofit corporation with a $500 million quadrennial budget that utilizes both volunteers and a paid professional staff. Unlike other national Olympic committees, which are government funded, the USOC obtains the majority of its funding from public donations and from corporate sponsorships. Throughout most of its history, the USOC had surprisingly little power. Unlike many countries whose Olympic committees are government arms, the USOC is, at best, only quasi-governmental. As the “coordinating body” over all amateur athletic activity within the United States, it has exclusive jurisdiction over “all matters pertaining to the United States participation in the Olympic Games” and is the “ultimate authority with respect to United States representation in the Olympic Games” (Foschi v. United States Swimming, Inc., 1996). The USOC has the authority to recognize a national governing body for any amateur sport. Although this sounds like a powerful mandate, for many years the USOC was subordinate to powerful amateur athletic organizations. According to one commentator, the USOC was little more than a travel agency, which sent athletes to the respective Olympic sites every 4 years. While other countries were developing coordinated Olympic programs, the USOC was embroiled in jurisdictional problems throughout the 1950s and early 1960s. Three competing amateur sports organizations fought over athlete eligibility. First was the Amateur Athletic Union (AAU), which at the time was the national governing body for 10 Olympic sports. Second was the school/college sports community. Finally, a number of independent national governing bodies, which conducted their programs apart from the AAU and did not have school/college participation in their sports, sought control. As a result, chaos resulted in the selection of the best athletes, and, to make matters worse, no dispute resolution mechanism existed to solve or address these problems. In the mid-1970s, President Gerald Ford formed a commission to present recommendations for revising the organization of Olympic sports, resolving disputes, and improving ways to finance Olympic sports in America. No disagreement surfaced on the central issue: The USOC had to be changed dramatically. Acting on the commission’s recommendations, Congress passed the Amateur Sports Act of 1978 (now the Ted Stevens Olympic and Amateur Sports Act), which man-

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dated the USOC as the one entity responsible for coordinating all Olympic athletic activity.

USOC Structure A key goal of the 1978 Amateur Sports Act was to strengthen the USOC. Unfortunately, the result served as a case study in bad policymaking because law did not create a practical structure. A bloated policy board and executive committee with confusing reporting structures set the stage for frequent disputes. Two uncoordinated chains of command occurred, with some members reporting to the USOC president and others reporting to the chief executive officer (CEO). The law “suggested” that the USOC president, a 23-member executive committee, and a 125-member board set policies for the organization. Yet the CEO and his or her paid staff implemented the policies while also raising money. The president and CEO often fought over control and the use of that money. This created a revolving door of CEOs and presidents. In 25 years, the USOC has had 13 CEOs and 11 presidents (Scott, 2004). Although the CEO received compensation, the president, elected by the 125-person board of directors, was unsalaried. The board was comprised of past USOC presidents, International Olympic Committee members, representatives of the national governing bodies, public-sector representatives, athletes who had competed in major international events within the past decade and representatives from the 39 Olympic sports. However, in an effort to accommodate other interested groups, the board also included members from such tangentially sports-related bodies as the Boy Scouts of America, the American Legion, and the Dwarf Athletic Association of America. It is no wonder that the organization was in such disarray. The president also chaired a smaller executive committee, and implemented policy. The executive committee, comprised of 22 members that included the USOC president, vice-presidents, U.S.-based IOC members and representatives of the national governing bodies, hired the chief executive officer, the rival power to the president. The executive committee also established policy, oversaw business matters, and implemented policy guidelines. At least 20% of the committee members were athletes with previous major world competition experience. Both the board and the executive committee members were unsalaried. In 2003, responding to political pressures and bad publicity, the USOC agreed to eliminate 20 members of the executive committee and reduce the 125-member board to 11. The new board consists of four directors who have no USOC ties, two national governing body

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(NGB) representatives, and two athlete representatives (Michaelis, 2003). In addition, the board will include three U.S. International Olympic Committee members with limited voting power.

Powers The Amateur Sports Act of 1978 mandated that the USOC was responsible for coordinating international sporting events for the U.S. national governing bodies (36 USC sec. 220504). All the NGBs were required to report to the USOC. However, the USOC was only allowed to recognize one NGB per sport, eliminating the earlier jurisdictional overlaps between different organizations claiming to represent the same sport. Although not a government agency, the USOC became a “quasi-governmental” organization, because the law mandated it periodically report to Congress. However, Congress does not oversee the USOC on a day-to-day basis, leaving the USOC largely unchecked.

Resolution of Disputes Because of court orders preventing the USOC from taking action against figure skater Tonya Harding for her role in the planning of the assault against Nancy Kerrigan in January 1994, Congress amended the Amateur Sports Act in 1998 (now called the Ted Stevens Olympic and Amateur Sports Act) to strengthen the USOC’s arbitration system. Under the amendments, a court may generally not impose any injunction against the USOC within 21 days of the beginning of a major competition. The amendments also established the office of an ombudsman, who, among other powers, may seek to mediate disputes. In 2004, the USOC adopted new bylaws covering the rights of athletes, coaches, trainers, managers, or other officials seeking participation in the conduct of international amateur athletic competitions (USOC Bylaws sec. 9.7). Aggrieved parties may submit their claims to arbitration within 6 months of the alleged denial of rights (USOC Bylaws sec. 9.2.).

Sponsorships USOC partners receive marketing rights to the U.S. Olympic Team and commercial access to the USA five-ring logo and commercial access to Olympic themes, terminology, and imagery for use in sponsor marketing programs. Several levels of sponsorship exist. “Sponsor-level” com-

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panies have access to the items just named and have rights to list the year in which the companies first became Olympic sponsors or partners. They include Anheuser-Busch, AT&T, and General Motors. The USOC also has lower levels of sponsorships, known as “suppliers” and “licensees.” All domestic sponsors receive marketing rights to the U.S. Olympic Team and conduct all advertising and marketing programs within the U.S. territory unless they enter into additional relationships with other national Olympic committees or the organizing committees for the Olympic games (Sports Business Daily, August 17, 2004, http://www.sportsbusinessdaily.com).

INTERNATIONAL FEDERATIONS International federations (IFs) are the worldwide governing bodies of various sports, possessing the authority to regulate the sport, subject only to the limitations of the Olympic Charter. A federation’s responsibilities include conducting international competitions, detailing eligibility rules, choosing judges and referees for competitions (including the Olympic games), organizing world championships, and resolving technical issues in their respective sports. Unlike the inherent weakness of the prior USOC model, by their nature, the IFs have a more centralized decision-making structure. Often powerful (even autocratic) presidents or CEOs lead IFs. In order to receive and maintain recognition from the International Olympic Committee, international federations must agree to comply with the Olympic Charter, show compliance with IOC criteria, and receive approval by the IOC executive board. Like the IOC, for many decades, the IFs limited membership to amateur athletes. Most, if not all, now allow professionals to compete. In recent years, the judging of events, particularly in the Olympics, has received criticism. At the 2004 Summer Olympic games in Athens, questionable scoring in gymnastics, swimming, equestrian, rowing, and fencing resulted in protests and appeals over medal results. Three gymnastics judges and a fencing referee have been suspended for errors affecting gold medals. Many remember the controversial judging at the 2002 Winter Olympics at Salt Lake City where improprieties in the scoring of pairs figure skating resulted in the awarding of joint gold medals. The respective federations took a great deal of criticism in their selection of judges and the lack of damage control. Athlete challenges to IF rulings on disputes are heard by the Court of Arbitration for Sport, which handles similar appeals involving Olympic athletes. A list of the respective IFs for each international sport recognized by the IOC and their web sites is given at the end of this chapter.

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NATIONAL GOVERNING BODIES (NGBS) Each international federation has a corresponding national governing body. An NGB is an organization in charge of running the sport in a given country. The particular IF generally recognizes one domestic body as an NGB. The NGBs set eligibility standards for participation in the sport, such as age limitations and professionalism. They also conduct competitions for selecting teams to participate in international competitions organized under the aegis of the international federation or the International Olympic Committee. National governing bodies must abide by the rules of their corresponding IF, as well as those of the IOC. Yet conflicts between the IFs and the NGBs have arisen in recent years regarding arbitration rules. The USOC’s bylaws outline the duties of national governing bodies in the United States. They include establishing written procedures to select athletes, coaches, and team leaders for the Olympic, Pan American, and Paralympic games teams; selecting site(s) and date(s) to qualify for the Olympic, Pan American, and Paralympic games teams; recommending a training plan for training Olympic, Pan American, and Paralympic games team members; establishing programs for the development of its sport; and preparing the requirements of its sport for submission to the USOC for apparel, supplies, equipment, training services, and transportation to service the Olympic, Pan American, and Paralympic teams (USOC Bylaws sec. 17.2). The NGBs also must participate in the IF activities of its sport and carry out those responsibilities required by the respective international federations. In the United States, the Ted Stevens Olympic and Amateur Sports Act requires that NGBs “agree to submit to binding arbitration … the opportunity of any amateur athlete … to participate in amateur athletic competition, upon demand of the corporation or any aggrieved amateur athlete.” (36 U.S.C.A. §220522(a)(4)(B)). We next examine the structures of the respective international federations and national governing bodies representing track and field, figure skating, and swimming.

Track and Field International Federation—International Association of Athletics Federations (IAAF). First established in 1912, the IAAF governs rac-

ing, walking, and other track and field events. In more recent years, the sport moved away from its traditional "amateur" eligibility to the present rules allowing professionals to compete in its events. For example, the IAAF now offers prize money for its competitions based on a points

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system, as well as additional bonuses for outstanding performances such as breaking world records. The organization has procured increased financing from areas such as corporate sponsorship—a departure from merely collecting membership fees. Headquartered in Monaco, the IAAF has 210 affiliated national governing bodies. The IAAF Council, the central body administering all IAAF affairs, includes the president, the general secretary, four vice-presidents, six representatives, and 15 individual members. Six committees and eight commissions assist the council. Council members are elected for 4 years with the exception of the general secretary, who is appointed by the council. National Governing Body—USA Track & Field (USATF). The USATF is the IAAF member in the United States. It inherited that role from the old Amateur Athletic Union (AAU), which dated from 1878. The AAU governed track and field until 1979, when the Amateur Sports Act decreed that the AAU could no longer hold international franchises for more than one sport. The officers and members of the USATF Board, the chairs of all the committees, and 12 delegates from each association are permitted to vote at meetings. In addition, it is required that 20% of the delegates be athletes. Since the mid-1980s, USATF events have been open to professionals. The USATF has 57 regional associations. Disputes between athletes and the USATF are first submitted to an appellate tribunal. If one party wishes a further appeal, the Court of Arbitration for Sport assumes jurisdiction. Its rulings are final. In recent years, the USATF has suffered organizational and economic difficulties. Track and field lacks consistent popularity, which makes finding sponsors difficult. As a result, the organization has limited economic resources to stage competitions and otherwise promote the sport. Even worse, the USATF has been embroiled in controversy over its drug testing rules. The International Olympic Committee criticized the USATF for permitting sprinter Jerome Young to run in the 2000 Sydney Olympics after having tested positive in the prior year for a banned steroid (Abrahamson, 2003). More recent allegations of performance-enhancing drug use created even more controversy. Tense relations between USATF and the IAAF, the sport’s international federation, over substance abuse has existed since the late 1990s, exemplified by an arbitration ruling in early 2003. The Court of Arbitration for Sport concluded that USATF did not have to disclose the drug test results of 13 athletes because of its, and the athletes’, reliance on a confidentiality policy USATF had maintained, despite IAAF rules requiring such dis-

THE INTERNATIONAL SPORTS SYSTEM

closure (Shipley, 2003). The IAAF claimed that its rules required all national track federations to disclose the results of the tests to the IAAF. Even if true, the USATF argued that such disclosure (from 1996 to 2000) was illegal under U.S. privacy laws. Despite the IAAF’s disclosure requirements, the panel concluded that USATF’s confidentiality policy took precedence, not necessarily because of the legal issues, but rather a procedural one: The IAAF failed to challenge USATF’s policies in a timely manner. Other conflicts over alleged doping included the saga of Butch Reynolds. After testing positive for a banned substance, Reynolds, a silver medal winner in the 400-meter run at the 1988 Seoul Olympics, obtained a decision from the American Arbitration Association (AAA) clearing him of the charge. Nevertheless, the IAAF refused to honor the decision, held its own arbitration hearing, and continued Reynolds’s suspension (Ward, 1996). Hurdler Stephon Flenoy also received a decision setting aside his doping charge, only to have the IAAF refuse to accept the decision and continue his suspension. Finally, Mary Slaney was cleared of doping charges by USATF, only to have the IAAF rule otherwise (Straubel, 2002). In a not-so-veiled criticism of USATF governance, in April 2003 the United States Olympic Committee’s board voted unanimously to mandate that USATF update its bylaws, improve its financial reporting, and improve its coordination with the United States Anti-Doping Agency (the agency now in charge of drug testing). A more detailed discussion on present drug-testing standards for Olympic and professional sports team athletes follows in chapter 10.

Figure Skating IF—International Skating Union (ISU). The responsibilities of the International Skating Union, the governing body over all national figure skating and speed skating associations, include jurisdiction over nonprofessional competitions, certification of national associations, and creating the rules for World Championship and Olympic figure skating championships. Founded in 1892, it espoused amateurism for many years but now allows professionals to compete, although under more limited circ*mstances than most other international federations. Judging controversies dominated the ISU, exemplified by problems in the 2002 Winter Olympics in Salt Lake City. In the pairs skating event, a gold medal was awarded to the Russian team of Yelena Berezhnaya and Anton Sikharulidze over a Canadian pair, Jamie Salé and David Pelletier. The result caused considerable criticism, because according to many, the Canadian pair skated a flawless program and the Russians

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did not. After a review, one of the judges, Marie Reine LaGougne (known in the media as “the French judge”), “confessed” that she was ordered by the head of the French skating governing body to vote for the Russian team as part of a deal with the head of Russia’s governing body to vote for the French team in the ice dancing event. Ultimately, dual gold medals were awarded to the Russian and Canadian teams, a first in Olympic history (Weiler & Roberts, 2004). The episode just described demonstrates the kind of sordid deal-making and arrogance of an organization that lacked adequate scrutiny. Why did the national skating federations select the judges for ISU events? In particular, why did countries participating in the World Championships or Olympics select the judges? Good reasons may exist, but it behooves journalists covering the governance of skating and other international sports to understand the basic functions of the international federations and national governing bodies and ask those kinds of questions. Fueled by the Salt Lake City scandal, the ISU altered its judging system. A computer randomly selects nine scores from 14 judges, whose marks are kept anonymous even during the traditional postevent evaluation. The new arrangement apparently solves the problem of one or two judges affecting the outcome, but it creates other issues. Under the prior system, incompetent or biased judges could be identified and punished, but the new system makes it easier for corrupt judges to go undetected. Who devised this new scheme, how long it took, and how much debate resulted remain unanswered questions. A more fundamental organizational change proposed is separating figure skating and speed skating into separate entities, much like the current structure in the United States. The ISU also governs speed skating, a much less popular sport in the United States than figure skating. Some have argued that the ISU is controlled by the speed skaters and is less attuned to the needs of competitive figure skating (Jones, 2003; Swift, 2003). Unlike most other major international sports, the ISU continues to cling to a modified form of “amateurism.” If a skater wishes to remain eligible to compete at an ISU-sanctioned event, like the World Championships, he or she is restricted from participating in certain professional tours (Crouse, 1998) but is eligible to participate in so-called “pro-am” events sanctioned by the ISU. NGBs—U.S. Figure Skating and U.S. Speedskating. As noted earlier, United States skating is governed by two separate NGBs, the United States Figure Skating Association and U.S. Speed Skating. We focus on U.S. Figure Skating (USFS), which was formed in 1921. USFS is

THE INTERNATIONAL SPORTS SYSTEM

the International Skating Union’s national governing body in the United States for figure skating. It has several hundred member clubs throughout the United States that stage competitions, thus allowing athletes to move up the ladder to international competitions. Most recently, the USFS changed its scoring system, which is now modeled after the one used in international competition. U.S. Figure Skating has a nine–member executive committee and a 37-member board of directors, of which 31 are voting members. Twenty percent of the board consists of athletes. Ironically, the current popularity of figure skating stems in part from an infamous off-ice incident in 1994: the assault on Nancy Kerrigan by associates of her rival Tonya Harding before the U.S. National Championships in Detroit (Blinebury, 1994). Kerrigan recovered to compete at the Winter Olympics in Lillehammer, Norway, but attempts to impose disciplinary sanction against Harding failed. After Harding went to court asking for an injunction to stop the hearing, the USOC simply abandoned the effort and Harding competed in Lillehammer. As noted earlier, the 1998 Ted Stevens Olympic and Amateur Sports Act limits the power of U.S. comes from issuing such injunctions. U.S. Speedskating is the National governing body for the sport. It is separate from U.S. Figure Skating, but is a member of the ISU, just like its sister NGB.

Swimming IF—Federation Internationale de Natation Amateur (FINA). Competitive swimming at the international level is governed by the Federation Internationale de Natation Amateur (FINA). FINA is also in charge of other aquatic sports, including water polo, diving, and synchronized swimming. The national body governing swimming in any country is eligible for membership in FINA. FINA’s central governing group, known as “the bureau,” consists of 17 members: the president, honorary secretary, honorary treasurer, five vice presidents, and nine additional members. Its duties are to encourage development of swimming throughout the world, to ensure uniformity of rules, and to adopt rules for the control of competitions, as well as many other functions. The bureau is elected by the General Congress (www.fina.org/const.html, n.d.). Note the intricacies of FINA. The General Congress, the highest authority of FINA, has the power to decide upon all matters arising in FINA. The Technical Congress decides on all technical matters concerning the competitive sport. Both congresses meet once a year. The bureau is limited to deciding matters assigned to them by the General

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Congress. There are also several standing committees with members from different federations, appointed by the bureau. The bureau is the division that regularly interacts with athletes. FINA has its share of problems, most notably allegations of performance-enhancing drug use. This issue was at the forefront in the 1990s, when the Chinese swim team suddenly started dominating in a sport where it had previously made modest showings. Despite various protests, FINA claimed that individual Chinese athletes were doping, as opposed to a systematic scandal by the Chinese Swimming Federation. During the Asian Games in 1994, seven female Chinese swimmers tested positive for anabolic steroids and were suspended for 2 years by the Chinese Swimming Federation. These test results created widespread suspicion of team-wide doping, especially given the meteoric rise in the medal count. During the 1988 Seoul Summer Games, the female swimmers took home three silver medals and one bronze. In the 1992 Barcelona Olympics, they captured four golds, five silvers, and one bronze. In response to the growing concern over this problem, in 1996 FINA passed a sanction whereby swimmers who test positive can be suspended for 4 years, and even implemented a sanction that would strip an athlete of a title won within 12 months of testing positive for drugs (Michaelis, 1996). FINA embraced professionalism in the mid-1980s. NGB—USA Swimming, USA Diving, U.S. Synchronized Swimming. FINA has affiliations with several U.S. national organizations, including United States Swimming, Inc., U.S. Water Polo, United States Diving, United States Synchronized Swimming, and United States Masters Swimming. Unlike areas of sports such as track and field, where there is a blanket organization governing all the various sports within its domain, swimming has an individual organization for each sport.

THE INTERNATIONAL SPORTS SYSTEM

INFORMATION CHECK When covering a international sports issue, a journalist should determine: 1. What are the applicable respective international federation and national governing body? 2. What powers do these bodies have that are applicable to the event in question? 3. Does the particular issue involve the Olympics? If so, when does the IOC or National Olympic Committee have control of the matter? 4. Are copies of the organizations’ constitutions and bylaws available? (If so, the journalist should read the appropriate sections and if anything seems inconsistent or unclear, ask why.) 5. How have similar issues have been handled in the past? 6. Is there a right of appeal? If so, with whom and where? 7. How accessible are organization representatives for interviews? 8. How are the officials of the organization elected or appointed? 9. Is there any athlete representation in these organizations? 10.Does the organization have any age minimums or maximums for competition?

HELPFUL WEB SITES International Archery Federation (FITA): USA Archery: www.archery.org http://www.usarchery.org/ International Association of Athletics Federations (IAAF); the IF for track and field: www.iaaf.org

USA Track & Field: www.usatf.org

International Basketball Federation (FIBA): www.fiba.com

USA Basketball: www.usabasketball.com

International Bobsleigh & Tobogganing Federation: www.bobsleigh.com

United States Bobsled & Skeleton Federation, Inc.: www.usbsf.com

International Cycling Union (UCI): no web site found

USA Cycling, Inc.: www.usacycling.org

International Federation for Equestrian Sports (FEI): www.horsesport.org

US Equestrian Federation: www.usef.org

International Federation of Rowing Association (FISA): www.fisa.org

United States Rowing Association: www.usrowing.org

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International Fencing Federation (FIE): www.fie.ch

United States Fencing Association: www.usfencing.org

International Gymnastics Federation (FIG): www.fig-gymnastics.com

United States Gymnastics Federation: www.usa-gymnastics.org

International Ice Hockey Federation: www.iihf.com

USA Hockey: www.usahockey.com

International Judo Federation (IJF): www.ijf.org

United States Judo, Inc.: www.usjudo.org

International Olympic Committee: www.olympic.org

United States Olympic Committee: www.usoc.org

International Paralympic Committee: www.paralympic.org

USA Paralympic Committee: www.usparalympics.org

International Skating Union (ISU): www.isu.org

The United States Figure Skating Association (USFSA): www.usfigureskating.org US Speedskating: www.usspeedskating.org

International Swimming Federation (FINA): www.fina.org

US Swimming: (no website found)

International Tennis Federation (IF): www.itftennis.com

United States Tennis Association: www.usta.com

International Volleyball Federation (FIVB): www.fivb.ch

USA Volleyball: www.usavolleyball.org

International Weightlifting Federation: www.iwf.net

USA Weightlifting Federation: www.usaweightlifting.org

Royal and Ancient Golf Club of St. Andrews: www.randa.org

United States Golf Association: www.usga.org

REFERENCES Abrahamson, A. (2003, December 2). Steroid secrecy upsets IOC; U.S. track officials haven’t explained why gold medalist Young was cleared to run in 2000 Games despite a positive test, Olympic chief says. Los Angeles Times, p. D1. Ansley, C. C. (1995). International athletic dispute resolution: Tarnishing the Olympic dream. Arizona Journal of International Comparative Law, 12, 277, 290. Bitting, M. R. (1998). Mandatory binding arbitration for Olympic athletes: Is the process better or worse for “job security”? Florida State University Law Review, 25, 655. Blinebury, F. (1994, February 24). A triumph and a tumble; Kerrigan ices Harding; Nancy nearly flawless as Tonya finishes in 10th place. Houston Chronicle, p. A1. Chambers banned after positive B test. (2003, November 8). Morning Star, p. 16.

THE INTERNATIONAL SPORTS SYSTEM

Court of Arbitration for Sport, Article 17. Arbitral rules. Retrieved June 16, 2005, from www.tas-cas.org Crouse, K. (1998, February 6). Saving grace; Kwan puts sparkle back into women’s figure skating. Los Angeles Daily News, p. 00. Foschi v. United States Swimming, Inc. 916 F. Supp. 232, 240 (E.D.N.Y. 1966). Green Olympic bill doubles. (2004). Retrieved Januar y 5, 2005, from http://news.bbc.co.uk/2/hi/business/4007429.stm Help the IAAF. (2003, May 9). Daily Telegraph (London), p. 4. Jones, T. (2003, March 26). On thin ice; New figure skating body wants to busy the old guard. Calgary Sun, p. 63. Kemp, J. (2003). Research evaluation of the Salt Lake City 2002 Winter Olympics. Retrieved July 10, 2004, from http://travel.utah.gov/Olympic_Evaluation.pdf Lenskyj, H. (1994). “Inside sport” or “On the margins?” Australian women and the sport media. International Review for the Sociology of Sport, 33(1), 19–32. Longman, J., & Thomas, J. (1999, February 9). Report details lavish spending in Salt Lake’s bid to win Games. New York Times, p. A1. Masteralexis, L. P., Barr, C. A., & Hums, M. A. (1998). Principles and practice of sport management. p. 221 Gaithersburg, MD: Aspen. McLaren, R. H. (2002). International sports law perspective: Introducing the Court of Arbitration for Sport: The ad hoc division at the Olympic games. Marquis Sports Law Review, 12, 515. Merron, J. (2003, April 22). Montreal’s house of horrors. Retrieved July 10, 2004, from http://espn.go.com/mlb/s/2003/0422/1542254.html Michaelis, V. (1996, July 14). Swimming under gun after Chinese scandal. Denver Post, Section OLY, p. 15D. Michaelis, V. (2003, October 20). USOC hopes to take note of change. USA Today, p. 13C. Rose, J. (1999, September 22). Upton calls for Olympics cleanup congressional probe to look at committee’s “culture of corruption.” South Bend Tribune, p. A1. Saloufakos-Parsons, A. (2001). Going for the “gold”: An application of the OECD Bribery Convention to the Olympic games scandal. California Western International Law Journal, 31, 297. Scott, M. S. (2004, January). Lloyd Ward: Victim or villain? Black Enterprise, Section BE Exclusive, p. 60. Shipley, A. (1999, May 4). IOC retains right to conduct probes: Ethics panel declines to take over task. Washington Post, p. D01. Shipley, A. (2003, January 11). Court rules in favor of U.S. Track; Refusal to identify athletes in drug testing case upheld. Washington Post, p. D01. Straubel, M. S. (2002). Doping due process: A critique of the doping control process in International sport. Dickens Law Review, 106, 523. Swift, E. (2003, May 10). An insurrection among American figure skaters, fed up with the corruption of the international body that governs them has sent sparks flying this week at an annual convention in down Norfolk. Virginian Pilot, p. A1. Ted Stevens Olympic and Amateur Sports Act, 36 U.S.C. sec. 220501 et. seq.(2001). (TTED3-03). Retrieved July 12, 2005, from www.ussoccer.com/templates/includes/ services/tted3-03 Track and field athletes not identified. (2003, November 12). ESPN Web site, http://www.espn.com

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Ward, B. (1996, Jun 19). IAAF flap changed Reynolds’ outlook. Tampa Tribune (Florida) Sports, p. 1. Weiler, P., & Roberts, G. (2004). Sports Law—Text, cases and problems (3rd ed., p. 1078). St. Paul, MN: West Group.

CHAPTER

5 Sports Contracts

Contracts are fundamental to the professional sports landscape. These documents determine the rights and obligations between the athletes, coaches, general managers, and the organizations that employ them. Although contracts encompass many different types of business and personal obligations, sports contracts have certain unique and important characteristics. Terms are subject to the labor agreements negotiated between players’ unions and their respective leagues (also a type of contract) and to the salary control mechanisms found in many of those labor–management agreements. Additionally, sports contracts contain particular duties and prohibitions not normally found in a standard business contract. Finally, as personal services contracts, sports contracts enjoy particular remedies exist not available in most everyday contracts. Although most sports contract issues receiving media coverage apply to professional athletes and their teams, contractual issues also apply to coaches and general managers. Sponsorship agreements, endorsem*nt deals, and event participation also serve as important aspects of the subject. To understand the sports business, a journalist has to understand the very basics of contract law, the terms of such agree83

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ments, and the important negotiating points involved. This chapter focuses on these issues in considerable detail. We do not discuss purely amateur athletes, because NCAA rules prohibit them from earning compensation for their athletic involvement. Often, professional athletes earn princely sums. In 2005, the average salary of a Major League Baseball player was $2,630,000, 32 times what it was in 1967 (AP, 2005). For an NFL player, it was $1.25 million (Spiegel, 2005); for the NBA, $4.9 million (Schulz, 2005); and for the NHL, $1.81 million (Harris, 2004). Even more telling are the total salaries paid to the few marquee athletes. Sports Illustrated, in a story called “The Fortunate 50,” assembled a list of the 50 most highly paid American athletes. The calculations covered base salaries, winnings (for individual athletes), endorsem*nts, and appearance fees. Tiger Woods led the list at over $76 million, of which $70 million constituted endorsem*nts and appearance fees, followed by NBA stars Shaquille O’Neal ($40 million, consisting of $26 million in base salary, $14 million endorsem*nts) and LeBron James ($4 million salary, $35 million endorsem*nts), then Peyton Manning (NFL), Kevin Garnett (NBA), Oscar de la Hoya (boxing), Andre Agassi (tennis), Kobe Bryant (NBA), Derek Jeter (Baseball), and Grant Hill (NBA) (Freedman, 2004). NBA players made up nearly half the list, with 24 names. It has become routine for fans and journalists to question the contracts signed by professional athletes. Although these salaries are generous, even excessive according to many fans and writers, it must be emphasized that professional athletes constitute elite talent. The numbers tell the story. Hundreds of thousands of youngsters play basketball and there are only about 350 active players in the NBA. The same can be said with athletes in almost every other sport, including individual sports such as golf and tennis. The owners and general managers who negotiate contracts with the athlete or his or her agent base their offers on the skills of the athlete, as well as leadership ability, fan popularity, and, of course, the potential for that athlete aiding in the club’s success. True, many cases of bad deals exist. The Texas Rangers realized 3 years and 3 last-place finishes too late that they should not have signed Alex Rodriguez to a 10-year, $252 million contract. The contract left them little financial room to maneuver for the rest of their roster. But often the bad deals look bad in hindsight. At the time they are made, the contracts may seem perfectly sensible. Contrary to popular belief, athletes rarely breach their contracts. The risks are too great from a legal, business, and public relations point of view. Legally, penalties in the form of damages and even in-

SPORTS CONTRACTS

junctions issued by courts are possible (Central New York Basketball v. Barnett, 1961). From a business perspective, such an action weakens the credibility of the player and effectively bans that player from the league, as no other owner can sign that player. It also creates ill will on the part of the team and its fans. Additionally, the move makes very little sense in this era of free agency, as an athlete attaining that status may simply pursue alternatives with other teams once his or her contract expires. Finally, a team inducing an athlete to breach will be dealt with harshly by the commissioner of the respective league under the “best interests of the sport” power in the league constitution, as discussed in chapter 1. Knowledge of the basics of these agreements is crucial in understanding the parameters of the terms of an athlete’s agreement. The mechanics of contract making are simple. Both parties make binding promises involving the exchange of a sum of money, services or property. The terms of the agreement must be legal, and the parties must have the mental capacity to contract. This means attaining a certain age (usually 18 years) and understanding the nature and consequences of the agreement they make. As a practical matter, the terms of a contract should be as definite and specific as possible. Otherwise, a court may be forced to interpret the contract for the parties (Americans and Natinal Leagues v. Major league Baseball Players Association, 1976).

WHAT MAKES SPORTS CONTRACTS UNUSUAL It is best to view sports contracts as a variant of entertainment contracts. In both cases, talent performing personal services is the centerpiece of the contract. Unlike commercial contracts involving mass-produced goods, in an agreement involving talent (in this case, the sports-oriented talent) one party agrees to perform certain specified tasks at a level of expertise that may not be easily replaceable. The contract must conform to the requirements of the respective league’s collective bargaining agreement (CBA). Before players unionized, general managers often imposed contracts on them because the players had little bargaining position. Professional athletes lacked free agency rights and lacked representation by agents. Additionally, such agreements were interpreted in unusual ways. Until the mid-1970s, most players signed 1-year contracts, which contained a unique form of option clause, known as a “re-

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serve clause,” essentially binding the player to the team for his entire playing career. These onerous clauses were eliminated through collective bargaining, arbitration or court rulings, as discussed in chapter 6.

CONTRACTS INVOLVING TEAM SPORTS ATHLETES Presently, each of the four major sports leagues (MLB, NFL, NBA, NHL) has unionized players and collective bargaining agreements (CBAs) between the respective union and the league. As noted earlier, the CBAs cover many of the items found in an individual player’s contract. For example, grievance and salary arbitrations derive from the collective bargaining agreement. In some leagues, salaries and ranges of salaries, and minimums, especially for rookies but also for veterans, are regulated. The salary regulations found in the collective bargaining agreements of Major League Baseball, the National Basketball Association, the National Football League, and the National Hockey League are discussed in more detail in chapter 6. Bonus provisions often serve as a key component. Examples involve compensation for winning a championship or making it to a playoff round. Also, bonuses for certain individual achievements (1,500 yards rushing, 40 stolen bases, scoring 50 goals) are not uncommon, or, in the case of coaches, for winning a certain number of games and/or a conference championship. Despite the fact that the parties—the team and the player—have concluded an agreement, the commissioner of the respective league retains the power to void the document if it is deemed contrary to the “best interests of the sport.” Essentially, all contracts are conditional on the approval of the commissioner, even though in the four major leagues the athlete is employed by a particular team and signs a contract with the team, not the league. In a “single-entity” league, the athlete may be employed directly by the league.

CONTRACTS INVOLVING INDIVIDUAL SPORTS ATHLETES Contracts involving individual competitors offer different issues. Professional golfers, tennis players, and boxers, for example, are not employees. Rather, they are independent contractors: in essence, people competing for prizes in competition. Although a team athlete is paid a

SPORTS CONTRACTS

salary whether his or her team wins or loses, individual athletes sign a participation contract with stipulated winnings if they attain a certain level of success at that event. However, some athletes (notably in track and field competitions) get paid “appearance fees” for simply participating in the event, often in an attempt to attract public interest (described in more detail in chapter 2). There are other key differences between a team athlete and an individual competitor. In order to qualify to participate in an event, an individual athlete must demonstrate evidence of past success or a sports-wide ranking level based on a system like the ATP in tennis. Also, athletes (or their sponsors) must pay expenses such as transportation, housing, and equipment, unlike team athletes, who have those expenses, including transportation, lodging, and meal allowances, paid by their respective teams.

KEY CLAUSES IN A LEAGUE–PLAYER CONTRACT For those writing about sports, a working knowledge of a respective league’s standard players’ contract is beneficial. Such a contract (essentially a form) is found on various sites on the Internet, such as NBPA.com (the Web site of the NBA players’ union). Similarities in the provisions among each of the four major league contracts outweigh the differences. A basic examination of the major provisions in a typical players’ contract follows. Don’t focus simply on the salary provisions; other sections merit scrutiny as well.

Salary A player receives a base salary, often coupled with performance bonuses. Often the bonuses will be contingent on surpassing a stipulated level in such statistics as field goal percentage, rebounds, or points per game, in the case of an NBA contract. Additionally, bonuses for being picked to an all-star team or winning awards such as the “most valuable player” title will be factored (Greenberg & Gray, 1998). The use of “guaranteed” contracts varies from league to league. In Major League Baseball, as of 2005, 190 player contracts contained guaranteed salaries (often negating many of the standard grounds for termination; Bodley, 2005). In the NFL, the practice is far less frequent. In addition, marquee players have also been able to negotiate guaranteed salary clauses or escape clauses allowing them to reopen the contract in the event that their salary does not place them within a

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specified number of top paid players in that position. In other cases, teams, most frequently those in the NFL, have been able to persuade players to agree to deferred compensation, that is, delaying payment of portions of a salary or a signing bonus to a specified period after those payments would normally be due. An escalator clause may appear in a player’s contract. More than a simple bonus clause, this provision rewards a player’s extraordinary performance by automatically raising the value of the player’s contract to a level commensurate with, say, the NFL’s elite performers at that player’s position.

Services This clause states what is required of the player. In the NBA agreement, the player is required to participate in training camp, team practices, exhibition games, regular season games, All-Star events, playoff games, and certain stipulated promotional activities (NBA Uniform Player Contract, Sec. 2(a)). A player cannot simply “feel like” not playing in the All-Star game. Likewise, unexplained absences from practices, games, and promotional events also violate this clause. Rarely does a team terminate a player based on individual violations, but the team could (and often does) impose fines on the player.

Expenses With the kinds of salaries found in the major sports leagues, one does not think of incidental expenses. Yet this section mandates that a team must cover “proper and necessary” expenses, including lodging, food, and transportation. The precise meal expenses are set forth in the particular collective bargaining agreement.

Conduct This provision is typically underestimated in any player contract. When examining this clause, note its broad language and the many types of potential misconduct that could be covered. An example is Paragraph 7(b)(1) of Major League Baseball’s uniform player’s contract, which states a club may terminate a contract if the player should “fail, refuse or neglect to conform his personal conduct to the standards of good citizenship and good sportsmanship.” To alleviate the potential harshness, punishment (usually fines and/or suspensions) may be challenged by the player in front of an independent arbitrator.

SPORTS CONTRACTS

A player is required to give his or her “best services” as well as “loyalty” to the team. This is hard to define (an exception to what was said earlier about the precision of contracts) because it is extremely difficult to determine when a player does not give his or her “best” so as to constitute a violation. However, a more frequent violation involves a prohibition on taking any action “detrimental to the best interests of the team and the league.” Examples of such actions include public criticism by a player of a team coach, owner, league, or referees. Such actions may result in fines or suspensions by either the team or the league. Even political statements and commentary may be deemed a violation. Journalists should understand the legal principle involved. Because the player works for a private organization, the U.S. Constitution’s First Amendment protection against laws abridging freedom of speech does not apply and such a clause, although possibly unfair, is not illegal. One interesting contract dispute centered on a “loyalty clause” inserted by Cincinnati Bengals management in the 2000 season. The clause, which appeared in many of its players’ contracts, provided that “the Club, in its sole discretion,” could withhold a signing bonus at any time if it felt the player made “any public comment to the media … that breaches Player’s obligation of loyalty to Club and/or undermines the public’s respect for the Club, Club coaches, or Club management” (Fielder, 2002, p. 553). In other words, it was a gag order to stop criticizing the team’s management. The idea originated after then Bengals wide receiver Carl Pickens publicly criticized the team and its management. Pickens was 3 months shy of receiving his $3.5 million signing bonus when he made the comments critical of the team’s decision to re-sign coach Bruce Coslet. An arbitrator upheld the clause, concluding it did not violate the terms of the CBA (Cyphers, 2001; Groeschen, 2001). Most professional contracts include a clause prohibiting a player from betting or attempted to bet on any league contest. In the NBA’s standard contract, for example, it specifically states that the commissioner has the sole authority to suspend the player or expel the player from the league (NBA Uniform Player Contract, sec. 5(e)). In contrast to the player’s general right to challenge a determination of misconduct, a determination of gambling is unappealable. That distinction demonstrates the importance of a “no-tolerance” policy on gambling.

Physical Condition All agreements mandate that players must be in “good physical condition” throughout the season. Often the failure to maintain such a level of playing condition, in the opinion of the team doctor, gives the team the right to suspend the player until he or she becomes so conditioned,

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again in the opinion of the physician. The player’s salary will be reduced accordingly for the time suspended. If, however, the player is injured while playing, the player will retain his or her salary during that injury period.

Prohibited Substances Certain leagues address the issue of substance abuse. The NBA has a detailed set of provisions regarding substance abuse by players, and the player’s failure to adhere to those conditions will result in suspension and possible termination of the agreement. The issue of substance testing, particularly in regard to performance-enhancing drugs, and how it is handled differs among the leagues, individual sports, and Olympic sports, and is discussed in detail in chapter 10.

Unique Skills All major league contracts contain a clause such as found in the NBA contracts: All NBA players have extraordinary and unique skills and abilities, such that a team can seek the remedy of injunction (as noted earlier) from a judge or arbitrator (NBA Uniform Player Contract, sec. 9). This is an attempt to “force” a court or arbitrator to treat a breach of contract with an injunction. However, it does not necessarily mean that a court or arbitrator will impose this remedy. As mentioned earlier, this remedy is discretionary.

Assignment (Player Trades) In the overwhelming majority of cases, a player’s contract permits assigning (the official term for trading) that player to another team. Note that the right to trade players is unique to the world of sports. In no other area of employment does it exist. Although some elite athletes have no-trade clauses or trade clauses limited to specific teams, teams do not like to have this right restricted.

Validity, Filing, and Commissioner Disapproval Filing of league player contracts with the commissioner’s office is usually required, and the commissioner retains the right to disapprove the contract, if authorized pursuant to a league’s constitution, bylaws, or collective bargaining agreement with the union.

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Other Athletic Activities A team invests considerable money, benefits, and resources in its athletes, and it does not want any athlete to engage in conduct that may likely cause injury or that may detract from his or her focus on the sport. This clause prohibits a player from engaging in “other sports [that] may impair or destroy his [or her] ability and skill as a player.” Often, this clause requires written team consent for the player to engage in sports endangering his or her health or safety, notably boxing, wrestling, sky-diving, baseball, football, hockey, and off-season basketball. Allowed exceptions often include amateur golf, tennis, handball, swimming, hiking, softball, and volleyball.

Promotional Activities Although individuals have inherent commercial rights in their names, voices, and likenesses, this clause allows the league or team to take photos and video of the player for use in promotional and publicity purposes. Often the player is restricted from participating in radio or television programs or sponsoring commercial products without the consent of the team. This section also requires the player to be available for media interviews.

Group License Each of the leagues has a licensing division, and this clause states that a player consents to have his or her image used and shares in royalties generated from that image. The great majority of players in the major leagues consent to this, although there are some opt-out provisions. Chapter 12 details the licensing system.

Termination Although rare, this section gives a team the right to terminate a player’s contract if the player fails to act with “good moral character,” and good sportsmanship, to keep him- or herself in “first-class physical condition,” or to obey the team’s training rules. In the NBA’s player contract, termination may occur if the player commits “a significant and inexcusable physical attack against any official or employee of the team or the NBA (other than another player), or any person in attendance at any NBA game or event” (NBA Uniform Player Contract, sec. 16(a)(ii)). The team must consider “the totality of the circ*mstances” in making its decision.

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CONTRACT NEGOTIATIONS From a business point of view, any contract negotiation involves “give and take” between the parties. But the amount of compromise depends on the bargaining power of either party, an obvious but salient point for those involved in the contract process or those covering contract negotiations. A journeyman player often accepts whatever a team offers. On the other hand, a marquee player has the upper hand because the team needs that player more. The same can be said of a coach, general manager, or broadcaster. The athlete’s representative must have familiarity with the league constitution, the terms of the collective bargaining agreement, the salary cap rules (if applicable) and the value of the player and how that athlete compared with others. Prominent sports agent Leigh Steinberg noted the following: “Once you understand the collective bargaining agreement and the trends, the second step is to try to understand the client’s negotiation position. Aside from preparation, this is perhaps the most important step because it is not simply a function of what the name of your client is or what number he is picked. Rather, it is really a question of how much leverage you have. Leverage is the bottom line in my business.” (Falk, 1992, p. 7)

Leverage encompasses several concepts, some obvious, others less so. The first is simply talent. A top draft pick has more leverage than lower picks. Then there is a record of performance. For veteran players, evidence of prior success (as compared to other players playing a similar position) is crucial. However, leverage also involves more intangible concepts, such as fan popularity. If the athlete has developed a public persona that attracts fans to games, that counts as an important advantage at the bargaining table, even if the athlete is not necessarily an all-star. Finally, team leadership—the impact that the athlete has in the locker room with other members of the team—comes into play. Often this involves a veteran player whose statistics may not be first rate, but whose years of experience and presence motivate the rest of the team. Conversely, attitude problems weaken leverage. A talented but spoiled player causing dissension in the team is a negative. Additionally, players who do not perform well in “big” games suffer from a weakened bargaining position. Many make the mistake of thinking that the only result of leverage is a high salary contract. Of course high salary is very important, but a good negotiator looks at other key negotiating points. One is termina-

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tion. A 4-year, $5 million per year guaranteed contract, which limits or prohibits termination by the team, may be more valuable than a terminable 3-year, $10 million per year contract that does not. In the NFL, the leverage focuses around the signing bonus. Many express surprise about high signing bonuses (much higher than in other sports), but because NFL contracts are not guaranteed and teams can “cut” players with relative ease, these bonus monies serve as the only “guaranteed” portion of the contract. Essentially a trade-off, the system fosters fewer guarantees for more bonuses. Another trade-off is current cash dollars versus deferred money. David Falk, another well-known agent, stated, “Deferred money is one of the most abused areas in professional sports contracts. That is why I like to call it ‘funny money’” (Falk, 1992, p. 13). He felt that the devaluation of money due to inflation makes the deferred amount worth considerably less than it would be if paid up-front. However, deferred income may be an area of compromise, as a team may be willing to pay more in deferred income than in up-front money. However, note that certain sports limit the amount of deferred compensation to be paid. In the NBA it is not more than 30% of the total salary (Falk, 1992). Leigh Steinberg echoes the abuse strategy regarding incentive bonuses: “When you are negotiating a contract and you are apart in your positions, one area available to you to close the deal is incentive bonuses” (Falk, 1992, p. 14). Although it is best to maximize guaranteed money, incentives can be used to close gaps. However, a contract loaded with incentives may cause difficulties, as the original contract for Ricky Williams demonstrated. In 1999, the New Orleans Saints traded for the top draft pick in the NFL draft and picked running back Ricky Williams as their selection. To the surprise of many, his agent proposed an incentive-laden, 7-year contract that guaranteed him only $11.6 million over that time. However, if the bonuses were exercised, the contract value jumped to $68.4 million, the most lucrative deal ever for an NFL rookie. Williams’ contract included an $8.84 million signing bonus and base salaries that ranged from $175,000 to $400,000 over the course of the deal. Also included were $1.6 million in annual bonuses of $100,000 for doing such things as participating in off-season workouts and keeping his weight below 240 pounds. Williams could have earned another $500,000 each year if he reached at least 10 of 26 goals worth $50,000 apiece. Also included were escalator clauses where Williams could have earned $1 million for gaining 1,600 yards, $1.5 million for 1,800 yards, $2 million for 2,000 yards, $2.5 million for 2,100 yards, and $3 million for eclipsing the NFL single-season rushing record. More than half of the signing bonus was in deferred income.

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Many agents and officials of the NFL Players Association criticized this agreement as setting unrealistic standards. It turned out that Williams did not attain many of these performance goals in his first year. Williams was represented by an agency run by Master P, a rap artist who sought entrée into the world of athlete representation. Unhappy in New Orleans, Williams was traded to Miami before the 2002 season and his contract was renegotiated. Although many of the incentive clauses were retained, the threshold numbers to attain those incentives were lowered. In 2004, he retired from the sport, but returned in 2005. The overall economics of the particular sport play a major role in the negotiating leverage. This seems obvious, but many who simply focus on lucrative contracts signed by highly sought free-agent players miss this point. Sports that have team owners who have the money—through high attendance, rights fees, and/or personal fortunes of the owner—will often pay more to get elite players. Sports and owners that suffer from limited broadcasting, low attendance, and lack of public interest won’t. Simply compare the salary of the average professional soccer player in the United States to his counterpart in the NFL and that becomes abundantly clear.

COACHES’ CONTRACTS Collegiate Coaching Although we have focused on athlete contracts, professional and college coaches often negotiate complex agreements covering many more subjects than simple compensation, as their jobs are far more involved than simply coaching a group of athletes. The coach is required not only to be an instructor, but also a fund raiser, recruiter, academic coordinator, public figure, budget director, television and radio personality, and whatever else the university’s athletic director or president may direct the coach to do in the best interest of the university’s athletic program (Greenberg & Gray, 1998). Specifically, college coaches must address issues like student graduation rates, prevention of criminal conduct, and NCAA rules enforcement. Even winning may not guarantee job security for a college coach. If attendance is down and the university’s alumni simply do not like the coach’s performance (even if he or she demonstrated a winning record), tenure can be very short. Contracts involving men’s college basketball and football are increasingly lucrative because these sports generate large revenues in a number of institutions. Contracts for coaches of less popular sports and women’s sports are more straightforward employment agreements.

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For journalists covering a particular contract controversy, coaches’ contracts from public institutions are generally available under disclosure laws, and it is very important to read them. Successful college coaches increasingly sign multiyear, seven-figure contracts laden with bonus provisions and income potential outside of coaching. In addition to base salary, a successful college coach can derive income from TV and radio shows, endorsem*nt contracts with shoe companies, speaking engagements, and summer camps (Greenberg & Gray, 1998). College coaches must adhere to NCAA rules, and their failure to do so may result in suspension without pay or outright termination (NCAA Division I Bylaws, sec. 11.2.2). Among the prohibitions, coaches cannot give remuneration or compensation to student-athletes or pay assistant coaches extra money (NCAA Division I Bylaws, sec.11.3). However, head coaches have a permissible array of activities that may constitute outside income, including monies from radio and television programs and summer camps. The following are some key sections found in college coaches’ contracts: Term. Much like athletes’ contracts, the term of a coach’s contract is dictated by the past successes attained. A successful coach will often have a multiyear contract. Sometimes, a “rollover” provision will be included, which works as an extension of the contract if the university is “satisfied” with the coach’s performance after a particular season. For example, coach X has a 5-year contract and after the first year, the university is satisfied with his performance; the contract term then increases to 5 more years, from 4. Who benefits from this rollover clause? Of course, the coach does because his employment extends another year (or more, if the clause is activated more often). However, a persuasive argument can be made that the university benefits even more because (a) the school triggers the clause at its discretion and (b) the clause serves to “lock in” this coach for a longer period of time and prevents other schools from recruiting that person without inducing a breach of contract. Reassignment. This clause, unique to a college coach’s agreement, permits the university to remove the person as head coach, but not to terminate the contract. Instead, “reassignment” to another job commensurate with the person’s skill and duties occurs. The disadvantage of a reassignment clause for a top-flight coach is obvious: It serves as a way to keep the talented person from going elsewhere. This form of “golden handcuff ” often stipulates that the failure of the coach to accept the alternative employment constitutes a breach of contract,

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possibly subjecting him or her to an injunction barring the coach from working elsewhere. Base Salary, Fringe Benefits, and Bonuses. Every coach’s contract will provide for some base salary. However, top-flight collegiate coaching agreements are filled with fringe benefits, such as free automobiles, free housing (or down payment toward a house), and moving expenses. The bonus provisions may turn out to be more lucrative than the base salary. They include a signing bonus, and bonuses for participation in postseason tournaments, attaining a certain win–loss record, victories in postseason tournaments, graduation rates for students, and increases in attendance (Greenberg & Gray, 1998). Termination. As in the case of an athlete’s contract, the termination clauses are especially important. There are basically two types of terminations: for “just cause” and “without cause.” “Just cause” means based on a proper, independent reason, usually a specific violation of law or regulation. For example, as part of the NCAA requirements, the coach can be terminated for “just cause” such as violating those rules. Usually the infraction is “major” (i.e., intentional), and can result from a subordinate’s violation of the rules as well. In 2003, two well-respected collegiate coaches lost their jobs due to off-field activities. Larry Eustachy, the former Iowa State men’s basketball coach, was drinking with coeds and fraternizing with frat boys at a college party. He lost his job. Mike Price, who lasted just a few weeks as Alabama’s football coach, allegedly visited a strip club and reportedly brought two strippers back to his hotel room for a night of sex. He lost his job (O’Donnell, 2003). Price sued Sports Illustrated for defamation and a settlement was negotiated in 2005. He became the head coach of the University of Texas–El Paso in 2003. Neither action had any bearing on their respective abilities as coaches. And neither coach committed a crime. But whether or not each committed a crime, each suffered a public embarrassment that caused the respective university to reconsider the coach’s continued employment. The schools thought that the bad publicity would limit each coach’s effectiveness and would hurt the school’s athletic program (Smith, 2003). As an example of a college coach’s contract, let us examine the agreement between Bob Knight (the former Indiana University men’s basketball coach who left the school amid controversy over his coaching methods) and his present employer, Texas Tech University. Because Texas Tech is a public institution, this contract is publicly available. Signed on March 23, 2001, the agreement’s term is 5 years. (Knight agreed to a 3-year extension on the contract in June 2004.) Knight and

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the school structured the agreement to give Knight a base compensation of $250,000 per year (a low figure for someone of Knight’s caliber). Other details of this contract merit interest. Knight’s term of employment is 10 months per year, giving him 2 “free” months to earn extra income. Furthermore, the agreement permits him to run private “summer camps” on school facilities. Then comes a key section, entitled “Guarantee of Outside Athletics Related Income.” It states that if Knight’s income outside of his base does not add up to $500,000 annually, the university guarantees any of the shortfall. That outside income includes endorsem*nt agreements for clothing, shoes, TV and radio shows, sports camps, and some speaking engagements. Excluded are book contracts and TV advertisem*nt contracts. This means the school could guarantee Knight three-quarters of a million dollars per season. Knight’s contract also includes a deferred compensation plan, deferring certain percentages of his income, and two free automobiles. The contract specifies that Knight risks termination if he violates any NCAA, Big 12 Conference, or university rules. Other coaches’ contracts include morals clauses. For example, the University of Texas–El Paso negotiated such a clause in Mike Price’s contract. The 5-year contract required that Price “conduct himself with due regard to public convention and morals, shall not do any act that will tend to degrade him in society or bring him into public hatred, contempt, scorn or ridicule, or that will tend to shock or insult the community or offend public morals or decency.” It was the first time the school ever included such a section in a coach’s contract (Moore, 2004).

Professional Coaching Many of the issues just discussed apply to professional coaches’ contracts. Although these agreements display similarities to athlete contracts, important differences exist. First, coaches are generally not unionized employees, so no union–management issues apply. Second, no salary limits due to “salary caps” apply. Lastly, unlike the guaranteed contracts many professional athletes possess, coaches’ contracts often lack job security. They can be dismissed at the will of the owner or general manager . In the case of an inexperienced or minor-league coach, they will no longer be paid. Because professional coaches work for private organizations, no legal requirement of public disclosure applies. An exception occurs if a coach or his or her team is in litigation, because court documents are public records. Often a professional coach’s contract will have a base salary, coupled with bonuses for on the field success. Team owners may further sweeten the deal by adding housing allowances, radio and television opportunities, and public speaking. In 1994, in his first year at the helm

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of the NHL’s New York Rangers, Mike Keenan coached the team to its first Stanley Cup championship in 54 years. Keenan’s contract consisted of the following provisions: • Term: 5 years. • Compensation: base salary of $750,000 (year 1), increasing to $850,000, $900,000, $950,000, and $1,000,000 annually for the ensuing 4 years. • Signing bonus: $660,875. • Loan to purchase residence: $400,000 (or 75% of the purchase price) at an interest rate of 5% per year. • Incentive clauses: If the team attained these goals, Keenan would be paid the following:

Best overall regular season record in the NHL—$50,000. Second best overall regular season record—$25,000. First in the conference—$40,000. First in the division—$25,000. Postseason bonuses: If the team participated in the NHL postseason playoffs the bonuses would be as follows: winning first round, $50,000; winning second round, $75,000; winning third round, $100,000; winning Stanley Cup, $200,000.

• Coach of the Year:

If Keenan received the “Coach of the Year” award—$ 25,000. If he was second in the voting—$12,500. If he was third—$7,000.

• Miscellaneous: The club was willing to provide an annuity of $50,000 per year commencing when he reached the age of 55 years and continuing until his death (assuming he fulfilled the contract) (Conrad, 1995). Keenan’s contract specified that Keenan’s bonus payments were to be sent within 30 days after the conclusion of the NHL season. In return, Keenan was required to devote “substantially all of his time, attention, skills and energies to coaching the team, in consultation and subject to the prior approval of the General Manager of the club.” He warranted “extraordinary and unique” skills and ability with regard to the sport of professional hockey. His services were therefore exclusive and irreplaceable to the club. Because of Keenan’s stature,

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the contract specified that any loss or breach could not be adequately compensated with money damages, thereby granting the team injunctive relief to stop the questionable activities. The contract specifically forbade any services and duties for any other professional hockey team, or any business venture competing with the Rangers or the team’s corporate parent at the time, Paramount Communications. Because the team wanted Keenan’s services, he negotiated some important protections. He could be discharged only for “cause”—meaning material (major) breach of obligations or unreasonable neglect. If such cause was involved, the contract gave him 20 days to cure the problem. If no cure occurred, the team’s obligations would cease. The “morals clause” was quite limited, stating that Keenan’s dismissal was justifiable only due to conviction of a felony or a plea of nolo contendere (no contest) with respect to a felony charge. Convictions for misdemeanors then would not be grounds for termination for cause. The agreement also provided that if the team discharged Keenan “without cause,” Keenan would receive a lump sum of 75 or 50% of his remaining base salary, depending on the date of notice. One month after the team won the Stanley Cup, Keenan abruptly terminated his relationship with the Rangers, despite the fact that he had 4 years left on his contract. He claimed that the team breached the contract because his performance bonus check arrived 1 day later than prescribed in the contract. The Rangers sued Keenan in U.S. District Court in New York, but the case was settled through the intervention of the NHL commissioner’s office.

INSURANCE Given the lucrative contracts that star athletes sign, disability insurance policies on the players have become a very important vehicle to protect the team and the player. These policies may be issued to athletes in all major sports, but the sport where insurance issues have been particularly important has been Major League Baseball, where many player contracts are guaranteed. The following scenario provides the reason: Say that player X has a 5-year guaranteed contract and gets a career-ending injury during a game or in practice after the first week of the first year. That player is entitled to the rest of his compensation—for the entire 5 years. With so much money at stake, it behooves the team to carry insurance. Relatively little has been written about the costs of disability insurance contracts on overall team finances. One report put the total cost of insurance premiums paid by baseball teams in 2002 at $55 million (Chass, 2002). Additionally, the costs of such contracts increased 300%

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in a 30-month period, some of which was due to the general increase in insurance after the September 11, 2001, attacks. Insurance contracts generally cover 60 to 80% of the value of the player’s contract. Until recently, these contracts covered up to 5 years of a player’s contract. However, they have been reduced to 3 years. In addition to the 9/11 effect, another reason cited is the case of Albert Belle. In 2002, Belle, an all-star player who rarely missed games due to injury, was diagnosed with a degenerative hip condition that forced his retirement. Belle was covered by an insurance policy that paid his team, the Baltimore Orioles, $27.3 million of his remaining $39 million salary. Belle was forced to retire after playing only two seasons of his 5-year contract, valued at $65 million. Brian D. Burns, the chairman and CEO of Pro Financial Services, one of two companies that underwrite most professional sports contracts, said that Belle’s injury “shook everybody.” “He was the kind of guy you would always want to insure. [This injury] told insurance companies that the rates had to go up and they had to go up dramatically” (Quinn, 2001, p. 80). Journalists should probe team officials to confirm the existence of such policies on a disabled player because it challenges the belief that a team had to “eat” the athlete’s entire salary in the case of a permanent disability of a guaranteed salaried player.

ENDORsem*nT CONTRACTS Athlete product endorsem*nt agreements have become a very important source of income for the relatively few professional athletes who have the marketability and name recognition to be able to make such contracts. The greater exposure of sports and sports-related businesses over the last quarter century has resulted in major increases in the compensation and scope of these agreements. At one time, endorsem*nts were limited to local products. Dean Chance, a former Cy Young winner who pitched for the Minnesota Twins, signed an endorsem*nt agreement with a local orange juice company. His compensation was $6,000 per year and an unlimited amount of juice (Reed, 2003). Although agreements to endorse a local supermarket or auto dealership still exist, superstar athletes such as LeBron James and Tiger Woods exemplify the modern trend of high-priced endorsem*nt agreements. These contracts have bolstered the image of the company by branding the merchandise with the persona of that athlete and help turn the athlete into a cultural icon, with worldwide exposure. Two aspects make these deals different from past agreements: (a) The products endorsed are not niche products catering to a small class of enthusiasts, but products or brands that have general public appeal,

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such as Pepsi and Buick; and (b) even brands that are athletic in nature, like Nike, are given a broader appeal because of the endorser. Such an agreement, although made with sports manufacturing companies, may include leisure clothing and eyewear. But this has to be put into perspective. Relatively few athletes achieve endorsem*nt heaven. Many, if not most, athletes who are able to endorse products still do so on the local level or work for sports firms marketing to an audience of devotees. Any athlete (or coach) endorsing a product is bringing a level of public confidence and credibility to that product. Yet that can be destroyed quickly and easily by acts that are criminal, immoral, or offensive. And the endorsem*nt contract contains a “morals clause” terminating the relationship in the event of such actions. In 1997, PGA golfer Fuzzy Zoeller made racially charged comments about Tiger Woods. Woods was to host a champions luncheon at the next year’s Masters, to which Zoeller said, “Tell [Woods] not to serve fried chicken or collard greens or whatever the hell they serve.” For his statement, which he considered a joke, Zoeller was dropped as a spokesman by Kmart. Certainly serious criminal acts (which could involve charges, not convictions) would likely result in a loss of an endorsem*nt contract. O. J. Simpson’s endorsem*nt agreements were terminated, despite his receiving an acquittal of murder charges.

THE MARKETING ASSESSMENT A firm seeking to engage an athlete to endorse its products must find a “marketable” athlete who projects a sellable image with a targeted group that the firm thinks is likely to buy its product. In the past, this meant a “positive” image, but that has changed in the last decade. An executive vice-president of player marketing noted that bad behavior can sell a product, while a player of high character may not. Referring to NBA player Tim Duncan, who some consider “dull and boring,” she noted that if lawbreakers are considered better pitchmen, it legitimizes such bad behavior (Jacobson, 2003). For certain audiences, Alan Iverson’s tougher, more rakish image has the pull for him to achieve financial success in the endorsem*nt business and make millions in playing contracts and endorsem*nt deals. Of course, there is no magic formula to predict success. In an excellent primer to endorsem*nt agreements, Pamela Lester noted: The athlete’s desire for endorsem*nts, willingness to make personal appearances in connection with those endorsem*nts, his or her likes and dislikes, strengths and weaknesses should be considered. A successful

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advertising campaign promotes both the athlete and the endorsed product by matching the product to the athlete, and vice versa. [And] Knowledge of all the athlete’s past and present endorsem*nts is critical. (Lester, 2002, p. 27:10)

Additionally, knowledge of all the athlete’s past and present endorsem*nt record is critical. In choosing an athlete, firms will consider public image, reputation, and personality. Just because an athlete is an all-star does not make him or her a successful seller of the product. Conversely, just because someone did not win a championship does not preclude that person from consummating lucrative endorsem*nt deals. Anna Kournikova serves as a telling example of this last point. Despite a career devoid of anything better than a quarter-final victory in a “Grand Slam” tournament and no more than a number 8 ATP ranking, she demonstrated the personality and sex appeal that resulted in agreements with firms such as Adidas (sportswear) and Lycos (search engines). In 1999, she earned an estimated $10–15 million in endorsem*nts fees, making her second only to Venus Williams (who signed a $40 million deal with Reebok). Even in 2003, with her skills waning, she still earned more money in endorsem*nts than Serena Williams. Serena Williams earned a reported $8 million annually on her endorsem*nt deals—which include Wrigley’s, McDonald’s, Avon, and Close-Up—putting her behind Venus Williams and Anna Kournikova, who both made about $13 million per year in off-court activity (Rovell, 2003). At the time, Kournikova had both a domestic U.S. following as well as an international one. Such popularity is increasingly important, as globalization has become a fixture in the business marketplace. But popularity in the U.S. market is still a crucial prerequisite for endorsem*nt success. More recently, due to her success and appeal, Maria Sharapova stood to earn $15 million in endorsem*nts in 2005 (Mullen, 2004). Team athletes have a more difficult time achieving international stature (especially for uniquely U.S.-oriented sports like baseball and football) than tennis players and golfers, who play in tournaments all over the world. Their names and faces may be as familiar to fans in Tokyo as in Tallahassee. The economics of the particular firm or industry creates a certain “up-and-down” aspect to the endorsem*nt market. The early- and mid-1990s economic prosperity expanded opportunities for endorsem*nts, but more recent corporate downsizing resulted in a diminution of opportunities. Changes in popular taste and social mores also have effects. Although “noncontroversial” white males were coveted in the

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past, that has changed in the 1980s with the success of Michael Jordan and other African-American stars in the NBA. The ability of “bad boys” such as John McEnroe and, later, Alan Iverson to secure endorsem*nts demonstrates a change. Even Latrell Sprewell obtained an endorsem*nt deal shortly after choking his coach.

THE KEY CLAUSES As for sports contracts, some young journalists make the mistake of focusing solely on the compensation. One can argue that the most important sections are the “endorsed products” and termination sections.

Endorsed Products Exactly what is to be endorsed must be specified in the agreement, not only so that the parties know exactly what they have to do, but also to avoid the problem of conflicting products. For example, let’s say that golfer X has an endorsem*nt agreement with a company that makes “golf equipment.” Does that include shoes? If so, just shoes worn at golf tournaments? If the golfer wants to endorse sneakers for another company, does that conflict with the obligations under the first agreement? That point has to be addressed. Some endorsem*nt agreements—especially those with multinational firms that manufacture equipment, apparel, and shoes—may be “head-to-toe” deals, covering every product manufactured (e.g., hats, shirts, pants, athlete shoes). This is the goal of the companies, who want to “lock in” the athlete to everything they make, as part of the compensation paid. On the other hand, an athlete (or coach) may seek individual deals for, say, golf clubs, leisurewear, and athletic shoes. If an athlete is relatively unknown at the time of the golf club agreement and becomes more successful and better known after that, that athlete’s power to negotiate a more lucrative contract for the later deals remains intact.

Termination In terms of negotiation, the athlete or coach wants more protection against termination and the company more power to terminate if certain stipulated events occur. If not taken seriously by both sides, the results can lead to financially significant issues. Frequently, the company possesses the right to terminate if the athlete becomes disabled or retires from the sport. It may well be that cer-

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tain compensation may be given, but a sports-oriented business may not find much use in a “former” athlete endorsing its tennis racquets. Then there is the “morals” clause. We have already discussed the importance of the reputation of the endorser. This clause, in effect, makes the agreement dependent on continuation of that reputation. With so many news reports of athlete misconduct, the company does not want a “tarnished” endorser on its roster. Such an individual creates a public relations problem and does not inspire confidence in the company or its products by the public. And the company certainly does not want to continue paying the athlete after the athlete engages in particular transgressions. Of course, the athlete wants this clause to be limited whereas the company wants broader enforcement. In any case, the scope of what is “immoral” is hard to define. A typical clause states that if the athlete commits acts “tending to bring himself into public disrepute, contempt, scandal, or ridicule, or tending to shock, insult, or offend the people of this nation or any class or group thereof, or reflecting unfavorably upon Company’s reputation or products, then Company shall have the right, upon oral or written notice, to immediately terminate this agreement.” This is far more than simple illegal conduct. And it should be. This can be noncriminal conduct such as obnoxious behavior, offensive public statements, or even controversial political actions. An athlete who decides to go to a country hostile to the United States and make public statements urging its leaders to attack the United States would not be endorsing the company’s products (in the United States) for very long. A coach who made offensive statements directed at certain groups of people could very well suffer termination. Also, drug or alcohol abuse can serve to violate the morals clause. And the termination also means the end to compensation. The athlete or coach may have termination rights as well, usually in the event that the firm becomes insolvent or fails to pay the required compensation. Possibly (but not frequently) the athlete may insist on a “morals clause” granting a right of termination in the event the company engages in improper or exploitative labor practices.

Compensation The compensation is usually divided into two categories: base compensation and bonuses. Think of base compensation as a minimum wage. This payment is received no matter what the level of success. The bonuses are based on specific achievement. In the case of an individual athlete, bonus payments often apply to victories or high place-

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ments in given tournaments. In the case of a team athlete, criteria include selection to an All-Star team, team championships, or regular season division championship. The breakdown between guaranteed money and bonus money depends on the nature of the negotiations and the strength of the parties. Especially for a younger athlete, focusing on larger base compensation is key, as no track record of achievement exists. The athlete need never win a match or have his/her team win a championship. For the company, limiting the base compensation (and the term) but basing the bulk of the potential monies on bonuses is a better strategy. It protects the firm from paying too much money in the event the athlete is a bust, either competitively or publicly. A third method of compensation, known as a “royalty on products sold,” is limited to what are known as “signature” products—products specifically carrying the athlete’s name or likeness. An endorser may negotiate a provision creating such a “signature line,” and a certain percentage of sales would be paid to the athlete. Usually, “signature-line” athletes are experienced, marquee performers.

Term The time period of the agreement is always stated.

Territory For an agreement with a national or multinational firm, the agreement is worldwide in scope. It applies everywhere. If the deal is for a local firm, such as an auto dealership in Ames, it will cover Ames and its environs (as defined in the contract).

Duties The agreement addresses the duties of the athlete or coach, which include personal appearances (the number and schedule to be specified or subsequently negotiated), and advertising in various media, notably print, broadcast, cable, and new media (Internet). Often the athlete or coach will have some right to approve advertising before a launch. As part of this duty, the company licenses the name and likeness of the athlete as part of its advertising and appearances. Also, the athlete must wear the clothing or use the equipment covered during tournaments and at other specified times.

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Other Provisions An endorsem*nt contract should contain clauses dealing with extending the term, schedule of payments, and protections to the athlete in the event there is a lawsuit claiming liability for a defect in the manufacture and design of the equipment of the goods. A “choice of law” section, mandating what law applies in case of a dispute, is also a must.

INFORMATION CHECK When covering contract issues, a journalist should determine: 1. Does a signed contract exist? 2. Is obtaining a copy of the contract possible? 3. If so, what are terms? Note the key clauses, including base pay, bonus, and termination. 4. Is a morals clause found, and if so, what conduct serves to terminate the contract? 5. Did the team take out an insurance policy on the player? On the coach? 6. How does the contract compare with others for similar players or coaches with similar experience? 7. Does the contract conform with the terms of the particular player’s collective bargaining agreement? 8. What bonuses and guarantees are found? 9. Other than the morals clause, what grounds exist for termination? 10.What remedies are sought by either athlete or team or, in the case of an individual athlete, between athlete and presenter, in the event of a breach?

REFERENCES American and National Leagues v. Major League Baseball Players Association, 59 Cal. App. 3d 493, 130 Cal. Rptr. 626 (Calf. Court of Appeals, 1976) Bodley, H. (2005, March 24). $2.97 billion payroll debt faces MLB for years to come. USA Today, p. 1C. Central New York Basketball v. Barnett, 181 N.E.2d 506 (Common Pleas Court, Cuyahoga Cty, OH, 1961). Chass, M. (2002, December 1). Costs are dictating 3-year offers. New York Times, p. 5. Conrad, M. (1995). Perspective: Mike Keenan’s power play—A slap shot against the Rangers and a slap on the wrist by the NHL. Seton Hall Journal of Sports Law, 5, 637.

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Cyphers, L. (2001, January 26). Free speech getting sacks in contracts, players getting hit with all-out blitz. New York Daily News, p. 91. Falk, D. (1992). The art of contract negotiation. Marquette Sports Law Journal, 3, 1, 7, 13. Fielder, T. (2002). Keep your mouth shut and listen: The NFL player’s right of free expression. University of Miami Business Law Review, 10, 547, 553. Freedman, J. (2004, May 17). The fortunate 50. Sports Illustrated, p. 64. Greenberg, M., & Gray, J. (1998). Sports law practice (vol. I, 2nd ed., pp 264, 266, 523, 534, 591). Charlottesville, VA: Lexis. Groeschen, T. (2001, January 23). Bengals’ loyalty clause is upheld; Will be included in “most” contracts. Cincinnati Enquirer, p. D01. Harris, S. (2004, February 15). NHL, players feeling labor pains. Boston Herald, p. B18. Jacobson, S. (2003, July 13). The only values are marketability. Newsday (New York), p. B23. Lester, P. (2002). Marketing the athlete: Endorsem*nt contracts. In The law of professional and amateur sports (pp. 27:10). St. Paul, MN: West Group. Moore, J. (2004, May 31). Price’s deal contains morals clause. Seattle Post-Intelligencer, p. D2. Mullen, L. (2004, December 20). Sharapova taking her shot at title of top female endorser in sports. Sports Business Journal, p. 15. NCAA Division I Bylaws, secs. 11.2.2 and 11.3. www.NCAA.org/Library/membership/division_i_manual/2004-05 NBA salary cap at all-time high. (2003, July 16). Pittsburgh Post-Gazette, p. D7. O’Donnell, C. (2003, December 28). College coaches gone wild. Bergen (NJ) Record, p. S10. Quinn, T. J. (2001, November 25). Paying for it. Injuries to stars increasing insurance costs for teams. New York Daily News, p. 80. Reed, T. (2003, May 25). Show me the money; it's much more of late. Akron Beacon Journal, p. A18. Rovell, D. (2003, September 6). Sidelined Kournikova still a winner off the court in endorsem*nt arena. www.ESPN.com. Schulz, T. (2005, May 22). Work stoppage in NBA would be ridiculous. Lansing State Journal. Retrieved July 11, 2005, from www.lansingstatejournal.com Smith, M. (2003, May 8). Coach’s contracts have clauses with some claws; Schools try to deal themselves out of embarrassments. Louisville Courier-Journal, p. 1E. Spiegel, E. (2005, April 11). Learning to get by on an NFL salary. Daily Pennsylvanian. www.dailypennsylvanian.com Standard Player Contract, National Basketball Association. www.NBPA.org Standard Player Contract, National Football League. Retrieved June 1, 2005, from www.nflpa.org/members Standard Player Contract, Women’s National Basketball Association. Retrieved June 1, 2005, from www.monstermac.princeton.edu/proguide/womens_standard_player.pdf

CHAPTER

6 Labor Relations in Sports

Labor relations between sports leagues and athletes present some of the most contentious issues in professional sports. In the last three decades, the intricacies of union–management relations and the tensions arising from disputes involving salaries and other working conditions have been frequently discussed on the sports pages and increasingly on the business pages as well. Suffice it to say that a knowledgeable journalist must have a solid understanding of labor issues. This chapter reviews the history of labor relations in professional sports and discusses the current collective bargaining agreements in place in the major professional leagues.

THE LABOR LAWS For the last 70 years, the National Labor Relations Act (NLRA), a comprehensive law passed in 1935, has set the structure of labor relations in the United States. The NRLA grants workers the right to form unions and engage in collective bargaining. It also permits workers to strike (known in legal parlance as a “concerted activity”) in order to achieve 108

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their goals of improved benefits and working conditions. In 1947 additions to the NLRA, known as the Taft–Hartley amendments, expanded employer rights during the collective bargaining process. Not surprisingly, the bases of labor disputes are grievances over “wages, hours and working conditions” (NLRA 29 USC sec. 151). The ways to accomplish a new collective bargaining agreement are steeped in leverage and tactics. Generally, a union represents employees in negotiation with their employers, and under the NLRA, employees cannot be fired for participating in union-related activities. Once a union is formed and recognized, the law permits the use of a strike as a method to attain the union’s goal of an improved collective bargaining agreement in the event that contract negotiations fail. Conversely, the labor law gives employers the right to “lock out” employees after the expiration of a collective bargaining agreement as a preemptive measure to show their leverage in attaining an agreement more to their liking. The NLRA lists a series of activities known as “unfair labor practices.” Violations result in sanctions by the National Labor Relations Board (NLRB), an administrative agency created under the statute. The most important of the unfair labor practices is the refusal of the parties to “bargain in good faith” with regard to wages, hours, or working conditions. These so-called “mandatory subjects of collective bargaining” seem straightforward at first glance. In reality, however, these concepts have been the subject of considerable discussion by courts and law professors. They have application to sports, as shown next. One example of lack of “good faith” involves protracted delaying tactics by one or both sides. Another involves an employer who takes unilateral action regarding wages, hours, and working conditions without consultation with the union (Cozzillio & Levinstein, 1998). An important exception to that rule occurs during an “impasse”—a situation where, after honest and hard-fought negotiation, the parties cannot agree to a new collective bargaining agreement. In such a case, an employer does have the right to unilaterally impose changes in the mandatory subjects such as wages and working conditions. For example, an employer can impose a new minimum salary or a new overtime policy after an impasse occurs. The employer’s actions would not be illegal. The standards for determining an impasse are not always clear. Impasse issues have occurred in labor disputes in Major League Baseball and the NFL. Although the NRLA gives workers the power to strike, it permits an employer to hire replacement employees and even to fire the strikers (MacNeil & Lehrer, 1993). Although athletes have been spared the remedy of termination, in the sports vein, replacement players were used

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in the 1987 NFL Players’ strike and for a short time during the 1994–1995 baseball players’ strike (Selig, 1995). For the union, the strike—or the threat of one—is the chief weapon. For management, it is the lockout. Although the effect is the same—employees don’t work and don’t get paid—the strategic difference is great. Initiated by the union at any time after the expiration of the agreement, the timing of the strike is in the union’s hands. In 1992, the NHL Players Association authorized a strike just before the Stanley Cup playoffs, even though the players worked most of the season without a collective bargaining agreement. Tactically, this strike gave the union members leverage because they had been paid most of their salaries for the season. For the league, it meant the possible elimination of the playoffs (the source of a great amount of team revenue). The 1994 Major League Baseball strike displayed a similar strategy. The players stopped working in August, 6 weeks before the beginning of the playoffs, after they worked for well over half the season. On the other hand, the lockout serves as the league’s and owners’ gambit. The optimal time is the beginning of the season, before the players receive the bulk of their salaries. The owners can save money, put pressure on the union for settlement, and not pay out any salaries as the weeks go by. The 1999 NBA lockout cost the league half of the season, but in what seems a league victory, the union agreed to a new collective bargaining agreement to salvage the season (and the paychecks). One last point: Traditionally, a union negotiated on behalf of employees for improvements in wages and working conditions, but more recently, many unions seek maintenance of the status quo when management seeks changes. That scenario has been found in recent negotiations involving all of the major sports leagues.

THE LEAGUES Presently, all of the major leagues and a number of smaller leagues are unionized. This means that each league’s management must negotiate with the players’ unions. Unions represent workers, in this case players, in discussions with the league for a collective bargaining agreement that outlines salaries, benefits, and working conditions. In comparison to most labor organizations, sports athlete unions are small in numbers, consisting of elite, skilled practitioners. To become professional players, these athletes had to excel, either through a minor league system or through high school and college. The competition is fierce. Hundreds of thousands of young people play the sport, yet there are 750 players on the opening-day roster in Major League Baseball, 1,600 in the NFL, 500 in the NBA, and 500 in the NHL. In the event of a strike or lockout, their elite status makes the management’s use of

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“replacement workers” more difficult than in other industries. Replacing striking factory workers with others may not result in a significant decrease in the quality of the goods produced, but using substitute players (presumably ones who did not make it into the top pro leagues to begin with) has a tremendous effect on the quality of the game. Professional athletes, unlike most of their unionized counterparts, negotiate their own contracts, although within the guidelines of the collective bargaining agreement, which focuses on broader issues such as free agency, salary constraints, luxury taxes, and minimum and maximum wage standards. Although the terms of the collective bargaining agreements vary greatly among the various sports, in every case, players (often represented by their agents) have the right to make their own deals. Despite the “elite” nature of professional athletes, considerable variation in the talent and salary of players exists even on a major league level. The differences in pay of many unionized workers are often measured in single dollars per hour. However, in professional sports, the differences are measured in hundreds of thousands, even millions of dollars per season. This adds tension to a union’s cohesion. With some players being paid the minimum salary and others commanding salaries many times that amount, the goals and priorities differ. The minimum or near minimum wage player may be more inclined to go on strike, whereas a highly paid free-agent All-Star may not. Undercurrents of this tension occurred in the NBA players during their 1999 lockout by the league, as discussed later in this chapter. Presently, sports labor relations involve rich owners and rich players, but at one time, neither sports franchise owners nor their teams exhibited great wealth. Salaries were artificially low and revenue streams were limited. Today many owners are billionaires, sometimes a number of times over. The list includes Microsoft’s Paul Allen (NFL’s Seattle Seahawks), and Philip Anschutz (NBA’s Los Angeles Lakers and NHL’s Kings), a member of the Forbes list of the 400 wealthiest individuals. Some owners are scions of family fortunes, such as Robert Wood (Woody) Johnson (NFL’s New York Jets). Others are tycoons, such as Daniel Snyder (NFL’s Washington Redskins), who founded a successful marketing firm, and Mark Cuban (NBA’s Dallas Mavericks), who founded broadcast.com, a leading provider of multimedia and streaming on the Internet, and later sold it to Yahoo! The values of their franchises are in the hundreds of millions of dollars. League revenues are in the billions and include revenue from broadcasting, cablecasting, sponsorships, and advertising, a far cry from the days of mere gate receipts (Quirk & Fort, 1997).

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Despite this kind of wealth, owners often argue that their teams lose money. Over the years the values of their franchises have generally increased, due to more lucrative broadcasting and cable fees and the value of their stadiums or stadium leases. It should be pointed out, however, that profitability can still be elusive. A 2004 study commissioned by the NHL concluded that 19 out of 30 teams lost a total of over $270 million during the 2002–2003 season. (Dupont, 2004). The unions often contest these conclusions, but it is difficult to determine which side is correct since the teams, as non-publicly-traded entities, are not subject to uniform accounting standards and federal securities disclosure requirements. An excellent example of journalistic investigation of such claims came in a report in the Lawrence (MA) Eagle-Tribune. It noted that the NHL study was “not a true audit,” as it relied on a disparate set of figures supplied by the teams themselves and might have underestimated hockey revenue in some crucial areas, including the lucrative fees for luxury suites. The newspaper interviewed NHL executives, players, union representatives, and others, and examined numerous internal documents and official records over a period of several months for its study. Independent observers, including academics, were quoted to bolster the report’s conclusion that this study did not constitute an independent audit, noting that figures were not independently derived and that not all the teams reported hockey revenue the same way (Strachan, 2005). Players’ associations began as “fraternal orders,” not involved in negotiating on behalf of their players. Although the NLRA dates from the 1930s, it was only in the 1950s that the players of the major team sports unionized, and it was another two decades before their organizations developed negotiating clout. Their colleagues in blue-collar industries were decades ahead. Before collective bargaining agreements limited its application, antitrust law was a weapon of choice by players’ unions, most notably in the NFL. The births of the unions representing the four major sports occurred at about the same time. The Major League Baseball Players’ Association (MLBPA) and the National Basketball Players’ Association (NBPA) were created in 1954. The National Football League Players’ Association (NFLPA) and the National Hockey League Players’ Association were founded in 1956 and 1957, respectively. At first, these “unions” resembled trade associations of players, because the player sought not to use them as negotiating representatives. Because of this, the leagues quickly recognized and welcomed these unions. The first head of the MLBPA was Cleveland Indians pitcher Bob Feller, who rejected the idea of negotiating with the owners. It was almost as if this organization assumed that a friendly roundtable discus-

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sion with management would redound to the collective benefit and assure contentment across the board (Dworkin, 1981).

SALARY CONTROL From a management point of view, salary control serves as the chief goal of every sports league. The need is obvious: Because the talent pool consists of many elite players, a “free market” results in a limitless range of compensation. Salary control is achieved by several different methods. Major League Baseball operates under a luxury tax in which owners are penalized for overspending, but the salaries of players, especially free-agent players, are not directly limited or capped. Although the luxury tax results in money flowing to poorer teams, it does not stop the New York Yankees from spending. The team’s profitability ensures that the payment of the tax amounts to a cost of doing business, rather than a ceiling on spending. The National Football League’s approach to controlling salaries is a cap system. As explained later in this chapter, NFL teams cannot exceed a stipulated salary amount each season. The NBA also employs a salary cap system, with an important exception for players re-signed by their present teams. In its recent collective bargaining agreement, the NHL also adopted a cap system. Another method of salary control involves the power of termination. In baseball, player contracts are guaranteed, meaning a very limited right of termination. In the NFL, much greater discretion exists in terminating (“cutting”) players, an important point for journalists. Because the experience of each of the major sports differs, we examine the labor history of each separately. We also analyze the present collective bargaining agreements.

MAJOR LEAGUE BASEBALL Since 1972, Major League Baseball and its players’ union have endured eight work stoppages. The sport’s history of labor–management relations reveals an atmosphere rife with anger. In 1876 William Hulbert, owner of the National League Chicago team and one of the league elders, declared, “It is ridiculous to pay ball players $2,000 a year when the $800 boys do just as well” (Fennell, 1994, p. 8). In many respects, nothing has changed except the amounts of money quoted. The close of the 19th century marked an era of confusion. Owners complained about escalating salaries and sought to control them. The players, angry over such attempts, engaged in strikes. Contract disputes ended up in court. Fans, angry and frustrated, talked about boy-

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cotting the sport. Attendance slipped in many cities, and some teams teetered on the brink of financial collapse. In the 1890s, players’ frustrations over salary and working conditions resulted in an unsuccessful attempt to unionize and start a “players’ league.” Until the middle of the 20th century, the emergence of a rival league was the only way that players could secure better wages in a more open, competitive environment. With the emergence of the new American League in 1900, established National League players were seduced by more lucrative contracts. Some of baseball’s best and brightest players left their National League teams because the American League promised “fairer contracts,” including fringe benefits and no salary limitations, provisions unheard of in the National League. American League President Byron Bancroft “Ban” Johnson also promised not to apply the dreaded “reserve clause” found in all National League player contracts for players who signed with teams in his league. The “reserve clause,” a standard contract option interpreted in an unusual way, arose from a secret agreement among the National League owners in 1879 as a means to control player salaries. The clause stated that if the player and the team could not agree to a new contract, “the [team] shall have the right to ‘reserve’ the [player] for the season next ensuing the term … provided that the [player] shall not be reserved at a salary of below [$].” Essentially, the player remained the “property” of the team for the following season. If the parties could not agree to a contract at the end of that one season, the option extended for the following year, year after year. This clause effectively barred players from negotiating with different teams to get the best deal. Additionally, in the 1890s, there was even a salary cap of $2,500 (Dworkin, 1981). The right to play for any team, known as “free agency,” did not exist in any sport, including baseball, at that time. The only way a player could move to another team would be through a trade. When the American League joined the National League, the reserve clause applied to American League players as well as those of the National League. A part of all baseball contracts until 1975, it served as the greatest salary restraint the owners had. One can only guess the kinds of salaries the Ruths, DiMaggios, Williamses, and Aarons would have commanded in a free-market environment. Not surprisingly, many players resented the reserve clause, but the owners fought to keep it intact over the ensuing decades. Yet many in the press supported the system, concluding it was needed to ensure economic stability of the sport. But even those in favor of the reserve clause acknowledged its draconian effect. In 1889, the St. Louis Globe-Democrat noted, “The reserve rule is, on paper, the most unfair and degrading measure … ever passed in a free country. Still … it is necessary for the safety

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and preservation of the national game”. However, other journals criticized the clause as “tyrannical” and “un-American” (Seymour, 1960).

The Antitrust Exemption Before the players had an active union, they tried to challenge the reserve clause in the courts, as a violation of antitrust law. Unsuccessful attempts were made in the late 1940s, the early 1950s, and the early 1970s. In each case, the players argued that the reserve clause was unilaterally imposed on them by a group of employers (the baseball team owners) and that the concerted actions of the owners violated the Sherman Act of 1890 and the Clayton Act of 1914, the two most important antitrust laws. Section One of the Sherman Act prohibits any person from making “a contract, combination or conspiracy to restrain trade” in interstate commerce. At first glance, it seems clear that the reserve clause violates this section of the Sherman Act. However, baseball owners got a lucky break from the Supreme Court. In 1922, the high court ruled the sport of baseball exempt from antitrust laws because baseball was not a “business in interstate commerce” (Federal Baseball Club, Inc v. National League of Professional Baseball Clubs, 1922). The Federal Baseball ruling is often misunderstood and misquoted. The mere three-page decision did not say (as some think) that baseball was not a business; rather it reasoned that the business was so localized that it did not rise to the level of systematic interstate commerce. In the words of Justice Holmes: The business is giving exhibitions of baseball.… It is true that, in order … for these exhibitions [to attain] the great popularity that they have achieved, competitions must be arranged between clubs from different cities and States. But the fact that in order to give the exhibitions the Leagues must induce … persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business.… [T]he transport is a mere incident, not the essential thing. That to which it is incident, the exhibition, although made for money would not be called trade or commerce in the commonly accepted use of these words.… Personal effort, not related to production, is not a subject of commerce. (Federal Baseball, 1922, pp. 208–209)

Despite changes in the business, the increase in revenue streams from the advent of radio, television, cable, and league-controlled merchandising, and a more expansive judicial interpretation of what activities constitute interstate commerce by the Supreme Court after 1935, the Federal Baseball precedent remained. Subsequent court rulings in 1953 and 1972 upheld the antitrust exemption.

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The 1972 case of Flood v. Kuhn is well known. Curt Flood, an all-star center fielder with the St. Louis Cardinals, refused a trade to the Philadelphia Phillies after an 11-year All-Star career. His salary was $90,000 per year, one of the highest in the game in 1969. Flood challenged the reserve clause as an antitrust violation in the hopes of reversing the Federal Baseball ruling and thereby gaining him the right to play for whatever team he wished. On June 6, 1972, the Supreme Court in a 5–3 vote rejected his claim and concluded that although the legal basis of the 1922 ruling was no longer sound and the exemption an “aberration” compared to other sports, Federal Baseball remained valid. The justices noted that Congress had ample opportunity to eliminate the exemption numerous times but chose not to. Curt Flood never became a free agent, and baseball kept its unique legal bonanza: near absolute protection in the realm of labor relations. The Federal Baseball case distinguished baseball from other professional sports because the courts did not extend the antitrust exemption to football, basketball, or hockey. Yet just 3½ years later baseball became the first sport to introduce modern free agency, and the effect of antitrust exemption on labor relations was eliminated.

Labor Agreements Make Headway In 1966, the Major League Baseball Players’ Association (MLBPA) became a negotiating representative for the players. The need for an effective union with a dynamic leader became evident, as the players did not achieve any improvements in their bargaining rights. For decades, the negotiation of players’ contracts had often been reduced to annual take-it-or-leave-it offers, and long-term contracts were rare and unnecessary due to the continued enforcement of the reserve clause. To make matters worse, salaries were not released so players could not compare their salaries in relation to their peers. Yet many owners claimed, with some legitimacy, that their profits were small and they lacked deep pockets for long-term contracts. For the first half of the last century, revenues derived almost exclusively from gate attendance, and the balance sheet depended exclusively on bringing fans into the ballpark—something that poorly performing teams often could not do. Therefore, organized baseball argued the necessity of the reserve clause. However, in the 1960s the revenue streams changed significantly. Radio and television broadcasting agreements and income from licensing the teams’ trademarks and players’ names and likenesses brought greater amounts of money to the teams. And the players, hamstrung by the reserve clause, received little of it.

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Marvin Miller, a labor economist and negotiator for the United Steelworkers Union, became the executive director of the MLBPA in 1966. To this day, many writers (and baseball owners) think of him as an uncompromising partisan. In reality, he was more nuanced. During his career with the Steelworkers, Miller also helped companies gain in productivity and profit. At the time of his ascension, Miller was not a leftist radical unionist, but a labor negotiator respected by industry, government, and Steelworkers Union members alike. He called the labor–management relations “as lawless, in [their] own way, as Dodge City in 1876” and classified baseball players as “the most exploited group I had ever seen” (Ryan, 1991). In a 1981 interview, he said, “It was comical. I discovered the three most important issues the players had brought before the owners in the previous negotiations were a faulty drinking fountain in St. Louis, a drain pipe in the outfield in Chicago and a splintered bench in the Fenway Park bullpen.” He added, “I concluded that the owners were having a carnival at the players’ expense.” As an example, he noted that the players had not had an increase in their minimum salary since the 1940s (Down, 1981). Miller’s transformation of the MLBPA from a struggling and ineffective organization to the most powerful union in sports is an important case study. Of course, the reserve clause remained Miller’s major concern. However, Miller, aware he lacked the power to negotiate with the owners on an issue so dear to the owners, started with less controversial ones to build respect from the players. Given the ambivalence of many baseball players to an active union, that was not an easy task. In a 1991 interview, he said, “I would go as far to say that the players were brainwashed. They were led to believe they were the luckiest men on earth simply to be allowed to wear that uniform.” In 1966, the average major league player’s annual salary was $19,000. In December of that year, Miller and then commissioner William Eckert negotiated the first collective bargaining agreement in professional sports. The agreement raised the minimum salary for the first time in nearly two decades and covered pensions and insurance. The owners, unhappy with any concessions to the players, fired Eckert and replaced him with Bowie Kuhn. The 1966 agreement lasted 2 years. The next collective bargaining agreement (with Kuhn as commissioner) raised the minimum salary from $10,000 to $15,000. Moreover, Miller secured a clause requiring “grievance arbitration” of certain player disputes. This clause weakened the commissioner’s power and gave the players a powerful new tool and, it turned out, a major concession by Kuhn. Miller had delivered benefits for the players and by the early 1970s he had their confidence and backing. The MLBPA union became more as-

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sertive and sought the big prize—elimination or alteration of the reserve clause. In April 1972 the players walked out for 2 weeks, forcing the cancellation of 86 games. The elite players especially sought greater freedoms to negotiate their value. The players achieved some success as the owners agreed to arbitrate salary disputes for players with 2 years or more of service. One year later, after a short lockout by the owners during spring training, a 3-year collective bargaining agreement was reached. This agreement maintained the salary arbitration system, but tweaked it. Under this arrangement, any player with 2 years or more of service could bring a salary dispute to arbitration before a three-person board. The board was made up of one arbitrator appointed by management, one by the union, and a third “neutral” arbitrator. However, the board specifically lacked the power to consider the validity of the reserve clause. Nevertheless, the reserve clause was doomed, not by the courts (they upheld it over a 50-year period); rather, by a labor arbitrator named Peter Seitz. In 1974, Seitz ruled Oakland A’s owner Charlie Finley breached a contractual obligation to defer half of pitcher Jim “Catfish” Hunter’s salary into an annuity. As a consequence, Seitz freed Hunter from his contract and made him a “free agent.” At the time, Hunter was making $100,000 per season. One of the top pitchers of the game, he was free to sign with any team and he ultimately chose the New York Yankees, who offered him a 5-year guaranteed contract for $750,000. It also included an astounding $1 million signing bonus, deferred compensation, and insurance benefits, making it worth $3.75 million. Hunter went from making $100,000 a year with the A’s to earning over $3 million in his years with the Yankees. This unprecedented contract was the first indication of what a ball player could earn on the open market. Other players now understood what Miller had been saying: They were grossly underpaid in a shackled environment. The Hunter case provided the impetus for baseball players to become free agents. Two pitchers, Andy Messersmith of the Dodgers and Dave McNally of the Expos, decided to “hold out” for the 1975 season, playing under the option period in the reserve clause. Then they planned to take their dispute to arbitrator Seitz in the hopes of making them free agents. The owners, fearful, offered them increasingly lucrative contracts, which both players refused. In the arbitration, Seitz, the “neutral” pick of the three-member arbitration board, cast the deciding vote in the Messersmith and McNally dispute. Although barred from ruling on the validity of the reserve clause due to the prohibition in the 1973 collective bargaining agree-

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ment, he could interpret its scope. The key question was: Was it a 1-year option or a perpetual one? Using basic contract interpretation rules, Seitz interpreted the reserve clause as having a 1-year limit. He concluded that after the 1-year “reserve” period, any player was a free agent. The modern age of free agency was born. After the award was unsuccessfully challenged in the courts (Kansas City Royal Baseball Corp. v. MLBPA, 1976), the baseball owners had to recognize a very different economic reality. When the 1973 collective bargaining agreement expired in 1976, the union had a much stronger hand to play in the negotiations for a new agreement. Owners, fearful of the effects of unfettered free agency and unprepared for its potential alteration of the baseball landscape, did not know what to do. In one sense, Miller saved them. Miller did not favor complete free agency, but not due to concern about the owners. He thought it was not in the best interests of players, as younger and/or nonstar players could be adversely affected. The owners had an incentive to negotiate short-term contracts, and to cast off mediocre players after bad seasons. What the union wanted (and received) was a system that allowed only veteran players free agency. The union hoped that free-agent veterans receiving market level salaries would create a ripple effect benefiting younger players. The 1976 collective bargaining agreement set the basic terms for all future agreements. During the first 2 years in the league, a player had to accept his club’s contract offers, without right to arbitration or free agency. From years 3 to 6, salary disputes were referred to arbitration, where the independent third party determined the salary. After 6 years, players would become free agents. This new system produced a considerable increase in salary. The average annual player salary rose from $50,000 in 1976 to $370,000 in 1985 (Weiler & Roberts, 2004). In 1981, a 6-week, midseason strike resulted in the cancellation of 712 games. The parties ultimately reached an agreement substantially identical to the 1976 CBA with the exceptions that (a) it ran for 4 years, and (b) the players could not demand arbitration until after 3 years of services (instead of 2). Salaries continued to increase, and in 1985, commissioner Peter Ueberroth encouraged owners to refrain from signing free agents from other teams. That “encouragement” occurred in a number of owners’ meetings after the season. As a result, free agent signings dropped dramatically. Only 4 of 32 free agents signed with other clubs. The other 28 did not receive a single offer from another team. A similar pattern occurred in 1986. That class of free agents included stars such as Tigers pitcher Jack Morris and National League batting champion Tim Raines. Neither received offers from other teams. The lack of signings kept sal-

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ary increases in check, but raised the union’s suspicions of collusion by the owners. If the owners in any other sports league tried the same tactic, a court would conclude an antitrust law violation. However, baseball’s antitrust exemption protected the owners. Possibly anticipating such a problem, the union relied on a clause shrewdly negotiated in the 1976 CBA that prohibited players from negotiating contracts as a group. This had been proposed by the owners to avoid situations where players (such as Dodgers pitchers Sandy Koufax and Don Drysdale) tried to negotiate as one unit. The union agreed to the clause, but in return demanded a reciprocal prohibition on the part of the teams. An arbitration panel ruled that the owners’ actions to shut out free agents violated this provision, and damages of $280 million were assessed (Matter of Arbitration Between MLBPA and the 26 Major League Clubs (1987), Grievance No. 86-2).

The 1994 Strike By 1994, both the NBA and NFL CBAs had provisions limiting the amount of money a team could spend on players’ salaries. Many baseball owners wanted a “salary cap” system as well, especially those from smaller market teams who claimed economic hardship due to the rising costs of free agents and arbitration rulings using free-agent signings as a basis for their conclusions. Acting commissioner Bud Selig (who owned a small-market team, the Milwaukee Brewers) led the owners in a push for major changes in the way that baseball did business with its players. They sought a salary cap, and the elimination of arbitration and the anticollusion provision that cost them in the free-agent boycott of the mid-1980s. The union (now led by Donald Fehr, who succeeded Marvin Miller) chafed at the proposals. The players decided their best leverage was a strike in August, when the season is three-quarters complete. Despite efforts of members of Congress and President Clinton and the intervention of federal mediators, the strike continued and ultimately resulted in the cancellation of the World Series. Ultimately, the courts intervened and the strike ended in April 1995. The players claimed that the owners engaged in an unfair labor practice in violation of the National Labor Relations Act. As said earlier, management and the union must negotiate in good faith, and management can only impose its proposed changes when an impasse is reached and further negotiations would be fruitless. The owners claimed that point had been reached and unilaterally imposed their terms, which included a salary cap. The players claimed there was no impasse and that the owners had engaged in an unfair labor practice.

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The National Labor Relations Board agreed with the players. The board’s conclusions were upheld by a federal appeals court, which determined that the players could work under the rules of the expired CBA. With this victory, the players ended the strike and returned to work in April 1995. However, it took almost 2 years to reach a new agreement. This 1997 CBA included some changes, including a “luxury tax,” which effectively fined big-spending owners for having payrolls above a certain level, but no salary cap system. The 1994 strike had lasting effects. Fan resentment led to reduced ticket sales for the next three seasons. Although average salaries dropped 10% in 1995, they grew 8.5 and 14.2%, respectively, in the following two seasons (http://www.sportsfansofamerica.com/FansInAction/Salaries/MLB1.htm). The result was an increasing gap between “small-market” and “big-market” teams. The luxury tax did not work to restrain salary growth.

The Present CBA In the summer of 2002, Major League Baseball and the Major League Baseball Players’ Association signed a new collective bargaining agreement that runs through the end of 2006 (or is extended to 2007 if a new deal is not reached). The agreement combines salary control and payroll parity in an attempt to eliminate the disparity between “richer” and “poorer” teams. The protracted negotiations pitted the longstanding demands of the owners to control salaries against the equally longstanding players’ position against a salary cap. The ultimate compromise is more incremental than revolutionary. The agreement includes the following: An Enhanced Revenue-Sharing Standard. The CBA provides that each team contributes 34% of its “net local revenue,” after deductions for ballpark expenses, to a cash pool a portion of which is redistributed equally to all 30 teams. This is known as the “Base Plan.” A second fund, the Central Fund Component, allocates another portion from that central fund ($72.2 million in 2003), from “richer” teams to “poorer” teams. The revenue-sharing fund component phases in at 60% of the total in 2003, 80% in 2004, and 100% in final years of the agreement (CBA, article XXIV). Note that a great deal of revenue is not included in this revenue-sharing system, including key sources such as revenues from national broadcast rights, and merchandise sales (CBA Article XXIV). It does not come close to the NFL’s system of centralized revenue distribution. The provision was further weakened by the fact that during the 2003 and 2004 seasons—the first 2 years of the CBA—only 60 and 80%, respectively, of that revenue included in the

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distribution fund was distributable. For example, if a team earned $50 million in net local revenue in the 2004 season, it meant that 80% of 34% would go into the pool, or $13.6 million. A Commissioner’s Discretionary Fund. A $10 million fund, with monies derived from equal contributions ($333,333), goes to the commissioner. The commissioner may make distributions from the fund to a club or clubs, in amounts and at times to be determined at the commissioner’s discretion, as long as the amounts do not violate other terms of the CBA (CBA, Article XXIV). A Luxury Tax on Excess Team Payrolls. Officially known as the “Competitive Balance Tax,” this is a central component of the agreement. Teams whose payrolls exceed set thresholds will be taxed on the portions above the thresholds. The money is to be used for player benefits, the industry growth fund, or developing baseball players in countries lacking organized high school baseball. The provision expires at the end of the 2006 season, meaning that if the CBA continues for the 2007 season, there will be no tax (CBA, Article XXII). There are two important pieces of this luxury tax. The first is the “tax threshold,” the maximum payroll a team can have without triggering the tax. The threshold is $117 million in 2003, $120 million in 2004, $128 million in 2005, and $136.5 million in 2006. If a team’s payroll reaches beyond the threshold, then the tax is computed based on two variables: (a) the year of the collective bargaining agreement and (b) the number of times the team has breached the threshold. The following chart summarizes the rates. Threshold

2003

2004

2005

2006

First-time breach

17.5%

22.5%

No Tax

Second-time breach

30%

Third & fourth-time breach

40%

These rates may not be as onerous as they appear. Note that the tax kicks in only for payroll amounts above the threshold. Anything below the threshold is not a basis for the tax calculations. For example, if a team has a $180 million payroll in 2004 and is a first-time violator, the team pays $13.5 million in taxes. If the tax were based on the entire payroll amount, then the tax would be $60 million (CBA Article XXIV).

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Limits on the Debt a Team May Carry. Also known as the “The Debt Service Rule,” it states that a team’s debt cannot exceed ten times EBITDA (earnings before interest, taxes, depreciation, and amortization, a commonly used financial formula determined by subtracting a company’s operating expenses such as payroll, administrative costs, travel and other items from gross revenues). For teams that moved into new facilities, the figure is extended to fifteen times EBITDA. The purpose is to ensure that a team’s cash flow is sufficient to meet its present and future obligations. Player contracts are part of the calculation of the EBITDA (CBA, Attachment 22) (Sheinin, 2005). This rule, not widely discussed, is scheduled to go into effect in 2006, after a grace period of three years. It may have been one reason that the New York Yankees have committed to building a new stadium, tentatively scheduled to open in 2009. Increase in Minimum Salaries. The minimum salary paid to players increased from $200,000 to $300,000 in 2003 and 2004, with cost-of-living adjustments after that (CBA, Article VI). No Teams May Be Eliminated Through 2006. As a result of attempts by Major League Baseball to eliminate two teams in 2001 and 2002, the players sought protection from this possibility. The CBA prohibits team elimination until 2007. In 2007, however, the owners may elect to eliminate two teams and must notify players by July 1, 2006. Contraction inevitably harms the players because more players must seek jobs with fewer employers. In fact, the union’s chief negotiator was quoted as saying this provision was “extremely important” (Topkin, 2002) (CBA Article XIV). Random Testing for Steroids in 2003, Amended in 2005. sion of these rules is found in chapter 10.

Discus-

A Possible Worldwide Amateur Draft. A committee composed of union and management representatives was created to establish rules and format. The reason for this provision is to avoid the situation of certain teams with established scouts in certain countries having a lock on potential stars from those countries, such as in the Dominican Republic. At the time of writing, there has been no agreement on the details of such a draft (CBA, Attachment 24). Benefit Contributions. Major League Baseball will contribute $115 million for player benefits (CBA, Article XXIV).

As of 2004, this CBA has had some success in controlling costs. In 2003, MLB free agent contracts declined substantially from the previ-

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ous year, and were down 57% from 2001. A majority of the 137 free agents negotiating in 2003 received decreases from their previous year’s salaries. A more indirect indication is the competitiveness of middle-level payroll clubs like the Los Angeles Angels and Oakland Athletics, which have made it to postseason play in recent years, due to astute player acquisitions and more revenue sharing than in the past. But the lull may not last, as higher free-agent contracts were attained in 2005. Two reasons cited for the increases include a revenue increase (notably from Major League Baseball’s satellite radio deal) of about $4 million per team, and attempts of poorly performing teams, such as the Seattle Mariners and the New York Mets, to become more competitive.

NATIONAL FOOTBALL LEAGUE History Although the National Football League Players’ Association (NFLPA) was formed in 1956, the NFL players only began collective bargaining negotiation with the league in the late 1960s. As in baseball, the major issue were changes in wage restrictions based on a “reserve” system. However, unlike baseball, the NFL did not have immunity from antitrust laws, and until 1993 many of the labor controversies were decided by the courts. Although NFL player contracts did not contain a “reserve clause” per se, the league commissioner Pete Rozelle imposed a requirement that had the same effect. The “Rozelle Rule” required a team signing a free agent to provide “fair and equitable” compensation to the team losing that player. The compensation could be in the form of active players and/or draft choices. The rule, unilaterally imposed in 1963, ultimately found its way into the first collective bargaining agreement made between the NFL and the National Football League Players’ Association in 1968. Over the next quarter century, the NFLPA attempted to change the rule, but was not as successful as its baseball counterpart in creating a more open market for players. A 1974 strike failed after the union realized it lacked the leverage to ease the restriction. The union then turned to the courts, and in 1976 a federal appeals court concluded that the Rozelle Rule was an antitrust violation (Mackey v. NFL, 1976). Because the rule had not been negotiated, but imposed, it was held to be illegal. After the court negated the Rozelle Rule, the union and management attempted to negotiate a new CBA. The league made proposals regarding free agency. One proposal (called “Plan B”) provided free

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agency to a limited number of players on each team without a requirement of compensation to the old team. In return, certain players received diminished benefits. When negotiations failed, the NFL imposed Plan B unilaterally. Ironically, this system was even more restrictive than the Rozelle Rule, because it gave the prior team the right of first refusal for 37 players on each team’s roster, even if they were free agents. During the period from 1963 to 1974, 176 players became free agents, of which 34 signed with other clubs. From 1977 to 1987, only one free agent player was signed by a new team. In 1987, the NFLPA wanted to remove free agency restrictions and went on strike to force the owners to eliminate Plan B. The NFL employed replacement players, which was disastrous for the NFLPA. The use of replacements served two purposes for the owners. First, they were able to continue the season, although the quality of the games suffered. Second, the owners weakened the union’s resolve. Ultimately, enough NFL players crossed the picket line to force the NFLPA to capitulate. From the late 1980s to early 1990s, the union went back to court, unsuccessfully seeking antitrust protection. They lost, due to a legal doctrine known as the “non-statutory labor exemption” to the antitrust laws, which states that the collective bargaining process supersedes antitrust law. A series of court rulings concluded the players lost the protection of the antitrust laws when they negotiated free agency terms through the union (Powell v. NFL, 1989). In a final maneuver, the players voted to revoke the authority of the union to represent them in contract negotiations. By doing so, they believed their antitrust claims would be resurrected. A federal court agreed (McNeil v. NFL, 1991), finding that once revocation of union authority occurred, antitrust law claims could be used as a basis of a lawsuit to eliminate the restrictive free agent rules. Ironically, the attempt to decertify brought the NFL and the NFLPA back to the bargaining table. Both sides realized the potential chaos resulting from decertification. They negotiated a collective bargaining agreement in 1993, one so successful that it has been extended twice at the time of this writing. The result has been relative labor harmony for the last dozen years.

The Present CBA The Collective Bargaining Agreement between the NFL and its players association is the longest running labor agreement among the four major sports. The present extension ends in 2007, although the possibility exists for a further extension.

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Aside from a salary cap, discussed in detail later in the chapter, the CBA contains the following: Non-Free Agents. Generally, free agency for players with less than three “accrued” seasons of NFL tenure does not exist. An accrued season means eligibility to play six or more regular-season games. The only exception occurs when a team fails to give one of its players a contract offer for at least one season by March 1 after the expiration of the season. In such a case, the player is free to negotiate a contract with any team (CBA, Article XVIII, sec. 2). Restricted Free Agency. A veteran with more than three and less than four accrued seasons (or five in the uncapped final year of the collective bargaining agreement) becomes a restricted free agent. If, prior to the signing period set by the NFL and the NFLPA, such a player receives an offer (known as an “offer sheet”) from a new club, his old club may exercise a right of first refusal and match the offer and retain him. If the old club does not match the offer, the player may sign with the new team, but that team must “compensate” the former team by offering draft choices. The number and quality of the draft choices depend on the amount of the offer (CBA, Article XIX, sec. 2). In other words, the more money a new team agrees to pay the restricted free agent, the more compensation accrues to the former team. Unrestricted Free Agency. A veteran with 4 years or more of accrued service (5 years or more in the uncapped final year of the collective bargaining agreement) may negotiate and sign a contract with any club, with no compensation awarded to the former team. Although players are eligible for unrestricted free agency sooner than their baseball counterparts (6 years), one should keep in mind that the average playing time for an NFL player is about 4 years (Moreno, 1998), and only about 20% of all NFL players become unrestricted free agents (CBA, Article XIX, sec. 1). The Franchise Player. In order to prevent a star player from leaving a team as a free agent, the collective bargaining agreement created a category known as a “franchise” player. Each team can designate one unrestricted free agent as a franchise player per season. The player may only negotiate with his old club for that season, and the club must pay him based on one of two standards. It pays him either 120% of his prior year’s salary or an average of the five highest league salaries for his position, whichever is greater (Article XX, sec. 1, sec. 2(i)). A fran-

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chise player may sign a contract for more than one season, and, if so, the designation continues for the duration of the contract (CBA, Article XX, sec. 10). Final Eight Plan. This provision, which only applies in a non-salary capped year (the final year of the agreement) prevents, with limited exceptions, the top four teams in the league (those which participated in the NFC and AFC Championship games) from signing any unrestricted free agent except those from his own team. This section also restricts the signing of free agents by the next four teams which made the playoffs but were eliminated earlier (CBA, Article XXI, secs. 2 and 3). Transition Players. Each NFL club is permitted to designate one unrestricted free agent as a “transition player.” Additionally, the club can designate a transition player in lieu of a franchise player, giving that team two transition players for the same season. Transition players are free to negotiate with any club during the designated time period, but the old club retains the right of first refusal over any offer with a new club. A transition player must receive a minimum of either 120% of his prior year’s salary or the average of the top 10 players in his position (CBA, Article XX, secs. 3, 11). Guarantees. An NFL contract is generally not “guaranteed.” For example, if a player has a 6-year, $20 million contract, only the signing bonus is guaranteed. In fact, if one considers that the average career of the NFL player lasts about four seasons, an average player with a 6-year contract will never see the benefits of the sixth year of his contract (Bouchette, 2002). In some cases, however, a contract may contain “skill” or “injury” guarantees. A skill guarantee obligates the club to continue paying under the contract even if the player has insufficient skill to make or remain with the club. An injury guarantee ensures full payment to the player in the event that he is unable to satisfy the team’s physical exam requirements or becomes physically unable to perform as a result of on-field injuries suffered during the contract. The payment covers the present season and up to 50% of salary for the following year (CBA, Article XII, secs 1, 2). From the union’s standpoint, the weakest aspect of the CBA is the nonguaranteed salary. Despite the fact that the NFL has the richest television contract in sports and the league made nearly $5 billion in revenue in the past season, more than the other leagues, NFL players do not enjoy the same security as many players in the other major league

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sports. In fact, by signing a nonguaranteed contract, an NFL player takes a considerable risk, as he can be terminated (or “cut”) at any time. First, many agreements tend to be back-ended, meaning most of the base salary is located in the last 2 or 3 years of the contract. If he suffers a career-ending injury, his contract ends at the conclusion of the season and he risks termination by the team during the term of the contract. Also, if the player becomes “too expensive” to the team due to salary cap constraints (discussed shortly), the team can either force a renegotiation of the contract or terminate the player. Stanford University professor Roger Noll put it best when he said that “the absence of guaranteed contracts transfers the risk of injury or deterioration of skills from the team to the player” (Cunningham, 2004). A Fund to Supplement Salaries of Players Whose Playing Time Is Disproportionate to Their Compensation. Implemented as part of

the 2002 extension to the CBA, the “Performance Based Pool” established a fund (with the money coming from league revenues) that is used to supplement certain salaries. In 2002, its first season, the program paid $472,000 per team. The following season, the amount rose to $1 million. That season, 163 players qualified for checks of $40,000 or more. Eighty-two players received checks for $50,000 or more and 20 earned more than $70,000. Most of these players received the minimum salary or a salary close to it (CBA, Article XXXVIII-B, sec. 1). Some may question why these restrictions exist. The answer centers around the fact that the NFL system is quite different in several respects from those of the other leagues, which may justify the lower salaries. Many professional baseball players and hockey players spend a great deal of time (or even their whole careers) in the minor leagues, where their compensation is dramatically lower than in the major league. With no feeder minor league in professional football, NFL players are drafted by a team, they sign with that team, and they play with that team right away. Another important point is that the NFL employs about twice as many players as baseball and hockey and more than three times as many as the NBA. Injury rates are also higher, creating a concern that owners would be stuck with paying out guaranteed contracts to many players, while seeking substitutes. And the benefits received by NFL players, which include long-term disability plans and pension eligibility after four seasons, are better than those in the other leagues. Yet average football salaries, as shown in the table at the conclusion of this chapter, lag behind those of other sports, in part due to the salary cap.

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The Salary Cap In 1993, the NFL and its union agreed to implement a salary cap, making professional football the second major sport to do so (the NBA was the first). The salary cap attempts to limit the potential for salary growth in a modified free agency system. Basically, player costs are limited to a specific percentage of league-wide revenues divided equally by the number of franchises existing in the league. The result, at least theoretically, limits the cumulative salary that a team can pay its athletes. Not only intended to control salary growth, the cap also promotes competitive balance amongst the teams in the league. With a cap, a “richer” team does not have an unfair advantage over a “poorer” team in signing marquis players. In practice, the salary cap involves difficult dollars and cents budgeting. The tricky, accounting-oriented mechanics of the cap are often misunderstood (or not understood). It is not the goal here to give readers an accountant’s breakdown of every variable, but rather a basic guide for journalists as to the applicability of the salary cap standards in the NFL. At the outset, the two most important considerations when discussing a salary cap are (a) how the cap is calculated and (b) its exceptions. Many call the NFL salary cap system a “hard cap,” as compared to the “soft cap” system found in the NBA. The inference is that the NFL system is stricter in operation than its NBA counterpart. However, the NFL system is filled with exceptions, just like the NBA’s loopholes. The NFL cap is considered a “hard cap” in that it seems to establish a more definite predetermined limit on the amount a team may pay its players. Yet without those exceptions, the most important being the amortization of the signing bonus over the life of the contract, actual salary expenditures would have exceeded the salary cap in each season since 1993. The NFL salary cap sets a ceiling on the amount of money any one team may spend on its players within a given season (known as “league year,” starting from February 20 and lasting to February 19th of the following year) and effectively limits the number of teams with which a player may negotiate. For 2005, that ceiling was based on 65.5% of “defined gross revenues” (DGR), less League Wide Projected Benefits (which include, among other things, player pension funding, group insurance, supplemental disability, workers’ compensation, unemployment compensation, social security taxes, post season salary, practice squad salary and medical costs) (CBA, Article XXIV, sec. 1(b)) divided by the number of teams. DGR includes gate receipts, luxury box revenues, personal seat licenses and broadcast rights tallied from the individual teams and the league’s broadcasting and cable agreements. However, certain incomes, such as that from conces-

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sions, parking, program and novelty sales, local advertising and promotions, signage, and luxury box income other than gate receipts, are excluded from the DGR for salary cap calculation (CBA, Art. XXIV, sec. 1(a)). In 2005, the team cap came to $85.5 million. The salaries of the team's top 51 players count towards the cap. To ensure that NFL owners do not pocket too much of their DGR, the collective bargaining agreement states that league-wide, the players are guaranteed to receive a minimum of 58% of DGR in any capped season, amounting to $67.3 million in 2004. If player costs for all NFL teams fall below 58% of DGR in a capped season, owners must pay the difference directly to the players that played during that season by April 15 following that season. If such payment occurs, the funds will be distributed based on the reasonable instructions of the union (Article XXIV, secs. 3 and 4). This provision, overlooked by many, serves as an important baseline to ensure that players are receiving some of the spoils of the revenues of the league. In addition to the league-wide salary cap, the current collective bargaining agreement mandates that individual teams pay their players a minimum of 56% of their DGR share (CBA, Article XXIV, sec. 5). Interestingly, no such minimum is found in baseball’s CBA, giving owners of “poor” teams the right to pocket luxury tax monies given to them by the wealthier teams. The calculation of the DGR must be done before the season begins, and the amounts include estimates of expected growth, based on such factors as television contracts, new stadiums, and other revenue growth. Any differences are either added to the pool or subtracted from the DGR pool for the next season. Hence, accounting skill is required to make accurate calculations. The number crunchers meet with union representatives to inform them of the DGR calculations, and if there are objections, an arbitration proceeding occurs to resolve the dispute. Even though the standard just described seems strict, the cap rules have been applied in a clever fashion. Some amounts, like a player’s base salary and certain types of bonus payments, can only be calculated for the particular season they are paid under the player’s contract (Spending Now Will Cost, 2004). But, certain payments can be prorated over the life of the player’s contract in order to get “salary-cap relief.” This strategy can produce instant results by keeping quality players for an attempt at a Super Bowl championship. However, by using this accounting technique, teams mortgage their future in favor of opening up salary room immediately. Hypothetically, a highly touted first-round quarterback could receive a contract including: (a) a signing bonus of $10 million; (b) a base sal-

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ary of $5 million; (c) a roster bonus of $50,000; (d) a reporting bonus of $50,000; (e) $50,000 for playing in 80% of team games; (f) $100,000 for gaining 1,200 yards in a season; (g) $200,000 for making the All-Pro team and being the most valuable player (MVP); and (h) $300,000 if the team goes to the Super Bowl. As described next, some of this money is prorated and some is not. These rules are complex but important in calculating salary cap room. A summary follows. Signing Bonuses. The signing bonus is the amount of money received by a player for merely agreeing to a contract with the team. The player and his agent attempt to maximize the signing bonus because it is not based on the player’s performance and is typically the only guaranteed payment the player receives. Thus, if a player has insufficient skill or is injured and not able to remain with his NFL team, the signing bonus is not forfeited or diminished in value. The rest of the contract, however, is usually terminated. The signing bonus is the best known and simplest method of circumventing the salary cap, because at the time of this writing, it may be prorated over the life of the contract or up to 3 years after the final capped year of the CBA (2009), whichever is sooner for salary cap purposes (CBA, Article XXIV, sec. 7). In other words, the total bonus amount is divided by the number of years in the player’s contract and, under the terms of the CBA, only the prorated amount is applied toward a given year’s salary cap calculation. If player X signs a 4-year contract with a $10 million signing bonus, $2.5 million will count toward the cap over those four seasons. However, the use of prorated signing bonuses carries some risk. Releasing players with large signing bonuses early in their contracts penalizes the team under the salary cap. So if a player leaves the team before his contract expires, the remaining prorated portion of the bonus is counted immediately, in a lump sum, against the cap. Taking our last example, the team will take a “cap hit” of $5 million if the player with a 4-year contract and $10 million bonus is released by June 1 before the upcoming season after playing 2 years. Other types of bonuses also exist, such as the guaranteed roster bonuses (a payment made in the preseason) and reporting bonuses (an extra payment for simply reporting to training camp). As described next, teams use other deferred compensation techniques to skirt the salary cap. Contract Renegotiation. In order to save salary room and keep star players, owners will often renegotiate player contracts during a

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season. There are basically two ways to do this. The first is by reducing a player’s salary and spreading it over a longer period of time. The reduction will create salary room in that given season. Also, money guaranteed in contract extensions and modifications is proratable (CBA, Article XXIV, sec. 7(b). One way involves “reworking” a player’s existing contract to get salary-cap relief. This serves to diminish salary. Say a player under contract for $5 million per season accepts a modification to a lower amount, $3,500,000. The team then has an extra $1.5 million in salary-cap room for the season. In some cases, the renegotiation may result in the player’s salary being paid over a longer period of time. Let’s take the following case: An expensive veteran quarterback, under a 4-year contract, making $9 million per season, coupled with a $15 million signing bonus, has 2 years left. The backup quarterback, making far less, played more games last season and achieved better production. The team does not want to continue paying such a high sum to a declining player. It could do several things: (a) Force a salary reduction and use this quarterback either as a starter or a backup. The result would be a lower salary and a restructuring and spreading the cap hit over future years (assuming a new signing bonus); (b) Release the player and take about a $7.5 million hit against its salary cap for the remaining prorated portion of his past signing bonuses; or (c) Renegotiate the signing bonus. Option (a) saves some salary-cap room next year, but costs the team out-of-pocket cash (notably the signing bonus, which is paid up front). However, option (b) costs salary-cap room because $7.5 million would be charged to this coming year, but does not cost the team any cash, because it does not have to pay the player (Miller, 2003). Option (c) involves renegotiating the signing bonus. Part of the player’s base salary is swapped into an added signing bonus. As a result, the player gets more guaranteed cash, and the owner gets more cap room, as well as the player’s services for a longer period of time if the contract term is extended. Also, this added bonus does not affect the proration of the original signing bonus. If a club and a player renegotiate or extend a contract and increase the player’s salary for the current season, the increase will be counted as salary for that league year if the negotiation is completed before the 10th week of the regular season. If the renegotiation is completed after the tenth week of the regular season, the increase in salary will be treated as a signing bonus that is allocated over the remaining years of the contract (including the “current” year of that contract) (CBA Article XXIV, sec. 7(b)).

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Incentive Clauses. Incentive clauses are performance-based awards found in many NFL contracts. The number of incentive clauses and their respective values are a function of various factors, including the individual club’s talent pool, the player’s leverage, his expected and past contributions to his club, his salary, and the number of years the player has served. Typically, rookie and reserve players’ contracts contain more incentive clauses because their base salaries are lower. Accordingly, as a player’s salary increases, the number of incentive clauses usually decreases. The base salary theoretically reflects contributions that were covered by previous incentive packages. “Playing-time incentives” reward a player for the amount of time on the field. Performance can be measured by games started or by a percentage of the team’s total number of plays on offense, defense, and/or special teams. The playing-time incentive clauses are often used with players recovering from an injury. “Statistical performance incentives” reward a player’s on-field performance within various statistical categories based on terms and conditions set forth in the contract for a particular year. The scope of these clauses is limited only by the creativity and ingenuity of the negotiators. For example, a wide receiver can be rewarded if he leads the NFL in receptions, or a quarterback may receive extra money if he ends the season with the highest quarterback rating in the league. “Honors incentives” reward players for exceptional individual achievements. Such incentives are attractive to clubs because relatively few players, regardless of their ability, earn such incentives in any given season. Some of the awards include NFL Most Valuable Player (MVP), NFL Defensive Player of the Year, All-NFL First or Second Team, selection to the Pro-Bowl, and Rookie of the Year. Additionally, players often receive bonuses contingent on the performance and success of their team. Team performance incentives include bonuses based on the team’s statistical performance or ranking. Examples of performance categories include the NFL’s top-ranked offense or defense. Also, a team can reward each player with a progressively higher amount of money if the team advances into the playoffs or wins the division, conference championship, or Super Bowl. As we can see, NFL contracts use incentive clauses with considerable frequency. But how the extra compensation fits into the salary cap presents an important question. The NFL-NFLPA collective bargaining agreement creates two different categories: (a) incentives “likely to be earned” based on whether the player could have satisfied the same

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clauses in the prior year, and (b) incentives “not likely to be earned.” If the incentive is likely to be earned, it counts toward the team salary in the current year’s salary cap. If it is not likely to be earned, it will not be counted against the cap even if the player meets the incentive and gets paid (CBA, Article XXIV, sec. 7). To interpret this very subjective standard, the current CBA provides this example to help in determining whether an incentive clause is likely or not likely to be earned for salary cap purposes. Assume player X receives an incentive bonus if he participates in 50% of the team’s offensive plays this season. Assume further that last season the team had 1,000 offensive plays. Therefore, as soon as player X plays in 500 plays in the current season (or 50% of last year’s 1,000 plays), the incentive will be considered “earned” for salary-cap purposes. The same incentive is considered not earned if the same player in the current year only participated in one of the team’s first 502 offensive plays. In this situation, it would be impossible for the player to achieve the 50% incentive based on last year’s performance of 1,000 plays. Therefore, if the player receives money for attaining the “likely to be earned” incentive and that amount puts the team over the cap, the amount paid above the salary cap in performance bonuses will be subtracted from the team’s salary cap in the next year (CBA, Article XXIV, sec. 7(c)(ii)). Deferred Compensation. The present CBA requires that base salary and bonuses that are deferred be counted in the year earned, not the year paid (CBA, Article XXIV, sec. 7). The use of deferred compensation has its risks. It may free salary room in the beginning but take up space in later years. The 2003 Buffalo Bills suffered for several years with cap space taken by “dead money”—bonuses paid to players no longer on the roster. For example, in the 2001 season, the dead money forced the Bills to compete with two-thirds of a roster. They had 32.6% of their cap room tied up in payments to former players such as Doug Flutie. In all, $22 million of their $67.4 million salary cap was dead money. In 2003, the Bills fielded three-fourths of a roster. They had $17 million of their $71.1 million salary tied up, or 25.5% (Gaughan, 2003). Problems of this kind loom even larger for the Washington Redskins. The Redskins aggressively signed free agents for a year-term period when Daniel Snyder acquired ownership of the team in 1999. By 2004, the Redskins gave six players contracts totaling $193 million and still were within the cap limit. By 2006, Washington will have 25 players under contract for a cap value of $92.9 million. Much of this compensation is in the form of prorated signing bonuses. The result is that the dead money cuts their salary cap budget (King, 2004).

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Retirement or Trading of Player. If a player is traded or waived on or before June 1, the remaining signing bonus that has not been included in his salary “accelerates” and is included in that year’s team salary for cap purposes. The team that waived or traded the player is responsible for the accelerated signing bonus. In most cases, if a player retires, the remaining signing bonus also “accelerates” and is included in that year’s team salary. Thus, the team will take an immediate salary cap hit of the remaining signing bonus and the new team is not responsible for any of the original signing bonus (http://www.glorifythepast.com/forums/showthread.php?t=5236, retrieved May 30, 2005).

A Quick Summary In summary, the NFL computes a player’s cap number by adding the prorated signing bonus, base salary, and other bonuses, including roster, option, reporting, and workout bonuses, and likely to be earned (LTBE) incentives. When a player signs a 5-year contract in 2004 that includes a $5 million signing bonus, a $1 million roster bonus in the first year, a first-year base salary of $500,000, and $200,000 in LTBE the first season, the player’s salary cap number for that season is $2.7 million, or the sum of $1 million proration (the signing bonus divided by the number of years of the contract), $1 million roster bonus, the $500,000 base salary, and the $200,000 LTBE (Seifert, 2004). Before leaving the NFL collective bargaining agreement, this quotation merits inclusion: “Just remember the basics of this,” Jay Zygmunt, the president of the St. Louis Rams Football Operations, said. “Every dollar you spend counts. The only thing you can control is when. But it’s going to count. There’s no way around it. No one’s immune from the process” (Thomas, 2004).

NATIONAL BASKETBALL ASSOCIATION History The modern NBA arose from a merger of two rivals, the Basketball Association of America (BAA) and the National Basketball League (NBL) in 1949. Not surprisingly, NBA players worked under the same restricted salary arrangements as in other major sports leagues. Like their football and baseball counterparts, NBA players slowly adapted to labor–management negotiation. Although formed in 1954, the National Basketball Players’ Association (NBPA) and the NBA did not engage in collective bargaining negotiations for over a decade.

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Similar to the other leagues, the NBA attempted to control salaries by a form of reserve system. And like their National Football League Players’ Association counterparts, the NBPA challenged the limitation based on antitrust theory. The lawsuit, known as the Oscar Robertson litigation (after the Hall of Fame player), was filed in 1970 and challenged the league’s reserve clause that severely curtailed free agency and effectively limited salaries (Robertson v. NBA, 1970). The case was settled in 1976, and the reserve clause was eliminated and replaced with a compensation system whereby teams who lost free agents would be entitled to cash, players, or draft choices determined by the NBA commissioner from the signing team. Additionally, the player’s former team would hold the right of first refusal on any free agent signings. At the time of the settlement, the NBA absorbed four teams from the defunct American Basketball Association (1967–1976), depriving players of a competitor league that attracted NBA players by offering more lucrative contracts. The terms of the settlement were memorialized in a collective bargaining agreement made in 1980. In 1983, the NBA became the first professional sports league to establish a salary cap. At the time, many NBA teams experienced financial difficulties. Franchises in Cleveland, Denver, Indiana, Kansas City, San Diego, and Utah reported serious losses, and some fell behind on deferred payments to former players (Bradley, 2004). In this atmosphere, the NBA and the NBPA decided to develop a novel salary structure. They created a salary cap on the amount teams pay most players, regardless of whether they are free agents or rookies. This agreement resulted in considerable success in stabilizing the finances of the league and its teams. The blueprint remains effective to the present day. The players were to be paid an aggregate amount of at least 53% of the league’s “guaranteed share of revenues,” known as the “defined gross revenues” (DGR), which included gate receipts, local and national television and radio revenue, and preseason and postseason revenues (Bradley, 2004). However, free agency remained restricted. During the term of the CBA, the NBA blossomed because of star players such as Magic Johnson, Larry Bird, and Michael Jordan. At the conclusion of this agreement, the players sought some form of unrestricted free agency and, like their NFLPA counterparts, went to the courts to challenge restrictions on free agency under the antitrust law. The NBA and NBPA settled the case, leading to the adoption of a 6-year CBA in 1988, which for the first time granted unrestricted free agency. In a victory for the players, it eliminated the right of first refusal to a free agent’s offer after a player completes his second contract (Bradley, 2004).

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The relatively harmonious relationship between the NBPA and the NBA ended in 1991 when the NBPA discovered that the NBA underreported revenues by excluding luxury box rentals, arena signage, and playoff ticket sales in the calculation of defined gross revenues. As arena economics began to shift in favor of suite and signage revenues, the union feared that the exclusion of such revenues would significantly hurt the players. The dispute was settled, as the parties agreed to a $2 million increase in the salary cap for the next two years (New York Times, 1992). At that time, the average salary for an NBA player was $1 million, up from $200,000 in 1976 (NBPA Timeline, n.d., retrieved May 1, 2004, from http://www.nbpa.com/aboutus/history.html). A period of strained labor relations followed. By 1994, the 1988 agreement ended and the players’ union instituted another legal challenge to certain terms of the CBA, notably free agency, college draft, and the right of first refusal (which was limited, but not eliminated under the old CBA). The courts ultimately ruled in favor of the owners, and once the litigation ended, contract talks continued (NBA v. Williams, 1995). The parties played the 1994–1995 season without a contract, but after that season, the NBA threatened a lockout if a new agreement was not concluded. A new agreement was negotiated in the summer of 1995 and was supposed to last for 6 years. However, it faced criticism from a group of “dissident” players, mostly All-Stars, who objected to its provisions, notably a luxury tax on teams that exceeded the salary cap. This fissure showed divergent interests between highly paid marquee players, such as Michael Jordan, and the union leadership. The stars, opposed to such a tax, argued that it would depress their salaries because the teams had an economic incentive not to negotiate high salaries to avoid exceeding the cap. These players and their agents sought termination or “decertification” of the NBPA as a bargaining representative. If that had happened, the unions would have lost the power to negotiate on the players’ behalf. Also, these players claimed that if the NBPA were decertified, the NBA clubs could not risk imposing team salary caps because of potential antitrust law challenges in the courts. The decertification attempt failed, as the players voted to retain the NBPA as its bargaining representative. However, in a defeat for the union, the players rejected the proposed CBA. The union, feeling the heat from the star players, took a tougher position with regard to a salary cap, and, after fruitless negotiations, the NBA decided to impose a lockout on July 1, 1995. This action was short-lived, as a new 6-year collective bargaining agreement, without any “hard” salary cap or luxury tax, was concluded. Both sides bought labor peace. The NBA avoided the cancellation of games, whereas the union mollified the desires of the dissident players who sought decertification.

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This CBA gave the players some tangible improvements, such as unrestricted free agency for all players following the conclusion of their contracts, and a guarantee of 48.04% of all basketball-related income (BRI) (an expanded version of the older “defined gross income”), characterized as the total of gate receipts, broadcast revenues, merchandise revenues, and concessions generated by all the teams in the league, which now included luxury suites, international television, and arena signage. The agreement also permitted unrestricted free agency after a player’s third season. For the owners, it provided for a reduction in the number of draft rounds to one and a rookie salary cap. It kept various exceptions to the salary-cap rules (to be discussed later), including the so-called “Larry Bird Exception,” which allowed teams to re-sign their own free agents at any price. One consequence of this CBA was that it enhanced the bargaining power of star rookie players. To make sure they would not become free agents too quickly, some received lucrative contract extensions to “lock” them with the team for more than 3 years. The use of Minnesota Timberwolves’ Kevin Garnett serves as a notable example. He received a 6-year, $121 million extension. The owners felt that the league gave in on the luxury tax issue. Fortunately for the NBA, the CBA had an “opt-out” provision. It provided that in 3 years, if total player salaries and benefits exceeded 51.8% of BRI, the NBA could “reopen” the CBA early and renegotiate the agreement. At the time of the agreement, team salaries constituted about 57% BRI level (Allen, 2002). By 1998, that amount was essentially the same. The average player salary approached $2 million. The minimum player salary was $225,000. Significantly, the money earned from player group licensing exploded to about $25 million a year (http://www.NPBA.com, retrieved April 21, 2004). To no one’s surprise, the league exercised its reopening option, and many speculated that a work stoppage was likely. From the NBA’s point of view, the salaries were so high that even the revenues from a lucrative, 5-year $2.4 billion television deal negotiated in 1997 did not alleviate the problem (In the Matter of National Basketball Players Association and National Basketball Association (Lockout Arbitration, Opinion and Award, 1998)). On July 1, 1998, the CBA officially terminated, and the NBA began what would become a 6-month lockout, then the longest labor stoppage in sports history. In such an event, the question becomes which side has more leverage. In most, if not all, of baseball’s strikes and lockouts, it has been the union. However, in this case, it was the NBA and its owners. One important reason derived from an arbitrator’s ruling that teams did

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not have to pay the players with “guaranteed” contract money (In the Matter … Association (Lockout Arbitration, Opinion and Award, 1998)). The October 19, 1998, decision threw the full balance of power in negotiations to the side of the NBA. As one commentator put it, “It simply became a waiting game until the union folded” (Michaelis, 1998). Ultimately, after the loss of half of the season and the threat to shut down the league for the entire season, the parties came to their present labor agreement. Before the stoppage ended, 423 regular-season games and the NBA All-Star Game had been canceled.

The 1999 CBA The collective bargaining agreement between the NBA and the NBPA, effective since the 2001–2002 season, expired at the end of the 2004–2005 season. Like its NFL counterpart, this CBA utilized a salary-cap system, but unlike the other major leagues it also specifically limited individual salaries, although with some significant exceptions. Unique to any of the four major league sports, this CBA also set maximum salaries for players based on their years of service and regulated the salaries for rookie players’ contracts. It also created an “escrow and tax” system if league-wide salaries exceed a certain percentage. As in the NFL, the NBA salary structure offered substantive control of salary growth. In return, the players received a minimum salary for veterans based on service, and methods to circumvent the cap, most notably by the continuation of the so-called “Larry Bird Exception.” The most important provisions of this CBA are as follows: Player Salary Maximums. This was an important concession by the union, because it put a drag on the salaries of the most elite players. For the 2003–2004 season, the cap was almost $11 million for a player from years 0 to 6. For service of 7 to 9 years, the cap was $13.1 million. For service of 10 years or more, it was $15.3 million (CBA Article II, Section 7(a)). Player Salary Minimums. The parties agreed not only on salary ceilings but also to salary minimums for veteran players, as well as predetermined rookie salaries. According to this rookie salaries system, a player’s salary was not based on his performance but rather on the position at which he was selected in the draft. Because a player’s performance in college was not necessarily representative of his potential for success in the NBA, this system may have resulted in unfairness regard-

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ing a player’s true market value. As of 2004–2005, the breakdown was approximately as follows: in year 1, rookies $385,000; 1-year veterans, $620,000; 2 years, $695,000; 3 years, $720,000; 4 years, $745,000; 5 years, $808,500; 6 years, $870,000; 7 years, $932,000; 8 years, $995,000; 9 years, $1 million; 10 years and up, $1.1 million. A maximum of $500,000 will be paid by teams and counted against their caps, with the difference paid from a league fund. The Salary Cap. The NBA salary cap system has not changed appreciably since it was first introduced in 1983. A team’s salary cap for each year was determined by a formula based on basketball related income (BRI). The cap amount was based on a figure comprising 48.04% of the projected BRI for the season subtracting player benefits, and dividing that amount by the number of teams in the league (29) (CBA, Article VII, sec. 2(a)(1)). Of crucial importance was how the BRI was computed. It included aggregate operating revenues received by the NBA, such as gate receipts, broadcasting rights fees, proceeds from exhibition games and in-arena sales of concessions and novelties, parking, team sponsorships, 40% of fees from fixed arena signage, and 40% of proceeds from luxury boxes (CBA, Article VII, sec. 1(a)(1)(vi), sec. 1(a)(1)(vii), sec. 2(a)). The salary cap maximums have increased over the years as a consequence of the NBA’s economic fortunes. For example, the 1983–1984 season had a cap of $3.1 million per team. For the 2003–2004 season, it was $43.4 million. For the same period of time, the average player salary rose from $250,000 to $3.7 million. In the 2004–2005 season, it increased just $30,000 from the previous season’s cap. However, that figure is deceptive, because if one took the cap exceptions into account, they pushed the average acceptable team payroll to over $59 million. When determining team salaries (e.g., to determine whether a team is over the salary cap), the following were included: salaries of all active players and players on injured reserve (including likely bonuses), salaries paid or payable to waived players, and any salary still being paid to retired players (Coon, n.d.) (CBA, Article VII, sec. 4(a)). Free Agency. Restricted free agency, where the player’s original team may match an offer by a prospective team, occurred after the fourth season for first-round picks, and after the third season for all others. For longer periods of tenure, unrestricted free agency applied in most situations. Escrow. To protect teams against spiraling salaries, the CBA limited aggregate player salaries to 55% of “basketball related income” until the end of the 2004–2005 season, when the amount increased to 57%

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(CBA, Article VII, sec. 12). To enforce this limitation, an “escrow and tax” system was established. Under this system, an amount not to exceed 10% of players’ salaries was placed in escrow. If aggregate player salaries exceeded 55 or 57% of the BRI level (depending on the year), the league would be reimbursed (with interest) the amount of the overage by the escrow fund (CBA, Article VII, sec. 12(c)). Any money remaining in the escrow fund would be returned to the players with interest. In the 2001–2002 season, about $138 million was returned to the owners because the player salaries exceeded the 55% BRI level. Luxury Tax. This provision imposed a tax on the teams, in the event that salaries were beyond the amount withheld by the players under the escrow provisions. The tax would be triggered when the league-wide salaries and benefits exceeded approximately 61% of BRI before the 2004–2005 season, 63.3% in 2004–2005. If the tax was triggered, all teams over the luxury tax threshold had to pay, dollar for dollar, the amount by which their team salary exceeded the tax threshold (NBA Luxury Tax Announced, 2004). The luxury tax threshold on 2003–2004 salaries was approximately $54.6 million. Teams under the threshold would collect a percentage of this tax amount. By the end of the CBA, teams over the threshold generally did not collect any amount. Note that the tax did not bar teams from exceeding the salary cap but presented strong monetary incentives to avoid doing so, similar to the luxury tax found in the present Major League Baseball collective bargaining agreement. Minimum Team Salary Threshold. Under the CBA, a team could not have a team payroll lower than 75% of a team’s salary cap. In the event that a team had a lower team payroll, the NBA could force that team to pay the players the amount equal to the shortfall (CBA, Article VII, sec. 2(b)). The minimum and maximum salary budgets could be spent by each team when signing new players, whether rookies or veterans. What constituted a “salary” was determined by rules regarding calculation of deferred compensation, signing bonuses, loans to players, incentive compensation, foreign player payments, 1-year minimum contracts, and existing contracts entered into before the agreement was made (CBA, Article VII, sec 2). Maximum Contract Length. The maximum length of a contract for most NBA players was 6 Years. For “Larry Bird Exception” players, it was 7 years (CBA Article IX, sec. 1). Suspensions and Fines for Player Misconduct. Players could be fined and/or suspended for noncompliance with the terms of their

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contracts. Players were fined $2,500 for each of the first two practices missed within a season, and $5,000 for each one thereafter. Their cash compensation could be reduced by 1/90th for each game that was missed. In addition, players could also be fined $10,000 for each promotional appearance and mandatory program that was missed (CBA, Article VI, sec. 1). The NBA also had the authority to suspend a player for up to ten games when a player was convicted or pleaded guilty or no contest to a violent felony (CBA, Article VI, sec. 4). All Players Were Drug Tested Once per Season. Marijuana and illegal steroids have been added to the banned substances list. The NBA reserved the right to perform drug testing on any player when it had reasonable cause to do so. In addition, all first-year players were subject to three “no-cause” drug tests within a season, and each veteran player tested once. When a player tested positive for illegal substances, other than marijuana and steroids, he was dismissed and disqualified from any association with the NBA, and could apply for reinstatement at a later date. However, if a player tested positive for either steroids or marijuana, he was required to enter a substance abuse treatment program (CBA Article XXXIII). Discussion on drug testing follows in chapter 10.

Exceptions to the Salary Cap The salary cap system has several important exceptions, most of which remain in effect in the present CBA. The following is a general description of each. The most significant, known as the “Larry Bird Exception,” allows a team to exceed the salary cap when it re-signs its own free agents. The exception covers up to the player’s maximum salary. The player must have played at least three seasons without being waived or changing teams as a free agent (CBA, Article VII, sec. 6(b)). In the 1999 CBA, the team could sign the players to a contract with annual raises of up to 12.5%. This exception thus permits the team’s total payroll to exceed the salary cap in order to sign its own free agents. A new team signing such a player can also use the exception; however, it can only offer up to a 10% increase of the player’s previous salary under the 1999 CBA (Aubut, 2004) The exemption is named after Boston Celtics great Larry Bird, because he was the first player allowed to exceed the cap. “Early Bird” Exception. This is a weaker form of the Larry Bird Exception. Players who qualify for this exception are called “early qualifying veteran free agents” in the CBA. A player qualifies for this exception after just two seasons without being waived or changing teams as a free agent. Using this exception, a team may re-sign its own free agent

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for 175% of his salary the previous season or the average player salary, whichever is greater. Such contracts last a minimum of two seasons. This limits its effectiveness because strategically, it may be better to play for a lower salary under a remaining contract and then have the full Bird exception available the next season (CBA, Article VII, sec. 6(b)). “Non-Bird Exception.” This applies to any free agent not in the first two categories. This exception allows a team to re-sign its own free agent to a salary starting at 120% of the player’s salary in the previous season or 120% of the minimum salary, whichever is greater, even if they are over the cap. Raises are limited to 10%, and contracts are limited to 6 years when this exception is used. Mid-Level Salary Exception. This exception allows a team to offer any player a contract equal to the average NBA salary every year, even if the team exceeds the salary cap. The exception amount for the Mid-Level Salary Exception is tied to the average player salary in the league. Thus, as the average salary in the league increases, the exception amount correspondingly grows. Contracts signed pursuant to the new exception may be up to 6 years. Finally, a team may utilize the Mid-Level Salary Exception every year instead of once every other year. For 2003–2004, it was about $4.9 million.

The CBA imposed severe penalties if teams and players attempt to circumvent these rules. A case in point involved a player named Joe Smith and the Minnesota Timberwolves. Smith signed with the Timberwolves for the amount of the mid-level exception, which at the time was $1.75 million. The parties made an under-the-table agreement that Smith would play under three consecutive 1-year contracts at below market value, and the Timberwolves would reward him by using their Larry Bird Exception to sign him to a huge contract beginning with the 2001–2002 season. The agreement was formalized in writing (not a wise thing to do under the circ*mstances), and the league eventually discovered the written agreement. It had long been rumored that such under-the-table agreements existed, but this was the first time the league had hard evidence in the form of a signed contract. The league responded by fining the team the maximum $3.5 million, taking away its next five draft picks (two were later returned), and voiding Smith’s $1.75 million contract and Smith’s two previous, already completed contracts. This essentially stripped the Timberwolves of any Bird rights to Smith, preventing them from re-signing Smith for any salary above the minimum (they had already used their other exceptions) (Enlund, 2000).

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With these exceptions, only three NBA teams were under the cap limits in 2004. And in an odd twist, the Chicago Bulls were paying $14.9 million to retired players. Eddie Robinson ($5.05 million) and Scottie Pippen ($5 million) constituted the majority of the hit (Fratello, Grizzlies Meet About Vacancy, 2004).

The 2005 CBA In June 2005, the NBA and the NBPA reached a tentative agreement for a new six-year CBA. While the outlines of the 1999 CBA remain, the new deal makes some important changes, which are outlined below: • Salary cap base increases from 48 percent to 51 percent of BRI, over the life of the agreement. For 2005–06, the team salary maximum was $49.5 million. • If salaries exceed 57 percent of BRI the players’ escrow tax decreases from 10 percent to 8 percent over the life of the agreement. • The maximum length of a player’s contract decreases from 7 years to 6 years. • The minimum roster size increases from 11 to 13 (of which 12 are active players). • The maximum annual increase in multi-year player contracts for players signing with the same team decreases from 12.5 percent to 10.5 percent. • The maximum annual increase in multi-year player contracts for players signing with a different team decreases from 10 percent to 8 percent. • Random drug testing increases to four times per season. Before, veterans were only tested during training camp and rookies tested four times. • The minimum age for an NBA player increases from 18 to 19. • An arbitrator can review player suspensions of over 12 games. • First and second-year players may be assigned to the National Basketball Developmental League (a de facto minor league). • The minimum rookie salary ($385,277) increases by 3.5 percent. • Rookie contract duration decreases from 3 years to 2 years. • Equal distribution of escrow and luxury tax to all the teams. In the prior agreement, such monies only went to teams below the luxury tax threshold (Fisher, 2005). The increase in the minimum age would prevent high school graduates from being drafted, serving to protect veteran players. Also, the NBA strengthened its connection with the NBDL when it gave teams the right to assign first and second year players, creating a minor league

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system. It also strengthened the hand of players who receive long suspensions, giving them the right to a hearing by an independent arbitrator. In terms of compensation, the new CBA increases the cap pool, but decreases the percentage of player salaries.

THE NATIONAL HOCKEY LEAGUE With only six teams (two in Canada and four in the United States) from the 1940s to 1967, ice hockey served as a niche sport, inaccessible to most areas in the United States. Since expansion started in 1967, its presence has grown considerably. So have its labor issues. In the early 1990s, Robert Goodenow assumed the leadership of the National Hockey League Players’ Association (NHLPA) and sought a more aggressive stand against management than his more malleable predecessor, Alan Eagleson. As a result, relations between the NHLPA and the NHL have become more contentious. The fireworks began during the 1991–1992 season, when the players and owners reached an impasse over free agency and the compensation system for restricted free agents. This led to a 10-day work stoppage between April 1 and April 11, 1992. However, the players and owners reached a new collective bargaining agreement and the season was completed. Labor peace was short-lived. In the fall of 1994, after no agreement was made due to issues of salary control and free agency, the owners locked out the players and the result was the cancellation of almost half the season, plus the All-Star game. In January 12, 1995, the parties came to an agreement, which became the governing CBA for the next 9 years. That CBA expired after the 2004 season, which led to another lockout and the cancellation of the entire 2004–2005 season. The following are details of the 1995 CBA and 1997 amendments, which extended the original agreement to the 2004 date. The terms of the 2005 agreement are discussed later in this chapter. Hockey players were eligible for free agency at age 32 for the first three years of the pror six year-contract and at age 31 for the final three years. Veterans with at least 4 years of NHL experience who completed

their contracts became unrestricted free agents. A shared pool of draft choices compensated teams losing such free agents (Lapointe, 1995). A rookie salary cap of $1.075 million in 2000. This formula covered players for three years if they are signed at age 21 or under. The draft age was 19, up fom 18 in prior years, although 18-year-olds can volunteer their eligibility. Restricted free agents. Players who met the specific age and experience requirements but did not attain unrestricted free-agent status

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fit into this category. Restricted free agents are free to negotiate and sign a player contract with any club, although significant compensation in the form of draft picks by the signing club is required (CBA, Article 10). Arbitration. The prior CBA had a unique salary arbitration system. If an owner disagreed with an arbitrator’s salary determination, that owner could “walk away” from the obligation to pay. The teams can do this up to three times over 2 years, but no more than twice in any 1 year. Players who are affected will become free agents.

The 1995 CBA did not employ any general salary cap structure, except for the rookie cap, and did not allow for a general sharing of revenues, except for national broadcasting and cable contracts. This created significant salary disparity and a dramatic increase in player compensation. During the 1990–1991 season, salaries averaged $271,000. Three years later the figure jumped to $572,161. In the 2000–2001 season, the average salary was $1,434,884, which rose to $1.8 million in the 2003–2004 season (Youngblood, 2004). On first glance, due largely to expansion and licensing agreements, NHL revenue grew from $500 million to $1.93 billion from 1993 to 2004. But a very high percentage of that money has gone to the players, who have seen their compensation grow from $300 million to $1.46 billion during that same period (Heika, 2004).

The 2005 CBA In 2004, the National Hockey League locked out the players, resulting in the cancellation of the season. Only after 301 days of often acrimonious negotiations, the parties ultimately came to a new agreement. Reflecting the uncertain financial health of the league caused by a significant diminution of broadcast and cable revenues, as well as the financial difficulties of certain teams, the new agreement, concluded in July 2005, results in just about all the major concessions demanded by the NHL management. It is too early to draw final conclusions, but the union’s failure to agree to similar terms the prior February, may have been a major tactical error, since it resulted in the league’s decision to cancel the season. This obviously hurt the players (who lost a season’s worth of pay) and it also hurt the league, which has to win back alienated fans, sponsors and advertisers. It will take time for the NHL to regain its foothold, particularly in the United States. The new six-year agreement, possibly the most complex deal in professional sports, is over 600 pages long. In essence, it provides for a leaguewide salary cap, revenue sharing, a revised salary arbitration process, and greater restrictions on entry-level salaries.

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The components of the 2005 agreement are as follows: • Salary Cap—With the cap, the NHL becomes the third of the four major sports leagues to embrace a cap system, something the union vowed it would never do. Salaries will be capped at a level of about $39 million per team, with a likely minimum of $23 million. • League Revenues—Player compensation will be based on 54 percent of league revenues. The formula for determining the percentage took months to establish and remains highly complex. The figure is based on estimated revenue of $1.7 billion to $1.8 billion, down from a reported $2.1 billion in the last season of play. • Maximum player compensation—No player may receive more than 20 percent of a team’s revenue in a single season. This is a way to control spiraling salaries paid by richer teams for star players. As of the 2005-06 season, the highest paid player could make $7.8 million. • Revenue sharing—the top 10 moneymaking clubs will contribute to a fund shared by the bottom 15 teams—ranging from $3 million to $8 million per club. Revenue sharing will come from league-generated revenues, player escrow, and playoff revenues and from the top 10 teams, but teams receiving funds are subject to performance standards. • Salary arbitration—under the old CBA, teams had no control over which players could file for arbitration and arbitrators looked to the compensation of other players of similar quality to make a determination, which could be any amount between the parties’ respective requests. The new CBA states that a player is generally eligible for salary arbitration after four years of service. It requires an arbitrator to choose between the club’s offer and the player’s request. Also, teams may seek arbitration for an unsigned player in an attempt to roll back the salary of a player whose production has slipped. As in the prior agreement, a team may “walk away” from an arbitration ruling, rendering the player a free agent. The ability to reduce the salary of a perceived underachieving player may be a real bonus for the owners. • Entry-level salaries—though the prior CBA imposed a cap on rookie salaries, bonuses paid to top rookies circumvented the limitations and according to the owners, resulted in increases in salaries to veterans through salary arbitration. The new agreement caps salaries at $850,000 (below the $1.075 million

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of the prior deal) and ties bonus money to team rather than to individual success. So, for example, bonuses could be awarded if the player’s team plays for the Stanley Cup. Free agency—under the old CBA, players over 31 or with ten years experience qualified for “Group 5” unrestricted free agency. The new agreement reduces the age requirement to 27, phased in over the life of the new CBA. Specifically, in 2006, it drops from 31 to 29, or younger players with eight years of NHL experience (with the 2004-05 wiped-out season counting in service time); for 2007, unrestricted free agency is age 28 or seven years’ experience; 2008 and onwards it is age 27 or seven years of experience. Rollback of salaries—current player salaries will be decreased by 24 percent. This marks the first time a players’ union has agreed to an outright diminution of salary. Escrow account — players will be required to deposit a percentage of their salaries into an escrow account at the start of the season, where it remains until the league calculates revenues for that year. If league-wide salaries exceed 54 percent of revenues, the players will be obliged to return an undetermined portion of their incomes from the escrow account. The amount will be determined over the course of the year. Minimum salary—raised to $450,000 from $185,000, increasing to $500,000 in the sixth year of the deal. A weighted NHL draft lottery in favor of poorer performing teams—Every team will have at least one chance to land the top pick, but the weakest teams will have three from a drum consisting of 48 ping-pong balls. Limited team buyout rights—Teams may buy players out of their contracts at two thirds of their value at no cost towards the salary cap, but only within 10 days after the CBA officially took effect. Drug testing—The agreement requires a minimum of two drug tests a year with no advance warning. A player will earn a 20-game suspension for a first-time offense, a 60-game ban for a second and a permanent suspension from the NHL after a third violation. Drug testing will be held between January 15 and the end of the regular season. The players may reopen the agreement after four years.

And, in a benefit to veterans, players with 10 years of service or 600 games can request a single hotel room while on the road. (NHL Agreement in Principal, 2005)

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Despite the significant sacrifices made by the players, the agreement may benefit the players in the long run, provided that league-wide revenues increase. Such an increase will augment the money available under the salary cap and the league revenue standards.

ARENA FOOTBALL AND THE WNBA Because of their recent vintage and smaller cash flow, the Arena Football League (AFL) and the Women’s National Basketball Association (WNBA) utilize a salary cap structure more universally, but also employ some novel methods to enhance player compensation. The AFL’s CBA, in place through the 2010 season, is the longest nonextended contract in professional sports. This CBA is due in part to the formation of a players’ association in 2002 and the benefits of a television contract with NBC, a co-owner of the league. Details of this agreement include: • Following the 2003 season, AFL players became free agents automatically if they are not under contract. • Each side can terminate the agreement after the 2006 season as long as the terminating party gives notice to the other side by the end of the 2005 season. • Teams can dress 21 players for each game. • There is a “hard” salary cap of $1,643,000 per team, a figure that increased a minimum of 2% in 2004 and 3% in 2005. This is a considerable increase from the salary cap of $350,000 in 2000. • The players receive long-term equity—a share of future expansion fees and a percentage of the increase in franchise values, similar to the NBC agreement. As part of this CBA, the 16-team league was scheduled to expand by at least two teams in the 2004 season, with franchises in Nashville and New Orleans (Layden, 2003). In the spring of 2003, the players of the Women’s National Basketball Association agreed to a new 5-year collective bargaining agreement. Among key terms of the pact: • Veteran minimum salaries increased from $40,000 to $42,000. Rookie minimum salaries remain at $30,000. • A hard salary cap of $622,000 exists for each club in the 14-team league. • Players who entered their seventh year in the league in the summer of 2003 (which duplicated the number of years the

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WNBA has existed) received restricted free agent rights. In 2004, seventh-year players had unrestricted free agency rights, and sixth-year players obtained restricted free agency rights. In 2005, 6-year players became unrestricted free agents and restrictive free agency extended to fifth-year players. Two players per team can be designated “core players.” If that happens, those players cannot be unrestricted free agents, but the team has to pay the maximum salary under the agreement. If a restricted free agent receives an offer she wants to take from a new team , details of the contract proposal must be made to the player’s old team, which has 10 days to match the offer. Before the agreement, WNBA players had no free agency rights. Marketing restrictions for players were lessened significantly. Under the previous CBA, players were prohibited from signing individual endorsem*nt deals with companies competing against WNBA league and team sponsors in 18 product categories. That has been limited to six product categories. The agreement can be reduced to 4 years if certain season ticket targets are met (Fisher, 2003).

This CBA came a few months after the NBA Board of Governors, which retains final authority over the WNBA, voted to change the league’s equity structure. The board ended the single-entity structure and allowed individual owners to buy teams and assume the financial risk.

MAJOR LEAGUE SOCCER In late 2004, Major League Soccer and the Major League Soccer Players’ Association concluded their first collective bargaining agreement. This CBA resulted from years of unsuccessful antitrust litigation, in which the courts ruled that MLS’s attempts to impose salary caps and other cost controls were not illegal. After the case ended, the players formed a union and negotiations began. It took 18 months of negotiations to consummate this CBA. Among the key terms of the pact : • It runs 5 years, through the conclusion of the 2009 season. • It raises minimum players’ salaries from $24,000 in 2004 to $28,000 in 2005 and 2006, $30,000 in 2007, $33,000 in 2008, and $34,000 in 2009. • It includes a 5-year group license revenue-sharing agreement, which will increase the amount paid by MLS to use players’ images by over 300%. • The CBA does not include a team salary cap, although the league has operated under a cap of about $1.7 million per team.

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MISCELLANEOUS LABOR ISSUES Player Drafts—Age Restrictions The National Football League, Major League Baseball, the National Hockey League, and the National Basketball Association take somewhat varying approaches regarding the minimum age of player eligibility for the leagues’ respective entry drafts. Of the four major leagues, the NFL’s policy is the most controversial. Consisting of seven rounds, it requires a player to be three seasons removed from the graduation of his high school class. So if his class graduated in 2002, eligibility begins at the 2005 draft. (Note that the requirement does not mandate graduation from high school.) In 2004, Maurice Clarett, a running back who played 1 year at Ohio State, challenged this restriction as a violation of antitrust laws. A lower federal court agreed and ordered him eligible for the NFL draft, concluding that because the collective bargaining agreement between the NFL and the NFLPA did not specify the age restriction, it was not within the scope of the nonstatutory labor exemption. The U.S. Court of Appeals for the Second Circuit reversed that ruling, concluding that the age restriction was proper and within the scope of the antitrust law exemption, because it was agreed to by the union and the management, even though its specifics were not included in the current collective bargaining agreement (Clarett v. NFL, 2004). This case received considerable press and public attention, much of it misdirected. The issue was not whether it was “fair” or “just” to ban Clarett, but rather whether it was legal under the meaning of the antitrust laws. In particular, the trial judge’s decision received major press coverage—even making the front page of the New York Times. However, the appeals court’s opinion—a much better reasoned and more legally consistent one—received much less play (Hack, 2004; Zinser, 2004). In Major League Baseball, a player is eligible for the June draft, which consists of 50 rounds, once his high school class has graduated. If the player doesn’t sign with the team that drafted him and goes on to enroll in college, he cannot be drafted again until after his junior year. The baseball draft applies to players in the United States, Canada, and Puerto Rico, and, more recently, to the Dominican Republic, Venezuela, and Panama. In those countries, players can be signed at the age of 16 (Major League Baseball Rule 3(a)(1)(B)). At this time, all 30 Major League Baseball clubs will draft in the order of finish, worst to first. Any team can sign players from countries not

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covered by the draft. However, there is a 1-year suspension for any player who fabricates his name, age, or nationality on documents such as U.S. entrance visas. In the NBA, the draft is just two rounds. One notable difference in the NBA draft is that the NCAA allows college athletes to apply for early entry into the NBA draft by giving notice 45 days before the draft date without automatically forfeiting their remaining college eligibility. The rule permits athletes to declare for early entry and then announce, 30 days after the NBA draft, whether or not they intend to return to collegiate competition (NBA CBA, Article X, sec. 5). The NBA rule permits players who choose not to attend college to be eligible. In recent years, players like Carmelo Anthony, Sebastian Telfair, and LeBron James either opted to go pro after high school or left college early to do so (www.NBA.com/draft2004/board_html; http://sportsstats.com/jazzj/). In the NHL, to be selected in the June draft, players must turn 18 by the following September 15. In the NBA, a player in the United States is eligible for the June draft once his high school class has graduated. Players from outside the United States must be 18 to be eligible for the draft.

States’ Nonresident Taxes on Athletes It seems unusual to end this labor relations chapter with a subject as complex and arcane as taxes, but, given the substantial incomes of many professional athletes, cash-strapped states and localities have drafted ingenious laws to extract revenues from that income. Such a scheme serves two purposes: first, to increase revenues, and second, to do so without having to impose new taxes on their citizens. A number of states and cities tax athletes who are nonresidents, but who play particular matches in given locations. In the early 1990s, Philadelphia was the first city to actively collect taxes on income earned by nonresident professional athletes within its city limits. Many other cities and states have since followed Philadelphia’s lead by taxing nonresident professional athletes in both individual and team sports. New York State takes an aggressive role in collecting taxes from nonresident athletes. Home to seven franchises in the four major sports leagues, this large number of professional teams means that a number of nonresident athletes compete in the state. This method of revenue raising serves New York well, especially given New York’s high personal income tax rate (New York Tax Law, Section 631(c)).

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Summary of Key Information Average player salaries (2004–2005) Major League Baseball: $2.31 million NBA: $4.018 million NFL: $1.25 million NHL: $1.8 million Salary cap Major League Baseball: No cap. NBA: A “soft cap” calculated annually based on an amount rising from 48% to 51% of “basketball-related league income” over the life of the agreement. Amount: $49.5 million per team (2005), and adding on exceptions, team average salary amount rises $59 million. Also, individual player salary caps based on years of experience. NFL: A “hard cap” is set at 65.5% of “defined gross league revenues,” or $85.5 million (2005). Teams can exceed the cap, but have to allocate a percentage of certain contracts to future years (in the form of signing bonuses or back-loaded contracts) to do it. NHL: A cap based on 54% of league revenues, or $39 million per team (2005). Average team payroll (2004) Major League Baseball: $68.1 million (25 players). NBA: $59 million (12 players). NFL: $71.8 million (53 players). NHL: $41.6 million (23 players) Player share of revenue (2004) Major League Baseball: 63% NBA: 58% NFL: 64% Contracts Major League Baseball: Guaranteed. NBA: Guaranteed. NFL: Not guaranteed. Teams can cut players at any time with no future obligations except signing bonuses, which for salary cap purposes are pro-rated over the life of the contract even if they’re paid up front. NHL: Contracts are fully guaranteed and can be bought out at two-thirds of their value. Free agency Major League Baseball: Players with six or more seasons are unrestricted free agents at the end of their contracts. continued

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Summary of Key Information continued NBA: Unrestricted free agency applies in most situations after 3 years, subject to a right to match option by the player’s original team. NFL: Restricted free agency after three seasons and unrestricted after four. Teams designate transition players and franchise players, but must pay them from a stipulated standard. NHL: In 2005, players become unrestricted free agents at age 31. That requirement drops to age 29 in 2006, 28 in 2007, and 27 in 2008. Arbitration Major League Baseball: Players with at least three seasons and less than six are eligible. Both parties must agree for arbitration to go ahead. NBA: None. NFL: None. NHL: Players eligible after four years of service. Note. Kulfan (2004); NHL Agreement in Principal (2005).

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INFORMATION CHECK When covering labor issues, a journalist should determine: 1. Does a collective bargaining agreement exist? If so, attempt to get a copy. Some are available on the Internet, but notably, the Major League Baseball agreement is difficult to obtain. 2. If so, what are the relevant provisions at issue? 3. If the CBA has expired and labor negotiations occur, what are the main issues? 4. If either side tosses financial figures, try to get independent expert verification as to the accuracy of those figures. Because professional leagues and teams are not public corporations, they are not subject to independent auditing. 5. Why was a strike or a lockout called at a particular point in time? (Note that parties may continue to work after a contract expires.) 6. If an employer mandates an impasse, why did it make that decision? Ask experts to assess the likelihood of a labor law violation. 7. When a settlement occurs, ask several experts to assess its merits and ask each for a prediction as to whether the goals of the parties were met. 8. What kind of salary cap system occurs? Obtain a basic knowledge of how it works. 9. What kind of arbitration system applies and what is its relative importance in the settlement? 10.If divisions occur within the ownership or union ranks, what are the reasons for those divisions and the possible ramifications?

REFERENCES Allen, B.-M. (2002). Embedded contract unionism in play—Examining the intersection of individual and collective contracting in the National Basketball Association. Connecticut Law Review, 35, 1. Aubut, M. (2004). When negotiations fail: An analysis of salary arbitration and salary cap systems. Sports Law Journal, 10, 189. Bouchette, E. (2002, March 30). The NFL: There’s no guarantees, except contract money. Pittsburgh Post-Gazette, p. ???. Bradley, R. (2004). Labor pains nothing new to NBA. Retrieved May 1, 2004, from http://members.aol.com/apbrhoops/labor.html Clarett v. NFL, 369 F.3d 124 (2d Cir. 2004). Coon, L. (n.d.). NBA salary cap FAQ. Retrieved May 5, 2004, from http://members.cox.net/lmcoon/salarycap.htm Cozzillio, M. J., & Levinstein, M. S. (1998). Sports law—Cases and materials (pp. 663, 776). Durham, NC: Carolina Academic Press.

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Cunningham, M. (2004, February 29). Players pay price for booming NFL; Union members lag behind their pro counterparts. Sun-Sentinel, p. 1C. Down, F. (1981, May 30). Man in the news: Marvin Miller. United Press International, Sports Section. Dupont, K. (2004, February 13). Report: NHL lost $273 million. Boston Globe, sports sec., p. 4. Dworkin, J. (1981). Owners versus players: Baseball and collective bargaining. Boston: Auburn House. Enlund, T. (2000, October 29). Timberwolves got caught by paper trail. Milwaukee Journal-Sentinel, p. 03C. Federal Baseball Club v. National League of Professional Baseball Clubs, 259 US 200 (1922). Fennell, T. (1994, October 3). Baseball’s troubled history, edited by Tom Fennell. Maclean’s, p. 8. Fisher, E. (2003, April 19). With deal, WNBA averts shutdown. Washington Times, p. C01. Flood v. Kuhn, 407 US 258 (1972). Fisher, E. (2005, June 22). NBA, union reach accord. Washington Times, p. C1. Fratello, Grizzlies meet about vacancy. (2004, November 28). Washington Post, p. E125. Gaughan, M. (2003, February 18). Capology 2003 (aka) money talks; Bills have about $10 million to spend on free agents. Buffalo News, p. C1. Hack, D. (2004, February 6). Judge order N.F.L. to permit young athletes to enter draft. New York Times, p. A1. Heika, M. (2004, February 7). Stopped cold; High salaries, low scoring and dismal ratings have mucked it all up for the NHL. Dallas Morning News, p. 1C. In the Matter of National Basketball Players Association and National Basketball Association (Lockout Arbitration, Opinion and Award). (1998). (Feerick, Arb.). Kansas City Royal Baseball Corp. v. MLBPA, 532 F.2d 615 (8th Cir. 1976). King, P. (2004, March 15). Now or never—Redskins will feel impact of six big-money signings in 2006. Sports Illustrated, p. 52. Kulfan, T. (2004, October 13). Comparing the leagues’ financial arrangements. Detroit News, p. 6G. Lapointe, J. (1995, January 12). Pact reached for salvaging hockey season. New York Times, p. A1. Layden, T. (2003, March 10). Through the roof? Sports Illustrated, p. 46. Mackey v. NFL, 543 F.2d 606 (8th Cir. 1976). MacNeil, R., & Lehrer, J. (1993, September 6). Strike, you’re out?; Weighing the benefits. 1993 Broadcast/PBS. Matter of Arbitration Between MLBPA and the 26 Major League Clubs, Grievance No. 86-2. (1987). Michaelis, V. (1998, October 20). Ruling shocks, disturbs; players admit owners now have the hammer. Denver Post, p. D05. Miller, I. (2003, November 12). 49ers are in bind for 2004. San Francisco Chronicle, p. C1. Moreno, K. (1998, March 9). On my mind: What’s worrying top executives. Forbes, p. 18. NBA v. Williams, 45 F. 3d 684 (2d Cir. 1995).

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NBPA timeline. (n.d.). Retrieved May 1, 2004, from http://www.nbpa.com/aboutus/ history.html Powell v. NFL, 930 F.2d 1293, 1303 (8th Cir. 1989), cert. denied, 498 U.S. 1040 (1991). Quirk, J., & Fort, R. D. (1997). Pay dirt: The business of professional team sports. Princeton, NJ: Princeton University Press. NHL agreement in principle; Revenue-sharing cornerstone of deal. (2005, July , 20). Toronto Star, p. C04. Robertson v. NBA, 389 F. Supp. 867 (SDNY, 1970). Ryan, B. (1991, June 23). Miller labored to make major leagues a better place to play. Boston Globe, p. 51. Seifert, K. (2004, July 25). Vikings insider; Mad hatters; Vikings’ innovative salary cap strategy has put them in great position for future. Minneapolis Star-Tribune, p. 1C. Selig, B. (1995, April 9). Baseball hired temporary replacements. New York Times, sec. 4, p. 14 [letter to the editor]. Seymour, H. (1960). Baseball: The early years (pp. 111, 150, 232). New York: Oxford University Press. Sheinin, D. (2005, February 4). Baseball’s financial reins bringing Yankees to heel. Washington Post, p. D01. Spending now will cost Snyder later. (2004, March 22). The Sporting News, p. 56. Strachan, A. (2005, March 5). NHL isn’t a clunker. Toronto Sun, p. 58. Teams get higher salary cap. (1992, February 10). New York Times, p. C4. Thomas, J. (2004, March 7). Higher cap brings spending to a head. St. Louis Post-Dispatch, p. D12. Toolson v. N.Y. Yankees, 1953, 346 US 356 (1953). Topkin, M. (2002, August 31). Labor deal a win-win situation for Rays. St. Petersburg Times (Florida), p. 1A. Weiler, P. C., & Roberts, G. R. (2004). Sports and the law (3rd ed.). Youngblood, K. (2004, January 20). Business of the NHL; Bucks beget blame; NHL salaries have risen fast, as the rate of finger-pointing about the cause. (Minneapolis) Star Tribune, p. 1C. Zinser, L. (2004, May 25). Federal appeals court denies Clarett’s bid for the NFL. New York Times, p. D2.

CHAPTER

7 Sports Agents

Agents are among the most misunderstood stakeholders in the sports business. The media often portray them as high-powered unethical deal makers who negotiate multimillion-dollar contracts for their clients and take large amounts of athletes’ money to live a life almost as glamorous as those they represent. Good journalists should be wary of this simplistic characterization. Although unscrupulous agents exist, it is unfair and untrue to generalize all agents this way. Most agents are not wealthy, flamboyant, or criminally suspect individuals. In fact, many struggle and have to earn a living by combining agency with other work. Agents have a number of important roles, depending on the particular athlete, the sport, and the nature of his or her representation. Some agents only negotiate player contracts; others specialize in endorsem*nt deals, whereas still others manage the athlete’s finances. Agents also serve as confidants, advisors, friends, and babysitters of their athletes. Often an agent, especially one representing a young and inexperienced athlete, serves as de facto guardian of the athlete’s interests. Agents must speak to the press when their athlete’s conduct results in 158

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criminal charges. They may have to find legal representation in cases of paternity suits. They may devote hours to speaking with the athlete about his or her confidential personal issues. The diverse roles of a sports agent make the position difficult to regulate, and the lack of uniform regulation and standards has resulted in a number of agents who lack the skills to do the job effectively and, even more dangerously, those few who commit criminal acts against the athletes they represent. These individuals generate considerable press attention, reflecting negatively on all sports agents. Even with haphazard regulation, many agents do their jobs well and are respected by athletes, their unions, and the team owners and general managers on the other side of the negotiating table.

THE BUSINESS The fictional movie character Jerry Maguire creates an impression of a sports agent as glamorous and aggressive. But most agents do not live a life of riches and glamour. Only a select few land the big athlete and the lucrative contract. Many more have to struggle to stay in business. Often their agency will be a side business of their law or accounting practices. Baltimore-based agent Tony Agnone gives a word of advice for anyone interested in entering the sports agency business: “Don’t.” He adds: “I try to explain to them it’s not the best thing in the world. It’s a very competitive business. I try to convince them there are other things to do besides being an agent.… It’s a situation that’s very competitive, very time consuming. It’s got to be done very meticulously, and there is some involvement of luck. If the planets are all aligned, it works” (Cohn, 2004). Many enter the business with dreams of glory. But according to figures provided by the NFL Players’ Association (NFLPA), which regulates anyone who represents an NFL player in contract negotiations with the league, of the approximately 1,200 NFLPA-certified agents, almost 70% do not represent even one active player (Shropshire & Davis, 2003). Ten percent of the agents represent 75% of the players (Cohn, 2004). According to Shropshire, in the NBA, there are 350 agents for about 350 active players. However, less than one-third of those agents represent players. In Major League Baseball there are about 325 agents representing 1,200 players, and in the NHL there are about 190 representing 800 active players. As discussed later in the chapter, one must be registered with the appropriate players’ association to represent active players (Shropshire & Davis, 2004). No matter what kind of sport is involved, one common thread permeates this business: difficulty in landing and keeping talent. Some agents expend considerable costs in travel and great amounts of time hoping to

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sign talent. With the growing internationalization of sports, many find basketball players playing in Europe or Canada. Qualifications, or lack thereof, have created more headaches. Although some of the players’ associations, such as the NFLPA, require agents to pass a test, no particular educational standards exist. Although many agents possess law or accountancy degrees, others do not. Even for those with professional licenses, a sports agency has particular rules and issues not found in a traditional law or accounting practice. Knowledge of the salary-cap structure in the NFL and NBA and various arbitration rules among each of the major leagues are two important examples. Often the rules are technical (as shown in the preceding chapter), so even a competent and responsible person may forget or be unaware. In 2004, David Joseph, the agent for then San Francisco 49ers wide receiver Terrell Owens, admitted missing the NFL’s deadline to file the necessary paperwork for free agency status. Although the player ultimately signed with the team of his choice, the Philadelphia Eagles, the result occurred through a player trade. Agents for two other elite NFL players made similar mistakes (Maske & Shapiro, 2004). Ethical issues permeate the business. First, agents compete against other agents for clients. Although traditional legal rules forbid “tortuous interference with contract”—one person attempting to get another to break a contract—in practice it is difficult to apply this prohibition. Athletes often sign with one agent then change their mind and sign with another. If these terminations—whether by the athlete alone or with the encouragement of another agent—occur before the player signs a professional contract, there is little the first agent can do. If he or she sues the former client for breach of contract, two major problems exist: (a) The damages collected would be minimal or nonexistent because that aggrieved agent did not negotiate a contract for the player, and (b) the act would have serious business consequences. Other athletes could very well shy away from this agent, hurting the business. So in many cases, the former agent has to consider this a cost of doing business. Rumors of agent payoffs to prospective clients abound, despite the prohibition of this practice under state and, more recently, federal law. Agents may do this via several techniques: outright payoffs, giving “loans” to athletes with repayment after a contract is signed, giving payouts to coaches to “deliver” clients, and the use of third parties—known as “runners” to dispense money and gifts to players. Examples of payoffs to athletes involved a $6,000 shopping spree at a Foot Locker store in 1994 by a number of Florida State University football players, or an alleged payment of $54,000 to a University of Iowa running back (Shropshire & Davis, 2003).

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Despite attempts to regulate their conduct, cases of egregious behavior occur and make headlines. In the 1980s, agents Norby Walters and Lloyd Bloom represented a number of NFL players. In 1988, a federal grand jury indicted the pair, accusing them of using money, gifts, and threats of violence to obtain representation contracts with college athletes, which violated NCAA rules. One year earlier, a federal district court in New York took the unusual step of refusing to enforce a contract made by the agents and an Auburn University player, citing “overriding policy concerns” (Walters v. Fullwood, 1987). In a subsequent criminal prosecution, Walters and Bloom were convicted for mail fraud and racketeering. Walters received a jail term and had to pay restitution of almost $300,000. However, an appeals court overturned the conviction on the grounds that the trial judge failed to properly instruct the jury and other procedural grounds (U.S. v. Walters, 1993). More recently, in 2002, a Florida jury convicted William “Tank” Black of defrauding six NFL players out of $8.5 million (Pound, Pasternak, Madden, & Hook, 2002). In November 2004, former NBA star Scottie Pippen won an $11.8 million judgment against a prominent Chicago financial adviser who was entrusted with $17.5 million of his money and proceeded to lose $7 million of it in questionable investments (Roeder, 2004). “It’s a situation that goes on every day,” Pippen was quoted in the Chicago Tribune. “There’s always a crook out there” (Isaacson, 2004). The article quoted Ron Shapiro, an agent and former securities commissioner for the state of Maryland, as saying “A significant number of professional athletes are de facto bankrupt [because of poor investments], meaning their debts outstrip their assets.” Former Los Angeles Laker star Kareem Abdul-Jabbar lost close to $5 million on failed hotel and restaurant ventures, as well as investments in Arabian horses, oil wells, and gold coins in the 1980s. He, like other athletes, gave their agents a power of attorney, meaning a legal right to invest the athlete’s money in whatever manner the agent wanted. Presently, the NBA and NFL, in conjunction with their respective players associations, include financial planning advice as part of their mandatory rookie orientation (Grossi, 2003).

MEGA-AGENCIES Although most agents either work alone or as part of a small group, some agencies have been acquired by larger firms or have expanded to include businesses such as sponsorships and presentations. If the agency has a strong stable of clients, the talent can be marketed into other areas of the sports business, such as event production and marketing, and licensing the intellectual property of their clients.

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The leading example of a mega-agency is IMG. Founded by Mark McCormack in the early 1960s, the firm grew from a small operation representing the interests of a few individual golfers to a behemoth. It has represented some of the top tennis and golf stars (http://www.imgworld.com/message/default.sps?itype=4440& icustompageid=9195). Just as important, IMG owns and operates professional tennis tournaments showcasing their talent pool. By owning these tournaments, IMG earns more money than just commissions from their athletes; it keeps the revenues from the tournament itself (Woo & Reifman, 2002; http://www.forbes.com/free _forbes/2002/1125/201.html). More controversially, IMG operates “training academies” for young athletes. In 1987, it bought the Nick Bollettieri Tennis Academy (considered one of the premier training centers for talented professionals-to-be) and expanded it to include more sports and locations. IMG is not the only mega-agency firm. SFX and Octagon also provide more services than contract negotiation, including marketing and endorsem*nts, team relations, public relations, and financial-planning services. Their Web site includes event management, TV rights sales, and new media planning (http://www.Octagon.com). SFX, in particular, grew from acquisitions of smaller agencies. In recent years, some large firms acquired sports agencies for large sums. From 1998 to 2000, broadcasting company Clear Channel bought several agencies and began representing 300 elite athletes, including Michael Jordan, Roger Clemens, and Jerry Rice. Agent Arn Tellem, whose client list includes Tracy McGrady, Reggie Miller, Jason Giambi, and Hideki Matsui, sold his firm to to SFX in 1999 for about $25 million (since bought by Clear Channel Communications). Assante, a Canadian financial services firm, paid an astronomical $125 million for Steinberg, Moorad & Dunn, headed by Leigh Steinberg. A mixed record of success occurred. Individual agents, often used to working independently and having achieved notoriety by doing things their way, have not always fit into a corporate culture. In 2005, Tellem resigned and exercised an option to buy back his agency, and take his clients (SFX Sports Chief to buy back L.A. Business, 2005).

DUTIES OF AN AGENT Agency law governs the basic responsibilities of any sports agent (sometimes called an athlete agent). Simply put, an agent represents another person, known as a principal, and negotiates on behalf of that principal (in our case, an athlete or a coach) in order to secure a con-

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tract. Agents often possess considerable power (known as “authority”) but remain a representative. An agent cannot overrule the wishes of the principal because the agent can only act within the authority given to him or her by the principal. The nature and limitations of an agent’s authority is illustrated by the circ*mstances surrounding the incentive-laden contract signed by running back Ricky Williams after he was drafted by the New Orleans Saints in 1999 (Shropshire & Davis, 2003). The New Orleans Saints traded to get a high draft pick so that they could pick Williams. That fact gave the player considerable leverage in the negotiations. But the ultimate contract seemed odd. Williams’s contract included an $8.84 million signing bonus and base salaries that ranged from $175,000 to $400,000 over the course of the deal. Williams could earn another $500,000 each year if he reached at least 10 of 26 goals worth $50,000 apiece (Mihoces, 2000). Many criticized the deal, questioning agent Leland Hardy’s judgment and competence, and pointed to his lack of experience in negotiating football contracts (Burwell, 1999). Ultimately, Williams fired Hardy and sought a trade to the Miami Dolphins because of his unhappiness in New Orleans. Upon arriving in Miami, his contract was reworked to a more traditional one, with fewer incentives and more up-front money. What did not get proper attention was the fact that the idea for this incentive-laden agreement did not come from Hardy, but from Williams. Williams reportedly told Hardy to reject a $25.6 million offer over 7 years and to go with the incentivized contract. Williams later admitted: “I’m first and last when it comes to my decisions … I don’t work for my agent. My agent works for me. This was my decision and my decision alone” (Shropshire & Davis, 2003). Williams’s statement perfectly summarizes the agent–principal relationship. The agent must follow the instructions of the principal, even if it may be against the agent’s better judgment. However, the agent has some important obligations to the principal, known as fiduciary duties. A fiduciary possesses a very high degree of loyalty to the principal and cannot engage in conduct considered a conflict of interest or act in bad faith. Based on this definition, an agent cannot do the following: (a) take payments from third parties to secure an agreement; (b) direct the principal to sign a contract with an entity owned or partly owned by the agent or a relative or close friend of that agent without disclosure of that fact; or (c) fail to reveal relevant information to the principal. The same fiduciary duties occur when an agent (or financial advisor) has the power to invest the athlete’s money. The agent must invest it as a “reasonably prudent investor”

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would and must keep the athlete informed of the nature of the investments. Under no circ*mstance can the athlete’s money be used for personal reasons. As discussed later, the NFL Players’ Association has drafted separate rules governing financial advisors. A notorious example of a breach of fiduciary duty involved an agent named Jerry Argovitz, who represented Billy Sims, an All-Pro with the Detroit Lions. In 1983, Sims sought a new contract with the Lions and Argovitz tried to leverage more money because the Houston franchise of the new United States Football League (USFL) also sought Sims’s services. Argovitz and the Lions were making relative progress in their negotiations. However, Argovitz gave the impression that the Lions were “dragging their feet” and brought Sims to Houston. The USFL team made an offer, which was accepted by Sims. However, Sims did not know that Argovitz owned 29% of the Houston team or that Argovitz never contacted the Lions with that offer so they could attempt to match it. He even asked Sims to sign a waiver stating that Sims could not sue Argovitz for breach of fiduciary duty (Detroit Lions & Sims v. Argovitz, 1984). Not surprisingly, the court ruled that Argovitz breached his fiduciary duty.

THE RISE OF AGENTS Although sports agents date from the 1920s, their numbers and use were limited. Most contract negotiations occurred directly between the athlete and the owner or general manager of a team. In the case of individual sports, the prohibition of professionals from the elite tournaments effectively negated the need for representation. A few highly regarded athletes, such as Babe Ruth, negotiated endorsem*nt agreements. A famous example occurred when the makers of the Baby Ruth chocolate bar signed New York Yankees slugger Babe Ruth to an endorsem*nt contract. In the few cases where athletes sought agent representation, management was often contemptuous. An often recited story involved the late Green Bay Packers coach Vince Lombardi and a player named Jim Ringo. Lombardi, seeing a gentleman with Ringo, asked who he was. Ringo replied that the man was to help in the contract negotiations for the upcoming season. Lombardi then excused himself, stepped into an adjoining room, and made a telephone call. When he returned, Lombardi informed Ringo that he was negotiating with the wrong team because the Packers coach had just traded him to the Philadelphia Eagles (Shropshire & Davis, 2003). The then-existing salary structure presented a fundamental problem. Compressed salaries existed in all of the major league sports be-

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cause of “reserve” clauses that prohibited outright or at best severely restricted free agency. In the 1960s and 1970s, the emergence of rival leagues such as the American Basketball Association (ABA), the World Hockey Association (WHA), and the American Football League (AFL) gave players more negotiating opportunities and increased their need for agent representation. To obtain credibility, these new leagues needed established stars and offered talented players more lucrative contracts than what they had. “Negotiations” in a true sense did occur, and agents represented these players. In time, the rival leagues either folded or merged with the more venerable league. Fortunately for the players, this coincided with the end of the reserve system and the rise of free agency. For the first time, bona fide arm’s-length negotiations, often with several teams simultaneously, increased demand for agents. The creation of salary arbitration systems for non-free agent athletes created yet another reason to obtain agent representation. Off-field activities increased the demand for agents and increased the need for sophistication and expertise. The rise of endorsem*nt opportunities required contract negotiations with nonsports entities, many of which involved individual professional athletes such as Arnold Palmer. The greater incomes derived from player salaries and possibly endorsem*nts necessitated money management skills, something that many athletes lacked. Finally, the higher income brackets of more and more athletes necessitated the need for effective tax planning, and athletes used the services of agents or financial planners to limit the tax bite of federal and state tax laws. As a result, the higher salaries earned by players translated to more income for agents. Agents then (and now) normally take a percentage of the amount negotiated, so the higher the contract, the greater the reward for the agent’s work.

AGENT RESPONSIBILITIES Securing Talent and Contracting With Teams and Endorsers The first (and possibly most difficult) task for the agent is to secure talent. A newly minted agent often must pound the pavement, speaking, cajoling, and charming a potential client. Unethical agents have offered money and goods to secure a representation contract for a talented athlete. Often, the fiercest competition surrounds collegiate or even high school athletes entering the draft of the respective league. In too

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many cases (although not all), the athlete being solicited exhibits little experience in making a choice. His or her decision in choosing one particular agent over others may be based on many variables, such as personality and opinions of family members (who can have a major say). Without belittling the importance of these reasons, the major consideration in choosing an agent should be experience in contract negotiations and financial planning—in other words, a more hardheaded business decision. But in many cases, a hotshot young athlete pampered since junior high school has developed a large ego and seeks a person who accedes to his or her every whim. Of course, more sophisticated and mature athletes (and their families) exist, especially among veteran players, who, by experience and perspective, have learned not to choose an agent just on personality and salesmanship. A successful agent develops a reputation based on the satisfaction of clients. Negotiating a lucrative contract for a first-round draft pick in the NFL or a free agent in baseball may bring many more clients. But a lack of perceived success renders the opposite effect, as unhappy clients switch agents, often for subjective reasons, unfair reasons, or no reason at all. In May 2005, NBA superstar LeBron James fired his agents, Aaron and Eric Goodwin, after they negotiated $135 million in endorsem*nt agreements with Nike, Upper Deck, Sprite and others, in addition to the $18.7 million he was guaranteed in his first four seasons under the collective-bargaining agreement. Instead, James decided to hire a former high school teammate to handle his affairs. (Banks, 2005). To determine the “success” of an agent, journalists should determine both how many new clients he or she signed, and how many he or she retained. An agent who signed three NFL first-round draft picks but lost five established NFL players in a given year may raise questions as to his success with veteran players. Reporters do not do enough of this kind of analysis. After securing and retaining talent, the agent’s goal remains signing the athlete to a contract. Without a player’s contract, the agreement made between the agent and the athlete becomes practically meaningless. The athlete has no obligation to pay the agent because agent fees are based on a percentage of the contract consummated between the athlete and the team or endorsem*nt company. Regarding time and commitment, an inverse equation exists between the level of talent and the level of work. A top-caliber player likely to be chosen or a top free agent generates a lucrative contract, with a good payday for the agent. If it is a long-term deal, the agent receives the percentage for as long as the athlete plays under the contract. However, if an agent represents a journeyman player, more

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legwork occurs with less guarantee of profit. The agent may have to spend more out-of-pocket money to take players to team tryouts or to shop the player to teams in other countries. The agent may spend thousands of dollars to secure a contract to no avail if the athlete is not picked and signed by a team. Of course, the more money paid to the athlete, the more the agent receives in compensation. This is particularly important because most of the players’ unions (except the Major League Baseball Players’ Association) cap the fees agents may earn. In the NBA, the cap is 4% of the amount paid to the athlete. In the NFL, it is 3%. Because of these limits, the real money is made on endorsem*nts and financial management. There is no limit on the percentages an agent may earn from endorsem*nt deals (which usually is 15%, but can be as high as 20% of the contract amount).

Understanding NCAA Rules An agent who seeks student-athletes must understand the restrictions drafted by the NCAA Division I manual. As described in chapter 3, the NCAA imposes a system of amateurism that prohibits compensation for student-athletes based on their athletic skills (NCAA Division I Bylaws, sec. 12.1.1). The rules also prohibit the student-athlete from signing any contract with an agent or receiving payments from an agent (NCAA Division I Bylaws, secs. 12.1.1-(a), 12.1.1-(c)). If an agent violates these rules, the student-athlete loses eligibility and scholarship support and the institution can be subject to sanctions. However, before state and federal laws were enacted, the agent often went unpunished because the NCAA Bylaws do not apply to agents.

Understanding the Appropriate Sport’s Collective Bargaining Agreement Often agents work in only one sport, rather than many, for financial and practical reasons. Working in only one sport requires that the agent register in the players’ association in that sport and permits development of an expertise in the issues unique in that sport. As noted earlier, an agent for 49ers wide receiver Terell Owens forgot to file papers declaring his player eligible for NFL free agency by the proper date. That omission cost his player millions of dollars in signing bonuses. Ultimately, a trade and a renegotiation were arranged (Maske & Shapiro, 2004).

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Understanding Salary Caps An agent representing NFL and NBA players must demonstrate knowledge of the salary-cap system in the NFL and NBA. Agents working for players in these leagues have the challenge of negotiating in an atmosphere of “capped” money or “free money,” a challenge not applying to their counterparts in Major League Baseball, which does not have a cap system.

Engaging in Damage Control One agent classified his job as “agent, manager, social worker, family counselor, and psychologist. All under one hat” (Shropshire & Davis, 2003). Indeed, the agent’s duties often transcend deal-making. Often, the agent maintains a close relationship with the athlete and is the person the athlete turns to in the event of an arrest, family emergency, or general personal crisis. If the athlete is connected with an embarrassing event made public, the agent serves as the spokesman, hoping to deflect criticism and to polish the tarnished image.

Study: Scott Boras Baseball player agent Scott Boras has developed a reputation as one of the most dominant and aggressive agents in the game. In 2005, his clientele included prime free agents Carlos Beltran, Adrian Beltre, Jason Varitek, Derek Lowe, Kevin Millwood, J. D. Drew, and Magglio Ordoñez, as well as Alex Rodriguez, Kevin Brown, Bernie Williams, and Greg Maddux. This gives him considerable power not only to negotiate lucrative contracts, but also to time the negotiations in an attempt to control the market and increase the interest of teams battling to obtain one of those players (Klis, 2004). Boras, like other top agents, limits his stable to only the top players, about 65. Significantly, to avoid the problems of spoiled rookies (and, in baseball, of players whose lack of seniority limits their bargaining position), he said, “We’re not for everybody. And not everybody’s for us. We’re looking obviously for the most skilled players. And we’re looking for discipline and players who want to take information and want to improve themselves.” Boras often presents projections on the likelihood of success of his clients in the future, even 10 years ahead. For example, if Carlos Beltran can maintain his averages he had during the 2001–2004 seasons, he should have 436 home runs, 562 steals and 2,695 hits at age 37. At age 40, the numbers would be 523, 673, and 3,208, which compares with the statistics of great players in the past. “When owners see these

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names, then it starts to click,” Boras said. “They start to realize what kind of player we’re dealing with. I tell them, ‘Now do you understand why I’m placing a premium on this guy?’ I say: ‘This isn’t what Scott Boras says. This is what the facts are’” (Klis, 2004). Boras, like other agents, has received criticism in the media. Some have questioned his calculations and his overselling of players to gullible owners, notably Alex Rodriguez’s $252 million, 10-year contract with the Texas Rangers. But remember, that is an agent’s job. He or she represents a client to the best of his or her ability within the guidelines of his or her fiduciary duties. And more than once, the baseball owners like Bud Selig learned the hard way that Boras knew the collective bargaining agreement better than they did. For example, Boras became successful because he used the baseball amateur draft rules brilliantly. He told owners that a draft choice would go back to college or become a free agent if the team did not sign that player. The owners imposed a 15-day deadline to offer draft picks a contract—something they considered a formality. Boras did not think so and used the short time period as a sword to force contracts to talented but untested players. He stunned the industry by getting Brien Taylor a record $1.55 million bonus from the Yankees in 1991. Due to a shoulder injury caused by a fight in a bar, Taylor never played one game for the team (Klis, 2004).

ALTERNATIVES TO AGENTS Going Alone Before the advent of free agency, players generally represented themselves. Although most athletes now employ agents, a few still decide to negotiate on their own. One may question the wisdom of such a strategy, but if the athlete feels confident and sophisticated enough to represent himself or herself, there is no rule requiring procurement of an agent. Two notable baseball free agents—slugger Gary Sheffield and pitcher Curt Schilling—negotiated their own deals in 2003. Sheffield negotiated a 3-year, $39 million deal with the Yankees and Schilling a $25.5 million contract with the Boston Red Sox (Hohler, 2003). In addition to confidence and sophistication, an athlete negotiating alone must display intestinal fortitude. Schilling admitted that his negotiations with the Red Sox were “intense and stressful” (Salisbury, 2003), but he negotiated a very favorable contract with the team. Schilling negotiated a 3-year deal before the 2004 season, calling for a $12 million salary for that season and increases for the following years. However, he also negotiated a clause stating that if the Red Sox

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won the World Series, his salary would rise by $2 million the following year, and a fourth year (originally an option) would become guaranteed. The team won the World Series in 2004 and Schilling received the additional compensation. What made Schilling’s tactic all the more interesting was that the “World Series” clause violated baseball rules prohibiting contract bonuses based on team achievements. The Red Sox, who did not want to lose Schilling on a technicality, argued for the clause. The commissioner’s office approved the deal, but later concluded such a clause was invalid in future cases (Chass, 2004). Often, the player (or representative) discusses the “great abilities” possessed whereas the general manager points out the “weaknesses.” If an athlete takes the negotiations personally and feels slighted by the team during the process, those bad feelings may linger, affecting the athlete’s morale. Often it is best not to have the athlete in the negotiating room, but to delegate the sometimes ugly process to a representative. Sometimes family members represent the athlete. A seeming middle ground between athletes doing their own contracts and employing an outside party, the family representative also has advantages and some particular pitfalls. A familial relationship between the athlete and the agent results in a strong bond of trust and respect, as opposed to a nonfamily agent who represents other similarly talented athletes and may not have the same bond. However, family members may also take management tactics personally, which will result in the same kind of hard feelings as if the athlete negotiates. Or, the family-member agent may interfere with the operations of the team. One reason for the deterioration in relations between the Philadelphia Flyers and its then captain Eric Lindros was the acrimony between Lindros’s agent (his father) and the team’s general manager Bobby Clarke. The stormy relationship between Clarke and Lindros became legendary when Carl Lindros began advising Clarke on whom his son should play with and how long he should be allowed to recover from injuries (Gormley, 2001).

Legal Representation Although many agents are attorneys, their duties are different. An attorney retained to negotiate a contract has a more limited role, whereas the agent acts as a general representative and confidant for the athlete. A number of mature athletes—who do not need the wisdom and guidance of an agent, but require the expertise of a competent negotiator—may utilize legal help. Lon Babby, an attorney for the Washingon, DC, law firm of Williams & Connolly, serves as an example of an attorney retained for the pur-

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pose of negotiating a contract. In return, the athlete paid an hourly rate for services, rather than giving a percentage of salary. When Babby negotiated Grant Hill’s $45 million deal with the Detroit Pistons, Babby billed $100,000, based on his hourly rate. An agent charging the NBPA’s rate of 4% would receive $1.8 million. Babby’s client list included the NBA’s Tim Duncan (Ludden, 2000).

STANDARDS AND REGULATIONS SPARTA Unlike professions such as law or public accounting, agents are not licensed by a governmental body. However, after much debate over the last decade, Congress, in an attempt to impose uniform standards, passed the first federal law regulating agents: the Sports Agent and Responsibility Trust Act (SPARTA). Enacted in September 2004, SPARTA makes it unlawful for sports agents to sign student-athletes into representational contracts with bribes or misleading information (15 USC sec. 7802, 2004). It permits prosecution of violators by the state where the misconduct occurred. Before SPARTA, 13 states did not have any laws governing sports agents. Thus, sports agents could operate with relative impunity in those states. Specifically, SPARTA makes it unlawful for a sports agent to (a) entice a student-athlete into entering an agency contract by giving false or misleading information or making false or misleading promises or representations; (b) provide anything of value to the student-athlete or anyone associated with the athlete; (c) fail to disclose in writing to the student that he or she may lose NCAA eligibility after signing an agency contract; or (d) predate or postdate contracts. In that sense, SPARTA mimics many state laws and NCAA rules. But SPARTA provides a uniform standard for prosecuting agents who choose to ignore NCAA rules and state law. Under provisions of SPARTA, both the sports agent and the student-athlete are required to notify the school’s athletic director within 72 hours of signing the contract or before the athlete’s next sporting event (15 USC sec. 7805, 2004). Additionally, SPARTA brings sports agents under the jurisdiction of the Federal Trade Commission (FTC), and considers sports agents who lure student-athletes with lies and gifts to enter into agency contracts in violation of the FTC’s Unfair and Deceptive Businesses Act (15 USC sec. 7803, 2004). It allows schools to seek civil remedies for any damages or expenses incurred through its

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violation. Civil fines can be imposed for each offense. Collected fines will go to the federal treasury, whereas damages and other restitution will go to the state. Although already prohibited by the National Collegiate Athletic Association (NCAA) and many states, the behavior targeted by SPARTA had been difficult to prosecute because of jurisdictional issues. The passage of this federal law eliminates these issues by enacting nationwide standards.

State Statutes SPARTA does not eliminate the states’ involvement with agents. As of 2005, 33 states regulated athlete agents. Although SPARTA applies directly to those states that do not have such a law, it does not nullify the state laws presently in existence. Rather, it preempts inconsistent provisions and standardizes the penalties. The multiplicity of laws requires agents to “register” in any state where they wish to do business. With such laws in over half of the states, the time and expense of registration are prohibitive. Very few, if any, agents register under every state’s law. Also, considerable variations occur in fee structure and requirements. Among the states, Florida ranks as one of the more important, so we will use Florida as an example. Florida law focuses on solicitation of student athletes (Fla. Stat. § 468.452 (2003)). The athlete agent must be at least 18 years old, must be of good moral character, and must successfully pass a proficiency exam to demonstrate comprehension of the Florida laws and rules pertaining to athlete agents (Fla. Stat. § 468.453(2) (2003)). The agent must undergo a criminal records verification, in order to establish that the candidate has not been convicted of a crime relating “to the applicant’s practice or ability to practice as an athlete agent” within the last 5 years (Fla. Stat. sec. 468.453(f)). These requirements apply to both out-of-state and in-state agents soliciting Florida student athletes. The Florida law requires that the contract between the agent and athlete must contain the basic terms, such as amount and method of calculating payment, services to be provided, duration, and expenses to be reimbursed by the student athlete (Fla. Stat. § 468.454(2) (2003)). Additionally, the contract must contain a conspicuous notice warning the student athlete that by signing the contract, he or she may lose his or her eligibility to compete as a student athlete; that within 72 hours of signing the contract the student athlete and the athlete agent must notify the student athlete’s athletic director; and that the student athlete may cancel the contract within 14 days after signing it, but that such a

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cancellation may not reinstate eligibility for intercollegiate athletics (Fla. Stat. § 468.454(3) (2003)). Any agent contract that does not conform to this section is voidable by the student athlete (Fla. Stat. § 468.454(4) (2003). Within 72 hours of the signing of the contract, the athlete agent must give notice in a record of existence of the contract to the athletic director of the student’s university, and the student athlete must also inform the athletic director that he has entered into an agent contract (Fla. Stat. § 468.454(5)(6) (2003)). Any agent contract between a student athlete and an unlicenced individual is void and unenforceable (Fla. Stat. § 468.454 (12) (2003)). The Florida law prohibits athlete agents from engaging in any conduct that demonstrates bad faith or dishonesty, commingling of funds, or offering anything of value to any person to induce a student athlete into signing a contract with the agent. The Florida law, like the athlete agent regulations of many other states, is limited in scope, focusing on recruitment issues involving collegiate athletes. It does not regulate the amount of fees an agent may charge and collect. It limits applicability to student-athlete solicitations. When writing on this topic, suffice it to say the appropriate state and federal laws are easily accessible, and they can be found on databases such as findlaw.com or lexis.com.

PLAYERS’ UNION CERTIFICATION The players’ unions from the major sports certify the agents that represent their players, requiring that the agent abide by the respective union’s rules and regulations in order to maintain their sports agent certification.

NFLPA In order to represent an NFL player, the agent must be certified with the NFLPA. The NFLPA refers to these agents as “contract advisors,” and its regulations require passage of a proficiency exam. Also, they limit how much compensation the agent receives from the player. The NFLPA regulations prohibit agents from providing inducements to college athletes and their family members and friends in order to sign a player; negotiating a contract in violation of the Collective Bargaining Agreement; engaging in unlawful conduct; acts involving fraud or dishonesty; or violating the fee schedule. Penalties, including expulsion, exist for those who violate the rules. Unlike rules for agent counterparts in basketball and hockey, the NFLPA does permit an agent to represent both players and coaches (Doman, 2003).

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In August 2003, over 300 more aspiring athlete agents sat for the NFLPA’s annual certification examination, and roughly 66% of those hopefuls passed, becoming contract advisors (Hall & Rothchild, 2004). The maximum an agent receives under the regulations is 3% of the amount paid to the player. Because NFL player contracts are not guaranteed and are often incentivized, the rules prohibit the agent from receiving the 3% of the entire contract amount “up front.” Although recognized as the most stringent of the four major leagues, the NFLPA system does not guarantee proper behavior. Leaders of the NFL Players’ Association are considering tougher screening methods for prospective agents (Maske & Shapiro, 2004). Note that the compensation restrictions apply only to contracts negotiated with an NFL team. Other types of contracts, such as endorsem*nts, have no fee restriction. The NFLPA also regulates “financial advisors” based on a different set of standards. This program, the first of its kind, requires such advisors to have appropriate education and 3 years of experience as a broker-dealer, investment advisor, certified public accountant (CPA), or certified financial planner (http://www.nflpa.org/PDFs/financial/NFLPA_code.pdf).

NHLPA The National Hockey League Players’ Association (NHLPA) regulates the conduct of agents who represent players in individual contract negotiations with clubs. Anyone not designated by the NHLPA as being duly certified (“certified agent”) cannot represent players. Standards for applicants suffer in comparison with those in the NFLPA system. Although a criminal records check occurs, no exam is required. A “certification guide” spells out the scope of the agent’s services and business practices. Each prospective agent fills out a questionnaire about his or her qualifications and background, which goes to the NHLPA certification group. The NHLPA bases its decision on this questionnaire as well as on the background check. As is the case with the other players’ associations, prospective agents do not have to be accountants or lawyers; agents need not possess a college degree. Although agents go through a criminal background check, the definition of “criminal” is limited. In one case, an NHL-certified agent received a conditional discharge after pleading guilty to assaulting the player, meaning no “criminal record” exists if the convicted party stays out of trouble (Shoalts, 2004). Agents say that avoiding links to NHL management serves as the main concern of the NHLPA standards. Player agents are not allowed to have clients among management or to have ownership shares in teams (Shoalts, 2004). Violations of the rules result in sanctions or expulsion.

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MLBPA The standards of the Major League Baseball Players’ Association (MLBPA) for agent certification mirror those of the NHLPA, as they do not require a college degree or the passing of a test. Also, agent fees lack any limitation, so an agent can charge as much as he or she wishes (MLBPA Regulations Governing Player Agents, 1993). However, these regulations include a peculiar and practically nonapplicable exception. No agent can charge a fee that drives the player’s actual compensation below the minimum salary plus $1,000 (MLBPA Regulations, sec. 4f). So, if agent X negotiates a player’s contract amounting to $301,000 per year, the agent receives no compensation, since $300,000 is the minimum salary. Conversely, if the agent negotiates a $1 million per year contract, that agent conceivably could earn $699,000. The player would actually receive $301,000, in conformity with the rules. According to officials from the Major League Baseball Players’ Association, in recent years, agents have become increasingly “bolder” and “often underhanded” in attempts to steal players from other agents. In 2003, the union instituted random financial audits of agents’ receipts and expenses (Chass, 2003).

NBPA Athlete agents representing NBA players must be certified with the National Basketball Players’ Association (NBPA). A person pursuing certification must have a degree from an accredited four-year college or university. Once a player agent is certified with the NBPA, that agent is subject to the “standard of conduct” regulations set forth therein (NBA CBA, Article XXXVI.). The code includes several general requirements, mainly administrative provisions regarding fees (both to the NBPA and from the players), as well as several sections labeled “Prohibited Conduct Subject to Discipline.” The prohibited acts mirror those prohibited by the other players’ associations: providing inducements to college athletes, family and friends in order to sign a player; negotiating contracts in violation of the collective bargaining agreement; committing fraud or deceitful acts; breaching the maximum fee schedule; and violating any provision of the standard player agent contract. The NBPA administers a comprehensive program involving mandatory instructional seminars and testing to ensure competence in contract matters. Presently, the maximum fee collected by the NBPA certified agent is 4% of the contract.

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INFORMATION CHECK When covering sports agent and financial advisor issues, a journalist should determine: 1. Does an agent represent the athlete? 2. If so, is the agent certified by the respective players’ association? 3. Did the agent negotiate a contract with a team or an endorsem*nt agreement? 4. Did the agent engage in any conflict of interest or breach of fiduciary duty? 5. How many other athletes does the agent represent? 6. Is the agent’s group of athletes increasing? Decreasing? 7. What is the background of the athlete’s financial advisor? In the case of the NFL, did the players’ association certify the financial advisor? 8. Has the athlete recently switched agents? 9. Did the athlete utilize someone other than an agent? Himself or herself? A family member? An attorney charging an hourly rate? 10.Does the agent work alone, in a small agency, or in a larger agency?

REFERENCES Banks, L. (2005, May 20). James’ switcheroo a youthful mistake; while there is nothing illegal about the move, there is much that is illogical and immature about it. Chicago Sun-Times, p. 155. Burwell, B. (1999, October 11–17).. Think Williams got bad deal? Don’t try to tell him that. Sports Business Journal, p. 54. Chass, M. (2003, February 7). Players union focuses on agents. New York Times, p. D7. Chass, M. (2004, November 7). Before helping Red Sox to a title, Schilling helped himself. New York Times, p. 5. Cohn, B. (2004, May 4). Few Jerry Maguires; Aspiring sports agents find the clients scarce, the glamour nonexistent and the going tough. Washington Post, p. C01. Detroit Lions & Sims v. Argovitz, 580 F. Supp 542 (E.D. MI 1984). Doman, M. (2003). Attorneys as athlete-agents: Reconciling the ABA rules of professional conduct with the practice of athlete representation. Texas Review of Entertainment & Sports Law, 5, 37, 55. Florida Athletic Agent Law, Title 32, §§ 468.452, 453 (2003). Gormley, C. (2001, August 21). One question unanswered as Lindros leaves. Cherry Hill (NJ) Courier-Post, p. 3. Grossi, T. (2003, July 13). Brown’s health big factor in contract restructuring. Cleveland Plain-Dealer, p. C10.

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Hall, T. J., & Rothchild, S. N. (2004, March 10). New York’s Uniform Athlete Agents Act. New York Law Journal, p. 4. Hohler, B. (2003, November 29). Red Sox hit jackpot, land Schilling; Boston signs Arizona ace to $25.5 million deal. Boston Globe, p. A1. Isaacson, M. (2004, December 19). Unscrupulous advisors, bad investments, lavish spending leave many athletes bankrupt. Chicago Tribune, p. 10. Klis, M. (2004, December 20). Doing business Boras’ way. Denver Post, p. C-01. Ludden, J. (2000, July 26). NBA law; Babby wins clients by acting like an attorney. San Antonio Express-News, p. 1C. Maske, M., & Shapiro, L. (2004, May 2). Agent awareness in the NFL; Union considers screening process after costly mistakes. Washington Post, p. E01. Mihoces, G. (2000, November 14). Williams’ loss doesn’t deter Saints. USA Today, p. 1C. MLBPA Regulations Governing Player Agents (1993). See 4F, found in Shropshire, K. D., & Davis, T. (2003). The business of sports agents (pp. 77–78). Philadelphia: University of Pennsylvania Press. NFLPA Regulations Governing Contract Advisors (1998). NHL CBA, Art. 6. Retrieved August 31, 2004, from http://www.nhlfa.com/CBA/ cba_agreement6.asp Pound, E. T., Pasternak, D., Madden, M., & Hook, C. (2002, February 2). Money players. U.S. News & World Report, p. 30. Roeder, D. (2004, December 1). Developer’s dealings costly to ex-Bulls star. Chicago Sun-Times, p. 81. Salisbury, J. (2003, December 26). Era of the sports agent is here to stay. Duluth News Tribune (http://www.duluthsuperior.com/mld/philly/sports/7572039.htm?template=contentModules/printstory.jsp). SFX Sports Chief to buy back L.A. business. (2005, September 28). Los Angeles Times, part C, page 8. Shoalts, D. (2004, June 29). Frost case raises questions about agents’ certification. G l o b e a n d M a i l ( To r o n t o ) . R e t r i e v e d A u g u s t 3 1 , 2 0 0 4 , f r o m http://www.theglobeandmail.com/servlet/story/RTGAM.20040629.wshoalts3 0/BNStory/Sports Shropshire, K. L., & Davis, T. (2003). The business of sports agents (pp. 10, 14, 15, 16, 26, 28, 51-52). Philadelphia: University of Pennsylvania Press. Sports Agent Responsibility and Trust Act, 15 USC, secs. 7802, 7803, 7805 (2004). U.S. v. Norby Walters, 997 F.2d 1219 (2d Cir. 1993). Walters v. Fullwood, 675 F. Supp. 155 (SDNY, 1987). Woo, V., & Reifman, S. Z. (Eds.). (2002, November 7). Forbes. Retrieved June 10, 2004, from http://www.forbes.com/2002/11/07/privateland.html

CHAPTER

8 Team Relocation and Facility Issues

Throughout the history of professional sports leagues, franchises have moved, sometimes two or three times. Within a 20-year time frame, the Boston Braves moved to Milwaukee and then to Atlanta, the Philadelphia Athletics moved to Kansas City and then to Oakland. The recent immigration and emigration of the NFL Raiders from Oakland to Los Angeles and back to Oakland has been one of the most controversial, drawing criticism from fans and resulting in considerable litigation. Why does a team move? Lack of financial success in its present market is one reason. For example, in 2002, the NBA’s Charlotte Hornets relocated to New Orleans, due to lack of attendance, financial losses, and the refusal of voters to approve the financing of a new facility. Similarly, a year earlier, another NBA franchise, the Vancouver Grizzlies, relocated to Memphis. The potential for greater opportunities in a larger and/or growing market serves as a second reason, the textbook example being the relocation of the Brooklyn Dodgers to Los Angeles in the late 1950s. How178

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ever, in recent years, the availability of new markets has been limited by expansion, resulting in few locations to which teams can relocate. That leads to the third and most recent justification for team (or more officially, franchise) relocation: the money stream from the facility. As discussed later, the economics of having a first-class stadium or arena with opportunities to generate revenues by seat licenses, naming rights, signage, parking, concessions, luxury boxes, and premium seating has resulted in attempts by cities to woo teams to different locations or to keep teams. Often, part of the cost of building the stadiums or arenas is borne by taxpayers, directly through funding or indirectly from taxes and bond payments. Although the idea of public financing of facilities has caused controversy, the majority of stadiums and arenas have some public component to their funding. This chapter discusses these issues and also analyzes a typical stadium lease agreement. The subject of stadium economics deserves more media coverage, and young journalists must learn the basics of one of the most important issues in the business of sports.

A SHORT HISTORY OF FRANCHISE RELOCATION The first phase of the evolution of the major sports leagues demonstrates a gradual shift from smaller cities to larger ones as the respective league matures and becomes successful. Although all leagues commenced operations with some teams in larger cities, a surprising number of franchises hailed from the heartland. Teams from baseball’s National League, the oldest continuous sports league of the four major sports, once hailed from Providence, Rhode Island, Syracuse and Troy, New York, and Worcester, Massachusetts. However, by 1899, the National League was ensconced in the eight largest U.S. cities. The rival American League started as a minor league but then decided to compete with the older league head-on by moving its teams from smaller cities to some of the larger cities where National League franchises were housed, such as Milwaukee to St. Louis and from Baltimore to New York. St. Louis had double the population of Milwaukee, and New York had over six times the numbers of Baltimore. The history of the NFL also evidences this movement. The original franchises were in cities such as Canton, Ohio, Hammond, Indiana, and Green Bay, Wisconsin (with the last being the only surviving original NFL franchise in its city of birth). Professional football, initially given second-class status in favor of the far more popular college version, had its roots in these working-class Midwestern cities and towns. Most

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of the major urban teams such as the New York Giants, Detroit Lions, and Cleveland Browns were expansion teams. The NBA, created after World War II, included teams from both large and smaller cities. In fact, teams from smaller cities such as Fort Wayne and Syracuse were more stable than their counterparts in larger cities, such as Detroit, Cleveland, Toronto, and Pittsburgh, which folded. Eventually, Fort Wayne moved to Detroit (and became the Pistons), and Syracuse moved to Philadelphia (and became the 76ers). For decades, the National Hockey League contained only six teams, two in Canada and four in the United States. Each of the “original six” franchises was financially stable and there was little reason to expand outside those cold-weather areas. A major expansion did not come until the mid-1960s. By the 1990s, team relocations, often from Canadian cities to the southern and western portions of the United States, occurred. The Quebec Nordiques moved to Denver and became the Colorado Avalanche in 1995. The Winnipeg Jets moved to Phoenix and became the Coyotes the following year.

WAVES OF RELOCATION It is best to look at franchise relocations episodically. Although the early relocations focused on playing in the largest markets (then in the Northeast and Midwest), a second wave of franchise movement—generally to the southern and the western United States—began in the post–World War II era. These regions experienced major population growth and created fertile markets for sports franchises to flourish. By 1950, Los Angeles had become the third largest city in the United States, but it had no Major League Baseball franchises, whereas Chicago and Philadelphia, numbers two and four, respectively, had two teams each. Five years later, the Philadelphia Athletics of the American League moved to Kansas City. Then came the New York Giants’ move to San Francisco and the Dodgers’ departure to Los Angeles. Until that time, St. Louis was the westernmost location for a Major League Baseball franchise. This era of franchise movement mirrored the movement of the nation as a whole. At the time, a Rustbelt–Sunbelt population migration began. Older stadiums and arenas, often found in decaying portions of cities, were not car-friendly. Fear of crime made fans less likely to come to night games. The facilities, often spartan and ancient, lacked modern amenities. New York’s Polo Grounds dated from the 19th century and began as a facility for polo. Newer cities, such as Los Angeles, Phoenix, and Dallas, were more car-friendly, and spread over a larger area with swaths of empty space.

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Modern facilities could be built in undeveloped areas with little difficulty in the city’s metropolitan area, rather than in the city proper. The Dallas Cowboys and the Texas Rangers, for example, play in stadiums located between Dallas and Fort Worth. The popularization of air travel enticed leagues to set up franchises in the South and the West. With teams no longer dependent on railroad travel, a New York team playing a California team as part of a road trip would not cause undue schedule disruption. With the advent of television, “nationalizing” a sport by opening every region to franchises became a greater priority. Teams in virgin territories could attract fans to a live game event and also to watching the sport on television. The television networks broadcast championship games nationwide, and the more interested fans were in the game itself, rather than just a particular team, the higher the viewership was. The NFL and NBA were more amenable to setting up shop in the West. The San Francisco Forty-Niners were born as an expansion franchise in 1949. In the NBA, the Minneapolis Lakers moved to Los Angeles in 1960 and the Philadelphia Warriors moved to San Francisco two years later. Although the movement of franchises south and west had exceptions (e.g., in 1970 the Major League Baseball Seattle Pilots moved to Milwaukee and became the Brewers), such movements were not the norm. The first two phases of relocations—the pre–World War II exodus to the larger cities from the smaller ones and then the postwar moves from the Rustbelt to the Sunbelt—made economic sense in a time when gate attendance was the primary factor of financial success. Building a large and loyal fan base was crucial because, with the exception of the NFL, teams did not share local revenues. Therefore, teams in growing markets with modern facilities could attract more fans and, later on, win more lucrative broadcasting rights for games. In 1953, the National League owners agreed to the first team relocation in Major League Baseball in 50 years when the Boston Braves moved to Milwaukee. The Braves agreed to play in County Stadium, a publicly owned facility, for a favorable lease agreement. Prior to that time, only one other team played in a publicly owned stadium. Every other facility was in private hands (Quirk & Fort, 1999).

NEW STADIUMS AND ARENAS Teams in each of the major leagues keep all or most of the gate receipts, the money spent by fans to see a live contest. Additionally, teams keep revenues from stadium amenities such as concessions, parking, advertising, and luxury seating. These facilities may also in-

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clude such attractions as angled seating (thus relieving postgame neck strains and giving excellent views of game action from all angles), walk-around open-air concourses that keep fans connected to the game, state-of-the-art video boards, breathtaking views, and retractable roofs. Therefore, the type of home stadium and the type of stadium lease agreement consummated between the franchise and the stadium owner become very important for a team’s balance sheet. New stadium construction boomed in the 1990s. Fourteen of the 30 major league baseball teams have stadiums that were built after 1992. Eighteen of the NFL’s 32 teams had new or renovated facilities during that time period. And, in a departure from the past, all 32 stadiums were constructed solely for the sports they were designed for. Another change was that nearly all these facilities were located “downtown” rather than in a suburban area. The revenue-generating characteristics of the stadium or arena are a major, if not the main, reason why franchise relocation occurred in the last 15 years. This is not to say that stadiums or arenas were not important in past years, but the revenue potential of a state-of-the-art facility is a crucial component because franchises must find consistent revenue streams to earn income at a time of record-high player payrolls. A team may be enticed to a different locale based on a lucrative new stadium deal. Also, a new facility often serves to increase attendance, whether it is in a new city or an existing one. In some cases, the stadium’s ability to produce revenue trumps the size of the market. For example, the Los Angeles Rams moved to St. Louis, an open market, because its former team, the Cardinals, moved to Phoenix in 1987. The team went from residing in the second largest market to the 12th largest. What enticed the Rams was the proposed stadium and its lease. The team receives 100% of concession revenues, 100% of revenues from luxury boxes and club seats, and 75% of stadium advertising sales revenues (Masteralexis, Barr, & Hums, 1998). The 1990s produced a spate of new stadiums and arenas on the major league level because the often functional but drab facilities built in the 1960s outlived their usefulness, and leases between the teams and the stadium owners (often governmental agencies) expired. Once the old stadium’s lease agreement expired, teams often demanded a new facility. If not forthcoming, sometimes the teams threatened to move. The Chicago White Sox almost relocated from its venerable location to Florida until a stadium replacing old Comiskey Park was built. As of 2005, because of the construction boom, there are not many major league cities where new stadiums or arenas need to be built. Major exceptions are the two largest U.S. cities, New York and Los Angeles. The facility construction boom has also worked its way to the minor

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leagues, as state-of-the-art facilities are being built to cultivate the growing popularity of minor league baseball (Caldwell, 2005).

LEAGUES’ CONTROL OF RELOCATION The rules codified in each of the major sports limit the right of a franchise to move without the approval of three-quarters of the other owners. In theory, this standard seems onerous, but in reality, few owners have blocked relocations. This process demonstrates the inherent conflicts in the relationship between a team and the league. On the one hand, the four major leagues have independently owned teams with their own staffs and their own independent revenue streams. On the other hand, they participate in a cooperative joint venture where certain rights are curtailed by provisions in the respective league’s constitution and by-laws. On the other side of the coin, this system has produced its share of operational difficulties (as explained in more detail in chapter 1) and legal controversies, especially in the area of antitrust law, but it remains the predominant form of team sports administration. One reason for prohibiting relocation, especially a relocation to a market where another league team already plays, is straightforward: No owner will want a rival team moving into the same area served by the existing team. It creates competition and can siphon fans and revenues. Moreover, other owners and the league itself may not feel comfortable with a team relocation, because of the potentially bad publicity from fans of the departing market losing that team. That may hurt the reputation of the sport and cause resentment for years to come. Additionally, other owners and the league may fear that relocation may make that team either too valuable or not valuable enough. Although this seems counterintuitive, a logic behind this reasoning exists. An unsuccessful relocation may result in a drop in league-wide revenues, which can affect the other owners’ bottom lines, especially in a league such as the NFL where virtually the entire broadcasting/cable revenue is shared (Cozzillio & Levinstein, 1997). But also note that a successful relocation can hurt other teams as well, especially in a league such as Major League Baseball, where owners keep much more of their revenue. That in turn may drive salaries up, because the relocated team has more money to pay, increasing its market value. In a salary-capped labor structure, the extra revenue may serve to increase the salary cap, costing the other owners more with little benefit in return. Additionally, some have argued that most league attempts to block franchise relocations were directed at own-

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ers, such as Charlie Finley, Bill Veeck, and Al Davis, who were perceived as mavericks (Mitten & Burton, 1997). From a political standpoint, an owner who blocks another’s relocation attempt may expect retribution aimed at his own team’s attempts in the future. From 1950 through 1982, 78 franchise movements occurred in the four major league professional sports. Eleven of those relocations occurred in baseball, 40 in basketball, 14 in hockey, and 13 in football. This serves as a powerful disincentive for an owner to block a relocation. The other disincentive is legal. In the 1980s, franchise relocation issues resulted in considerable legal and economic debate and litigation. No league wants a repeat of the Oakland Raiders litigation, where a federal appeals court ruled that the NFL’s relocation rules constituted an antitrust law violation (Los Angeles Memorial Coliseum Commission v. National Football League, 1984). The federal appeals court did not rule that all relocation limitations are invalid, but it determined that even a league as centralized as the NFL may not “improperly” block relocation. From a business standpoint, that standard is vague and difficult to implement. Given the steep penalties for antitrust violations (three times a jury award), the NFL, NBA, and NHL did not pursue further litigation, a likelihood if their owners attempted to block a relocation move. And maverick owners like Davis have not been bashful about using the courts to get their way. Note that Major League Baseball was not affected by this ruling because until 1998 it was exempt from antitrust laws.

FACILITY ATTEMPTS TO STOP RELOCATION Although we have focused on attempts by other owners to block a relocation, a related issue has been attempts by facility owners to stop a move. This issue does not affect a league or its other owners as a relocation does, because of the relatively low stakes for those owners if a franchise moved from an older arena to a new arena in the same city. But a substantial immediate effect on the owner of the facility results because it loses its major paying client. Legally, a facility owner cannot stop a team from moving once its lease expires. However, an owner often attempts to protect interests by drafting certain contract provisions in the lease agreement to make it more difficult for a team to terminate the lease before its expiration. One common way to do this is to use a “liquidated damages” clause that spells out specific monies paid in the event the team breaches its contract and moves either to a facility in the same metropolitan area or to a different city. The amounts can be a flat amount or a per-game rate.

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For example, the lease agreement between the Minnesota Timberwolves and the Minneapolis Community Development Agency (the owner of the Target Center) stated that total damages for a breach would be $60 million, reduced by $3 million for each of the first 10 years during the lease (Greenberg & Gray, 1998). In one NFL team lease, the damages are stated as $50,000 per game (Greenberg & Gray, 1998). When covering a possible breach of lease, a journalist should find out the terms of this clause, or whether it exists in the lease at all.

RELOCATION AND CITIES Much has been written about the effects of a franchise’s relocation on the economy of the departed city and on the psyche of the team’s fans. Probably the classic example was that of the Brooklyn Dodgers’ relocation to Los Angeles in 1957. But the reasons for the move are probably more complex than the simple answer of “abandonment” of Brooklyn by the team. In reality, a generous offer of land for a new stadium and the economic opportunities of a growing market, and the failure of New York to condemn land for a facility in downtown Brooklyn served as the bases (Shapiro, 2004). A more recent example of a similar public outcry came when the Baltimore Colts moved to Indianapolis in 1984. To entice the team to relocate from its long-time home, the city guaranteed 12 years of annual ticket sales of more than 45,000, took out a 10-year, $12.5 million loan at an interest rate of 8%, and committed $4 million for a training facility (Leone, 1997). The Colts were negotiating with both Indianapolis and Baltimore, which wanted to keep the storied franchise. When word of the possibility of the team’s move to Indianapolis was made public, the Maryland state legislature tried a novel approach: It considered a law authorizing Baltimore to condemn the property of the team by the concept of “eminent domain,” the seizure of private property by the federal or state government or governmental agency for a “public use.” After passage of the Maryland law, the Colts’ owner, Robert Irsay, made his decision to move. Without consulting the NFL, Irsay accepted the Indianapolis offer and packed the Colts’ property into moving vans in the middle of the night, one day before the Maryland law was enacted. Even though the city sued to enforce the law, the fact that the Colts’ business and their property were outside the state made the Maryland law ineffective. On the other side of the coin, cities hoping to get franchises or keep them have often been generous with funds and construction. To lure the Cleveland Browns to Baltimore, enticements included a $200 million rent-free stadium with 70,000 seats, 108 luxury boxes,

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and 7,500 club seats and a $15 million training facility; 100% of revenues from ticket sales, luxury suites, club seats, concessions, stadium-naming rights, and parking; and half of all revenues from non-football events.

EXPANSION As in the case of relocation, each of the leagues requires that an expansion team application be approved by three-quarters of the owners. Because of the league structure, a new team must go through an involved and often costly process before being selected as an expansion franchise. It has been argued that the limited number of teams entering a league stifles competition and may (except in the case of baseball) run afoul of the antitrust laws. Except for New York, Los Angeles, and Chicago, each city is limited to one team—if not by rule, then in practice. However, the leagues can offer legitimate business reasons for requiring franchise owners to have a certain level of financial security and to not hold ownership interests in other clubs in the same league. Because a considerable capital investment is necessary to support a competitive professional sports team, a viable sports league must have financially secure franchise owners. Initially the franchise owner must pay expensive expansion fees and operating expenses, and must retain sufficient financial reserves to hire players and coaches, based on rules determined by the league. In all the major league constitutions, a clause limiting expansion and relocation in a “home territory” of an existing franchise exists. Usually that figure is between a 50- and 75-mile-radius around a major metropolitan area (Kurlantzick, 1983). Although the very largest markets have more than one team, a new or relocating team often has to pay what is known as an “indemnity fee.” To attain an expansion franchise, not only must the applicant be able to pay the expansion fee, but the league must investigate the validity of the information that the potential expansion franchise owner releases. This issue has not always received enough attention from journalists. Sometimes the leagues themselves have not done a proper investigation, which has led to some embarrassing results. In 1997, the NHL approved the sale of the New York Islanders to a “businessman” named John Spano, who turned out to be practically insolvent yet who was able to obtain bank loans and to convince the league he had adequate financial resources. Spano ultimately pleaded guilty to fraud in connection with the attempted purchase (Valenti, 1997).

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FINANCING A STADIUM With contributions made by cities or states, or both (“public sector”), along with those made by the owner(s) of a franchise or private businesses (“private sector”), franchises have been able to finance and build new state-of-the-art stadiums that provide economic returns and enhancements not recognized in their old counterparts. Except for SBC Park (formally Pacific Bell Park), the first privately financed ballpark in Major League Baseball since Dodger stadium opened in 1962, most ballparks are financed with substantial public money (Keating, 2001). Although most new state-of-the-art stadiums replace multipurpose facilities three to four decades old, new facilities can also replace more recent venues. In Memphis, Tennessee, an arena known as the “Pyramid” opened in 1991. Because the 19,000-seat facility was “antiquated,” in that it did not attract restaurants and lacked other revenue generators, the public—through taxes to pay the debt from bond issuances—subsidized the construction of a $250 million arena that houses the NBA Grizzlies. The same occurred in Charlotte, North Carolina, where a new $265 million arena replaced the 16-year-old Coliseum housing the Bobcats. The economic benefits to a franchise include revenue enhancements such as naming rights, advertising, luxury box leases, increased number of club seats, pouring rights (beverages), parking revenues, concessions, and favorable lease terms. This is in addition to the general increased attendance that results when the new facility opens.

FUNDING VEHICLES In theory, the use of revenue enhancements mentioned in the preceding paragraph has provided a financial base that allows the franchise to secure funding for a new state-of-the-art stadium or arena. Today, most facilities are financed through a public/private partnership. At least 38 major league sports venues have been built or rebuilt using nearly $7 billion in tax-exempt financing since 1990, according to a Washington Post review of more than 40 professional baseball, football, hockey, and basketball projects (Whoriskey, 2003). The public sector contributes equity (cash), pledges, and revenue from taxes, and/or issues debt through the issuance of bonds, often tax-exempt bonds. The private sector contributes private equity (owner(s) cash contribution/guarantee), private debt (bank or institutional funds), and/or funds borrowed under a credit facility program

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run by a particular league (MLB or NFL in particular). Private debt is usually secured by guaranteed streams of revenue from naming rights, luxury suites, club seats, and advertising.

Public Funding The use of public funding for financing stadiums remains a controversial and important issue when writing about stadium financing. Public financing has drawn criticism from a number of economists, who argue that the money spent on the facilities does not result in increased revenues for cities, but in considerable benefits to team owners. Studies by Zimbalist and Noll (1997) and Baade (1994) concluded that such arrangements were money losers (Krueger, 2002). However, others have concluded otherwise. The essence of those arguments is that “the primary benefits provided by teams to the local communities are consumption benefits” such as the benefits provided by “parks, golf courses, swimming pools, zoos, concert halls” (Green, Klein, & Lebowitz, 1998). They argue that the mere presence of the team in the community confers additional benefits, including “identifying with the success of the team, following the team on television and radio, reading about the team in the newspapers, and talking with their friends about the team”(Dorocak, 1999). Examining, analyzing, and writing about a proposed new facility requires a basic knowledge of financial lending techniques. It also involves asking pointed questions about the source of the money, the control of the facility once it opens, and the proposed lease terms. In financially troubled times, the monies spent on facility construction or even ancillary issues such as highway construction to and from the stadium or arena can siphon away funds from other governmental activities. Although a municipality (“the public”) owns many stadiums and arenas, the primary tenant team controls the majority of the revenue. Once the facility opens, the amount of money directly invested by NFL teams is quickly recouped, often within a few years—thanks to lucrative luxury boxes, club seats, and considerably higher ticket prices. Taxpayers, however, typically are committed to up to 30 years of debt payments. Certain public interest or ad hoc groups representing public funding opponents have attempted to stop such funding by utilizing lawsuits, but in most cases, the courts will not block funding unless the scheme violates a specific law or regulation (environmental rules come to mind). Otherwise, the courts grant deference to governments to make such decisions.

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Methods of Public Funding Bonds. Localities may issue bonds, basically publicly traded securities purchased by individuals or organizations who serve as creditors. A bond is a loan, payable with interest. Because bonds are issued by a municipality or governmental state agency, they are often secured (guaranteed) by the municipality or state’s general taxing power or a specific source of revenue. Types of bonds include the following:

• General obligation bonds: These securities are to be repaid from general tax revenues of the particular government. Such bonds often require governmental approval and have become more and more difficult to use because of public opposition and the need for state and municipal governments to provide more basic projects in uncertain economic times. • Special tax bonds: These securities are guaranteed from monies coming from a specific tax. The municipality, county, or state may levy an additional tax to be specifically used to pay these obligations. • Revenue bonds: These securities are more complex, as they are secured by revenues coming from the facility and/or special taxes passed to pay for them. Often the tax would be on hotel use (which is politically safe because tourists do not vote) or on tickets to events in the new stadium or arena. • Lease revenue bonds: These securities are issued by a governmental authority distinct from the municipality, county, or state, not the government itself. These authorities, sometimes known as public corporations, often have the power to issue bonds and collect tolls or taxes. (An example is a bridge or tunnel construction authority.) Bonds will be issued as part of a lease agreement between the authority and the government, which leases the facility from the authority and then subleases it back to that very authority. Any revenues collected by the government (and the franchise[s] using it) may be used to pay the authority (Greenberg & Gray, 1996). Bonds are either taxable or tax-exempt. Tax-exempt securities, meaning those exempt from federal (but not necessarily state) taxation, are preferred, as more attractive to investors. Federal tax law permits the use of tax-exempt bonds to fund sports facilities (although with restrictions) if certain criteria are met. Basically, “private business interests” cannot “control” the facility’s use (Greenberg & Gray, 1996).

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Taxes. States, counties, and municipalities have the power to use tax revenues or levy new taxes to fund the construction of facilities. The type of taxes created is often dictated by the political popularity of the project as well as the creditworthiness of the proposal. Examples of additional taxes would be surcharges, sales tax, special taxes on alcohol, tobacco products, and restaurant sales and hotel use taxes, and car rental taxes. The laws creating the taxes may have a “sunset” provision that ends a tax at a certain date (i.e., completion of the facility, payment of the debt). The locality or the state may also enact a lottery to raise money either to pay for the facility or to guarantee payment of the bonds. Governments may also issue certain tax abatements on the real estate taxes the facility would normally pay. And costs of additional road construction, such as special exits from a highway to the facility, are often borne by the local government (and, by extension, the taxpayers) as general expenditures.

Private Financing Most stadium and arena financing involves some private sources. Usually banks play a central role, as they lend money outright with some secured source of repayment, such as revenue from luxury suites or concessions. Additionally, private financing includes guarantees by the team owner backed by personal assets or by bonds backed by personal seat license fees. An additional method is the issuance of “stadium investment bonds,” secured by the assets produced by the facility (Fraas, 1999). A final method is the use of personal seat licenses (PSL), explained later in the chapter. The economics of granting generous stadium deals to lure or keep teams continue to be debated. An economic downturn, market saturation, and questionable economic benefits lead to increased public criticism. State and local governments, often forced to reduce public services or raise taxes, do not have the money to pay for new stadium or arena construction. Also, with expansion in all the major leagues, virgin markets are simply hard to find.

THE STADIUM/ARENA LEASE Often teams obtain stadium or arena leases on favorable terms, especially if a municipality or government agency owns the stadium or arena. In 1995, Slate Gordon, then a Washington Senator (a Republican who generally espoused the view of minimal intrusion of government in business), pulled together a deal to build a new stadium for the Seattle Mariners. Of the $414 million price tag, the team only paid $45 million. The rest was paid by state bonds. However, the team was given the naming rights,

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which, coincidentally or not, came to $45 million. In effect, the team did not put up one cent for the facility. Also, the Mariners got all the revenues—concessions, luxury boxes, parking. The only obligation the team had was paying the operating costs of the stadium (Quirk & Fort, 1999). It is rare (but not impossible) that a team owns a stadium outright; more frequently, the team will lease to play its games in the facility. Given the public interest in sports franchises, the lease between the team and the stadium or arena they play in is a document that should receive far more scrutiny and coverage than it often gets in the media, especially if the public and/or bondholders are paying for the facility’s construction. The following paragraphs break down the basic terms of such an agreement. Duration. The lease often includes a long initial term and some options to extend. The term could be 30 years to recoup the cost of construction and upkeep. Additionally, the document contains option clauses, giving the team the opportunity to extend the lease, usually on similar terms. Some lease agreements require affirmative written communications if a team wishes to extend the lease under an option clause. Others are the opposite: They require that the team notify the facility owners or manager if they do not wish to extend. Termination. All leases have termination clauses giving the team the right to terminate the lease before the expiration. A lease may permit termination if certain attendance minimums are not met. The Minnesota Twins were able to escape from their lease if the number of tickets sold for three consecutive baseball seasons was less than 80% of the American League average (Greenberg & Gray, 1996). A more common provision, known as a force majeur clause, allows termination after damage or destruction of the facility due to war, weather condition, or fire. Additionally, some leases give the franchise the option to terminate at a specified period. The New York Jets had a clause allowing the team to terminate the lease after 5 years as long as they signed a letter of credit. The Anaheim Mighty Ducks of the NHL had a termination clause that allowed them to end their 30-year lease with Arrowhead Pond (the arena) after giving 2 years notice as long as the team planned to move out of the Los Angeles area for the duration of a 30-year term (Greenberg & Gray, 1996). In the case of the Jets, the reason for this early termination was that the lessor, Giants Stadium, already had a marquis tenant playing in the same league, the rival New York Giants. That is a luxury that most stadiums do not have. Although rare, some leases may give the lease owner the option to extend as well.

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Use. The centerpiece of a stadium lease is the right for the team to use the facility and a corresponding right to limit use by others. Of course, a stadium or arena may have many uses, such as concerts, rallies, and other sporting events. The way this section is negotiated evidences the power that a franchise may have. Note that a facility is very much like an airline. It makes no money when it is not used. If an airplane sits in a hangar for one day, that one day of income is lost and never replicated. The airplane must fly with paying passengers taking up as many seats as possible. Similarly, an unused facility does not generate revenues. So for the owner, frequent use is imperative. On the other hand, the principal tenant (team) may want to have “exclusivity” and limit other types of uses as much as reasonably possible. Too much use may result in wear and tear on the field and in seating, and requires the cumbersome job of putting away and taking out equipment. Although rare, the lease may give the primary team absolute exclusivity, giving the franchise a veto right over any other events potentially held in the facility. Clearly that gives the tenant the right to dictate what events can and cannot be held. More frequently, the exclusivity right is more limited. For a baseball team, it may give the team exclusivity or a priority as to events during the season. For example, it can state no other event may occur on the day of a baseball game, or that if the team is involved in any postseason events, a conflicting event scheduled must be canceled to permit the playoff game to be held. Regarding the off-season, the lease may give the team “input” regarding the use of the facility, but not a veto power. If the event results in a likelihood of damage to the field, the team may have the power to reject the event. For example, a baseball team may have the right to bar an auto race on the grounds of the facility because of the likelihood of damage to the property. Finally, the lease often allows certain special events, such as a public memorial event, in the facility within the exclusivity period. Sometimes, a team will “reserve” event dates (meaning dates of potential home games). That may occur even before a final schedule of games is released by the league involved. Those dates are held exclusively for the team until the team specifically “releases” them (usually because of final schedule changes by the team or the league). Other leases may prohibit sporting events for a certain period of time before the team’s games. As the principal tenant, the team does not want competition that may limit gate attendance. For example, the Orlando Magic had a clause in its lease with the City of Orlando (the owner of the arena) that prohibited the city from scheduling a non-Magic “basketball-related event” within the period 3 days before to 3 days after a Magic game (Greenberg & Gray, 1996).

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Although most leases require the team to play all their home games at the facility, in some cases the lease may permit the team to play some games at a location within the home team’s market. Before moving into the Staples Center, the Los Angeles Clippers played most of their games in the Los Angeles Memorial Sports Arena. However, their lease granted the team the right to play up to six home games at Arrowhead Pond in Anaheim (Greenberg & Gray, 1996). Many stadium leases contain a provision permitting the team to have its offices in the facility, along with some training areas and places to store equipment. This is more common in stadiums than in arenas because arenas lack the space, a problem compounded by the fact that many basketball and hockey teams train in separate facilities. Use by Other Teams. Most leases prohibit another professional team in the same sport from using the facility. Because most cities have only one pro team per sport, this would apply to the largest markets. However, exceptions occur. In the 1970s, the New York Yankees played in Shea Stadium during the reconstruction of Yankee stadium, and more recently, the NFL’s New York Giants and New York Jets agreed to share the cost of building a new football stadium. Both teams will share in the revenues generated therein including income derived from the naming rights to the new stadium, to be located next door to the teams’ current stadium in New Jersey. This marks the first time in NFL history where two rival teams have entered into a partnership for the purposes of building and subsequently sharing a sports facility. More frequently, issues involving use of the facility by professional teams from other sports occur, and, as noted earlier, the lease sets the priorities.

STADIUM NAMING RIGHTS The idea of naming a sports facility after a bank, brewery, or orange juice maker who pays for the privilege is relatively recent. Before the 1990s, facilities were named for their teams, present or past owners, historical figures, or in honor of war veterans. Yankee and Dodger Stadiums serve as examples. So do the Nassau Veterans’ Memorial Coliseum (Long Island, New York), Veterans Stadium (Philadelphia), and Memorial Stadium (Baltimore). Older fans may remember the owners’ names Shibe, Comiskey, Griffith, Crosley, Baker, and Ebbetts emblazoned on their teams’ stadiums. In Pittsburgh, Forbes Field was named after a British general who helped found the city. In one interesting example, the Cincinnati Reds played at the “Palace of the Fans,” probably the last time a team thought of the fans when naming a ballpark (Erardi, 1999). However, in the last decade and a half, naming rights have become an essential part

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of stadium and arena economics. As these facilities become more and more expensive, naming rights defray some of the costs of construction. In 1973, Rich Stadium in Buffalo became the first stadium in any major league to utilize naming rights. The rights fee was $1.5 million for 25 years. By 1988, there had been only three naming-rights deals, with a total contract value of $25 million. In 2003, 66 “named” facilities existed, worth $3.6 billion. When the Los Angeles Forum was renamed the Great Western Forum in 1988, many callers hung up, thinking they had dialed a wrong number (Horovita, 1988). Since then, public acceptance of “named” stadiums has increased. In 2004, more than half the arenas and stadiums in professional baseball, football, basketball, and hockey now bear corporate names. Some firms even have naming rights in multiple facilities. For example, American Airlines obtained naming rights for arenas in Dallas and Miami. The naming-rights trend has also extended to minor league and college stadiums and arenas. A long-term naming rights deal provides an excellent funding device. Corporations wish to purchase naming rights for a number of reasons. The repeated use of the name countless times during broadcasts and in print article references constitutes a potentially cost-effective way to advertise. Often, broadcast contracts stipulate that team announcers use the corporate name in all references. Additionally, given that the naming rights are exclusive, competitor firms do not have many alternate facilities to obtain similar rights. The facility becomes attached to that corporation and that corporation only. Naming rights help create a positive image and foster local goodwill toward a firm, especially if the teams using the facility are successful and popular. They make the business a part of the sports community in that city. The rights create a major presence in regions where the firm seeks to expand operations. A previously unknown financial institution can make a major impact in its new territory by buying naming rights. However, that notoriety has its risks. The Houston Astros’ stadium was originally named Enron Field and kept that name for only two seasons. This proved embarrassing after Enron’s downfall, with indictments of many of its top directors and officers. Because Enron filed for bankruptcy, the Astros were legally able to find another sponsor. The stadium was renamed Minute Maid Park in 2003, to the great relief of the team and stadium owner. Naming rights facilitate cross-promotion and tie-ins. For example, Fleet Bank (since acquired by the Bank of America) had the naming rights to the Fleet Center in Boston. As part of its rights, automatic teller machines from the bank were installed for patrons to withdraw cash. Chicago’s United Center has an airline ticket booth. Also, the firm obtains a luxury box or other select seating, an excellent device for bringing prospective or potential clients. Finally, tax advantages exist. The

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costs incurred in the purchase of naming rights may be allowed as “advertising business expenses” under the Internal Revenue Code (Internal Revenue Code, sec. 162). Naming rights agreements are usually over a long term. The range is typically 10 to 30 years with options to renew. Annual payments are made by the firm to the team or to the local government or stadium authority in charge of building the stadium or arena. If a franchise decides to end its tenancy and move out of the stadium at any time during the term of the signage agreement, the firm usually has the right to terminate that agreement. If the stadium or arena is significantly damaged or destroyed by an unforeseen event, the firm may terminate the agreement. If the facility cannot be used for a relatively short time due to an act of God (force majeur) event, the agreement may call for a suspension of payments for that period, but not a termination right. Signage placement serves as a centerpiece of any naming rights deal. A standard agreement involves placing signs on the side of the facility (able to be seen from a highway), on the roof (if it is enclosed), and on certain “exit” signs on the highway leading to the facility. In the interior, the agreement specifies the number of signs inside the facility and their locations (e.g., left field wall, back of home plate). Additionally, a sign is usually posted on or near the scoreboard. The agreement often specifies that the facility may contract with other advertisers, but the other advertisers cannot be competitors of the naming rights firm. Or, it may specify that the firm may have the right to veto the selection of any other advertiser inside the facility. Houston’s Toyota Center provides an example of a typical deal. The arena, which opened in September 2003, is home to the NBA Rockets, the WNBA Comets, and the American Hockey League Aeros. The sponsors are Toyota Motor Sales USA, regional distributor Gulf States Toyota, and the Houston Power Team Dealers. The 20-year, $100 million agreement includes the following: • Signage at the five entrances to the facility, including a “large neon sign” at the main entrance. • The name “Toyota Center” on the roof, along with the Toyota logo. • Signage at four locations in the parking garage. • A 41-foot-high by 35-foot-wide graphic of the Toyota logo just inside the main entrance visible from outside the arena. • The right for Toyota to name a courtside lounge adjacent to the luxury suites on floor level. • Toyota’s name or logo on video screens at each end of the building, in two places on the basketball court itself, and on the front of the courtside press table (Feigen, 2003).

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CONCESSIONS Concessions are important in generating stadium revenues. Although many think of concessions as overcrowded stands selling overpriced hot dogs, pretzels, and sodas, the kinds of items sold and the agreements to sell them constitute important aspects of a stadium or arena deal. Successful concessions—based on variety and placement—can add significant revenues to both the stadium owner and the team. For example, the Philadelphia Eagles, which moved into Lincoln Financial Field in 2003, have an official hot dog (Dietz & Watson), an official salty snack (Utz Quality Foods), and an official ice cream (Turkey Hill). The companies have their products sold exclusively at the new stadium, and their logos are displayed on signs throughout the concourses. In addition, all three obtained the right to use the team logo and colors in Eagles-themed food products for sale to the general public and can do cross-promotions. Utz issued a limited-edition, one-pound Eagles commemorative bag of potato chips. Dietz & Watson’s sells “Eagles Beef Franks” in stores around Philadelphia, and Turkey Hill plans a new ice cream called Eagles Touchdown Sundae. Team players and other team personnel may also be involved. When the concession deals were announced, offensive tackle Jon Runyan, the Eagles cheerleaders, and Swoop, the team mascot, attended. A particular segment of the concession deal, known as “pouring rights” applies to beverages. Pepsi and Miller Brewing secured pouring deals. Pepsi bought the rights to sell its soft drink and bottled water brands—and to put its name on a gate and an open area to be known as the Pepsi Zone. Miller gets its Lite beer served and sponsors a party tent in the plaza outside the north end of the stadium (Brockinton, 2002). In some facility agreements, the team gets 100% of the concession revenues, whereas in others the team may get 100% of concessions on game days (Greenberg & Gray, 1996). In yet other agreements (usually in older facilities), the owner gets 100% of the revenues. One other approach involves splitting the fees between owner and team based on total revenues or on products. For example, the owner may get 100% of revenues for food, whereas the team gets 100% for souvenirs and programs.

SEAT LICENSES For a team or governmental entity financing the costs of building a new stadium or arena, the use of the personal seat license (PSL) can be a very effective revenue generator. These licenses consist of agreements by ticket holders to pay a fee for the right to purchase tickets at a speci-

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fied location for a designated period. The license brings in millions of dollars to help defray the costs of the construction of the new facility. It helps governments and taxpayers who may partially foot the bill because it eases the financial bite. Finally, it may bring the fans a closer identification with the respective team. By purchasing a property right in their seats (which may or may not be transferred to others, depending on the particular PSL), the fans contribute to the success of the team in helping build a top-of-the line facility, from which the team (and the entity that owns the facility if not the team) can derive revenues. The concept does have drawbacks. First, if fewer fans than expected pay for licenses, the construction financing may be in jeopardy. A municipality may have to guarantee the shortfall, which occurred when the City of Oakland agreed to refurbish the Oakland Coliseum (known as the Network Associates Coliseum since 1998). Also, the often considerable fees charged by licensors limit access to the stadium by fans of lesser means. And disputes have arisen over the “caliber” of the seating received by the license holder. In one case, a group of Pittsburgh Steelers season ticket holders who bought seating licenses for the team’s new stadium sued because the seats they received were not comparable to what was promised (Yocca v. Pittsburgh Steelers Sports, 2004).

SEATING ORGANIZATION/PRICING At one time, the typical seating plan in a stadium or arena had a graduated sectional approach. The facility consisted of four or five distinct sections (box seats, loge, reserved grandstand and unreserved grandstand), with the best seats toward the front and the more affordable seating further back and higher up. The revenue generated from this arrangement was often unpredictable, unless many season tickets were bought. Even for those facilities with a strong season-ticket commitment, teams and facility owners now create new levels of premium seating to increase revenue. Luxury suites are probably the best known and most successful form of seating-based revenue. Although many older stadiums had some “private boxes” (the first being 18 private boxes furnished with drapes and armchairs in the stadium for the Chicago White Stockings in 1883), modern luxury suites have become far more ubiquitous in the newest facilities. The revenue derived often constitutes the second most important revenue stream for professional sports franchises, behind television revenues (Greenberg & Gray, 1996). Often expensive, with prices in the hundreds of thousands of dollars per season, these suites frequently include a kitchen, waiter service, and comfortable seating in an enclosed, climate-controlled environment, somewhere toward the middle or top of the stadium or arena.

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In considering the importance of such seating to the economics of a franchise, let’s take the example of the Fleet Center (now TD Banknorth Garden) in Boston, a facility that opened in 1995. The Fleet Center contains 104 luxury suites available for prices ranging from $175,000 to $225,000 per season (http://www.intix.org/news.php?ArticleUD=821). This compared with only 36 in the old, cramped Boston Garden, the arena replaced by the Fleet Center. Average the prices, and the result is tens of millions of dollars per season. In larger stadiums, the numbers of seats are often higher. FedEx Field, the home of the Washington Redskins, includes 280 suites. The revenues from luxury boxes may go to defray the costs of construction, to pay off debts, or to the stadium owner and the franchise in some formula found in the lease. Often the franchise takes the lion’s share of the money. The NHL’s Anaheim Mighty Ducks get 45% of the first $1 million derived from luxury suite revenues, 50% of the next $10 million, and 55% of the next $10 million (Greenberg & Gray, 1996). In other cases, a flat percentage is used. The Arizona Diamondbacks pay 5% of the revenues to the owners of Bank One Ballpark, the Maricopa County Sports District (Greenberg & Gray, 1996). Club seats constitute a second class of premium seating. This idea came from the late Joe Robbie, the owner of the Miami Dolphins. The biggest difference between club seats and luxury suites is that club seating mixes with the general seating layout of the facility, although with more perks. Far less costly than luxury suites, club seats cost tens of thousands of dollars per season, rather than the six-figure amounts for suites. No uniform location exists for club seats, although they are often found at choice locations, such as center ice, or the third-base dugout. Often club seat holders have waiter or waitress service and television monitors. Generally sold on an annual lease that can cover from 1 year to 10, the team usually keeps the bulk of the revenues from club seating, although facility agreements usually require that a small percentage go to the facility owner. “Regular” seating generally follows the more traditional pricing model, although with higher prices than in the past. A few franchises have begun to experiment with alternative pricing techniques, whereby certain matches with more competitive or popular opponents will feature higher prices for all (or part of) the seats than for those with less attractive rivals.

ADVERTISING As anyone who has attended a sporting match can attest, advertising is a ubiquitous component to the viewing experience. Often placed in conspicuous locations in the stadium or arena, the size and frequency

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(in the case of rotating advertisem*nts) of the material vary, depending on the agreement made. A key point is exclusivity. Rarely will advertisem*nts for two products of a similar type occur in one facility. The heart of facility advertising is signage. The company with the naming rights will often have the pick of the best location(s) for signs, which often means the scoreboard display. However, the team and/or facility owner may contract with other advertisers for signage and or advertisem*nts outside the location of play, such as near concession stands or near the entrances and exits. Ads even grace bathrooms. A firm called Stall Tactics places advertisem*nts above urinals and in restroom stalls (Greenberg & Gray, 1996), claiming that patrons will likely remember ads in unusual areas. The control of advertisem*nt procurement and revenues are controlled by the lease agreement with the facility owner and the team. In some cases, the lessor (facility owner) retains advertising selection and revenues, whereas in others it is the team that controls both. In some cases, revenues are split between the team and the owner.

PARKING Fees from parking may be divided between the franchise and the stadium owner. Additionally, the fees may include nonevent parking.

OTHER REVENUE GENERATORS In addition to the options already described, a stadium or arena may include other devices designed to generate revenue. The facility may include one or more retail stores, with agreed-on amounts going to the team and/or the owners, sit-down restaurants open to the public on game and nongame days, paid public tours, and even museums. The lease agreements will often divide the revenues in some proportion between the team and the facility owner.

ALTERATION OF EXISTING FACILITIES If an established team cannot construct a new facility or get the stadium/arena owner or a locality to build one, expansion or alteration remains a viable option. Often done by adding more seats, or creating different seating tiers, it serves to modernize the facility and increase revenue potential. Fenway Park, the long-time home to the Boston Red Sox, added 274 seats above its left-field wall in 2003 and sold them at $50 per seat. In the following year, the team added more seats atop the roof of the structure and sold them for a minimum of $75 per ticket. The

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added seating was expected to bring in $4–$6 million for the team (Sandomir, 2004a).

A FINAL WORD Stadiums serve as major money machines for sports teams, and a state-of-the-art facility generates potentially more revenues than an older venue. Even in the NFL, with its equal sharing of important revenue streams, the changing economics driven by stadium deals create disparities between “stadium-rich” and “stadium-poor” teams of as much as $100 million per season, according to one report that cited NFL executives (Bell, 2004). In March 2004, NFL commissioner Paul Tagliabue appointed a 12-member committee to study this disparity and recommend changes. Although the 1990s was a boom period for new facilities, demands for new stadiums and arenas continue. New York City, for example, has two aging baseball stadiums and no venue ideal for football. The questions of cost, governmental aid, and public support for new facilities costing hundreds of millions of dollars continued to be debated.

INFORMATION CHECK When covering stadium/arena construction and team relocation issues, a journalist should ask: 1. Why is a new/renovated facility needed? 2. What are the design plans? 3. Who owns the facility? 4. What is the proposed method of financing? 5. If government sources constitute all or part of the financing, how will be the money be raised? Taxes? Bonds? 6. If taxes serve as a revenue vehicle, what kinds will they be and whom will the taxes affect most? 7. If bonds serve as a revenue vehicle, who will issue them—the state or locality or a public corporation? 8. If private sources are involved, who are these sources and what are the amounts of contributions? 9. What are the details of the naming rights deal, such as the term, placement, and costs, and who gets the revenue? 10.What are the details of any sponsorship deal, such as the term and coverage, and who gets the revenue? 11.What are the costs of luxury box and club seating? 12.Who gets revenues from nonsports events at the stadium?

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REFERENCES Baade, R. (1994). Stadiums, professional sports and economic development: Assessing the reality. Chicago: The Heartland Institute. Bell, J. (2004, July 6). NFL tug-of-war over revenue. USA Today, p. 1C. Brockinton, L. (2002, September 9). Pepsi becomes Philly founder. Street and Smith’s Sports Business Journal, p.4 Caldwell, D. (2005, May 16). Baseball’s minor leagues more than just about baseball. New York Times [online]. Retrieved July 11, 2005, from www.innx.org/ news.php?ArticleID=821 Cozzillio, M., & Levinstein, M. (1997). Sports law—Cases and materials (pp. 568–569). Durham, NC: Carolina Academic Press. Dorocak, J. (1999). Tax advantages of sports franchises: Part I—The stadium. Law Review of Michigan State University—Detroit College of Law, 579. Erardi, J. (1999, April 5). A ballpark built for the fans. Cincinnati Enquirer, p. 8S. Feigen, J. (2003, July 25). Arena’s sticker price for Toyota: $100 million. Houston Chronicle, p. A1. Fraas, K. N. (1999). Notes & comments: “Bankers up!” Professional sports facility financing and other opportunities for bank involvement in lucrative professional sports. North Carolina Banking Institute, 3, 201, 210–223. Greenberg, M., & Gray, J. (1996). The stadium game (pp. 63, 71, 159, 161–162, 185, 339, 349). Milwaukee, WI: National Sports Law Institute, Marquette University Law School. Greenberg, M., & Gray, J. (1998). Sports law (2d ed., vol. 1, pp. 218, 225, 523). Gaithersburg, MD: Aspen. Green, K., Klein, B., & Lebowitz, B. (1998). Using tax-exempt bonds to finance professional sports stadiums. 78 Tax Notes 1663. Horovita, B. (1988, December 6). They are banking that it’s a great advertising forum. Los Angeles Times, p. 2. Keating, R. (2001). Baseline welfare cases: Stadiums, subsidies and the dole. Retrieved June 20, 2005, from www.newcolonist.com/stadium.html Krueger, A. B. (2002, January 10). Take me out to the ballgame, but don’t make taxpayers build the ballpark; The high cost and low benefit of sports subsidies. New York Times, sec. C, p. 2. Kurlantzick, L. (1983). Thoughts on professional sports and the antitrust laws: Los Angeles Memorial Coliseum Commission v. National Football League. Connecticut Law Review, 15, 183, 203. Leone, K. C. (1997). No team, no peace: Franchise free agency in the National Football League. Columbia Law Review, 97, 473. Los Angeles Memorial Coliseum Commission v. National Football League, 726 F. 2d 1381 (9th Cir. 1984). Masteralexis, L. P., Barr, C., & Hums, M. (1998). Principles and practice of sports management (pp. 299–300). Gaithersburg, MD: Aspen. Mitten, M. J., & Burton, B. W. (1997). Professional sports franchise relocations from private and public law perspectives: Balancing marketplace competition, league autonomy, and the need for a level playing field. 56 Maryland Law Review, 56, 57, 104. Quirk, J., & Fort, R. (1997). Pay dirt–The business of professional team sports (pp. 131–132). Princeton, NJ: Princeton University Press.

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Sandomir, R. (2004a, April 16). To raise money, baseball tries new squeeze play. New York Times, p. A1. Sandomir, R. (2004b, May 30). At (your name here) arena, money talks. New York Times, sec. 3, p. 1. Shapiro, M. (2004). The last good season: Brooklyn, the Dodgers and their final pennant race together. New York: Doubleday. Valenti, J. (1997, October 8). Spano cops plea; Admits he lied about wealth, could get 5 years in prison. Newsday (New York), p. A05. Whoriskey, P. (2003, July 28). Stadiums are built on federal tax break. Washington Post, p. A01. Yocca v. Pittsburgh Steelers Sports, Inc., 854 A. 2d 425 (Pa. 2004). Zimbalist, A., & Noll, R. (1997). Sports, jobs and taxes: The economic impact of sports teams and stadiums. Washington, DC: Brookings Institution Press.

CHAPTER

9 Sports Injuries

Whether one is a professional athlete or a weekend warrior, almost every participant incurs physical injury at one time or another. Sports such as football and ice hockey result in more frequent and severe injuries than others, due to the frequent physical contact between players. Auto racing displays particular danger because of the limited space between drivers racing around an oval track at high speeds. Activities not associated with physical contact also have the risk of injury—recreational jogging and tennis come to mind. Even spectators at sporting events also suffer injuries. In the majority of cases, sports injuries are minor, but serious, even fatal accidents do take place. When a fatality results from a sports event, news coverage occurs. The death of Brittanie Cecil, a 13-year-old spectator at a NHL Columbus Blue Jackets hockey game in 2002, serves as a good example. After an errant puck hit her, she suffered fatal brain damage. The intense media coverage resulted in the NHL using netting, in addition to Plexiglas boards, to protect fans sitting in back of the goals (Arace, 2003). 203

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Frequently, the media covers an injury suffered by a professional or collegiate athlete that sidelines that athlete for a period of time and adversely affects the team’s chances of success. Issues like the causes and preventions of sports injuries have generally lacked sufficient news coverage, and the underlying business and legal issues surrounding the question of sports injuries are infrequently explored. Another problem involves disclosure. Of the many professional sports, only the NFL makes its injury information public. Reporters covering other sports often have to speculate. In college sports, disclosure of injuries may be limited because of the provisions of the Health Insurance Portability and Accountability Act (HIPAA) and its accompanying privacy regulations, which restrict the dissemination of individuals’ health information. Practically, however, most college athletes sign a waiver, permitting such disclosure (29 USC sec. 1191c). The bulk of the total number of injuries involves the millions of recreational athletes who participate simply for the fun and exercise. Injuries are so ubiquitous and the people so unknown that little newsworthiness exists for most cases (unless a fatality or severe injury occurs). Statistically, 40% of deaths and serious injuries related to athletics occurred in swimming, diving, and boating, not team contact sports (Appenzeller, 1998). Lack of training and lack of supervision are common threads that run through such cases. Despite the litigiousness of our society, difficult legal hurdles exist for a person to win a lawsuit for injuries incurred in sports activities. Traditional legal doctrine often immunized liability of other participants, team owners, leagues, and schools. The responsibility rested almost solely on the person suffering the injury because he or she assumed the risk of harm or consented to participating in an activity with an inherent risk of harm. Successful lawsuits were rare. Recent changes in law and society have made this issue less clear-cut. While legal victory is far from guaranteed, stakeholders such as sponsors, municipalities, stadium/arena owners, and insurance companies may incur liability, with the possibility of considerable damages awarded against one or all of them by juries. The most difficult and important issues do not involve the responsibility of one athlete for injuring another, but lack of adequate protection, such as safety standards provided by third parties to prevent injuries from occurring. This concept, known as risk management, merits discussion later in the chapter. Still, many of the rules outlining the inherent risks of sports activities and legal immunity remain in place. For every moneymaking case, others are dismissed before making it to trial. This chapter discusses several topics: (a) the key legal standards governing sports injuries; (b) the consequences of dangerous athletic

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activities; (c) how sports organizations attempt to minimize the risk of injury on participants and spectators; and (d) the post-9/11 environment. It should give journalists a primer as to what kinds of questions to ask when covering an injury situation. Note that a general discussion follows. Specific standards do vary from state to state.

LEGAL THEORIES Sports injury cases combine two distinct areas of law: torts and contracts. A tort occurs when someone engages in conduct that violates a duty imposed by law resulting in financial responsibility. A tort involves certain levels of liability (never use the word guilt when writing about a tort case, because guilt is a criminal law concept). Often a jury hears a tort case, and it determines (a) the defendant’s liability and if so, (b) the amount of monetary compensation awarded to the victim. It is important not to confuse torts with criminal law. In tort cases, the injured party, not the state, brings claims. A jury determines liability and a monetary amount for the damages, not a prison term. The standard for proving the tort is less onerous than for a criminal case. Liability is based on a “preponderance of the evidence,” whereas a criminal case requires guilt “beyond reasonable doubt”—a high level of certainty.

Who Can Be Liable? Potentially, tort liability extends to many parties. And plaintiffs sue as many parties as practically possible, in an attempt to collect damages from the defendant with the most assets (known as “deep pockets”). The following list demonstrates the potential defendants. Participants. Participants are those who participate in the event. Where one participant commits an intentional, reckless, or negligent act against another, liability accrues. Service Personnel. These include teachers, lifeguards, aerobics instructors, and trainers. Each has a duty of care to the students and may be liable for tortious acts. The liability of coaches and athletic personnel includes failure to provide competent personnel, adequate instruction, or proper equipment; failure to warn; failure to supervise; and improperly treating injured athletes. Liability also occurs for violations of association or conference rules, and injuries due to the improper design of a facility.

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In January 2005, a jury awarded $135 million to the family of a 7-year-old girl paralyzed in a car accident caused by a drunken fan, holding the vendor liable for serving the patron (who is serving a jail term for vehicular assault). The stadium rule of buying two beers at one time was violated when the patron gave the vendor $10 in exchange for buying six beers. The team and the stadium owner were not held liable (Markos, 2005). Spectators. Spectator injuries occur during sports events, and it is common to categorize fans as victims—one hit by a foul ball or a hockey puck—rather than producers of the injuries. However, cases where spectators instigate violence against other spectators, or even against athletes and officials, may result in liability against those aggressors. Nevertheless, as discussed later, owners, operators, and administrators are also liable for such transgressions, as they have primary responsibility for the safety of patrons, athletes, and officials. Administrative/Supervisory Personnel. This categor y includes leagues, school principals, and the school districts, with liability based on their supervisory role, rather than participation in the act itself. If a plaintiff can prove that these defendants employed unfit personnel, failed to provide proper supervision, failed to have a supervisory plan, improperly directed an event or athletic program, failed to establish safety rules or comply with existing safety requirements, or failed to remedy dangerous conditions, liability (usually negligence) occurs. Employers. A doctrine known as “vicarious liability” results in employers having responsibility for the acts of employees. Even if the employer shows no fault of his or her own, the employer’s liability occurs through the negligent acts of the employees. For example, if an employee of an arena fails to attach the basketball court correctly and a spectator trips and breaks an ankle, that employer is vicariously liable. However, limitations exist. First and foremost, the employee causing the injury must have acted within the “scope of employment,” meaning that the incident occurred during working hours and under the supervision and control of the employer. Courts have to determine how much control and supervision were present at the time of the injury.

Liability Torts are classified into four basic categories: intentional acts, recklessness, negligence, and strict liability. These require different standards

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of proof. The following describes the basic requirements to determine liability and defenses for the following torts. Intentional Torts. Intentional torts require the plaintiff to prove that the defendant displayed a desire to injure. Most frequently, intentional torts in sports involve assault and battery cases among participants. Assault constitutes the desire of one person to put another in fear of unauthorized bodily contact. The battery is that unauthorized contact. Assault and battery tend to occur in body contact sports such as football, ice hockey, and soccer. However, difficulties occur when proving these torts in an athletic context. A football tackle, for example, displays an intention to hit another player; the same applies to a body check in hockey. In most cases, these acts are deemed as “part of the game,” thereby precluding successful claims for assault and battery. Legal and practical reasons exist for the relative lack of assault and battery lawsuits. Legally, an important defense known as “consent” applies in a great many situations. If the athletes voluntarily participate in a sport, have knowledge of the risks involved, and have an awareness of potential injuries that may occur, consent occurs (van der Smissen, 2003). A football player who steps onto the field consents to being tackled, and a hockey player on the ice consents to bodily contact. For youth and amateur participation, this standard is supplemented with a contract that the participant (or parent) signs, outlining the nature of these risks. The consent defense covers activities within the reasonable contemplation of one who plays a particular sport. For example, an intentional high stick in a hockey game is not permitted and results in a penalty against the wrongdoer. But high sticking occurs in hockey, and the internal rules of the sport attempt to regulate this conduct. Therefore, an assault and battery lawsuit would likely be unsuccessful. When the act goes beyond those boundaries of reasonable activities—legal or illegal in the sport—then the consent defense fails. Professional athletes are particularly reluctant to bring assault claims to court. Sports organizations, particularly professional leagues, frown on litigation and prefer to enforce penalties against transgressors by their own internal governance. Other players may ridicule the athlete for resorting to courts, rather than the league process (or in some cases, for defending himself or herself on the field or in the rink). Then the reputation of the athlete and even of siblings entering the sport suffers. In one case, a hockey player for the NHL’s Colorado Avalanche considered bringing a lawsuit against a Vancouver Canucks player whose improper body check rendered him unconscious, but decided not to because the victim’s brother sought to play in the NHL (Berlet, 2004). Finally, the po-

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tential damage recovery may not be worth the effort. For those with guaranteed contracts, their salaries will be paid to them for the rest of their contract terms in any event. Whether the event took place in an amateur or professional sports context, the keen journalist should ask whether the conduct was within the contemplation of the sport and subject to the consent defense. Recklessness. Reckless conduct does not require intent to render a specific injury, but exists when a player “intends to commit the act but does not intend to harm an opponent.” One commentator defined it as “highly unreasonable conduct where a high degree of danger is present” (Keeton, 1984). The leading case defining this concept involved a professional athlete who sued an opposing player and team for injuries suffered during an exhibition game in 1973. Dale Hackbart, a safety for the Denver Broncos, attempted to block Charles “Booby” Clark, a rookie running back for Cincinnati. Clark, “acting out of anger and frustration, but without a specific intent to injure,” hit Hackbart on the back of the head and forearm. No penalty was called. After the game Hackbart was diagnosed as having a neck injury, ending his career. A federal appeals court concluded that Hackbart had a viable claim for recklessness, rejecting the view that the inherent danger of the sport precluded this action (Hackbart v. Cincinnati Bengals, 1979). Negligence. Negligence, the most heavily utilized tort, is not based on intent, but rather on a determination of fault. A plaintiff alleging negligence must prove that the defendant failed to act in a manner commensurate with a “reasonable person” in the same circ*mstances. To prove a case of negligence, the injured must show: (a) that the defendant (the team, school, doctor) had a duty of care to the injured person; (b) that the duty of care was breached; (c) that the breach caused the injury; and (d) that the injured person suffered damages. Although this standard seems easier than that of intent and recklessness, many claims involving sports injuries are precluded due to dangers inherent in the given sport or from clauses in contracts prohibiting such claims. As a prerequisite to a negligence claim, a duty of care must be present, meaning a legal responsibility of the defendant to the plaintiff. In many cases the duty is obvious and easy to establish. A school has such a duty to its students, as a league does to its participants. But sometimes evidence of this legal duty is elusive, as in this example: A member of a college rugby team broke his neck while participating in a tournament hosted by another college. The plaintiff sued both his school and the hosting school, claiming negligence. He claimed

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that the hosting school was responsible for the “negligent conduct” of its rugby team because the host school’s team held a co*cktail party the night before the tournament, even though two matches were scheduled on the next day. The court dismissed the lawsuit against the host school because no legal relationship was found between the parties (Fox v. Board of Supervisors of Louisiana State University, 1991). Once it is determined that a duty exists, the focus shifts to the second element—a lack of reasonable care in the defendant’s actions. A core concept in the law of negligence, this means that a court compares the defendant’s actions to those of a fictitious “reasonable person” under the same circ*mstances to determine whether a breach of that duty occurred. The next issue concerns whether that breach of duty “caused” the injury. This is a complicated and abstract legal doctrine, and we do not have to engage in in-depth analysis here. For our purposes, causation means a direct connection between the act and the accompanying injury. Let’s take this example: D, a softball player, decides to take batting practice outside an area of the field designated for such practice. He disregards the signs posted in the locker room designating the area for batting practice. While taking practice swings, he hits P, another player, who was standing nearby. P suffers a concussion and a broken cheekbone. Analyzing this case based on the preceding standard, a legal duty existed between players D and P, and D acted below the standard of reasonable care by disregarding the sign and engaging in an activity involving a blunt instrument. Also, the injury to P was a direct cause of D’s improper activity. Even though D did not seek to hit P, the actions demonstrated negligence. The preceding case is quite simple; however, negligence cases involving sports are often more complex and involve more than one defendant. A key issue surrounds the role of “supervisory” personnel, such as a coach, teacher, league, school district, or, in some cases, a sponsor. The focus of the liability on the supervisory personnel differs from that of the person who committed the act. Here, the liability results from a lack of an adequate safety plan, or proper training. For example, if a teacher acted negligently in failing to properly administer first aid to a student who suffered an injury, the principal, the school, or the superintendent of the school district can be held liable if that teacher did not possess the requisite first-aid certification mandated by the state’s law, and that deficiency caused the injury. Defenses to Negligence Claims

Defenses to negligence exist. One is contributory negligence, which results if the plaintiff also acted in a negligent manner, contributing to the injury. Contributory negligence traditionally served as a complete

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defense and resulted in a dismissal of the lawsuit no matter how egregious the defendant’s negligence. Even if the plaintiff was slightly negligent, the defendant won the case. The harsh results of contributory negligence prompted most states to eliminate that defense and replace it with “comparative negligence.” Comparative negligence rules vary from state to state, but basically this concept apportions the damages between the negligent plaintiff and one or more defendants. If both a defendant and plaintiff are deemed negligent, the jury’s damage award is reduced to the extent to which the plaintiff contributed to his or her own harm. Taking the last example, under a comparative negligence system, if a jury determines that the plaintiff was 30% at fault and the defendant 70%, and the jury awards $100,000 in damages, the plaintiff only receives $70,000. Most states require that the plaintiff ’s negligence cannot exceed a threshold of 50%. If that is exceeded, the plaintiff cannot recover any award. The final defense, assumption of risk, ranks as the most important used in sports injury cases. A participant in an athletic activity, who voluntarily and knowingly assumes a risk of harm arising in that activity, cannot recover damages for a negligent act occurring during that activity. Assumption of risk is a defense only in negligence and strict liability cases. Intentional tort claims, as mentioned earlier, employ the defense of consent. For example, fans attending a baseball game know that a ball may be hit foul and into the stands. They assume the risk of that injury. An amateur hockey player hit by a puck causing injury to his eye also will likely lose any lawsuit on that basis. (Note that professional athletes are barred from most injury lawsuits based on workers’ compensation laws, discussed later.) In most states, assumption of risk requires that the risk be “foreseeable.” This issue of foreseeability is a key point to ask a lawyer representing any party in a negligence case. In 2004, a Massachusetts Appeals Court rejected a jury award of $486,909 in a lawsuit against the Red Sox filed by a spectator hit by a foul ball. The court concluded that “even someone with scant knowledge of baseball should realize that a central feature of the game is that batters will forcefully hit balls that may go astray from their intended direction.… [The Red Sox] had no duty to warn the plaintiff of the obvious danger of a foul ball” (Costa v. Boston Red Sox Baseball Club, 2004). Assumption of risk doctrine frequently involves contractual clauses in which participants agree before they can participate in an activity. Participants frequently contract to limit negligence liability arising from an injury in a sports event. Often explicit (known as an express as-

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sumption of risk) but sometimes implied from the general terms of the agreement, these limitations clauses are generally enforceable.

LIMITATION OF LIABILITY CLAUSES Most organizations that sponsor sports competitions require participants to sign event participation agreements. These contracts contain provisions that serve to limit the liability of sponsors, owners, schools, and other organizations in personal injury lawsuits. Known as “agreements to participate,” they may include issues such as protective gear requirements, medical prerequisites, and the types of care available in case of an emergency. An example of a simple agreement to participate may state the following: I know that participating in this event is a potentially hazardous activity. I agree not to enter and participate unless I am medically able and properly trained. I agree to abide by any decision of an event official relative to my ability to safely complete the event. I am voluntarily entering and assume all risks associated with participating in the event, including, but not limited to, falls, contact with other participants, spectators or others, the effect of the weather, including heat and/or humidity, traffic and the conditions of the course, all such risks being known and appreciated by me. Having read this Waiver and knowing these facts, and in consideration of your acceptance of this application, I, for myself and anyone entitled to act on my behalf, waive and release [organization, parent organization, national governing body, city and state], all sponsors, and their representatives and successors, from present and future claims and liabilities of any kind, known or unknown, arising out of my participation in this event or related activities, even though such claim or liability may arise out of negligence or fault on the part of any of the foregoing persons or entities (New York Road Runners waiver, 2005).

When writing about a negligence lawsuit and an assumption of risk defense, a journalist should examine the agreement containing the particular assumption of risk provision. For those participants under the age of 18 years, a parent or guardian must sign; otherwise, the waiver may not be enforceable because the minor lacked the legal rights to consummate the contract. Note that the agreement serves as evidence of notification of the risks involved. Courts tend to scrutinize these agreements to ensure that they are not manifestly one-sided. If so determined, a court can strike them down as “unconscionable” and the injured person may sue based on traditional tort concepts. Most states do not enforce a clause that “limits all liability to the presenting organization, league, school, coach and other partici-

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pants,” even if signed with free will. Instead, the courts usually enforce a clause limiting liability for negligence, but not for intentional torts such as assault and battery. Keep this point in mind when interviewing an attorney representing a defendant in such a case. The language in such agreements must be clear and concise. If not, courts may refuse to enforce them on the basis of public policy. Consider the following example: Plaintiffs, an auto racer and his wife, sued for damages after the racer suffered injuries. Before the race, the racer signed a “Release and Waiver of Liability/Indemnity Agreement” as a precondition of participating in the race. During a race, his vehicle crashed and burned. He suffered burns and incurred substantial medical costs. He sued based on negligence alleging the lack of care in fighting the fire by the racetrack. The agreement barred legal actions for, among other things, injuries compounded by “negligent rescue operations.” That term was undefined and the racer argued that it made the limitation of liability “vague and unenforceable.” The court ruled otherwise, noting that even though it did not specifically state that the waiver applied to “negligent firefighting” claims, the waiver did include the term “negligent rescue operations” when it stated that injuries received may be compounded by negligent rescue operations (Groves v. Firebird Raceway, 1995).

STRICT PRODUCT LIABILITY In the last half-century, the concept of strict product liability for acts that lack intent or fault on the part of the defendant has become an accepted standard for certain “unreasonably dangerous” items. Product liability cases focus on defects in design, manufacture, or warnings making the product “unreasonably dangerous,” rather than the actions of individual players, coaches, or supervisory personnel. The reason or cause of the defect is not important. Liability extends to both manufacturers and retailers, as long as a third party does not alter the product. Note that the “no-fault” standard of product liability does not guarantee liability. Many of these lawsuits fail to make it to court because of the difficulties in determining “defect,” “unreasonable dangerousness,” and “cause.” Also, the defenses of assumption of risk may be applicable. As a result of product liability litigation, manufacturers attempt to limit their liability by posting warnings on both the product and in the instructions. They should carefully craft the design, as well as the word-

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ing, advertising, marketing, and promotion of the product. The wording in a catalog can be significant. There should be clear and unambiguous warnings on the packaging as well. Product liability lawsuits have involved athletic equipment. Frequent claims allege design defects in football helmets. Some plaintiffs have demonstrated tragic injuries, such as quadriplegia or head injury (Arnold v. Riddell Sports, 1994; Rodriguez v. Riddell Sports, 1999).

STATE LAW IMMUNITY States and localities are favored defendants in personal injury lawsuits because of their “deep pockets”—considerable resources to pay legal judgments. A bar to unfettered lawsuits against these defendants is the use of “sovereign immunity,” a traditional doctrine aimed to protect the state from lawsuits for its actions. Many jurisdictions retain laws limiting lawsuits; others have granted permission for parties to sue them. If a plaintiff sues a town for an injury sustained in a town park, claiming negligence due to inadequate supervision, the existence of an immunity law may prohibit the lawsuit. Even when lawsuits are allowed, states and localities can require “notice of claims” filed in an expedited manner (90 days in New York) or mandate that the trial be held before a special judge, not a jury (New York General Municipal Law, sec. 50e; New York Court of Claims Act, sec. 12). When writing about a lawsuit against a municipality or state, it is important to know whether an immunity law exists and how it affects the claim.

MEDICAL MALPRACTICE The issue of the conduct of medical personnel in servicing athletes (and sometimes spectators) has two distinct components: the malpractice of the physician or emergency medical technician, and the responsibility of the team or organization for that conduct. Often, the two get blurred. First, consider the malpractice of physicians, trainers, and emergency medical technicians (EMTs). Similar to negligence, medical professionals have a duty to the patient to exercise the level of care that a reasonable medical expert of their level of training would provide, given the circ*mstances. If the care falls below that standard and causes or exacerbates the injuries, liability accrues—for example, when a doctor performs duties below a general, competent standard, or when a trainer fails to promptly refer an injured athlete to a physician for evaluation and treatment (Mitten, 1999).

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Over the last two decades, the rise of sports medicine as a distinct specialty and the increase in the quality of medical care in general have increased the standards of “reasonable care.” Professional teams often have sports physicians as consultants, and even if that is not the case, most franchises are located in cities with major medical centers. On the collegiate and high school level, presenters of sports events commonly have some emergency medical assistance on hand or nearby. The failure to do so may result in negligence. Courts appear to be most receptive to suits by athletes alleging that a physician or athletic trainer has improperly treated their injury, thereby causing “enhanced harm” to the athlete. In addition, courts have found that an athlete has a valid claim against a physician for improperly providing medical clearance to resume or continue playing a sport, or failing to fully inform the athlete of the material risks of athletic participation with his or her medical condition (Mitten, 1999). However, courts have dismissed negligence suits by athletes against team physicians and athletic trainers employed by public educational institutions based on state immunity laws. On the professional side, many lawsuits against teams and team physicians have been dismissed under state workers’ compensation laws prohibiting employees from suing employers or other employees for negligence. Workers’ compensation is a major hurdle for many athletes. These laws provide back wages and compensation for medical costs to victims of work-related injuries. They do not require fault, but in return, injured employees give up the right to sue their employers for full compensation. For one who receives injury for falling on a loading dock and experiences a temporary backache, this system works reasonably well. But for athletes whose careers end prematurely or who experience permanent injury, workers’ compensation is a difficult barrier. If the team doctor is an “employee” of the team, many states bar or limit suits against the employer and the doctor under workers’ compensation. If, however, the doctor is an “independent contractor” then the law does not apply and the doctor may be sued. Often the relationship between the team physician and the athlete differs from the typical doctor–patient relationship. In a typical scenario, the doctor serves the patient, not the employer. Communications are confidential, protected by the doctor–patient relationship. In the case of team doctors, the physician receives payment from the team and works for the team. The duty of reasonable care in skill and treatment remains, but questions of confidentiality, conflict of interest, and loyalty surface, especially when the medical advice or treatment

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results in an incomplete recovery, or worse, in a permanent injury (DiCello, 2001). Athletes who allege they were “forced” to play despite their injuries include former NBA star Bill Walton. In order to play, Walton claimed he “reluctantly accepted” injections of cortisone and Novocain and ingested other medications for several years. Walton eventually settled a lawsuit filed against his former team, the Portland Trailblazers (Habib, 2002). Former National Football League players Charles Krueger and Dick Butkus also sued their respective teams, alleging that the teams and team physicians failed to disclose the nature and extent of their injuries, and failed to inform them of the risks associated with painkilling treatments. The Krueger case did not involve claims of malpractice but rather the failure of team personnel to discuss relevant medical information which constituted fraud (Krueger v. San Francisco Forty-Niners, 1987). In 2002, a New Jersey jury awarded former Philadelphia Flyers defenseman Dave Babych $1.37 million for his claim against the Flyers’ team doctor. Babych alleged that the doctor “deviated from standard medical practice” and “failed to inform Babych of the ramifications of playing with the injury” (Roberts & Conrad, 2002). The traditional arrangements between a team and its medical professionals have been changing. Due to the increasingly competitive health-care market, hospitals and medical practices have sought to pay professional teams for the right to treat their players. In addition to the revenue, sports franchises get the services of the provider’s physicians either free of charge or at substantially discounted rates. In return, the medical groups and the hospitals obtain the exclusive right to market themselves as the team’s official hospital, health maintenance organization (HMO), or orthopedic group, a point worth noting when writing about malpractice claims. Criticism of this practice occurs. “These groups should have to put out a disclaimer: ‘We paid for the ability to treat these top athletes,’” said Dr. Robert Huizenga, a former team doctor for the Oakland Raiders and past president of the National Football League Team Physicians Society. “What’s it say about our profession when the most high-profile jobs are awarded not by merit, but by auction?” (Pennington, 2004). Note that an imperfect result does not automatically make the doctor or the team liable. Athletes share responsibility. Often, the athlete pressures the physician for certification to play. Professional athletes realize their tenure is limited and do not want to end their careers prematurely because of being sidelined by an injury.

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INFORMATION CHECK When covering issues involving personal injuries, a journalist should determine: 1. The circ*mstances and facts surrounding the injury. 2. The accurate diagnosis and comments from experts about the effect of such injury. 3. The parties sued and, if a verdict occurred, those responsible and their levels of responsibility. 4. The legal theories behind the lawsuit. 5. The claims of the defendants. 6. Whether waivers of liability were signed. 7. Whether the medical care was adequate. 8. The kind of relationship that the team doctor has with the team. 9. Whether the doctor is an “employee” or “independent contractor.” 10.How long the treatment in question was. 11.Whether the athlete has a history of similar injuries. 12.Whether the athlete has a history of prior medical conditions possibly complicating the treatment. 13.Whether the athlete sought alternative medical opinions.

RISK MANAGEMENT The bulk of the preceding text focused on remedies following personal injury. This portion details attempts by leagues, teams, and facility operators to reduce the risk of injury. This concept, known as risk management, involves the planning and logistics of a sports event, whether it is the Super Bowl or a local high school soccer game. The failure to adequately cover potential risk results in injuries, bad publicity, the diminution of the reputation of the organization or team (or even sponsor), and, of course, litigation. The goal of risk management is first to minimize the amount of injury overall, and second to insure that when injury does occur, someone else pays. For journalists, knowledge of these issues results in better reporting and more in-depth questions. In a sports setting, risk management involves many stakeholders: players, coaches, managers, teams, facility owners, the equipment manufacturers, vendors, spectators, and yes, the media. A well-organized and safe event is the goal. The potential for mishaps is high, and it behooves the organizations sponsoring or running the event to attempt to limit the injuries that occur on their watch. Think of the possibilities:

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a riot in or outside the facility, people falling over slippery surfaces, inebriated fans, a natural disaster, or a 9/11-style terrorist attack. Risk management procedures include planning to provide a prompt response to incidents. Organizers of an event should establish a response team and develop a well-defined strategy so that each member of that team knows what to do (Appenzeller, 1998). As noted earlier in the chapter, all sports club participants should be required to sign a waiver or release form prior to participating. But this only scratches the surface of risk management. Presenters, including sports clubs, leagues, and stadium or arena owners or sponsors, should develop a disaster handbook, obtain insurance, provide equipment and facilities fit for that particular use (which they should inspect regularly), and develop an emergency medical plan (Appenzeller, 1998). Often, they consult with independent firms specializing in this kind of work. A good risk assessor sizes up the potential risk of the event or events. Journalists covering an incident should inquire about the level of risk prevention planning involved.

Common Risk Management Issues Athlete Protection. The stabbing of women’s tennis star Monica Seles by a deranged fan and the assault on figure skater Nancy Kerrigan resulted from security breakdowns. In the latter case, the only transportation provided by the organizing committee hosting the U.S. National Figure Skating Championship was a hotel shuttle van with no security protection (Graham, Neirotti, & Goldblatt, 2001). Event promoters, teams, and leagues must have plans to protect the talent. Here are some questions to think about: Who had access to the dressing room areas? Did he or she enter from restricted entrances? What kind of security detail existed? What steps were taken to prevent fans from going on to the playing area? Were the athletes made aware of the security protections available to them? In the case of a team, did the coaches and general managers know the extent of the protection? Financial Protection. During many sporting events, significant amounts of cash changes hands. Purchases of food, beverages, souvenirs, and payment of game-day tickets result in the need to store the money to prevent theft. Where was the money kept? And in the case of credit card information, were the records secured in password-protected computers? Other questions include: How was the theft or loss discovered? What access did employees have to the information?

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Crime Protection. No organization guarantees spectator safety from criminal acts, such as thefts of wallets and pocketbooks. Frequently, the victims carelessly left these items in open pockets or simply hanging on a seat. But what if the facility gave access to non-ticket holders through an unguarded passage? In one example, at R. F. K. Stadium in Washington, DC, it was discovered that kids would sneak under the end of zone bleacher seats and steal bags and purchases. To prevent this, fences with gates had to be constructed to close off the ends of the bleachers and ushers placed at every gate (Graham et al., 2001). After a number of fans, upset over a controversial boxing decision, threw chairs into the ring in Madison Square Garden, resulting in a number of injuries and arrests, it was reported that only 70 security guards and 50 ushers serviced the entire arena (Schultz, 1996). Storage of Personal Belongings. Since 9/11, a number of sports facilities have limited what items can be brought into the facility, and many have implemented inspection checkpoints. These measures, designed to prevent terrorist acts in marquee sports events, have increased facilities’ operating costs, and burden fans by delaying their entrance. Yet if event planners did not take such action and a terrorist act occurred, questions would surely arise as to the adequacy of the precautions. Credentialing. For the press, access to nonpublic areas of the facility requires credentials. Often, the sports organization or presenter issues the credentials, and a person without the proper credentials lacks the access needed to adequately cover the event. In the case of a team playing a number of games at “their” stadium or arena, the credential procedures are well known to editors and reporters. But for an individual event, such as a national competition, the organizers must specifically state the requirements and procedures for seeking credentials. It also helps to give the credential holder proper directions and rights. Often, the presenters will not “advertise” these areas by placing large signs, to prevent the general public from seeking access. Staffing. For major events, private firms, working with local police, handle security matters. Hiring those employees involves a “reasonable” job search. In many cases, these firms do not advertise, but hire based on referrals. If a staff member embezzled money from an event, the question becomes whether the security firm failed to adequately check that employee’s background. Or, if the security staff members carry weapons, what is the nature of their training? Note that laws regulating such training vary, so no uniform standard exists.

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Ingress and Egress. How quick and easy is it to enter and exit the facility? Are the exits well marked and easy to find? In older or smaller venues, the issue deserves particular attention when a crowd control problem or riot occurs. It also wipes away some of the mistiness and nostalgia that many have for such older facilities. I attended hockey games at the Boston Garden on two occasions and found exiting particularly difficult. The cramped main passageway created a very congested atmosphere. Questions to ask include: How many exits exist? Are the exits well marked? How do disabled spectators exit in an emergency? Pyrotechnics. As part of the entertainment, many sports events feature half-time, pregame, or postgame shows involving special effects, such as smoke and fireworks. If problems occur, questions should be asked about whether the producers of the show and the sports event complied with local fire code requirements. Use of the Public Address System. What kinds of announcements are made on the facility’s public address system? Often, announcements notifying fans of risk of injury from foul balls or hockey pucks are broadcast during sports events. But what announcements occur in the event of an emergency? Are they audible? Presenters should script such announcements in advance to ensure that announcers do not “ad lib” any statements. Outside Climate and Indoor Climate Control. What is done in the event of inclement weather? If the weather forecast calls for snow or ice, this mandates the existence of procedures alerting the staff to clear passageways and stairways. Bad weather before an event requires greater steps. The clearance of snow and ice prevents injuries and ugly occurrences, like the throwing of snowballs onto the field. Snowball incidents at a few NFL games caused injury to those on the field and raised questions of the organizational planning of the event. For indoor events, the facility engineers should frequently test the climate control system. Medical Emergencies. It has become standard to have some medical personnel on premises in the event of an unanticipated need. Particular challenges occur in events that take place over a large area, such as a marathon, where water stations, medical technicians, and transportation are spaced through the entire course. Questions should focus around the training, accessibility, and amount of the equipment and personnel. Even if one operates a park or gym used by the general public, questions regarding the first-aid training and other qualifica-

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tions of personnel may exist. One study reported that only 10% of the respondents indicated that an on-site automatic external defibrillator (AED) was available in their recreation areas (Miller & Veltri, 2003).

Alcohol and Public Safety Public safety remains a primary concern of anyone involved in presenting a sports event. In a time of heightened sensitivity to mishaps, injuries, and intentionally violent acts, the sports industry must spend adequate time and resources on presenting a safe event. If not, the responsible parties are questioned by the press. In November 2004, during a match between the Indiana Pacers and the Detroit Pistons, three Pacers players were suspended by the NBA for a total of 128 games, and five Pacers and seven fans were charged with misdemeanor assault and battery related to the brawl between players and the fans that created national headlines. This type of stadium or arena violence has recurred over the last two decades, resulting in questions of adequate security during games. At times, fans have hurled bottles, batteries, snowballs, and racial slurs at players, who sometimes responded with verbal and physical actions. In 2002, a Kansas City Royals first-base coach was attacked while standing in the coaches’ box by a father and his son at Chicago’s Comiskey Park (Brown, 2004). In 1974 the Cleveland Indians hosted the Texas Rangers in a game where over 25,000 fans consumed more than 65,000 cups of beer that night—thanks to the 10-cents-a-cup promotion. Not surprisingly, the crowd became unruly, and some fans ran onto the field and attacked players, who feared for their lives. The Indians were forced to forfeit the game (http://en.wikipedia.org/wiki/cleveland_Indians, retrieved June 6, 2005). In an article published shortly after the melée between fans and players at the Pacers–Pistons game, George Hacker, the Alcohol Policies Project Director at the Center for Science in the Public Interest (CSPI), a nonprofit health advocacy group, summed up the source of the problem. “It’s the beer talking,” Hacker said. “Most people don’t do that kind of stuff when they’re sober. Who in their right mind wants to attack a big athlete? You’ve got to be nuts to do that” (McAllister, 2004). As a result of the violence, the NBA created a “Fan Code of Conduct,” which sets forth expected standards for all attendees of NBA games. It also restricts the size of drinks to 24 ounces and limits purchase to two drinks at a time. The guidelines prevent alcohol sales after the fourth quarter begins. Other leagues do not have a uniform policy, but many teams stop beer sales after a certain point in the event. However, prevention of

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dangerous incidents may involve greater measures. Hacker proposed the following: • Selling beer with lower alcohol (3.2) content. • Selling beer in smaller quantities—for example, reducing the common 16-ounce cups to 10-ounce cups. • Raising the price of beer. • Not only cutting off beer sales before the game ends, but limiting the amount of time before the game when beer is sold. • Increasing vendor vigilance in terms of heavy drinkers by requiring every adult fan to wear a wristband to indicate how many drinks the fan has bought. With stated limits on the number of drinks sold in a game, this method helps enforce the numerical limit. A complete ban on alcohol sales is highly unlikely, due to the adverse fan reaction and the importance of the beer advertising in sports (spending more than $540 million on sports TV advertising in 2003).

DEFAMATION Knowledge about the rules of written and spoken defamation by journalists helps avoid lawsuits. Presumably, many students and reporters have already learned the basics in other classes or through their publication’s editors or attorneys. We do not intend to rehash them here, but we will point to particular issues involving reporting sports. Defamation, a tort that involves false statements causing injury to reputation, is based on traditional English law. Two types of defamation exist: libel (written defamation) and slander (spoken defamation). As a “strict liability” tort, winning a defamation case meant that the plaintiff had to prove that the information was false and caused injury. It did not matter if the statement was an honest mistake or an intentionally malicious comment. Because of the potential for chilling free speech, the Supreme Court altered the rules in its famous New York Times v. Sullivan (1964) ruling. Today, if the plaintiff is a “public figure,” he or she must prove that the statement was false, and done with “malice” or “reckless indifference to its truth.” The complex definitional elements of this standard have received a great deal of debate and discussion, but it remains good law. Defenses to defamation include truth and opinion. If the statement in question is factual and truthful, no grounds for defamation exist. Opinion is less clear and merits greater discussion. A fine line exists be-

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tween fact and opinion, and the courts often have difficulty in making that designation. And sports commentary—whether in print or in broadcast—is ripe for this kind of lawsuit. A sports column accusing a coach of being a liar could be libelous, according to a 1990 opinion by the U.S. Supreme Court. Even though the claim came from a “column,” rather than a straight news story, the Supreme Court concluded that the opinion defense does not automatically excuse the journal and the journalist from liability as long as the column was “sufficiently factual to be susceptible of being proved true or false” (Milkovich v. Lorain Journal, 1990). It also serves as a lesson to sports writers and broadcasters to exhibit care in their writing, even in an “opinion” piece. The issue of defamation has taken on greater urgency with the advent of sports talk radio. Given the often brash personalities of the announcers of these stations, their viewpoints sometimes constitute wicked criticism, some of it plainly unfair or nasty. Saying that a player “stinks” or is “over the hill” does not lead to successful defamation suits. But claiming that a player missed a game because he was drunk is another matter. In 1997, an announcer on radio station WIP-AM in Philadelphia stated that then Philadelphia Flyer Eric Lindros missed a game because of a hangover caused by drinking the night before. The report claimed four undisclosed sources, one of which was inside the team’s organization. The team’s owner sued the station for defamation. Earlier that year, another announcer on the same station claimed that Lindros was friendly with a local mobster. “I’ve had enough,” owner Ed Snider was quoted as saying. “The WIP hosts constantly misrepresent the facts.” Ultimately the radio station settled, issuing a public apology and contributing an undisclosed amount of money to a charity (Manley, 1997).

A WORD ABOUT CRIMINAL LAW AND SPORTS As stated in the preface, this text does not cover criminal law issues in sports in great detail, despite the seeming frequency of the connection between crimes and athletes. Highly publicized athlete-defendants trials such as those of O. J. Simpson and Kobe Bryant receive considerable media coverage. But the issues involving most criminal charges against athletes are not related to their sport or sports in general. And the laws and procedures utilized are the same as those against any defendant. Note that criminal laws differ from state to state. Definitions of crimes can and do vary. An offense in one state may not be prosecutable in an-

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other, especially in the realm of sexually oriented activities. That means when writing about or discussing an arrest, indictment, or trial, it is important to read the charges to avoid generalizations. Presently, web sites such as findlaw.com often obtain copies of criminal indictments and post them on the site for easy access. The notoriety of elite athletes becomes a blessing and a curse. On the positive side, the athlete may create a positive reputation in the minds of his or her fans, if not the public at large, by demonstrating success on the field. Competent, even stellar legal counsel and crisis management experts are available, given the financial resources. On the negative side, the scrutiny of the athlete’s conduct by ambitious prosecutors may give rise to “overcharging” in an attempt to obtain publicity. Athletes, especially star athletes, enjoy a great deal of press coverage, a fact well known to prosecutors, who ultimately have the discretion to bring charges (victims of crimes do not make the decision). The prosecutor’s decision, often based on strategic reasons, is rarely second-guessed by courts. For prosecutors, conviction is the goal—and the favorable publicity resulting from the conviction of a high-profile athlete can lead to public acclaim for that prosecutor. The Kobe Bryant case demonstrates a powerful interplay between a famous athlete with high-powered legal representation and an aggressive local district attorney. The case turned out to be a fiasco, with the D.A. forced to drop the sexual assault charges because the victim chose not to proceed with the trial. Some of the mistakes included staff members of the trial judge inadvertently releasing in camera (closed hearing) transcripts with the name of the victim, (a violation of Colorado’s rape shield law) and then the judge demanding a “gag order” barring publication of those transcripts. The Colorado Supreme Court, in a 4–3 ruling, permitted the publication (People v. Kobe Bryant, 2004). Had a trial occurred, it is likely that the superior quality of Bryant’s attorneys would outshine those of a rural district attorney’s office, especially in a case where the alleged victim’s sexual activities could be an issue. Yet high-quality lawyers do not necessarily win in the court of public opinion. Although the tactics they utilize may work in a courtroom, the athlete may suffer a loss of reputation even if an acquittal results. Therefore, wealthy athletes often hire public relations experts to deal with the public fallout. Criminal charges against athletes are not a rare occurrence. This raises the question of whether there is more such activity today than in the past. Some have argued that professional athletes are held to a higher standard (Robinson, 1998), whereas others see the opposite (Out of Bounds: Professional Sports Leagues and Domestic Vio-

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lence, 1996). Certain commentators have suggested that there is a greater incidence of off-the-field criminal activity, drug-related gambling, and domestic violence by athletes for three reasons: (a) Athletes are conditioned to believe that the rules do not apply to them, (b) the subculture of sports perpetuates violence and drug use, and (c) the subculture of sports glorifies violence and denigrates women (Cart, 1995; Nack & Munson, 1995). It is up to journalists to form their own conclusions.

Examples of On-Field Criminal Activity Although violent activity occurs at football fields, hockey rinks, and basketball courts almost every day, participants rarely are charged with criminal conduct. District attorneys are reluctant to get involved in matters traditionally handled under the enforcement powers of a professional or amateur sports organization. What may constitute an assault outside of sports could be within the rules of the game. However, egregious acts do occur, and in such cases players have been criminally charged. In 2000, the chief prosecutor in Vancouver, British Columbia, charged then Boston Bruins player Marty McSorley with assault after he hit Vancouver Canuck Donald Brashear from behind with his stick. A quick two-handed swing of his stick clubbed Brashear on the side of his face. Brashear suffered a severe concussion and was hospitalized. McSorley was handed a 1-year suspension from the NHL and was found guilty of assault with a weapon by a provincial court in British Columbia. The trial judge rejected McSorley’s defense that the act occurred during the “heat of the game” (Regina v. McSorley, 2000). The McSorley case has a precedent. In 1969, Ontario prosecutors charged Edward “Ted” Green and Wayne Maki with assault for a harrowing on-ice incident. It began when Green hit Maki in the face with his gloved hand and in the shoulder with his stick. A fight then erupted in which Maki ultimately fractured Green’s skull. Both players were acquitted, however, based on their “consent” to play a violent sport (Regina v. Green, 1970; Regina v. Maki, 1970). In 2004 another NHL player, Todd Bertuzzi, was charged with assault causing bodily harm over an on-ice incident in which he gave a behind-the-head punch to an opponent. Steve Moore, the injured player, was carried off the ice unconscious. He suffered two fractured vertebrae, and his hockey future remains unclear. The charge carries a maximum penalty of 10 years in jail. The NHL suspended Bertuzzi indefinitely, causing him to miss the remaining 13 games of the regular

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season and the playoffs. The suspension has cost him more than $500,000 in lost salary. However, in a plea bargain, the British Columbia court sentenced Bertuzzi to a conditional discharge that also included a $500 fine and 80 hours of community service (Joyce, 2004). Both this incident and the McSorley case a few years earlier received heavy media attention. Because the actions were recorded, millions viewed the injury. Many other examples of potentially criminal conduct occur that have not been prosecuted, such as the infamous choking of then Golden State Warriors coach P. J. Carlessimo by player Latrell Sprewell during a practice in 1997 and the 1977 mauling of NBA player Rudy Tomjanovich (of the Houston Rockets) by Kermit Washington of the Los Angeles Lakers. Tomjanovich suffered several bone fractures, a brain concussion, and leakage of spinal fluid from the brain cavity; the blow ended the Tomjanovich’s career as a professional basketball player (Howard, 2003; In Brief: Basketbrawl, 1977). The criminal prosecution and civil injuries arising from injuries and deaths caused in the ring is nonexistent because the nature of the sport sanctions assault. In the history of boxing, deaths in the ring, though rare, have occurred. In 1930, Frankie Campbell died after a knockout by Max Baer. Four decades later, Emil Griffith knocked out Benny “Kid” Parente so severely that he died of the injuries. On April 2, 2005, Becky Zerlentes became the first female boxer to die as a result of a punch received during a Colorado Golden Gloves match. She died the next day from “blunt force trauma” to her head. (Bianculli, 2005).

INFORMATION CHECK When writing about risk management issues, a journalist should ask: 1. Are written procedures covering security, injury prevention, and emergency evacuation in place? 2. Were those procedures followed? 3. How recently were those procedures enacted? 4. Were drills or practices utilized? 5. How well or poorly are security personnel trained? 6. Was intoxication an issue in the event?

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INFORMATION CHECK When writing about criminal issues and sports, a journalist should ask: 1. What is the nature of the event, not only from the district attorney’s press conference, but also from speaking to defense lawyers for the athlete? 2. Who are the defense lawyers? Are they well known? 3. How much experience do the prosecutors have in prosecuting a high-profile case? 4. What is the precise definition of the crime (as state laws vary in this regard)? 5. Does the defense of consent occur if the act is committed during a sports contest?

REFERENCES Appenzeller, H. (Ed.). (1998). Risk management in sport—Issues and strategies (pp. 40, 42–46, 88–89). Durham, NC: Carolina Academic Press. Arace, M. (2003, September 24). Blue Jackets put up new protective nets at Nationwide. Columbus Dispatch, p. 01F. Arnold v. Riddell Sports, Inc., 853 F. Supp. 1488, 1489 (D. Kan. 1994). Berlet, B. (2004, March 11). Pack’s Moore focuses on job. Hartford Courant, p. C2. Bianculli, D. (2005, April 19). A welter of emotions. Documentary looks back at fatal ’62 fight. New York Daily News, p. 74. Also available at www.usaboxing.org/92 _1224.htm Brown, T. (2004, November 19). Things don’t sit well in the stands; Fans respect the games but not a lot of athletes, and answers to violence are not always obvious. Los Angeles Times, p. D1. Cart, J. (1995, December 27). Crime & sports ’95: Sex & violence. Los Angeles Times, p. C4. Costa v. Boston Red Sox Baseball Club, 61 Mass. App. Ct. 299 (2004). DiCello, N. (2001). No pain, no gain, no compensation: Exploiting professional athletes through substandard medical care administered by team physicians. Cleveland State Law Review, 49, 507. Fox v. Board of Supervisors of Louisiana State University 76 So. Wd, 978 (La. 1991). Graham, G., Neirotti, L. D., & Goldblatt, J J. (2001). Guide to sports marketing (p. 119). New York: McGraw-Hill. Groves v. Firebird Raceway, 1995 U.S. App. Lexis 28191 (9th Circuit). Hackbart v. Cincinnati Bengals, 601 F.2d 516 (10th Cir. 1979). Habib, H. (2002, June 16). When injuries rob athletes, who’s to blame? Palm Beach Post, p. 1C. Health Insurance Portability and Accountability Act, 29 USC 1191c (2000). Howard, J. (2003, December 24). Spree delivers words, deeds. Newsday (New York), p. A69.

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In brief: Basketbrawl. (1977, December 26). Newsweek, p. 79. Joyce, G. (2004, December 23). Bertuzzi on probation one year; plea bargain to conditional discharge carries chance of no criminal record. Toronto Star, p. A10. Keeton, W. P. (1984). Prosser and Keeton on the law of torts (5th ed., p. 215). St. Paul, MN: West. Krueger v. San Francisco Forty-Niners, 234 Cal. Rptr. 579 (Cal. App. 1st Dist. 1987). Manley, H. (1997, June 8). Throwing a check at talk radio. Boston Globe, p. C7. Markos, K. (2005 March 5). $135 million DWI award in crash upheld. Bergen Record (New Jersey), p. A07. McAllister, M. (2004, November 24). Beer muscles; Fans take leave of senses when alcohol involved. Retrieved June 6, 2005, from www.sportsillustrated.com.com/2004/basketball/NBA/11/23/alcohol Milkovich v. Lorain Journal, 497 U.S. 1 (1990). Miller, J., & Veltri, F. (2003). Symposium: General aspects of recreation law: Security issues in public recreation centers. Journal of Legal Aspects of Sports, 13, 265. Mitten, M. J. (1999). Medical malpractice liability of sports medicine care providers for injury to, or death of, athlete. American Law Review, 33, 619. Nack, W., & Munson, L. (1995, July 31). Sports’ dirty secret. Sports Illustrated, p. 62. New York Times v. Sullivan, 376 U.S. 254 (1964). Out of bounds: Professional sports leagues and domestic violence. (1996). Harvard Law Review, 109, 1048. Pennington, B. (2004, May 18). Sports turnaround: The team doctors now pay the team. New York Times, p. A3. People v. Kobe Bryant, 2004, 94 P.3d 624 (Colo. 2004). Regina v. Green, 2 C.C.C.2d 442 (Ont. Provincial Ct. Sept. 3, 1970). Regina v. Maki, 1 C.C.C.2d 333 (Ont. Provincial Ct. Mar. 4, 1970). Regina v. McSorley, B.C.P.C. 0117 P 21 (2000). Roberts, G., & Conrad, M. (2002, November). Jury awards $1.3 million to former Flyers player against team doctor. Sports Lawyers Association Newsletter Retrieved on September 25, 2005 from www.sportslawyers.org Robinson, L. N. (1998). Professional athletes—Held to a higher standard and above the law. Indiana Law Journal, 73, 1313, 1322–1323. Rodriguez v. Riddell Sports, Inc., No. B-CV-96-177 (S.D. Tex. Mar. 16, 1999). Schultz, J. (1996, July 13). Brawl another low blow for boxing; Officials point finger at “reckless individuals.” Atlanta Journal and Constitution, p. 01G. van der Smissen, B. (2003). Symposium: General aspects of recreation law: Legal concepts related to youth responsibility. Journal of Legal Aspects of Sport, 13, 323. Waiver Agreement. (2005). New York Road Runners, Inc. Retrieved June 28, 2005, from www.nyrr.org/egi-bin/ltmlos,lgi/17938.3.073367090067710735 Waiver of Liability, New York Road Runners. Retrieved June 20, 2005, from www.nyrr.org

CHAPTER

10 Drug Testing in Sports

One of the most complex issues in sports involves drug use by professional and amateur athletes. The use of performance-enhancing drugs, testing standards, and punishments involving competitive athletes has generated debate among fans, players, sports executives and politicians. And the almost weekly nature of this coverage makes it an evolving news story. With all this in mind, a basic primer of the drug testing standards in various sports organizations serves readers best. But as of the end of 2005, implementation of the enforcement standards varies. Also, different philosophies of what constitutes “guilt” still permeate the athletic landscape. Drug use in sports has changed over the last 30 years. At one time, drug use—at least in the United States—constituted illegal drug use, such as smoking marijuana, popping amphetamines, or snorting cocaine. In the 1980s, Major League Baseball, stunned by the convictions of four Kansas City Royals players on cocaine possession charges, suspended them for 1 year. Note the word illegal. For the leagues and other sports organizations, little difficulty occurs in drafting a policy against illegal drug use. Such 228

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activities violate criminal laws, and those involved are subject to prosecution by the state. Both the unions and leagues recognized the problem and drafted sections in their collective bargaining agreements to address illegal drug use. Athletes used legal substances (particularly alcohol) for years with little consequence and little publicity from the media. Often occurring after a game, alcohol use was within accepted standards of conduct during the time, and sports writers, not wanting to reveal the dark side of star athletes, refrained from such coverage. More recently, a different type of drug abuse evolved: of substances, some legal, many not, that boost performance, giving the athlete a competitive edge. Leagues and sports organizations have grasped for ways to control these drugs, often “designer” compounds created specifically to boost athlete performance. Although athletic federations banned “stimulating substances,” the lack of a comprehensive testing program made these rules almost useless. Early drug tests were first introduced in the 1960s. Nevertheless, the use of the first-generation class of drugs, known as anabolic steroids, continued. Anabolic steroids enhance muscle development, and allow athletes to train harder and recover more quickly from strenuous workouts. In the 1970s, athletes from East Germany were given these drugs in a government-ordered quest for athletic glory. The policy worked. In a short time, that nation’s athletes won a striking number of medals at the Olympics. At the 1976 Olympics at Montreal, East German women won 11 of the 13 swimming events, an astounding achievement in a nation of only 16 million people (Lee, 2004; http://encarta.msn.com/encyclopedia_761562380_2/Olympic_Games.html). In non-Communist countries, some individual athletes started using these drugs. Yet despite occasional mention, the issue did not generate much attention until two events propelled this issue into the public eye: the suspension of Canadian sprinter Ben Johnson after testing positive for anabolic steroids, and the revelations of state-sponsored doping after the fall of Communism. Johnson won the Gold Medal in the 100-meter spring at the Seoul Olympics in 1988, and afterward tested positive for the steroid Stanozol. Subjected to a torrent of negative publicity along with the ire of millions, he was forced to forfeit his medal. Shortly thereafter, the demise of East Germany revealed a state-run pattern of performance–enhancing drug abuse among its athletes. Some 10,000 East German athletes took steroids to boost their performance. The revelations resulted in criminal convictions and jail sentences for doctors and trainers (Ungerleider & Wadler, 2004).

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Performance-enhancing drugs pose different pharmacological issues than traditional illicit drugs, which serve as addicting agents. Unlike those drugs (or alcohol), which may adversely affect an athlete’s performance, performance-enhancing drugs aid in performance and are taken solely for that purpose. And, as said earlier, many of them were not illegal, although in 1990 Congress passed the Anabolic Steroid Control Act, which categorized certain anabolic steroids (although not all) as controlled substances (21 USC sec. 802, 2003). The 1990 act was tightened by passage of the Anabolic Steroids Act of 2004, which prohibits over-the-counter sales of “steroid precursers” such as androstenedione, which act like steroids once ingested. Also, the act clarifies the definition of anabolic steroids to include tetrahydrogestrinone (THG) (Iwata, 2004). But still-legal performance-enhancing substances, classified as either prescription drugs or nutritional supplements (which escape the rigorous regulation of the Food and Drug Administration), are available for purchase at drug stores or laboratories. Also, detection is problematic. Athletes may take other substances, known as “masking agents,” to “hide” the presence of those substances in the athlete’s system, thus avoiding a positive urine sample test (the preferred method of drug testing). Finally, privacy issues mix into the debate. U.S. law and society value a right to privacy, and many argue that random drug testing, especially during nonwork time, is intrusive and a violation of individual rights (Ludd, 1991). Unless specific cause exists, testing should be limited in time and scope. In professional sports, certain players’ unions have used this argument to forestall strict drug testing (Barker, 2004). Only in recent years have professional leagues and international and domestic athletic organizations tightened standards. But variations exist, notably in the difference between the international athletic organizations (whose participants are not unionized) and professional league athletes, whose unions negotiate collective bargaining agreements detailing the rights of players who test positive. When indictments of several individuals associated with an alleged steroid distribution ring occurred in 2004, the issue exploded onto the sports and news pages. Congressional hearings were held in 2005 and many politicians and commentators demanded strict drug testing and punishment by professional sports and even proposed a nationwide standard. The critique of “lax” standards may be justified (Dvorchak, 2005). However, a counterargument also merits attention. If an athlete uses legal or even illegal drugs during the off-season, is it his or her employer’s business? And if so, how invasive should the tests be? The drug testing procedures governed by International and amateur athletic organizations are far more invasive than those in the pro leagues. They

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constitute an invasion of privacy (justified or not), one that many people find burdensome and intrusive. Given that the rules and standards are changing rapidly, the rest of the chapter consists of a short summary of the drug testing standards implemented in various organizations as of 2005.

NCAA The NCAA Executive Committee created a list of banned substances for which they test athletes for use by urinary analysis. Each student-athlete must sign a drug testing consent form annually, in which the student-athlete agrees to be tested for prohibited drug use. Failure to complete and sign the consent form results in the student-athlete’s ineligibility to participate in all intercollegiate athletics. Since 1999, NCAA drug-testing programs have been administered by the National Center for Drug Free Sport. Essentially two plans exist, one for the season and another for postseason events. As far as the seasonal tests, the program, implemented by the NCAA in 1990, applies to about 10,000 student athletes each year, and its focus was to deter the use of anabolic steroids. (http://www.crnusa.org/ODS_CRN_PEP_FinalReport.pdf, 2002; FDCH Political Transcripts, October 8, 2002). During the regular season, the center randomly selects football and track and field programs for short-notice testing (less than 48 hours of notice to the schools). The center also randomly selects the individual athletes for testing based on the institutional squad lists. Every Division I and II football program conducts tests at least once each academic year. Testing is based on a random draw. A student-athlete who tests positive cannot participate in at least one season of competition, which includes any postseason play. The National Center for Drug Free Sport selects NCAA postseason events for testing and submits the confidential testing schedule to the NCAA president for approval on behalf of the NCAA executive committee. Each NCAA championship competition is tested at least once every 5 years. Approximately 1,500 athletes are tested at those events each year, and any who test positive lose their collegiate eligibility for at least 1 year. The NCAA list of banned drug classes is composed of substances that are generally considered to be performance enhancing and/or potentially harmful to the health and safety of the student-athlete. The NCAA recognizes that some banned substances are used for legitimate medical purposes. Accordingly, exceptions can be made for those student-athletes with a documented medical history demonstrating the

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need for regular use of such a drug. Exceptions may be granted for substances included in the following classes of banned drugs: stimulants, beta blockers, diuretics, and peptide hormones (NCAA Div. 1 Bylaw 31.2.3.1). The NCAA drug-testing program grants an appeals procedure by the institution for a student-athlete who receives a positive drug test or who violates NCAA drug-testing protocol. At least three members of the drug-education and drug-testing subcommittee of the NCAA Committee on Competitive Safeguards and Medical Aspects of Sports hear appeals.

THE OLYMPIC MOVEMENT USADA Although the International Olympic Committee (IOC) has the ultimate drug-testing authority for Olympic sports, it assigns this duty to the individual national bodies such as the U.S. Olympic Committee (USOC). The USOC in turn created an independent organization to manage a comprehensive, independent drug-testing program. That organization is the United States Anti-Doping Agency (USADA). The USADA began operating on October 1, 2000, with full authority for testing, education, research, and adjudication for U.S. Olympic, Pan American, and Paralympic athletes. The USADA drafts principles, standards, policies, and methods of enforcement in antidoping policy. In addition, the USADA is also responsible for educating athletes about the rules governing the use of performance-enhancing substances and the harmful health effects of the use of such substances. As a requisite of recognition by the USOC, any national governing body or Paralympic sports organization must comply with the USADA procedures (http://usantidoping.org/what_is/ index.htm, viewed 7/6/04). The USADA has authority to test any athlete who is a member of a national governing body, such as USA Track and Field, who participates in a USOC-sanctioned competition, or who has given his or her consent to testing by USADA. Generally, the prohibited substances fall in the following categories: anabolic agents, diuretics, masking agents and peptide hormones, stimulants, and narcotics. Alcohol also may be tested in certain circ*mstances. What makes this system comprehensive (or an egregious violation of privacy rights, depending on one’s point of view) is the testing of individual athletes in an out-of-competition setting with little or no notice. Once athletes are identified by the national governing body and/or the

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USADA for inclusion in the program, USADA will select athletes to test based on an automated draw that considers a number of factors, including ranking, risk of doping within each sport and test history (http://usantidoping.org/what_is/index.htm, viewed 7/6/04). A “doping control” officer may come to the athlete’s home, school, or training facility. The athlete’s failure to cooperate may result in suspension (http://usantidoping.org/athletes/policies.asp, retrieved 7/6/04). An athlete submits two urine samples to the USADA. After the USADA receives notification from the laboratory that an “A” sample is positive, it notifies the athlete, the USOC, and the particular national governing body. Then the “B” sample is analyzed, typically within 2 weeks. If the “B” sample analysis confirms the “A” sample positive, this is considered a positive test and the test results are turned over to USADA’s Anti-Doping Review Board (a group of experts independent of USADA) for review. The athlete cannot attend this hearing. The USADA Review Board then presents its recommendation to the USADA. The USADA is then responsible for proceeding to an adjudication of the matter or closing the matter based on the review board’s recommendation. USADA will forward the review board’s recommendation to the athlete, the national governing body, the USOC, the relevant international federation, and the World Anti-Doping Agency (WADA). The athlete has the right to a hearing if USADA proceeds with adjudication as a result of a positive or elevated test. He or she may choose between two separate hearing procedures: 1. The athlete may elect to proceed to a hearing before the American Arbitration Association (AAA). 2. The athlete may elect to proceed directly to a final and binding hearing before the Court of Arbitration for Sport (CAS) held in the United States. The second option may be more practical because it saves time. In many cases, a proposed sanction is provided by the arbitrator or, if accepted by the athlete without a hearing, forwarded to the national governing body to impose. In some cases, the sanction may be determined by the national governing body or the USADA (USADA 2004). The USADA replaced programs by the USOC and national governing bodies that were perceived as hiding drug cheaters. There have been several doping incidents, most notably those involving the members of USA Track and Field, in which the names of athletes who reportedly tested positive for performance-enhancing drugs were not released,

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causing discord between USA Track and Field and its international federation, the International Association of Athletics Federations (IAAF) (Conrad, 2001). For example, Jerome Young tested positive for a steroid called nandrolone the year before going to the Sydney Olympics in 2000 to compete in the 1600-meter relay race; nonetheless, it remained secret and he was cleared to participate in the race. On June 29, 2004, the Court of Arbitration for Sport ruled that Young be stripped of his gold. Alvin Harrison, who was also on the same team as Young and took home a silver in Sydney, is currently facing a lifetime ban due to a doping charge, as he is accused of using steroids. His brother Calvin Harrison was suspended and declared ineligible for the Athens Olympics after testing positive for modafinil (Gloster, 2004). Enhancing the credibility of U.S. testing efforts “by eliminating the negative perceptions inherent” in prior programs was a key reason for the USADA’s creation.

WADA The creation of the World Anti-Doping Agency (WADA), an international version of the USADA, resulted from a doping scandal at the 1998 Tour de France bicycle race. In a police raid during the race, a large number of prohibited medical substances were discovered. The amount seized and the accompanying bad publicity and embarrassment suffered encouraged a coordinated effort to stop doping in all sports. Before the establishment of WADA, the IOC and other international federations suffered the same problems as their domestic counterparts: These governing bodies adopted their own standards and procedures, resulting in confusion and inconsistency. In 1999, WADA was established, headquartered in Montreal. WADA proposed a World Anti-Doping Code, which has since been adopted by an impressive array of national Olympic committees, international federations, national governing bodies and national anti-doping organizations (such as the USADA). As of this writing, most of the international sports bodies have adopted the code and its procedures. Notably, the major professional sports leagues in the United States have not, despite political pressures to do so. The Code imposes an absolute liability standard involving the use of banned performance-enhancing substances. Whether one takes the drug intentionally or accidentally does not matter. It states: “It is each Athlete’s personal duty to ensure that no Prohibited Substance enters his or her body. Athletes are responsible for any Prohibited Substance … found to be present in their bodily specimens. Accordingly, it is not necessary that intent, fault, negligence or knowing Use on the Athlete’s

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part be demonstrated in order to establish an anti-doping violation” (WADA Code, Article 2.1.1, 2003). The WADA code calls for a 2-year ban for a first offense and a lifetime ban for a second, barring mitigating circ*mstances. The Code does grant an exception when an illness or disorder is responsible for the presence of the prohibited substance (Article 2.1.3) and also allows for athletes to be able to use certain prohibited substances for good medical reasons under a scheme of therapeutic use exemptions that will involve individual assessment (Article 4.4) (Opie, 2004).

NFL Of the major sports leagues, the strictest drug policies come from the NFL. The illegal use of drugs, the abuse of prescription drugs, over-the-counter drugs, and alcohol is prohibited for NFL players. Moreover, the use of alcohol may be prohibited for individual players in certain situations, such as following a charge for driving under the influence. The NFL and the National Football League Players’ Association (NFLPA) have maintained policies and programs regarding substance abuse. They can be found in Article XLIV, Section 6(a) of the NFL Collective Bargaining Agreement. The NFL has separate drug-testing policies for “substances of abuse” and steroids. The so-called Intervention Program serves as the cornerstone of the substance abuse policy. Under the Intervention Program, players are tested, evaluated, treated, and monitored for substance abuse. The NFL tests for illegal use of drugs and the abuse of prescription drugs and alcohol every year on a specified date, with notice given to players far in advance. If a player fails the first test, he gets a second test before any disciplinary action (suspension) is taken. The philosophy rests on the belief that recreational drug use is a medical issue. Players who fail a drug test are placed in the Intervention Program, with the goal of treatment and rehabilitation. Only players who do not comply with the requirements of the Intervention Program are subject to discipline. If a player has been suspended indefinitely under the substance abuse program, he is eligible to apply for reinstatement after a given period of time. The commissioner then determines whether or not to accept the reinstatement (National Football League, Policy and Program for Substances of Abuse, 2003). The NFL also, and more strictly, tests for steroids and performance enhancing drugs, giving random tests for steroids to players. A computer randomly selects six players on each team each week to be tested. On the first positive test result for a performance-enhancing drug, a player is suspended for four games without pay. A six-game sus-

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pension follows a second positive, and a third positive results in at least a 1-year suspension. The league also tests for masking agents. If a player tries to pass a test by using masking agents, suspensions occur, even if a steroid is not detected (Collinsworth, 2004). All disciplinary action provided under the policy is imposed through the authority of the commissioner of the NFL. The commissioner maintains the ability to impose other sanctions as he deems necessary, and, significantly, no appeals process exists.

NBA The NBA policy on drug testing and drug use was considered a bellwether when first adopted in 1983. The players and the owners agreed to a drug detecting system administered by an independent expert. The regimen remains essentially the same today. Actual drug testing does not occur unless confidential evidence brought to that expert demonstrates a drug abuse problem. Only then can “authorization for testing” occur. The policy also encourages players to come forward and admit their problems. If they do, then treatment is available without the threat of disciplinary sanction. In the 1999 collective bargaining agreement, the illegal addictive drugs and performance-enhancing drugs are covered, including amphetamines, cocaine, LSD, opiates (heroin, codeine and morphine), PCP, marijuana, and steroids (CBA, Article XXXIII, sec. 4(c)). A Prohibited Substances Committee, comprised of one representative from both the NBA and NBPA and three substance abuse experts jointly selected by the NBA and NBPA, issues a list of prohibited steroids. The NBA and NBPA have jointly selected a medical director to manage and oversee the program, select and supervise program counselors and other program personnel, and evaluate and treat the NBA players in the program. An independent expert jointly selected by the NBA and NBPA will issue documents known as “Authorizations for Reasonable Cause Testing” under the program. Notably, the league, the team, and the union are prohibited from publicly disclosing information regarding the testing or treatment of any NBA player in the program, except as required by the suspension or dismissal of a player in the program. This differs from the approach of the WADA and USADA. A player may come forward voluntarily regarding his use of a prohibited substance and seek treatment in the program. There is no penalty the first time a player comes forward voluntarily. A player may not come forward voluntarily when he is subject to an authorization for reasonable cause testing or when he is subject to in-patient or aftercare treatment in

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the program (http://news.findlaw.com/legalnews/sports/drugs/policy/ basketball/index.html, retrieved July 16, 2004). A player tests “positive” for a prohibited substance at the concentration levels set forth in the collective bargaining agreement. The player is also deemed to have tested positive if he fails or refuses to submit to a drug test, or if the player attempts to mask, substitute, dilute, or adulterate his urine sample. A player notified of a positive result has two business days to request a retest from the NBA and NBPA. The retest will be performed at a laboratory different from the laboratory used for the first test (CBA, Article XXXIII, sec. 4(c)). If the NBA or NBPA receives information that provides “reasonable cause” of a player’s use, possession, or distribution of a prohibited substance, the NBA or NBPA will request a hearing with the other party and the independent expert within 24 hours of the receipt of that information. If the independent expert decides “reasonable cause” exists, an authorization for testing is granted and the NBA arranges for testing of the player four times during the next 6 weeks. If, after the test, the NBA or NBPA believes there is sufficient evidence to show use, possession, or distribution of a prohibited substance, the matter may be taken directly to the league’s grievance arbitrator. If the grievance arbitrator determines that the player has used or possessed amphetamine or one of its analogs, cocaine, LSD, opiates, or PCP, or has distributed any prohibited substance, he will be dismissed and disqualified from the NBA. Under the 1999 Collective Bargaining Agreement, all first-year players were subject to “no-cause” drug tests once during training camp and up to three times within a season. A veteran player was subject to only one drug test per season. All no-cause tests are at the discretion of the NBA and without prior notice to the player. When a player tests positive for illegal substances, other than marijuana and steroids, he is dismissed and disqualified from any association with the NBA, and can apply for reinstatement at a later date. However, if a player tests positive for either steroids or marijuana, he is required to enter a substance abuse program (NBA CBA Art. XXXIII). If a player tests positive for amphetamines or one of their analogs, cocaine, LSD, opiates, or PCP during reasonable cause testing, first-year testing, or veteran testing, he will be dismissed and disqualified from the NBA. A player will also be dismissed and disqualified from the NBA if he is convicted of a crime involving the use or possession of amphetamines and its analogs, cocaine, LSD, opiates, or PCP (CBA, Article XXXIII, sec. 5(d)). If a player tests positive for performance-enhancing drugs for the first time during reasonable cause testing, first-year testing, or veteran testing, the player will be suspended for five games and will be re-

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quired to enter the antidrug program. A second positive test for steroids will result in a 10-game suspension and the player’s reentry into the program. A third (or any subsequent) positive test for steroids will result in a 25-game suspension and the player’s reentry into the program. A player will be dismissed and disqualified from the NBA if he is convicted of a crime involving the use or possession of steroids (CBA, Article XXXIII, sec. 10(c)). If a player tests positive for marijuana for the first time during reasonable cause testing, first-year testing, or veteran testing, or he is convicted of the use or possession of marijuana in violation of the law, he will be required to enter the antidrug program. A second such violation will result in a $15,000 fine and the player’s reentry into the program. A third (or any subsequent) such violation will result in a five-game suspension and the player’s reentry into the program (CBA, Article XXXIII, sec. 9(c)). Any veteran player dismissed and disqualified from the NBA under the terms of the program will be disqualified for a period of not less than 2 years. Any first-year player who is dismissed and disqualified from the NBA under the terms of the program will be disqualified for a period of not less than 1 year. Reinstatement occurs only with the approval of both the NBA and the NBPA, and such approval may be conditioned on random testing and other terms (CBA, Article XXXIII, sec. 12(a)). In 2005, the NBA and the NBPA have agreed to a new 6-year collective bargaining agreement. In it, players will be subject to four random drug tests per season, and penalties for use of performance-enhancing drugs will be increased (NBA.com, 2005).

MAJOR LEAGUE BASEBALL In the wake of allegations of use of performance-enhancing drugs by star players such as Barry Bonds and Jason Giambi, and resulting pressure from politicians, commentators, and the public, Major League Baseball and the Major League Baseball Players’ Association twice amended their collective bargaining agreement to tighten their drug testing procedures in 2005. The first change, agreed on in January 2005, increased the penalties for violators and expanded the list of illegal performance-enhancing drugs (Fisher, 2005). It provided that every player will undergo at least one random test during the playing season, and included random testing during the off-season, irrespective of a player’s country of residence. It also provided for additional tests for an unspecified number of randomly selected players. In addition, testing would occur during the off-season for the first time.

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The agreement also revised disciplinary penalties for positive test results, with first-time offenders suspended for 10 days. Second-time offenders would be suspended for 30 days. Third-time offenders would be suspended for 60 days. Fourth-time offenders would be suspended for 1 year. All suspensions would be without pay. Significantly, offending players would be publicly identified, a departure from the prior policy of keeping the names of first-time offenders secret(www.MLB.com, 2005). The new policy expanded the list of banned substances to include diuretics, masking agents, human growth hormone (HGH), and steroid precursors. Critics of the new policy have pointed to the omission of amphetamines from the banned substances list. According to some, the use of amphetamines is an even bigger problem in baseball than steroid use. In addition, there will be no blood tests for human growth hormone, although baseball expects a valid urine test to be developed shortly. The penalties fell far short of those stated in the World Anti-Doping Agency’s Code, which calls for a 2-year ban for first-time offenders unless there are mitigating circ*mstances. In addition, WADA has a far wider list of banned substances. During congressional hearings in 2005, Dr. Gary Wadler, an expert on drug testing, called the revised standards inadequate and advocated that each of the major sports leagues be measured by the WADA standards (Kroichick, 2005). The January 2005 changes did not mollify critics and after months of continuing criticism and Congressional pressure, Major League Baseball players and owners agreed to significantly tighten the policy in November 2005. The new policy, effective in the 2006 season, sharply increases penalties for steroid use to a 50-game suspension for a first offense, 100 games for second offense, and a lifetime ban for a third. It also establishes mandatory random testing for amphetamines, a first for any of the major professional leagues. First-time amphetamine offenders will be subject to mandatory follow-up testing. Second-time offenders will be suspended for 25 games and third-timer offenders for 80 games. Players could be banned for life for a fourth offense. Any player banned for life has a right to seek reinstatement after two years (Hohler, 2005). Prior to the amended agreements, the current collective bargaining agreement devised an unusual and heavily criticized approach to the problem. During the 2003 season, all players were subject to two tests (one initial test and one follow-up test conducted between 5 and 7 days following the initial test) at unannounced times for the presence of any prohibited steroid. In addition, the commissioner’s office had the right to conduct additional “survey testing” in which up to 240 players would be tested, and if the results indicated that more than 5% of players tested positive for steroids, all players would be subject to two unan-

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nounced tests (an initial test and a follow-up test 5 to 7 days later) for steroids during the 2004 season (known as “program testing”). If a player tests positive, he shall immediately receive treatment and be subject to discipline for further violations. The program testing would have continued for each season covered by the current CBA unless fewer than 2.5% of players test positive for steroids for two consecutive seasons (CBA, Attachment 18). Regarding illegal drugs, major league players who possess, sell, or use such controlled substances risk disciplinary action by their individual clubs or by the commissioner. This prohibition also applies to agreed-upon steroids or prescription drugs. The Health Policy Advisory Committee (HPAC), a group comprised of doctors and lawyers representing the league, the players, and the office of the commissioner, is responsible for administering and overseeing the anti-drug program. Once a player tests positive, he enters a treatment program under a “clinical track.” The medical representatives will help tailor a treatment and counseling program for the player. However, if the player fails to comply, by continuing to use or sell banned drugs, the player is put on an “administrative track” and is subject to immediate discipline. In the summer of 2004, MLB and the players’ association banned the use of androstenedione, the substance used by Mark McGwire when he hit 70 home runs 6 years earlier. However, this was done after the Food and Drug Administration banned its sale. Other leagues and organizations had banned “andro” years earlier. This prior testing system received considerable criticism.

NHL Before the present collective bargaining agreement, the NHL did not randomly test for steroids, stimulants or any other performance-enhancing drugs; instead, it offered education and counseling. (Wilstein, 2004). The new agreement, ratified in the summer of 2005, requires that any player can be tested a maximum of twice per year based on a list of banned substances. First-time offenders will receive a 20-game suspension, rising to 60 games for a second offender and lifetime expulsion for a three-time offender. (Dupont, 2005)

RECENT CONTROVERSIES BALCO Athletes have sometimes gone to impressive lengths to circumvent drug screening, notably in the case of certain track and field athletes. An edge, even a slight edge, can make a difference between winning

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an Olympic gold medal or finishing out of medal contention. In the summer of 2003, the Bay Area Laboratory Co-Operative (BALCO) created at least one undetectable steroid. THG, or tetrahydrogestrinone, was that undetected steroid. Unknown until an unidentified track and field coach sent a syringe containing the substance to the USADA in June 2003, THG was administered in drops placed under the tongue. Detection was difficult, because its half-life was short and no traces existed by the time a routine drug screening occurred. After the creation of a test procedure for THG, four American track athletes tested positive for the steroid. One track and field star, Kelli White, the world sprint champion at 100 and 200 meters, admitted that she used undetectable steroids provided by BALCO. Other athletes, notably in baseball, were also implicated, such as the Yankees’ Jason Giambi and the San Francisco Giants’ Barry Bonds. These allegation cast a pall over their achievements. Dr. Don H. Catlin, of the University of California (UCLA) lab that first discovered THG, said: It’s not one little athlete reading something in a book or magazine and writing away for something. There are a lot of people involved. It shows you the stakes are high and getting higher. These are not just last-stringers trying to make the team. These are name athletes, champions. It’s terribly disturbing. The drugs work, and high-level athletes take them. That’s the highest form of crime in a sense for an athlete. (Longman, 2004, p. 3)

But the methods used in the BALCO investigation present issues of privacy, due process, and basic civil rights. Under the U.S. legal system, an accuser must prove guilt (in a criminal case) or liability (in a civil case). The U.S. Anti-Doping Agency, with federal prosecutors, has attempted to use what one commentator called “sloppy-nasty” tactics, to make “cheaters now look like victims, and the innocent like potential martyrs” (Jenkins, 2004). Leaks of athletes’ grand jury testimony to the press by prosecutors violate the confidentiality of such testimony. Press conferences and statements by USADA officials strongly implying guilt under the ongoing criminal investigations are similarly debatable. Journalists should probe accusers and ask why information was leaked. When writing about this issue, note the level of proof required. For example, the USADA changed its definition of proof from “beyond a reasonable doubt” (the standard for criminal prosecutions) to a standard of “comfortable satisfaction.” Why did the agency do this? Did it think the older standard too difficult? One answer is that the change clearly makes the USADA’s job much easier in attempting to prove guilt (Jenkins, 2004).

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Other recent performance-enhancing substances have included a cream consisting of the steroids testosterone and epitestosterone, which serves to mask the steroid because it can be washed off quickly. Another is trenbolone, used to increase the weight of cattle. Although not legal for humans, athletes have obtained the substance from abroad and injected it. Experts noted that it is difficult to detect in routine drug screenings because of its short half-life. A third is Norbolethone, an older, rarely used drug, which was not even on the IOC list of banned drugs until recently. Finally, erythropoietin (EPO), an effective, but particularly dangerous (even fatal) drug, stimulates the production of red blood cells and thus enhances oxygen-carrying capacity and endurance. Although it is banned, cyclists and runners have used it. Some experts believe that the deaths of a group of Dutch cyclists in the late 1980s were caused by EPO use. An additional performance-enhancing subject is Modafinil, a stimulant that has been used to enhance performance. The issues of drugs and drug testing will continue as a major concern in the sports landscape. A Comparison of Penalties for Performance-Enhancing Drug Test Violations Among Sports Organizations Organization 1st Violation NFL

2nd Violation 3rd Violation

4 games (min..) 6 games

4th Violation 5th Violation

1 year

NBA 5 games (1999–2005)

10 games

25 games

NHL (2005)

20 games

60 games

Lifetime ban

MLB (2005)

50 games

100 games

Lifetime ban

Olympics

2 years

Lifetime ban

INFORMATION CHECK When covering substance abuse issues, knowledge of the standards discussed here is required. After that, the journalist should determine: 1. What substance(s) was discovered? 2. What does the athlete or his or her representative say about the circ*mstances leading to the alleged discovery? 3. Was there a “medical” reason to take the substance? 4. Is it an illegal drug in the United States? 5. Does the athlete plan to appeal?

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REFERENCES Anabolic Steroids Control Act of 1990, 21 USC sec. 802 (1999). Barker, J. (2004, December 9). White House pushes MLB to crack down on steroids; North Dakota senator says players union must put end to “stonewalling.” Baltimore Sun, p. 3C. Collinsworth, C. (2004). The best policy: NFL's drug testing. Retrieved July 6, 2004 from www.nfl.com/new/story6744864 Conrad, M. (2001, July 13). USA Track criticized for “lax” enforcement of anti-doping rules. Retrieved June 1, 2005, from www.sportslawnews.com/archive/Articles%202001/USATrackDoing.htm Dupont, K. P. (2005, July 22). A look at the deal. Boston Globe, p. E3. Dvorchak, R. (2005, May 19). Congress remains skeptical; grills, prods sports czars on steroids. Pittsburgh Post-Gazette, p. C-1. Fisher, E. (2005, January 13). Baseball beefs up steroid penalties. Washington Times, p. C01. Gloster, R. (2004, August 3) Harrison hit with 2-year drug suspension. Ventura County Star, p.4. Hohler, B. (2005, November 16) Baseball gets tough about doping. The Boston Globe, p. A1. Iwata, E. (2004, December 21). Andro users, sellers push to beat ban. USA Today, p. 1A Jenkins, S. (2004, June 26). Due process? Not for track stars. Washington Post, p. D1. Kroichick, R. (2005, April 20). Congress calls leagues to testify. San Francisco Chronicle, p. D2. Longman, J. (2004, June 11). Edge is all to athletes, BALCO case reveals. New York Times, sec. D, p. 1. Ludd, S. O. (1991). Athletics, drug testing and the right to privacy: A question of balance. Howard Law Journal, 34, 599. National Football League, Policy and Program for Substances of Abuse (2003). Retrieved September 27, 2005 from www.nflpa.org/Members/Main.asp? NBA, NBPA reach agreement in principle on new collective bargaining agreement. (2005, June 21). Retrieved June 22, 2005, from NBA.org/news/cba_050621.htm Opie, H. (2004). Drugs in sports and the law—Moral authority, diversity and the pursuit of excellence. Marquette Sports Law Review, 14, 267, 275. Ungerleider, S., & Wadler, G. I. (2004, June 20). A new world order in elite sports. New York Times, sec. 8, p. 12. USADA Protocol for Olympic Movement Testing, (2004, August (13). Retrieved September 25, 2005 from www.usantidoping.org/files/active/policies_procedures/2004%2Ousada%20protocol[3].pdf Wilstein, S. (2004). NHL can’t afford to be aloof about drug testing. Retrieved July 16, 2004, from http://msnbc.msn.com/id/4569409

CHAPTER

11 Discrimination in Sports

A good journalist tackles a discrimination story with caution because it is one of the most difficult subjects to cover. With the possible exception of labor-management issues, allegations of favorable or unfavorable treatment produce the angriest charges and countercharges from those involved. Because of the broad and controversial legal and social issues, understanding the basis of a discrimination claim and obtaining information from as many parties as reasonably possible is a must. This chapter provides a general background on the various kinds of discrimination that exist and the appropriate standards used to determine the validity of a discrimination claim. Note the distinction between illegal discrimination and policies that, while not illegal, result in the lack of representation of certain groups of people. Witness the case of the Augusta National Golf Club, the home of the prestigious Masters’ competition. Protests against the all-male club were launched during the 2003 tournament, which received notable coverage, especially in the New York Times. William “Hootie” Johnson, the chair of the club, said, “There never will be a female member, six months after the Masters, a year, 10 years, or ever” (Bisher, 2003). 244

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Legally, the club has the right to exclude women, because a private facility has the discretion to select the members it wishes, no matter what sex (or race) they are. Discrimination laws apply in the employment relationship, and these laws—state and federal—prohibit discrimination based on race, ethnicity, religion, age, and in some cases sexual orientation. Employment discrimination issues can exist in sports. For example, the paucity of African Americans in management or coaching positions in the major sports has been noted. In addition to employment, discrimination laws apply to actions by government entities and private organizations that receive governmental funding. In particular, gender-based discrimination has received a great deal of coverage and discussion, due to the considerable litigation resulting from the interpretation of Title IX, the statute governing equity in federally funded institutions. The standards have produced intense debate about claims by certain male athletes of “reverse discrimination.” Discrimination against those with disabilities has also resulted in discussion and lawsuits, notably in high school and collegiate sports. In 1964, the passage of Title VII of the Civil Rights Act barred discrimination in employment based on race, color, religion, sex, or national origin. Since then, outright, intentional discrimination is illegal. Essentially, Title VII prohibits intentional discrimination in hiring, promotions, and termination. A basic question arises of how to prove such acts. It is safe to say that most employers and their managerial and supervisory employees (even in the sports industry) refrain from making openly racist statements regarding employment standards. Therefore, limiting discrimination laws to purely intentional statements would result in few successful cases. Instead, a system based on “disparate impact” or statistical underrepresentation has been devised by the courts. Simply put, if such a statistical imbalance can be shown between the number, rank, or termination of employees as compared to a general population, a basic presumption of employment discrimination occurs. For example, if only two of the NFL’s 32 head coaches are black, as compared with the percentage of players or even the percentage of African Americans in the United States (which is far higher), it can merit a disparate impact claim by those eligible black candidates denied head coaching positions. However, the employer has a defense of “business necessity,” and if the team or the league proves that the disparity is based on success (meaning victories) and that a full and fair job search yields candidates that are qualified, then the employer wins. With this in mind, let us tackle some of the major issues.

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RACE DISCRIMINATION If one thinks of an example of an egregious discriminatory policy in sports, the lack of African Americans in professional baseball ranks at the top. From the late 19th century to 1947, Major League Baseball enforced a ban on “Negro” ball players. The policy was never formalized, but the effect was pernicious. During the reign of commissioner Kenesaw Mountain Landis, not one Black person played in the major leagues. While baseball denied it had a race problem, it had existed under the veneer of impartiality. As reportedly noted by Landis’s successor, Albert “Happy” Chandler, “so long as Landis remained commissioner, … there wasn’t going to be any black boys in the league.” (Rogosin, 1995). Certainly, talent existed. Marvelous players from Negro Leagues toured the country and even competed against White major leaguers in exhibitions (Weiler & Roberts, 2004). The foolishness and outrageousness of this policy resulted in a great talent pool of players excluded from the major leagues. The segregation policy also violated good business sense. A greater number of players for owners to pick from would exist and owners’ leverage over their players in a pre-free-agency era would increase, keeping salaries low, possibly even lower than was the case. After Landis died in 1944, the color barrier broke down with the entry of Jackie Robinson (Brooklyn Dodgers) and Larry Doby (Cleveland Indians). It took another decade to integrate all major league teams. But changing attitudes about minority players, unfortunately, took years longer. In 1987, the issue of race in sports became national news when Al Campanis, a vice-president for the Los Angeles Dodgers, made inopportune remarks on an ABC News “Nightline” broadcast when asked about the lack of black managers and front-office personnel in the sport. He said, “I don’t think it is prejudice. I truly believe that they may not have some of the necessities to be, let’s say, a field manager or perhaps a general manager.” Campanis was fired after that broadcast, and Major League Baseball instituted an affirmative action program to expand opportunities for minorities on the coaching and managerial level. A few years before that, the NFL and NBA instituted such programs. In 1985, the league worked with Benjamin Hooks, the NAACP executive director, to hire Blacks in the front office. The NFL hired its first Black head coach in the modern era, Art Shell of the Los Angeles Raiders, in 1989. Another example of offensive comments occurred a few years later. In the early 1990s, Cincinnati Reds principal owner Marge Schott made

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anti-Semitic and racist comments that received wide publicity. Ultimately, she accepted a 1-year suspension and a fine. Although her opinions constitute protected free speech under the First Amendment, that immunity does not apply to a private organization like Major League Baseball, which was well within its rights to enact sanctions against her for those comments. More recently, in 2003, conservative radio talk show host Rush Limbaugh stated that Philadelphia Eagles quarterback Donovan McNabb was overrated by the media and the NFL because of their interest in seeing Black quarterbacks and coaches do well. The resulting criticism forced Limbaugh’s resignation from his role on ESPN’s “Sunday NFL Countdown” (Siemaszko, 2003). Players have joined in this chorus of ill-timed statements. Atlanta Braves relief pitcher John Rocker made insulting comments about various minority groups and gays in an interview in Sports Illustrated in 1999. In it, he ranted against the kinds of people who took the subway to Shea Stadium (the home of the New York Mets) and then stated: “The biggest thing I don’t like about New York are the foreigners … Asians and Koreans and Vietnamese and Indians and Russians and Spanish people and everything there. How did they get into this country?” (Pearlman, 2000). Commissioner Bud Selig suspended Rocker for the spring training and the first 28 days of the 2000 regular season. Unlike the situation with Schott, Rocker, a unionized employee subject to the collective bargaining agreement, pursued arbitration. The arbitrator reduced the fine to $500 and the suspension to14 days during the season (Standora, 2001). The Rocker case presents an important question when dealing with insensitive racial, ethnic, or religious comments. Rocker made them during the off-season, in a nonbaseball setting. Should his employer sanction him for his opinions, as odious as they are? If Rocker got along with his teammates and did not engage in any racial or ethnic insults while engaged in his job, should the league mete out punishment? Another issue involves double standards. The rap group led by the Philadelphia 76ers’ Alan Iverson made a CD replete with comments about those with “fa*ggot tendencies,” and “f*cking bitches.” NBA commissioner David Stern criticized the lyrics as “repugnant” but did not take any disciplinary action (Smith, 2000). Given Rocker’s statements, do these comments deserve equal sanction?

UNDERREPRESENTATION OF MINORITIES Although underrepresentation of African Americans exists on the management level, with the exception of ice hockey, no such problem occurs among players. In 2003, 10% of baseball players, 65% of NFL

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players, and 78% of NBA players were African-American. What has become striking, however, is the increase in percentage of other minorities in professional sports. Today, 28% of baseball players are Hispanic, up from 14% in 1990, and 2% are Asian, an increase from 0% in 1992 (Racial and Gender Report Card, University of Central Florida., 2003). In terms of ownership, the survey found that baseball had two general managers who are people of color—the fewest among the big three leagues. Three people of color and 16 women had minority share holdings of MLB teams, 29% of Major League Baseball’s central office employees were people of color, a second to the NBA’s 30%, while 25% of central office employees at the senior exec level were people of color. Women occupied 22.5% of the senior level positions. For the NBA, the same survey gave the NBA the best racial and gender diversity. The NBA led all men’s pro leagues for people of color among players (78%), league office VPs (12%), league office professional staff (29%), Limited Partners (6%), head coaches (40%), CEOs/Presidents (10%), General Managers (17%), team VPs (12%) and team professional administration (24%). The NBA was best for women in men’s pro leagues in league office VPs (13%), league office professional staff (44%), Owners (3%, tied with the NFL), Limited Partners (18%) and team VPs (17%) (Lapchik, 2004a, 2004b, 2004c). In one sense, professional athletics is the ultimate meritocracy, as only the very best make it to the major league level. The selection, cultivation, and compensation of these athletes are commensurate with their abilities and the likelihood of illegal discrimination is scant. Although frustration exists regarding the slow pace of African Americans, Hispanics, and women in head coaching, general manager, and other executive positions, litigation is rare in the professional leagues. The time, cost, uncertainty of success, and, possibly most importantly, the limited prospect of employment after bringing such a lawsuit serve as disincentives to undertake such a strategy.

TITLE IX Gender equity and enforcement of Title IX of the Education Amendments of 1972 have become the signature issues in the area of discrimination and school sports. Title IX merits recognition by many in the general public, something few laws achieve. However, public recognition is not synonymous with accuracy, and some of the reporting and commentary about Title IX lacks substantive knowledge about the language, history, and enforcement of this important statute. The law’s controversy lies in the enforcement issues created by regulatory bodies and the courts, rather than the actual text.

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Although the main interpretation issues are settled (at least for now), the social ramifications of Title IX continue, resulting in much debate and, at times, rancor. Explaining, rather than advocating, is the goal in this chapter. Journalists must exercise caution and prudence when tackling this tricky subject and ask the right questions. Let us dispel several myths at this juncture: (a) Title IX primarily applies to gender equity in sports; (b) the law constitutes a government-mandated affirmative action program; and (c) the law only applies to women. None of these assertions is true. Title IX, enacted by Congress with the signature of President Richard Nixon, is an educational rights law, pertaining to all educational programs receiving federal assistance. It states: “No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any educational program or activity receiving federal financial assistance” (20 USC 1681(a), 2000). That means that if university X has a biology program that limits participation to men and receives a federal grant of $1 million, the institution is in violation of Title IX. Note that the law applies to both public and private institutions. Federal funding is the key, and many private institutions receive such funding. Affirmative action involves a voluntary or court-ordered remedy for past discrimination. Title IX, however, is a statute barring discrimination, not a judicial remedy. Also, Title IX deals with opportunities for an “underrepresented sex,” which may apply to females or males. If a situation arose in which male athletes suffered discrimination, they could sue under the law. Yet, the enforcement questions belie the outward simplicity of the law. The seemingly broad language led to years of interpretation questions. Although Congress passed the statute, it empowered the Office of Civil Rights, a federal administrative agency, to craft the particular regulations needed to implement and interpret the law. As was the case with the Americans with Disabilities Act (discussed later in this chapter), the regulations caused the most controversy and required judicial intervention to ensure a uniform interpretation. It took 3 years of input and drafting for the issuance of the first set of regulations by the Department of Health, Education, and Welfare (HEW) in 1975. When the regulations were criticized as vague, the Office of Civil Rights (a successor agency in charge of implementing Title IX) reconsidered and came up with more specific recommendations in 1979. Although the 1975 regulations addressed broad terms like admissions and employment of students, the 1979 rules, for the first time, specifically applied the statute to issues of gender equity in intercollegiate sports. These standards, despite criticism from certain quarters, remain in effect.

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At the same time, a debate developed concerning the scope of Title IX’s application. Is it institution-wide or merely applicable to the particular program funded by federal monies? If it is the latter, virtually no athletic programs fall within its ambit, because few if any athletic departments receive federal funding. Institution-wide application, however, results in school-wide enforcement. So if the college or university accepts $100,000 for its biology lab or its cyclotron, athletics must comply with Title IX and its regulations. The Supreme Court concluded that the more limited standard applied in Grove City College v. Bell (1984). Three years later, Congress passed the Civil Rights Restoration Act (1988), which explicitly extended Title IX coverage to all programs of an institution that receive federal money. By the late 1980s and early 1990s, Title IX litigation regarding athletic programs began in earnest. In addition to the federal government, the courts allowed individual lawsuits for money damages for violations of Title IX. Most cases have arisen from private litigants, and the plaintiffs emerged victorious in the great majority of these cases (Weiler & Roberts, 2004). Unequal treatment in the participation, funding, and scholarship opportunities in athletic programs served as the basis of these lawsuits. Because of these disparities, the argument went, colleges and universities lacked compliance with Title IX. The courts had to determine whether a violation of Title IX existed, and in answering that question, they looked to the 1979 Office of Civil Rights Guidelines. These important—and controversial—rules serve as the basis for Title IX interpretation. To ensure compliance in participation of athletic programs, the college or university must prove one of three alternatives (or “prongs”): 1. Demonstrating that intercollegiate athletic participation is “substantially proportionate” to the respective enrollments of each sex in the particular institution; or if not, 2. Demonstrating that the institution has a history of and continuing practice of expanding participation opportunities for the underrepresented sex; or if not 3. Demonstrating that the institution fully and effectively accommodates the abilities and the interests of the underrepresented sex in the current program (Title IX policy interpretation, 44 Fed Reg. 71, 418, 1979). Revenue-producing sports such as men’s football must be included in the calculation, despite the lack of women’s football teams.

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The rules cover not just participation, but also scholarships. Many schools grant athletic scholarships based on NCAA rules. The OCR guidelines require that male and female student-athletes receive such scholarships proportional to their participation. The OCR policy outlines “nondiscriminatory factors” such as equipment and supplies, scheduling of goods and practice times, travel and daily allowances, access to tutoring, coaching, locker rooms and competitive facilities, and other support services. Violation of the rules may result in monetary damages and judicial remedies to rectify the situation. It is best for an institution to show prong 1, the “proportionality” ratio. Basically, if an institution shows “substantial proportionality” in the numbers of male and female athletes, compliance occurs. Let’s take an example: College X has 5,000 students, 53% female and 47% male. Two hundred and fifty students participate in intercollegiate athletics. Of those 250, 100 are female and 150 are male (including a number of men’s football players) or a breakdown of 40% female and 60% male. Because these numbers do not fit the proportionality of the student body, noncompliance occurs (unless one of the two other prongs is fulfilled). However, the regulations did not specify what the parameters are for “substantial proportionality.” What if the student body is 53% female and athletic participation is 49%? Does that result in compliance? That question is left up to the courts. One court concluded that an 11% discrepancy is not substantial proportionality (Cohen v. Brown University, 1993). Presently, many college and university athletic programs lack substantial proportionality (Equal Opportunity in Intercollegiate Athletics: Requirements Under Title IX of the Education Amendments of 1972, Department of Education, 2002). The second prong, a demonstration of the institution’s current and historical practice of program expansion, means that although a disparity remains between the ratio of male to female students and the proportion of those engaged in intercollegiate athletics, the institution has a history of expanding opportunities for the underrepresented sex and a plan for continuing that practice. Applicable in the case of an institution seeking to remedy past practices, it requires greater resources to expand the numbers of athletes of the underrepresented sex. The standard involves considerable factual data. A court must examine the past practice of the institution. How many years has the college or university attempted to correct the disparity by adding programs for the underrepresented sex? Have new teams been created? Have club teams “graduated” to varsity teams? Have those teams been created or expanded to meet the interests of that gender? Simply creating new teams does not ensure compliance if little demand exists for them. Louisiana State University learned that lesson

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when a court concluded that its decision to add women’s softball and soccer did not constitute an adequate response to student interest (Pederson v. LSU, 1996). Once the history of program expansion is adequately demonstrated, the institution must then demonstrate a continuation of that practice. The regulations do not specify a particular timeline but should show consistency. An example of the difficulty of fulfilling prong 2 occurred in a lawsuit against Colgate University. Colgate added 11 women’s varsity sports in the 1970s and 1980s, but did not add any women’s sports from 1989 to 1993, when the lawsuit was filed. Afterward the court refused to rule in favor of the university and did not dismiss the case. Basically, the court determined that factual questions still existed as to whether the second prong’s requirements were met (Bryan v. Colgate University, 1996). The parties settled the case shortly afterward. The second prong benefits wealthier schools, those possessing the resources to invest in larger athletic activities. Many less affluent institutions lack this ability. The question becomes, what can these schools do to eliminate the disparity? That is the role of the third (and by far the most difficult) prong. This alternative allows an institution that maintains a disparity between men’s and women’s programs to determine that, despite the disparity, the interests and abilities of student athletes are “fully accommodated.” In making this determination, the Office of Civil Rights regulations consider these factors: (a) “whether there is unmet interest in a particular sport, (b) sufficient ability to sustain a team in the sport, and (c) a reasonable expectation of competition for the team.” To show that the underrepresented sex’s interest is met, the regulations require proof by such methodologies as surveys of students in the institution and potential students in the community. In addition, personal interviews may be utilized. If the institution so proves, then compliance occurs. If not, then a court considers the ”ability to sustain an intercollegiate team,” a particularly subjective and questionable consideration. The institution must show, through the opinions of coaches, administrators and athletes, whether it possesses the ability to field a particular team. What makes this ludicrous is that “a school may ask the women’s softball, basketball and swimming coaches whether the school has the potential to sustain a varsity bowling team” (Bentley, 2004). If, somehow, the institution can show a lack of ability to sustain new teams, then compliance occurs. In March 2005, the federal Department of Education (which has since assumed enforcement power over Title IX) issued a “clarification” of the third prong of the OCR standard. It puts the burden of proof on students and government investigators to show that a college is not doing enough to accom-

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modate women’s (or in some rare cases, men’s) athletic interests and abilities. It crafted an e-mail “model survey” to gauge student interest and demand for a particular sport and noted that even where interest exists, schools are not obligated to add a women’s team unless the interested students have ability and there are opponents in a school’s competitive region. (Statement of James Manning, http://www.ed.gov/about/offices/list/ ocr/docs/title9guidanceadditional.html, retrieved May 6, 2005). At this time, the effect of this change on Title IX enforcement is unclear. Before the passage of Title IX, women composed only 5% of the total number of athletic participants in high school and 15% in college. By 1992, 36% of all interscholastic participants and 34% of NCAA intercollegiate participants were women (Missouri Women’s Council Report, 2003). Although Title IX controversies centered on collegiate athletes, the law also applies to primary and high schools, and future cases may well focus more on these levels. The increased level of interest constitutes a reason why. In 1972, when Title IX was enacted, there were 295,000 girls participating in high school sports, or roughly 1 in 27. Thirty years later, there are more than 2.8 million girls, or approximately 1 in 3 (Report of the National Coalition for Women and Girls in Education, 2002). Already we see litigation. Many lawsuits claiming discrimination against girls and their athletic opportunities due to poorer playing fields, equipment, and locker rooms than their male counterparts have been filed. At the federal Department of Education, the number of complaints involving sex discrimination in high school and even middle school athletics has outpaced those involving colleges by 5 to 1 since 2001 (Pennington, 2004). Also, state athletic authorities have become more aggressive in reviewing member schools’ compliance. In Kentucky, the state athletic association’s decision to annually review all 284 member school districts for Title IX compliance (a process that often leads to fines and penalties for the noncompliant) has brought about the construction of more than 70 softball fields (Pennington, 2004). After the filing of a lawsuit, two Westchester, New York, high schools were ordered to move girls’ soccer from the spring to the fall, so the girls’ teams would have the same opportunity as the boys’ teams to compete in regional and state soccer championships (Paskin, 2003). In researching a Title IX issue, considerably more information is available regarding collegiate athletic programs than those of primary and secondary schools. Under the Equity in Athletics Disclosure Act, a federal law enacted in 1994, colleges and universities must disclose all pertinent data on the financial support and numbers of male and fe-

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male athletes (20 USC sec. 1092). In primary and secondary public schools, no such federal requirement exists, and much of the enforcement is fractionalized among local school districts.

CRITICISMS OF TITLE IX Title IX has almost singlehandedly created the boom in women’s athletics in the United States. However, Title IX enforcement comes at a cost, and some have criticized the method in which it is enforced. In June 2002, the Secretary of Education created a 15-member commission to study Title IX and possibly recommend changes in its enforcement. Its conclusions, published 8 months later, showed that although the panel agreed on many issues, sharp differences existed on others, prompting a dissenting report. The majority reaffirmed the ideal of Title IX but called for modification and “clarification” of the three-prong test. For example, it called for eliminating the category of “non-traditional” students (meaning older students) from the calculation of proportionality and permitting the Department of Education to allow for a “reasonable variance” from equality if proportionality is retained as a way of complying with Title IX (Report by Commission on Opportunity in Athletics, 2002). Although the commission’s recommendations did not translate into legislation, they demonstrated a discomfort with the proportionality standard (prong 1 of the three-part test) and the adverse consequences of Title IX for male teams. In certain situations, male athletics suffered in the quest for proportionality. The argument that men’s teams had to “suffer” unfairly to ensure compliance with Title IX resonates strongly in some circles. The impetus for the establishment of the commission was a lawsuit filed by the National Wrestling Coaches Association claiming “reverse discrimination.” It alleged that Title IX discriminated against male athletes with respect to participation opportunities because sports programs had been eliminated at many schools as a result of the regulations. Neither the lower federal court nor the federal appeals court decided the merits of the case. The federal appeals court, in a 2–1 ruling, dismissed it on procedural grounds (Nat’l Wrestling Coaches Ass’n v. U.S. Dept. of Education, 2004). However, one judge did note that the claims of the plaintiffs were “speculative” because individual schools had discretion to utilize various methods to comply with Title IX, and even a favorable ruling would not result in the likelihood that the men’s programs would be protected (Nat’l Wrestling Coaches Ass’n v. U.S. Dept. of Education, 2004). The following year, the Supreme Court rejected an appeal of the ruling (Nat’l Wrestling Coaches Ass’n v. U.S. Dept. of Education, 2005).

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Evidence exists showing that some men’s programs have been eliminated or reduced to satisfy compliance. The question journalists should research or ask is the possibility of alternatives—most notably, changes in the numbers and scholarships in the football program, which is generally all male and quite large in many institutions. Because women generally do not have football teams and men’s teams contain high numbers of players (with high numbers of scholarships in some cases), this creates difficulties for other men’s programs. Men’s wrestling or swimming lacks the constituency and alumni interest that football has, so diminution or elimination of football, especially in an institution with a “football tradition,” is less likely. Another argument criticizing Title IX focuses on primary and secondary schools. It concludes that such enforcement provides a disincentive to engage in any improvements because of the costs of compliance. If new training facilities are built, the argument posits, then they have to accommodate women’s as well as men’s teams. In other words, why commit to new men’s facilities unless one can ensure they are used by women as well? A final point, based on race and class issues, notes that many, if not most, of the beneficiaries of Title IX have been women of middle- or upper-middle-class means. It questions whether the proportionality test benefits them over men from underprivileged backgrounds. A sensitive point rarely argued publicly, this was summarized in a 1997 speech given by the Rev. Jesse Jackson in Sacramento, California. In it, Jackson stated, “There are those who say affirmative action is hurting whites. Let’s look at that reasoning. The primary beneficiaries are the white family. The majority of beneficiaries under Title IX are white women who with education, as they join the work force, and get contracts, help stabilize the white family and expand the economy” (Jackson, 1997). This argument, if true, raises a difficult moral and ethical dilemma. For example, say that a university must spend a proportionate amount of money on athletic scholarships between men and women, but in doing so, poorer or minority male students are affected in disproportionate amount. In many cases, an athletic scholarship is the only opportunity for many of these male students, whereas this is generally not the case with the female athletes.

DISABILITY Disabled people have attained legal protections through legislation passed in 1973 and 1990. Some of the protections mirror those for other groups with a history of discrimination. However, unlike race or

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sex discrimination, the disabled have unique obstacles in terms of athletic participation. First, the central focus of disabled athletics rests in the secondary schools and colleges, rather than the professional sports. Given that professional athletes must rank at the pinnacle of those playing the sport, it is difficult, if not unlikely, for someone without an arm or leg to perform competitively with others. And in the rare event that someone with a life-altering disability makes it to the pros, that person should understand the risks involved in participation. With school participation, discrimination laws protecting the disabled have been in effect for over 30 years, and a body of jurisprudence has developed from the many lawsuits that have been filed against school districts. The first of the two major disability protection laws, section 504 of the Rehabilitation Act of 1973, prohibits the exclusion of participation from any program or activity receiving federal financial assistance (29 U.S.C. sec. 794). The second, the Americans with Disabilities Act of 1990 (ADA) (42 USC sec. 12101 et seq., 2002) expanded this mandate. Enacted to protect disabled people from discrimination in the workplace, by private entities offering public accommodations and services, and by the government, it ensures that disabled Americans are offered the same opportunities as all others in society. The ADA incorporated section 504 of the 1973 act and has been utilized by student athletes when faced with exclusion from participation in a sport. In order for an athlete (or just about anyone else) to bring an ADA claim, the person must demonstrate a “disability,” and despite that disability, the person is “otherwise qualified” to obtain the benefit sought. The ADA defines disability as “a physical or mental impairment that substantially limits one or more of the major life activities of such individual” (42 USC sec. 12132, 2002). An athlete has a claim when he or she proves that if not for his disability, the person qualifies to engage in the activity. Once shown, the burden shifts to the defendant to show that the eligibility requirements are essential and neutral, and that accommodations for the disabled athlete fundamentally alter the nature of the athletic program. Under Title II of the ADA, which applies only to state or local governments or agencies, the individual must show that the defendant is a public entity, that he or she is a qualified individual with a disability, and that this person has been excluded from participation or denied benefits offered by the entity because of the disability. Public educational institutions or state public school athletic associations fit into this definition. Typical claims under this title involve denials of student requests for waivers of certain eligibility requirements. The three most common requirements that are litigated are: (a) maximum age re-

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quirements; (b) the eight-semester rule, which prohibits a student from participating in interscholastic sports if he has spent more than eight semesters completing grades 9–12; and (c) a requirement of certain physical condition. The following examples illustrate the point: A 19-year-old in a special education program seeks the right to try out for the football team but is barred because of an 18-year-old maximum age ceiling; a student in his ninth semester due to a neurological condition seeks the tryout for the track team; or a student blind in one eye seeks a spot on the school’s hockey team. Cases against private entities offering public accommodations or services are brought under Title III of the ADA. The accompanying regulations define a place of public accommodation as “a facility operated by a private entity whose operations affect commerce and come within at least one of twelve enumerated categories.” Under a Title III action, a plaintiff must show a disability, that the claim is against a private-entity defendant operating a “place of public accommodation,” that the athlete was denied the opportunity to participate or benefit from services or accommodations on the basis of his disability, and that reasonable accommodations could have been made without fundamentally altering the nature of the entity. The disability laws are difficult and intricate. An excellent example of this point involves the most notable sports case brought under Title III of the ADA—PGA Tour, Inc. v. Casey Martin (2001), decided by the U.S. Supreme Court. Martin, a professional golfer, suffered from a circulatory disorder that causes severe pain and that had already atrophied his right leg, making it virtually impossible for him to walk an 18-hole golf game. Despite this condition, Martin, an accomplished golfer, progressed to the point where he sought qualification to the PGA Tour, the top professional level for men’s golf. Unlike the PGA’s other levels of competition, the PGA Tour rules stated that no participant may use a golf cart. Martin applied for a waiver from that rule but was denied. The PGA claimed that the use of the cart gives one participant an advantage over other players who have to walk a course. Leaving aside the issue of poor public relations caused by the PGA’s act, Martin’s case brought forth a slew of comments, many of them off point. The key issues were (a) whether a private golf course (where most PGA tournaments are staged) becomes a “place of public accommodation” under the ADA because it hosts a golf tournament, and if so, (b) whether Martin fit the definition of someone disabled. The majority opinion of the U.S. Supreme Court concluded that a golf course was indeed a place of public accommodation, for the players as well as the audience, thus bringing the dispute within the jurisdiction of the ADA. This key point received far too little coverage. Then the court had to determine whether

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Martin fit the definition of “disabled,” which he did because his impairment substantially limited one or more major life activities. Some mistakenly compared Martin’s case with that of Ken Venturi, who suffered through heat stroke while competing in a golf tournament in the 1960s, to show the importance of this “walking only” rule. But that also missed the point. Venturi was not disabled, because it was the weather conditions that caused his serious heat stroke, not a life-limiting physical condition. In rejecting the views of many golfers, the court noted that access to a cart would not fundamentally alter the competition, because other levels of PGA competition permitted a cart. Therefore, a denial to accommodate Martin’s disability was a violation of the ADA. The court reasoned that walking between holes was not an “essential attribute of the game itself.” Even if it were to alter the game, Martin endures much more fatigue even with the use of the cart than his able-bodied competitors.

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INFORMATION CHECK When covering discrimination issues, a journalist must proceed with caution. This issue, sensitive at the least and incendiary at worst, must be covered carefully, with an understanding of the allegations made and the appropriate legal standards. Ask the following questions: 1. What is the basis of the claim? If it is racial, what laws are allegedly violated? If it is sexual, is it Title IX and/or another law? If it is based on disability, is it the ADA and/or section 504 of the Rehabilitation Act? 2. How many individuals are making this claim? 3. Was the conduct intentional? For example, were discriminatory words or conduct alleged? 4. Was the discrimination more institutional, based on disparate numbers of student-athletes versus the percentage of those students in the institution? 5. If Title IX is alleged, what defenses does the institution have? Have any of the three prongs of the 1979 Office of Civil Rights guidelines been satisfied? 6. If the first prong is violated, how does the institution demonstrate compliance with the second or third prong? 7. What remedies do the plaintiffs seek? 8. If the institution decides to reduce men’s teams, either in numbers of teams, number of players, or numbers of available scholarships, has the institution considered cuts in its men’s football program and, if applicable, the number of scholarships? 9. When covering professional sports issues, does a particular organization have a plan to increase participation by traditionally disadvantaged groups, notably in coaching and the degree of success of the program? 10.If the sport has a players’ association, what procedures are in place, if any, in the respective collective bargaining agreement to combat discrimination?

REFERENCES Bentley, E. (2004). Title IX: How Title IX should be interpreted to afford women the opportunities they deserve in intercollegiate athletics. Sports Lawyers Journal, 11, 89. Bisher, F. (2003, April 16). Johnson: Club will never have female member. Atlanta Journal-Constitution (Atlanta, GA), p. C1. Bryan v. Colgate University, 1996 WL 328446 (N.D.N.Y. 1996).

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Civil Rights Restoration Act of 1987 (20 USC sec. 1681 1988). Cohen v. Brown University, 991 F. 2d 888 (1st Cir. 1993). Equal Opportunity in Intercollegiate Athletics: Requirements Under Title IX of the Education Amendments of 1972, Department of Education (2002).http://library.lp.findlaw.com/articles/file/00020/005675/title/Subject/ topic/EducationAthletics/filename/education_2_2709 Equity in Athletics Disclosure Act, 20 USC sec. 1092 (1999). Grove City College v. Bell 465 U.S. 555 (1984). Jackson, J. L., Sr. (1997, October 27). Save the dream: March on the Capital, speech delivered October 27, 1997, Sacramento, CA. Retrieved January 17, 2005, from http://www.inmotionmagazine.com/jjsave.html Lapchick, R. (2004a, (April 6). Racial and gender report card: Major League Baseball. Retrieved June 1, 2005, from www.bus.ucf.edu/sport/public/downloads/2004_Racial_Gender_Report_Card_MLB.pdf Lapchick, R. (2004b, May 4). Racial and Gender report card: National Basketball Association. Retrieved June 1, 2005, from www.bus.ucf.edu/sport/public/downloads/NBA_Report_Card_2004.pdf Lapchick, R. (2004c, May 24). Racial and Gender report card: National Football League. Retrieved June 1, 2005, from www.bus.ucf.edu/sport/public/downloads/2004_Racial_Gender_Report_Card_NFL..pdf Nat’l Wrestling Coaches Ass’n v. U.S. Dep’t of Education, 126 S. Ct. 12 (2005). Nat’l Wrestling Coaches Ass’n v. U.S. Dept. of Education, 366 F.3d 930 (D.C. Cir. 2004), aff ’g, Nat’l Wrestling Coaches Ass’n v. U.S. Dep’t. of Education, 263 F.Supp.2d 82 (D.D.C. 2003). Open to All: Title IX at 30 (2002). The Secretary of Education’s Commission on Opportunity in Athletics. Retrieved June 10, 2005, from www.ed.gov/about/bdscomm/ list/athletics/title9report.pdf Paskin, J. (2003, July 16). Spring soccer for girls found unfair. Journal News. Available at http://www.nynews.com/newsroom/071603/a0116titleix.html Pearlman, J. (2000). At full blast. Sports Illustrated, 91(25), 60. Pederson v. LSU, 912 F. Supp. 892 (La. 1996). PGA Tour, Inc. v. Casey Martin, 532 U.S. 661 (2001). Pennington, B. (2004, June 29). Title IX trickles down to girls of generation Z. New York Times, p. C1. Rogosin, D. (1995). Invisible men: Life in baseball’s minor leagues. Kodansha America. Siemaszko, C. (2003, Oct. 2). He quits ESPN gig over race remark. New York Daily News, p. 4. Smith, S. (2000, October 13). Iverson’s rap? NBA will take the rap. Chicago Tribune, p. 9. Standora, L. (2001, June 23). Now, Rocker is headed to the Bronx, instead of Queens. New York Daily News, p. 4. Title IX at 30: A report card on gender equity. Report of the National Coalition for Women and Girls in Education (2002) Retrieved June 22, 2005, from www.laxpower.com/new/stories.php?story=2002-006 Title IX, Policy Interpretation (1979) 44. Fed. Reg. 71, 418. Weiler, P., & Roberts, G. (2004). Sports law—Text and cases (3rd ed., p. 85). St. Paul, MN: West.

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12 Intellectual Property and Sports

Unlike a business that produces machinery or apparel, a league, team owner, college, or individual athlete does not need an engineering plant, heavy equipment, or a fleet of trucks to manufacture or transport its product. Instead, the leagues, teams, athletes, colleges, conferences, and independent tournaments possess rights to “intangible” property—the trademarked names, logo designs and general rights to license and reproduce those items for merchandising purposes. Over the last quarter century, the marketing, and sale of the team names, designs, uniforms, and player images have constituted a lucrative revenue base. The licensing and merchandising of sports properties has been transformed from a relatively small and fragmented sideline into a highly profitable $17 billion global industry. Retail sales of sports licensed goods account for 10% of worldwide retail sales of licensed merchandise (Kolah, 2002). Owners of the intellectual property enter into licensing agreements that account for the bulk of the revenue. In 261

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2004, the NFL led the major leagues, earning $3.2 billion, whereas the NBA and Major League Baseball earned slightly less ($2.65 and $2.2 billion, respectively). Next came NASCAR ($2 billion) and the NHL ($1.5 billion) (Sosnowski, 2005; Toronto Star, 2005). What is licensed? Mostly merchandise carrying the names, logos, and designs associated with a particular sport, league, team, college, athletic conference, or other governing body. The licensee, often a firm manufacturing clothing, shoes, or sports equipment, contracts with the respective intellectual property owner for the use of its names, logos, and designs on items sold to the public. The licensor often receives a stated percentage of the sales, and, even more importantly, has control over the production, design, and overall quality of the product. The major aspects of these agreements are discussed later in this chapter.

TRADEMARKS Intellectual property contains a broad category of rights; the most important for sports purposes are trademark protection and licensing. All too often, writers and broadcasters confuse trademarks with copyrights. They are quite different. Defined as “any word, name, symbol or device used to identify and distinguish goods from those manufactured or sold by others” (15 USC sec. 1127), a trademark is a brand name, design, symbol, shape, color scheme, slogan, or even smell for use in commerce. For example, the brand name Coca-Cola identifies a particular soft drink. The name Coca-Cola is trademarked—a rival cannot use that name without permission. If the rival does, it faces severe penalties, including civil fines, injunctions, and criminal prosecution (15 USC sec. 1127). The law requires that a trademark owner use the mark. An unused mark loses protection after a certain period of time, opening it up for use by another entity. Most U.S.-based trademarks are registered with the U.S. Patent and Trademark Office in Alexandria, VA. In order to obtain trademark protection, the mark has to be “distinctive.” Examples of distinctiveness involving sports-related marks include “arbitrary” titles—common words applied in an unfamiliar way. The Detroit Tigers and the Carolina Panthers come to mind. In the context of the respective sport, these words connect a fan’s mind to the respective team. There are also “suggestive” marks—those requiring imagination, thought, and perception, like the New York Yankees. Another basis for distinctiveness comes from “fanciful” marks—made-up names with no dictionary meaning. “Super Bowl” is a trademark of the NFL (although it did not coin the term and was hesitant to use it at first).

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A generic term cannot be trademarked, as it lacks distinctiveness. The terms football and baseball themselves have no protection, so if anyone wanted to design a sweatshirt with those terms, no tradmark infringement would result. The NFL and Major League Baseball cannot own those terms. Once a trademark is registered, the owner uses a circled R as evidence. A protected trademark cannot be used for a commercial purpose without the owner’s permission. Trademark infringement occurs when one improperly uses another’s protected trademarks or uses a mark “likely to cause confusion about the source of a product or service.” The focus of trademark infringement analysis is on the confusion of actual or potential customers. Accordingly, an infringer’s products or services need only be sufficiently related to the trademark owner’s products or services so that it is likely that both are promoted to and/or used by common customers (http://inta.org/info/basics.html, retrieved June 5, 2005). This rule protects consumers from being misled by the use of infringing marks and also protects producers from unfair practices by an imitating competitor. Infringement involves one of two situations. The first involves creation of a design similar or substantially similar to an existing trademark, creating a “likelihood of confusion.” Courts consider the following factors to determine whether confusion exists: the degree of similarity between the plaintiff ’s and defendant’s mark, the proximity of the products or services, and the existence of actual confusion (15 U.S.C. sec. 1114). No one factor is necessarily controlling, and in general infringement is evaluated on a case-by-case basis, based on the totality of the circ*mstances. It is incumbent on a sports organization to consider the trademark ramifications of a name or logo seriously. That requires due diligence, a legal term meaning a comprehensive search to see if the name or design is used by someone else or is sufficiently similar to the other mark. The failure to do so not only may lead to infringement claims. After the NFL's Colts left Baltimore for Indianapolis, that city was awarded a Canadian Football League franchise, under the name "Baltimore Colts." The NFL and the Indianapolis Colts sued and a federal appeals court enjoined the CFL team from using the “Colts” name (Indianapolis Colts v. Metropolitan Baltimore Football Club, 1994). In another example, the Atlanta Thrashers of the NHL received their name in an expeditious but risky manner. After the NHL awarded the franchise to Ted Turner, Turner, asked about the name of the team by a reporter, blurted out “Thrashers … I like the name Thrashers.” (The brown thrasher is the state bird of Georgia.) A California team owned the mark, and Turner paid a settlement to avoid a lawsuit (Unger, 1998).

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The second basis for infringement is clear-cut counterfeiting of goods, known as “knock-offs.” Known as “unfair competition,” such acts are prohibited by the Lanham Act (15 USC sec. 1057 et seq.), which is the most important law protecting trademarks. The act provides the courts with the right to enjoin the manufacture of knock-off merchandise, coupled with monetary penalties. Fake goods costs sports organizations sizable amounts of money, and because these counterfeit goods are often made cheaply, such items hurt the image of the trademark holder. Seizure of the fake goods by the FBI and local police occurs, but despite that power, it is often difficult to catch infringers because it is easy for them to make knockoffs and they are able to work quickly and sell their fake goods in locations such as street fairs and small shops. Larger and more reputable stores usually won’t carry them. More recently, a third method of trademark infringement, known as dilution, was created. Although dilution does not involve a likelihood of confusion, it applies when a similar, though not identical mark “blurs” or “tarnishes” that trademark. The necessary elements to a claim of dilution by blurring require: (a) the first mark must be distinctive and (b) the second user attempts to capitalize on the first mark’s status. Dilution by tarnishing occurs when a new trademark’s similarity to a famous mark causes consumers mistakenly to associate the famous mark with the second user’s inferior or offensive product (Kimpflen, 2004). A hypothetical example of blurring exists when a minor league baseball calls itself the New York Yanquis; in the case of tarnishing, it would be a strip club called the New York Spankees. While every nation has its own trademark laws, an international treaty known as the Madrid Protocol enables a person or entity from a member state to simultaneously register a trademark with all member states at the time of original filing in the home country. This treaty means that trademark applicants do not have to file separately in every member country, making it easier and more cost-efficient to obtain international trademark protection. Since this treaty came into effect in 1995, sports organizations have expanded their trademark applications to countries all over the world (http://madridprotocol.info/internationaltrademarkprotection.htm l, date retrieved, June 15, 2005).

COPYRIGHT As noted earlier, trademarks and copyrights sometimes are confused with each other. Although trademark law protects names, designs, and

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logos, copyright protects “original words of authorship in any tangible medium of expression” (17 USC sec. 102 (2001)). Examples include books, music, recordings, broadcasts, films, theatrical presentations, and choreography. Recent changes in the copyright law have expanded protection to the life of the author plus 70 years, whether the work is performed or not. The right to broadcast and rebroadcast sporting events has been a central topic involving copyrights. Because it involves media issues, it is discussed in chapter 13.

ATHLETE’S RIGHT OF PUBLICITY Athletes protect their image for economic and personal reasons. The more celebrity status an athlete has, the more leverage he or she has to enter into endorsem*nt and marketing deals. For example, according to one estimate, Tiger Woods will earn more than $2 billion in his lifetime from his endorsem*nts (Sherman, 2000). Taking that athlete’s name or likeness without permission undercuts control of his or her reputation and results in damages for lost business opportunity. If someone uses an athlete’s name in connection with a p*rnographic product, the athlete will stop this use (usually by a court order) to protect the athlete’s image. The failure to take action could create public perception that the athlete assents to the representation. The public’s interest in particular athletes based on their success and personality has resulted in the achievement of celebrity or near-celebrity status. Athletes such as Babe Ruth, Michael Jordan, Wayne Gretzsky, George Forman, Venus and Serena Williams, and Tiger Woods have a protected property right in their name. They can license their names or likenesses in posters, apparel, toys, and video games, generating fees often based on a percentage of each item sold. Although it is still rare for an individual to trademark his or her name, an inherent right to control the use of his or her name and likeness exists based on a more traditional legal concept known as a right of publicity. The right of publicity allows a person to protect and control the use of his or her identity for commercial purposes. Laws recognized by most states cover the unauthorized use of all recognizable aspects of a person, including image, name or nickname, biographical data, and a distinctive feature such as voice or walk, all of which are often referred to as a celebrity’s persona (ETW Corporation v. Jireh Publishing, Inc. 2003). The extent to which the First Amendment pro-

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tects a defendant in a right of publicity case is an issue that has vexed courts and commentators. Two decisions demonstrate the tension between commercial protection and free speech. The first involves Tiger Woods. An artist named Rich Rush painted a work entitled “Masters of Augusta,” which commemorated Tiger Woods’s victory at the 1997 Masters’ Tournament, and sold it in “limited-edition prints.” The painting shows Woods in three different poses. Also featured are the Augusta National Clubhouse and likenesses of Arnold Palmer, Sam Snead, Ben Hogan, Walter Hagen, Bobby Jones, and Jack Nicklaus looking down at Woods. A divided federal appeal court concluded that Woods’s right of publicity was outweighed by the First Amendment. Concluding that the painting constitutes a “creative” work of art, not simply an illustration or photograph of Woods, but rather a work of art with novel elements, the court deemed it “creative” enough not to violate Woods’s rights. The majority of the court noted that Rush’s work consisted of a “collage of images” that in combination described a historic sports event and conveyed the significance of Woods’s achievement in that event (ETW Corporation v. Jireh Publishing, Inc., 2003). Yet compare the Tiger Woods decision with a case involving Tony Twist, a former NHL player known as an “enforcer,” and a comic book producer. After learning of the existence of a comic book that contained a villainous character named “Tony Twistelli,” Twist sued the creators, publishers, and marketers of the comic book. Twistelli engaged in activities such as multiple murders, abduction of children, and sex with prostitutes. The fictional Twistelli and the real Twist bore no physical resemblance and, aside from the common nickname, were similar only in the sense that each had an “enforcer” or tough-guy persona, according to the court. Unlike the ruling in the Woods case, the Supreme Court of Missouri concluded that the comic-book creators and publishers intended to gain commercial advantage by using Twist’s name to attract consumer attention to the comic books and that they marketed the comics and the character to hockey fans who knew Twist and his reputation. This, according to the court, outweighed First Amendment protections (Doe v. TCI Cablevision, 2003).

LICENSING AGREEMENTS—GENERAL POINTS Merchandising encompasses the practice of companies to sell products with the trademark of a league, conference, team, or other organi-

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zations on those products. The theory behind sports merchandising is that the market power of that organization as a brand attracts fans of the sport to buy the merchandise and therefore enhances the value of the product sold. A licensor (usually a league) and licensee sign a “trademark license agreement” granting permission from the licensor trademark owner to use a trademark for a defined purpose. An agreement using the name of an athlete often results in a similar agreement (even if the name was not trademarked). The agreement specifies the scope of the license. In addition to identifying the parties to the agreement and the specific trademarks licensed, the agreement states what rights are licensed and, particularly in the case of goods manufactured bearing the trademark, the standards and quality control mechanisms. The major segments of a license agreement involve the following: Quality Control. In almost every license agreement, the licensor exercises quality control over a licensee’s goods and services. The importance of this power cannot be overstated. Because a trademark represents the trademark owner’s brand name and reputation, the owner wants to ensure that the goods and services possess a high level of quality, as consumers tend to rely on this reputation in making purchasing decisions. A licensed product of inferior quality hurts the reputation of the licensor. For example, say that the Winnetka Wombats licensed their trademark to X Clothiers, Inc., to make apparel bearing the trademark. If X Clothiers makes poor-quality goods, customers are apt to complain and, although the team did not make the goods, the image and brand of the team will be damaged by adverse reaction from buyers. That could translate to lower sales in the future and even to a diminishing interest in the team. Specific Use of the Trademark. The licensor often specifies the manner in which the trademark will be used on or in connection with the goods and services of the licensee and on advertising and promotional materials. Often, the agreement requires that the licensee obtain the licensor’s permission before using any new presentation of the trademark. Term. The trademark license usually states a fixed term for the license and the conditions under which the license may be renewed for an additional period of time. For example, in August 2003, Major League Baseball announced a 5-year deal whereby the league and its

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30 teams would be guaranteed at least $500 million from 2005–2009, due to the signing of new contracts with its licensing partners (Walker, 2003). Exclusivity. An agreement almost always gives the licensee an exclusive right to use that trademark in connection with the manufacture of a certain line of products. If a shoe company obtains a license, it should have the exclusive right to use the name and logo owned by the licensor. If the licensor could negotiate with another shoe company, this would severely compromise the branding of the first shoe company. Royalties. The royalty payments—usually a percentage of sales—are stated and defined to ensure that both parties understand the calculation.

In recent years, the four major professional sports leagues have reduced the number of licensees, seeking long-term exclusive agreements. Examples are deals with Reebok by the NFL and NBA to produce various NFL and NBA branded merchandise. In December 2000, the NFL signed an exclusive 10-year contract with Reebok to provide all on–field and sideline apparel for all 32 teams (Sandomir, 2003). A year later, in August 2001, Reebok signed a 10-year agreement to provide apparel and footwear for the NBA and WNBA (McCarthy, 2001). This makes sense from a marketing point of view. A few major licensing agreements with marquee firms outweigh a multiplicity of deals, which cheapens the brand and generates public confusion.

PROFESSIONAL LEAGUES AND GROUP LICENSING Each of the four major sports leagues has created separate corporations in charge of licensing the uses of the names, logos, symbols, emblems, signs, uniforms, and identification of the league and its member clubs. Note that the leagues have this role, rather than individual teams. Specifically, NBA Properties, NFL Properties, NHL Enterprises, and MLB Properties hold the exclusive trademark and licensing rights for each of the leagues and oversee the marketing and protection of individual trademarks and products. Revenues from these agreements are shared by all the teams in the respective league. The advantages of the league-wide licensing approach are uniformity of licensees, standardized quality control, and equality in revenue distributions. But league-wide licensing has problems. Marquee teams, such as the New York Yankees or Dallas Cowboys, must share royalties with teams that sell less merchandise. That did

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not sit well with Jerry Jones, who purchased the Cowboys in 1989. Jones, who paid $150 million for the team (a large sum at the time), sought to increase revenues for his investment. He made private deals with firms in competition with firms that had league-wide licensing deals. For example, he licensed “official card” rights to American Express, although Visa had such rights league-wide. After a series of lawsuits, Jones and the NFL settled, allowing him to license specific promotions only within Texas Stadium, the home of the team (Foldesy, 2004). The unions representing major league players often act as agents for the licensing of athletes’ names and likenesses and have negotiated a formula for the sharing of licensing revenues with the leagues. The licensing agreement applies to a group. In the NFL, it is any program involving six or more players. In Major League Baseball, the minimum is three. Individual athletes retain the right to make individual deals (Ferber, 2005). The vast majority of league athletes participate in these arrangements by signing annual contracts with their union, allowing the leagues to market various items bearing their likeness. The licensed items—T-shirts, trading cards, and video games—are often controlled by the licensing division of the league. Revenues derived from the licensing are distributed among the athletes. Players may opt out of the group licensing agreements, and on occasion some do, in the hope of negotiating more lucrative marketing deals. One of the first players—and probably the most famous—to opt out of a group licensing agreement was Michael Jordan. He withdrew the use of his name and likeness for licensed NBA products. Jordan’s superstar status and economic impact to the league afforded him the opportunity to go solo. However, most players remain a part of the agreement because they lack that kind of economic and marketing leverage. A summary of the licensing systems in each of the four major sports leagues follows.

NBA NBA Properties, Inc. (NBAP), the marketing and licensing arm of the NBA, owns and exclusively licenses all trademarks, service marks, trade names, and logos of the NBA and its member teams. NBA Properties has complete control over all the league’s trademarks and logos outside of each team’s own arena. In addition, NBA Properties possesses the right to market the trademarks and logos internationally. All income that is generated from such intellectual property is split evenly amongst all the teams.

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NBAP acts as the exclusive licensor for NBA teams and controls all merchandising contracts. Regarding players’ rights, the NBA and the players’ union, the National Basketball Players’ Association (NBPA), negotiated a group license agreement in their collective bargaining agreement (CBA). That agreement allows the league to retain the right to license a player’s name, number, and likeness for uniforms, trading cards, posters, video games, and other products. It granted a license to Reebok (as current apparel licensee) to manufacture player jerseys, and revenues from sales of these jerseys are split between the league and the team. Retired NBA players also share in this agreement, whereby revenue from sales is split among the league, the NBRPA (National Basketball Retired Player’s Association), and in some cases the retired player (NBA CBA, Art. XXXVII, sec. 1). In the 1990s, the monies from group licensing exploded. In 1996 the NBA essentially guaranteed $25 million per year equally disbursed amongst the league’s approximately 400 players (with the exception of elite players who may either opt out or negotiate a higher percentage of licensing monies) as payment for their licensing right (http://sportsillustrated.cnn.com/basketball/nba/news/ 1999/01/06/settlement_terms). More recently, the NBAP has signed non-exclusive, multi-year videogame licensing renewals with EA Sports, Take-Two, Sony, Midway Games and Atari. The agreements began in October 2005 and their value is reported to be $400 million for five to six years. (Consumer Electronics Daily, 2005) Unlike the other major sports leagues’ unions, the National Basketball Players Association does not distribute licensing revenue or enter into group licensing agreements on behalf of the players. NBA Properties has the sole authority to enter into such licensing agreements.

NFL The NFL teams created NFL Properties (NFLP) in 1981 to act as the exclusive agent for negotiating and entering into merchandise licensing and sponsorship agreements. The income derived from these licensing deals passes to the NFL Trust, which controls these revenues before passing it to the teams on an equal share basis, regardless of the amount earned by any particular team’s marks. The NFLP is equally owned by the franchises of the NFL, and its role consists primarily of holding the team and league trademarks and the receipt and distribution of any income derived from the licensing efforts of NFL Properties. However, the team owners do retain limited control over the licensing of their trademarks. The teams may use the marks in promotions of games, in their publications, and in some local advertising.

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In March 2004, team owners voted in favor of a 15-year extension of the NFL Trust. However, dissents and abstentions from certain owners prompted the league to appoint a commission to consider ways to rectify certain disparities that occurred in recent years (Bell, 2004). In 2004, the NFL had more than 20 league sponsors, who together paid more than $100 million in sponsorship fees. Most of the NFL sponsors sign year-round deals, with the exception of a few that sign up only for the Super Bowl. Pepsico, General Motors, Bayer, Campbell Soup, and other companies also have laid out millions for exclusive sponsorship deals that give them the right to apply the NFL logo to their products (Coors Paid Millions for This Privilege, 2003). Clothing makers licensed by the NFL sell league apparel to wholesalers and retailers for about $1.5 billion and pay the NFL 10% of their revenues, or about $150 million (Murphy, 2003). The league keeps part of the money, and the rest is split among the teams. Unlike the other leagues, the National Football League Players’ Association has its own marketing and licensing subsidiary, known as PLAYERS, INC., which represents 1,800 active and 3,000 retired players. PLAYERS, INC. negotiates the licensing of player names and images in trading cards and collectibles (such as bobble heads, figurines, and pennants), video games, fantasy football, apparel and novelties, and other retail licensed products. PLAYERS, INC. grants licensees the rights to use players’ names, numbers, likenesses, and images. It handles group licensing agreements involving six or more players. PLAYERS, INC. receives a percentage for the licensing. For video games, it is 5–9% of the retail price. Royalties are distributed equally among the players in most cases. Although a player may opt out of the arrangement, PLAYERS, INC. represents the overwhelming majority of NFL players. It entered into a licensing agreement with Reebok for the license to make NFL player jerseys. Retail sales of those jerseys exceeded $240 million in 2003. PLAYERS, INC. granted its first video game license in 1989. To date, the football videogame category has grown to over $350 million in retail sales, with licensees that include Sega, Sony, Microsoft, and EA, using player images and likenesses on game packaging as well as for print, radio, Internet, and television advertising (http://www.playersinc.com/about_us/about_main.aspx, retrieved January 21, 2005).

MLB Major League Baseball Properties (MLBP), established in 1984, controls the marketing and licensing of all league-wide and teams trade-

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marks. In order to bind all teams to a contract, three-quarters of the teams must agree to the terms of a particular licensing agreement. Individual teams retain some exclusive control of their trademarks within a certain radius of their home stadiums. All domestic promotional and retail licensing income is shared among the teams in equal amounts, regardless of the actual income generated from a single team. MLBP obtains a percentage of fees based on their gross income. The royalty revenue derived from licensed merchandise is placed in a Major League Baseball general fund, but the individual teams can increase their revenue by selling game souvenirs, such as bats and baseballs used during games. In January 2000, team owners granted the MLB commissioner authority to distribute the shared sources of revenue unevenly, so that “poorer” teams receive a larger share to make up for their losses or disproportionately low amount of local revenue. The commissioner also has discretion in giving these poorer teams a larger share to develop new players and to build new parks. About $260 million went from big-market to small-market teams in 2003, and that figure was projected to reach $300 million in the 2004 season (Borden, 2003). For the past 40 years, Major League Baseball players have signed annual contracts with the MLB Players’ Association to market their names and likenesses on merchandise. Any firm seeking to use the names or likenesses of more than two Major League Baseball players in connection with a commercial product, product line, or promotion must sign a licensing agreement with the MLBPA. The license grants the use of the players’ names and/or likenesses only, not the use of any Major League Baseball team logos or marks. Examples of products licensed by the MLBPA include trading cards, video games, T-shirts, and uniforms. Players receive a pro rata share of licensing revenue, regardless of popularity or stature. Each player’s share is determined by his actual days of Major League Baseball service in a given season (http://bigleaguers.yahoo.com/mlbpa/faq, retrieved April 25, 2004; phone conversation with Sheila Peters at MLBPA, May 15, 2004). Players have the option to opt out of the agreement, but that is rarely done. In 2003, Barry Bonds opted not to re-sign the annual licensing agreement (Raine, 2003).

NASCAR NASCAR owns and operates Americrown Service Corporation (Americrown), a licensed vendor of souvenirs and merchandise sold at Nextel Cup speedways. NASCAR controls the licensing of membership, including drivers and their crews, team owners, speedway owners, and corporate sponsors. Most souvenirs and merchandise are

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licensed by either NASCAR or the speedway or the sponsor associated with any particular name, trademark, image, or likeness represented on the item. The licensee pays the licensor a percentage of gross receipts from sales of the licensed merchandise. To sell souvenirs and merchandise at NASCAR Nextel Cup races, all vendors must be licensed by the speedway or by an affiliate or subsidiary of the speedway. A vendor pays the speedway a fee for each NASCAR event and a percentage of its gross sales. The speedway, in turn, pays a percentage of its gross receipts to NASCAR (co*kley, 2001). NASCAR also has licensing agreements with many of the drivers and driving teams. This results in NASCAR controlling most of the merchandising. Although each driver may control his or her name and likeness, most assign those rights to their driving team. Only a very few drivers, such as Jeff Gordon and the late Dale Earnhardt, kept their rights.

Olympics The International Olympic Committee (IOC) owns the name and controls the trademarks to the Olympic Games, including the Olympic symbol (the five rings), the Olympic flag, the Olympic motto (Citius. Altius. Fortius), the Olympic flame, and the Olympic torch. The IOC obtains legal protection on both a national and international basis, to protect against trademark infringement of the Olympic symbol, flag, motto, and other related trademarks. In cases where the national law or a trademark registration grants to a national Olympic committee (NOC) the protection of the Olympic symbol, the NOC may only use the ensuing rights in accordance with instructions received from the IOC executive board. Each national Olympic committee shall take the necessary steps to prohibit any unauthorized use of the Olympic trademarks. In the United States, Olympic trademarks are given automatic protection under the Ted Stevens Amateur Sports Act, meaning that the United States Olympic Committee (USOC) does not even have to show “likelihood of confusion” to successfully prosecute an infringement case (36 USC sec. 220506(a)). The USOC successfully sued an organization not affiliated with the USOC to stop it using the term Gay Olympics. After lengthy litigation, the Supreme Court upheld the USOC’s rights (San Francisco Arts & Athletics, Inc. v. USOC, 1987). Corporations wishing to use any Olympic trademarks must first pay the IOC a rights fee and sign a general sponsorship agreement. For example, IBM provided the IOC with $40 million worth of computers and cash in return for use of the interlocking rings in its advertising efforts in 1996. In 2004, Hellenic Telecommunications Organization provided 58.7 million Euros ($70.4 million) to Athens Olympic Games.

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There have also been sponsorship disputes between athletes and national Olympic committees (NOCs) concerning apparel sponsors. In the 1992 Barcelona Games, Michael Jordan and other players under contract to Nike draped a U.S. flag over the Reebok logo of their basketball warmup suits. More recently, Kim Clijsters, then the number 2-ranked player in women’s tennis, withdrew from the 2004 Athens Olympics because she could not wear apparel from her own sponsor. The Belgian Olympic Committee prohibited its athletes from wearing apparel not made by team sponsor Adidas (which has sponsored the Belgian team since 1976), whereas Clijsters had a deal with Fila, which stipulated she can only play wearing the company’s clothing (Clijsters to skip Olympic Games, 2003). For all licensing agreements, the conditions set forth under the Olympic charter state that NOCs will receive half of all net income from “exploitations derived from use of the Olympic symbol and Olympic emblems, after the deduction of all taxes and out-of-pocket costs relating thereto” (Olympic Charter, chapter 1, p. 25). Sponsorship conflicts also exist between a particular sport’s governing bodies and its athletes. U.S. Olympic gold medalist Gary Hall, Jr., said that swimmers “need a unionlike association to protect themselves from organizers and sponsors,” after USA Swimming threatened to sanction swimmers for failing to display a bib with the FINA (the International Swimming Organization) sponsor Argent. Hall was fined $5,000 by USA Swimming for not wearing designated Speedo gear in Athens and said: “What seems like a step forward for marketing people was actually 20 steps back. What happens if Speedo takes over a meet? What happens if, say, Nike is trying to get involved? Would the Nike swoosh have to be covered up by Speedo?” (Frauenheim, 2004).

NCAA The bylaws of the NCAA provide that institutions may give third parties permission to use a student athlete’s name, photo, and so on, as long as all money is paid to the member institution and not to the student (NCAA Div. I Bylaws, sec. 12.5.1.1). Student athletes are also prohibited from accepting compensation from any non-NCAA institution as an award for their athletic performance. But no restriction exists on the colleges themselves profiting from using the player’s likeness for promotional purposes. In fact, many universities are now getting into the trading card business, a practice deemed by the NCAA as a permissible promotional activity. Because NCAA players consent to the use of their likeness, they

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give up any right to sue for compensation. Additionally, players are not entitled to compensation when their coach or university contracts with a company to endorse their product, such as having the players wear Nike sneakers or other apparel (NCAA Div. 1 Bylaws, sec. 12.5.2.1). Because of the increased profile of the NCAA due to the lucrative men’s basketball television contract with CBS, the retail market for NCAA-related merchandise reached over $2.75 billion (Horrow, 2004).

INFORMATION CHECK When covering intellectual property issues, a journalist should ask: 1. Has the item in question been licensed by the respective owner of the trademark (usually one of the major league’s property divisions)? 2. What products are covered by that licensing agreement? 3. Has an athlete consented to his or her name and likeness being used, either under the respective collective bargaining agreement or another agreement? 4. Has the athlete’s name/likeness been misappropriated without permission? 5. What rules exist between an organization with a licensing agreement with one firm and an athlete who signed a contract with a rival firm wearing apparel with its logo at a competition?

REFERENCES Bell, J. (2004, July 6). NFL tug-of-war over revenue. USA Today, p. 1C. Borden, S. (2003, September 30). Rich team, poor team bottom line: This series is a financial mismatch. New York Daily News, p. 4. Clijsters to skip Olympic Games (2003, December 2) Guelph Mercury, p. B7. co*kley, M. A. (2001). In the fast lane to big bucks: The growth of NASCAR. Sports Law Journal, 8, 67, 85–87. Coors paid millions for this privilege; Others jumped in …; To the party for free; Who’s in the game? (2003, December 14). Houston Chronicle, Business, p. 1. Doe v. TCI Cablevision, 110 S.W.3d 363 (Mo. 2003). ETW Corporation v. Jireh Publishing Inc., 332 F.3d 915 (6th Cir., 2003). Ferber, T. (2005). Symposium: Trademark and publicity rights of athletes. Fordham Intellectual Property, Media & Entertainment Law Journal, 15, 449, 488. Foldesy, J. (2004, June 17). NFL owners fear death of golden goose; Revenue sharing divides teams into two camps. Washington Times, p. C01. Frauenheim, N. (2004, November 20). Hall says swimmers should form union. Arizona Republic, p. 19C.

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From issues & controversies: Celebrities’ right of publicity. Retrieved January 17, 2003, from www.uni.edu Horrow, R. (2004, November 12). Retail wars and sports: Competition for expanding revenue. Retrieved January 26, 2005, from http://cbs.sportsline.com/general/story/7881232 Indianapolis Colts v. Metroplitan Baltimore Football Club, 34 F.3d 410 (7th Cir. 1994) International Trademark Association, Trademark Infringements. Retrieved June 5, 2005, from www.inta.org/info/basics_infringement.html Kimpflen, J. (2004). Trademarks and tradenames, sec. 116. American Jurisprudence (2nd ed.). St. Paul, MN: West. Kolah, A. (2002). Maximizing revenue from licensing and merchandising. Sports Business Group. (http://www.sportsbusinessassociates.com/sports_reports/Licensing%20and%20Merchandising%20brochure.pdf). McCarthy, M. (2001, August 2). Reebok to be exclusive apparel provider of NBA. USA Today (http://wwwusatoday.com/sports/nba/stories/2001-08-01-reebok.htm). Murphy, B. (2003, December 14). Coors paid millions for this privilege; Others jumped in …; … to the party for free; Who’s in the game? Houston Chronicle, p. 01. NASCAR popularity running in high gear. (2005, February 20). Toronto Star, p. B06. Raine, G. (2003, November 21). Giants slugger to negotiate his own merchandise deals. San Francisco Chronicle, p. B1. Sandomir, R. (2003, August 20). Reebok strikes exclusive deal with NFL. New York Times, p. D3. San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522 (1987). Sherman, E. (2000, July 2). Driving toward a billion endorsem*nts propels Woods to riches. Chicago Tribune, p. 1. Sosnowski, T. (2005, February 1). NFL Powerhouse; The NFL is the king of sports licensing. Playthings, p. 22. Unger, H. (1998, January 7). Thrashers’ name at heart of federal lawsuit. Atlanta Journal & Constitution, p. C.01. US Olympic Committee: Exclusive right to name, seals, emblems and badges, 36 USC sec. 220506 (2002). Videogames (2005, March 23) Consumer Electronics Daily, p.1. Walker, D. (2003, August 5). MLB announces licensing deals. Milwaukee Journal-Sentinel, p. 2C.

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13 Traditional and New Media in Sports

Dissemination of sporting events through any one of various media outlets constitutes the single most important source of revenue for professional and amateur sports organizations. For sports leagues and individual events, fees earned from media rights bring in billions of dollars per year. The media also has benefitted, since sports events constitute an important source of programming. Marquee sports events such as the Super Bowl draw large numbers of viewers or listeners, resulting in premium fees charged to advertisers. This chapter examines the basics of the business of sports broadcasting and the newer models evolving as part of the introduction of new technologies. It outlines the history, the nature and variety of sports broadcast deals, and concludes with some thoughts on the future of sports and media.

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THE PROPERTY RIGHT Think of a sports broadcast as a form of property. Someone (usually a league or a team) owns the rights not only to the game itself, but to how it disseminates to the public. At one time, that only meant a live performance, but since the advent of radio, television, and more recently satellite and Internet, it means reproducing the event to audiences far away from the site of the event. A patron paying a fee to see a match had the right to see it with his or her eyes at the stadium or arena. Someone may watch it on free or cable television, assuming the event is broadcast. But if that person recorded the event and charged a fee to anyone who wanted to see it, that violates the right of the property owner (the team, league or presenter) to control the dissemination of his or her property. That property right to distribute the game or, more precisely, to license that right to broadcast the event to others, is central. Licensing involves a permission to use, not a right to own a product. When the NFL licenses broadcast rights, it permits the broadcasters, under prescribed conditions, to broadcast games. The radio, television, and cable licensees are, in essence, delivery tools. They produce the event but do not own it, and they pay a sum to the owner to produce it. Initially, with the exception of boxing, organized sports did not take to licensing broadcasting rights. In particular, many in baseball felt that broadcasting games on the radio would siphon off fans coming to the ball park. Boxing, however, took to licensing early on. As a dominant sport in the early decades of the 20th century, boxing matches were filmed and distributed to theaters (Ward, 2004). Sports programming involves more than broadcasting the game. Increasingly, it involves news programs, features, and sports talk shows. At a time of prepackaged general programming, sports broadcasts are broadcast live. This characteristic adds to the excitement and unpredictability of the event. In 2003, a survey by Broadcasting & Cable magazine found that Major League Baseball teams received $692 million from local TV and radio broadcasts. The bulk ($493.9 million) derived from rights fees from regional cable networks, TV stations, and radio stations. But an increasing amount ($198.3 million) came from the sale of advertising time by teams that have opted to retain the rights and produce and sell games on their own or in partnership with local outlets. This new trend—culminating in the creation of a team’s own broadcast entity—has occurred in recent years (Clarke & Seltzer, 2003).

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THE KEY AUDIENCES Radio and over-the-air television earn their revenues through advertising. Advertisers choose particular types of programs to target certain audiences, based on demographics such as gender, age, race, ethnicity and income. Sports broadcasts have traditionally appealed to a male demographic, and advertisers for items of interest to males found such events to be an excellent way to reach that audience. Hence, broadcasters paid fees to broadcast such events to earn money from advertisers. The more popular the event, the more the outlet charges for ads. Cable broadcasting differs in some respects. It earns money from advertising, but in addition it has another revenue stream—subscriber fees from local cable operators. For carrying a particular cable network, the operators pay a negotiated fee. For all four major sports leagues, approximately 66% of the viewers are male. A detailed study by Fox Sports found that 22% of NFL viewers for the 2001 season were between the ages of 18 and 34 years, whereas in baseball, this age group accounted for only 17% of all viewers. Twenty-nine percent of NFL viewers are in the 35–49 age range, whereas for baseball it is 22%. In hockey, 78% of fans are male, 79% are between 18 and 44 years old, 51% are between 18 and 34 years old, 81% earn more than $35,000 per year, and 60% earn more than $50,000 per year (www.hockeysfuture.com/advertising.php). More recently, the NFL has attempted to attract younger viewers and add to its relatively small but core female audience (www.jomc.unc.edu/ executiveeducation/sportsbusiness/demographics.html). Baseball displays the oldest demographic. More than half of baseball’s viewers are at least 50 years old, with 30% being 65 or older. In football, only 40% of viewers are 50 years or older and 17% are above the age of 65. Teenagers composed 6% of the NBA audience, and more than a third of the NBA viewers are under 50 years old. Fifty-four percent of NHL viewers in the 2001 season were under the age of 50 (www.medialifemagazine.com/news2002/sep02/sep09/5_fri/news3fr iday.html). In terms of income patterns, the typical NFL viewer makes an average of $55,000 per year. In hockey, it is $48,000, with $43,000 in baseball and $39,000 for the NBA. Because of the increased buying power of African Americans, Asians, and Hispanics, and the fact that these groups are increasingly making up the fan base in baseball, marketers are eager to reach them. More Blacks and Hispanics are tuning in to television and radio to listen to baseball games. From 1996 to 1999, the number of Hispanics who said they watched a baseball game in the past year grew 12.2%; for African Americans, there was a 6% increase. A marketing

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director for the New York Mets noted that much larger companies, such as Toyota, have begun advertising on Hispanic radio stations, whereas in the past it was mostly small-scale companies that advertised there (Gardyn, 2000).

RADIO Once Major League Baseball teams discovered that radio (and eventually television) created more income and helped publicize their teams and attract more fans, they negotiated rights agreements to broadcast games. Generally, local radio broadcasts constitute the bulk of baseball broadcasting. Presently, ESPN Radio has exclusive national radio broadcast rights with both the NBA and MLB. For MLB, included in the package is a full schedule of Sunday night baseball games each season, opening-day and holiday doubleheaders, select pennant race games, all postseason games including the World Series, the All-Star game, its events, and regular season play by play (http://www.abcradio.com/index.cfm?bay=content.view&catid=72 &cpid=101). Also, MLB has a long-term contract with XM Satellite Radio, paying the league $150 million over 11 years. Major League Baseball splits the proceeds equally among all the teams. For the NBA, ESPN is entitled to broadcast regular weekend afternoon games, select playoff games and doubleheaders, all conference and NBA final games, and the All-Star game, as well as weekend events and the NBA draft. In 2004, the NFL signed a 7-year deal with Sirius Satellite Radio to broadcast all professional games. The NFL received $188 million in cash and $32 million in Sirius stock (www.fortune.com/fortune/smallbusiness/articles/0,15114,433734-3,00.html). Although network radio broadcasts produce significant revenue, the amount is secondary to television. Locally, teams make license agreements with individual radio stations serving their markets. These teams keep the revenue earned.

TELEVISION Television drives sports broadcasting. Although introduced at the 1939 New York World’s Fair, television broadcasting as we know it developed after World War II. As part of its programming, sports events—especially those in confined areas such as boxing—were standard fare. However, sports television’s economics did not develop systematically. Unlike today, the attraction of sports to television was not advertising, but airing to increase demand for television itself. In those days the three networks—NBC, CBS, and DuMont (or their parent compa-

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nies)—manufactured and sold receivers, and their more immediate goal was to increase television household penetration. Sports television—which at the time included the World Series, boxing matches, and college football games—received increased interest, and by 1950, 10.5 million receivers rested in U.S. homes (http://www.museum.tv/ archives/etv/S/htmlS/sportsandte/sportsandte.htm). Although it is hard to fathom, early television broadcasts for team sporting events did not help the bottom line for many teams. Home attendance dropped precipitously in many instances. For example, after the Boston Red Sox started televising home games in 1950, attendance dropped from 1.45 million in 1948 to less than 300,000 in 1952. The Los Angeles Rams’ gate receipts dropped 50 percent in the first year of home broadcasts. Ultimately most teams adopted some kind of “blackout” policy for their home games. By the end of the decade, teams and leagues became more sophisticated in parceling out broadcast rights, making adept use of the blackout rules to focus on road games, which would result in fan interest without any diminution of attendance (MacCambridge, 2004). In the 1950s, sports broadcasting became a province of weekend afternoons, rather than prime time. Entire shows sponsored by one company became the economic model for both entertainment and sports. By the mid-1960s, the amount and costs of broadcasting sports increased to a point that individual advertisers found it increasingly difficult to pay for sponsorship of major events by themselves. The modern approach of “spot advertising” took over. Advertisers would pay for one or more placed advertisem*nts during a sports event, with payment negotiated between the broadcaster and the advertisers based on ratings measurements. This system created a bonanza for both sports leagues and the broadcast networks (and local stations as well). The number of hours of sports on network television increased as the audiences grew and the multiplying ranks of spot-buying advertisers coveted these valuable minutes. This mutually beneficial situation persisted well into the 1980s (http://www.museum.tv/archives/etv/S/ htmlS/sportsandte/sportsandte.htm). As technology improved, so did the quality and sophistication of the broadcast. Television networks and local stations began to pay ever-increasing rights fees, which increased the revenues of the respective rights holder, whether it was a league or an individual team. The experience of baseball is illustrative. In 1950, Major League Baseball earned $1.2 million from national broadcasts. By 1960, that amount tripled, to $3.3 million. But note the exponential increase since then: over $16 million in 1970, $47.5 million in 1980, $365 million in 1990, and $570 million in 2000 (Schaaf, 2004). The increasing revenue to team owners from television was one rea-

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son for the growing militancy of the Major League Baseball Players’ Association. The experience of the NFL is even more striking. Baseball was “America’s national pastime” well before the advent of television, but the NFL was largely made by television. Because the NFL had less public exposure than baseball, the league should have embraced television as a vehicle to gain exposure for the sport. Early attempts by the Los Angeles Rams and Philadelphia Eagles to televise home games met with resistance from the league, which imposed strict rules prohibiting the broadcast of NFL games in any city where there was a home game. The rule was struck down by a court in the 1950s (U.S. v. National Football League, 1953) as a violation of the antitrust laws. The ruling resulted in a prohibition of league-wide contracts until the Sports Broadcasting Act of 1961 (15 USC sec. 1291) created an antitrust exemption permitting such agreements. The Sports Broadcasting Act protects teams in smaller television markets by pooling broadcasting rights with teams located in larger, more lucrative television markets in order to assure small-market teams equal shares of television revenues and coverage (Cox, 1995). The other major sports leagues signed on to this legislation (although the NCAA did not). This law created the present environment for network television rights agreements with the respective leagues. After the passage of the Sports Broadcasting Act, the NFL teams agreed to sell their television rights as a single package and to share broadcast revenues equally among all franchises. This revenue sharing idea originated from the new commissioner Pete Rozelle and a number of the venerable NFL owners. This turned out to be a brilliant move. Rozelle argued that the league’s competitive balance on the field would eventually be destroyed if teams in major television markets continued to sell their broadcast rights individually. The inequity would diminish the overall attractiveness of the NFL’s product. Another reason for the single rights arrangement was that the rival American Football League had signed a similar television package with ABC 1 year earlier.

Types of Television Deals For the NFL, NBA, and Major League Baseball, television agreements follow what has become known as a “traditional” model. The network pays a specified rights fee to exclusively broadcast the events, sells commercial airtime, and keeps the revenue derived from that airtime. Production costs are covered by the network. This approach also applies to national cable networks, such as ESPN.

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Why do broadcast and (more recently) cable networks spend large sums of money on major sporting events? The first is to draw a large audience, to justify large advertiser fees. The Super Bowl is a prime example. In 1967 an advertisem*nt during the Super Bowl cost $42,000, whereas in 2004 it set a record-breaking rate of $2.25 million for a 30-second advertisem*nt (http://advertising.about.com/cs/ superbowlxxxviii/a/pregame_2.htm). Throughout much of the 1960s and 1970s, the networks earned profits on such deals. However, profitability sagged in later years, as ratings fell flat. Presently, CBS, ABC, and Fox networks will have combined losses of $5.5 billion on NFL, NBA, Major League Baseball, and other major sports contracts between 2000 and 2006 (Fatsis, 2003). Yet the networks continue paying more for broadcasting rights. That leads to the second, and more likely, reason for the hefty fees: prestige. Broadcasting a product like the NFL or Major League Baseball gains credibility for the broadcaster (especially if it is an up-and-coming network) and serves as a lead-in to other programming. In other words, it adds to the reputation of the broadcaster. Fox’s winning the rights to broadcast NFL games in 1994 serves as a case study. Fox’s bid—an astounding $1.58 billion, well ahead of the previous contract price—resulted in great publicity and credibility for the then-fledgling operation. Although Fox wrote off $350 million in losses that year, the network as a whole showed an increase in profits of almost $100 million (Noland & Hoffarth, 1997). On the other hand, the loss cost CBS, the prior rights holder, considerable prestige and a few affiliated stations, which jumped to Fox upon the news that the upstart won the broadcasting rights for National Football Conference (NFC) games. The NFL’s television contract, lasting 8 years and expiring after the 2005 season, has a total value of $17.4 billion paid by three networks, Fox, ABC, and CBS. CBS broadcasts American Football Conference games and pays $4.1 billion, $500 million per year, for those rights, and Fox has rights to National Football Conference games for a fee of $4.4 billion, or $550 million per year. ABC pays the same amount as Fox for rights to broadcast Monday night football and selected playoff games. Cable rights holder ESPN broadcasts Sunday night games, worth nearly $4.8 billion or $600 million/year (Clarke & Seltzer, 2003). In late 2004 and early 2005, the NFL reached new, more lucrative broadcast rights agreements. The league concluded six-year deals with CBS and Fox, totaling $8 billion, as well as a five-year, $3.5 billion extension of its deal with DirecTV, also starting in 2006, in which fans can buy a package of games through the satellite system. In addition, ESPN will pay $1.1 billion per year over the length of an eight-year contract to televise “Mon-

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day Night Football”—a program staple on ABC since 1970. In addition, after an eight-year hiatus, NBC returns to the NFL family with a package of prime-time Sunday night games, while ABC becomes the only network not to television NFL games. Despite flat ratings and losses by some its broadcasting partners, the NFL will average $3.74 billion a year in television revenue. (Shapiro & Maske, 2005) The NFL also has its in-house broadcast entity, the NFL Network, which provides coverage of events such as the draft, but does not broadcast games as of yet. Major League Baseball’s present agreement, which expires in 2006, is divided into broadcast and cable segments. Fox retains the exclusive rights to broadcast selected Saturday games and the World Series, League Championship, and certain early round games. It pays a total of $2.5 billion or $417 million per year for the 6-year term (which ends in 2006), an increase from the prior 5-year $1.7 billion ($340 million per year) contract, where broadcast rights were divided by Fox and NBC. Fox’s share of the contract almost quadrupled from $575 million (or $415 million per year). In an indication of unprofitability for Fox, the broadcaster has taken a $225 million writeoff on this contract. Cable rights are secured by ESPN for $2.37 billion over eight years. It expires in 2013. The NBA’s present deal with ABC and ESPN dates from 2002 and expires in 2008. The rights fee pays a total of $4.6 billion, or $766 million per year. For the first time, an Internet service provider, America Online (AOL), is included. The annual fees mark an increase from the $660 million in the prior 4-year deal with NBC and TNT and $275 million in the deal before that. However, the present agreement focuses more on cable than prior deals. The MLB, NFL, and NBA agreements follows the traditional licensing method. However, alternative methods exist. One, known as the “revenue-sharing” model, involves the NHL and the Arena Football League (AFL). These leagues sold their broadcast rights to NBC, but neither will receive rights fees from the network. As a consequence of the relative novelty of the AFL and the poor rating performance of the NHL in recent years, these agreements require the network to split the advertising revenue with the leagues after the network has paid the associated costs. NBC was able to obtain all of the broadcasting rights, yet avoid all financial risk associated with having to pay rights fees (Gross, 2004). On the cable side, in 2005 the NHL concluded a deal with OLN that is worth $135 million over two years. A third method of securing broadcast rights is simply buying air time. Certain events, notably LPGA events, follow this model. The rights holder keeps ad revenues generated from the event after paying the costs of buying the time and production. Although the PGA also has bought time, the

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PGA has more corporate sponsorship than the LPGA, so the LPGA has to use its own money to ensure broadcasts (Kazmierski, n.d.).

Local Television Except for the NFL, local teams negotiate their own broadcast and cable agreements. The predominant method remains similar to the traditional broadcast arrangement, in which a station pays a rights fee to broadcast games, but retains ad revenue. This is common in Major League Baseball, where each team negotiates a broadcasting and/or cable deal. However, cases have existed where the team simply buys time at the station. In earlier years, over-the-air stations were the licensees, but in the last two decades, cable sports networks have siphoned much of these games from their over the air rivals. More recently, a number of NBA, NHL, and Major League Baseball owners have started up their own sports networks, in an attempt to keep all the TV profit. Probably the best known example of a team-operated network is YES, owned by the New York Yankees. Since its launch in 2002, YES has brought increased revenues to the Yankees empire. In 2004, it had an estimated value of $1 billion (Higgins & Becker, 2004). Team-operated networks deal with cable operators directly and eliminate cable sports networks from the equation. Theoretically, it gives the team more control to set prices and programming. Yet team-owned networks have considerable risks. High startup cost and production fees mean a great deal of up-front expense. No guarantee exists that cable operators will accept the station. YES had to fight for 1 year to get carriage on Cablevision, a leading cable operator in the New York metropolitan area, and millions of viewers had no access to Yankees games during this dispute. Disputes usually center around the carriage fees paid by the cable operator for picking up the station. If the team does not do well, or viewers simply do not watch, the team’s network may fold, which happened with the Minnesota Twins (after just 6 months) and the Portland Trailblazers (16 months). Ultimately, these teams signed with established sports networks.

MEDIA OWNERSHIP OF TEAMS The purchase of a team by a media company presents issues of synergy between the team and the parent company. On the one hand, such an arrangement serves all sides well. The team does not have to find a media outlet and the media parent has ready-made program-

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ming. Such arrangements exist. The Los Angeles Dodgers (Rupert Murdoch’s News Corp. until the team’s sale in 2004), the Chicago Cubs (Tribune Co.), the Atlanta Hawks and Thrashers (Time Warner), and the New York Knicks and Rangers (Cablevision) serve as examples. Whether this has contributed to team success or hurt the quality of the team is a matter of debate. Some media owners lack knowledge about a sport, or their team is simply a small cog in a vast empire and does not merit major attention (Futterman, 2004).

THE OLYMPICS The most lucrative single-event broadcasting contract involves the Olympic Games. Approximately 3.9 billion viewers tuned in to watch the games in 2004, and U.S. television networks have paid enormous sums of money for the rights to broadcast the games. The rights fees paid for exclusive rights to broadcast the games in the United States account for the great majority of the money earned by the International Olympic Committee for broadcast rights. In 1960, the total rights fee to broadcast the summer games was merely $400,000. In 1996, the summer games cost NBC $456 million, and in 1998, the Winter Olympics cost CBS $375 million. NBC has purchased the broadcasting rights for all the games, beginning with the Summer Olympics in 2000, up to and including the summer games of 2012. For the rights to all of the games, NBC has paid a staggering $5.57 billion. This breaks down as follows: summer 2000 (Sydney), $715 million; winter 2002 (Salt Lake City), $555 million; summer 2004 (Athens), $793 million; winter 2006 (Turin), $613 million; summer 2008 (Beijing), $894 million; winter 2010 (Vancouver), $820 million; and summer 2012 (London), $1.18 billion. Commenting on the 2004 Olympics in Athens, NBC noted that in addition to profiting from advertising, carrying the Olympics served as a platform to hype up its fall schedule (Albiniak, 2004).

NCAA In the NCAA, with basketball and football, the league controls the rights to some postseason games whereas the various athletic conferences sell the regular season games. In 2002, CBS renewed its NCAA contract for exclusive coverage of the men’s basketball tournament for $6.2 billion. The contract extends to the 2013–2014 season and includes the Final Four, regular and postseason games, and 83 championships. It also includes all of the licensing, publishing, sponsorship, and marketing rights for the sport.

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ESPN also entered into an 11-year contract through the 2012–2013 season, costing $200 million, which includes 21 championship games in women’s basketball, and the men’s and women’s College World Series, World Cup, and indoor track and field (Clarke & Seltzer, 2003).

NEW TECHNOLOGIES Satellites In 2004, Major League Baseball and XM Satellite Radio entered into a multiyear agreement, giving XM broadcast rights to all regular and postseason games. XM created a dedicated year-round MLB channel, and XM will pay MLB roughly $60 million yearly through the 2015 season. Presently the NFL and NHL also have satellite radio deals, with XM’s rival Sirius Satellite Radio. The NFL receives $220 million over 7 years, through 2010. The NFL also licenses broadcasts through DirecTv, for $3.5 billion over 5 years through 2010. Additionally, both the NFL and NBA have their own satellite television services. NBA TV and NFL TV provide subscribers with saturation coverage of their respective sports. The NBA, in particular, broadcasts live games, many in high-definition video and sound. Major League Baseball plans a launch of its television service sometime in 2005.

Wireless Technology As cell phones proliferate and their calling rates get cheaper, cell-phone providers have turned to contact, notably sports information, to draw subscribers. Major League Baseball Advanced Media has partnered with Sprint to offer GameDay Audio, which for $9.95 per month will stream radio broadcasts of every game to subscribers with high-end model Sprint phones. A separate baseball package through phone maker Nokia offers video highlights of games on little phone screens. NBA Unwired, the basketball league’s wireless product, has video highlights after every game for $4.99 a month. NASCAR.com To Go has a live race-tracking application for cell phones called TrackPass. The NFL eventually will offer live game audio on mobile phones. The NBA, the NFL, and the Major League Baseball Players’ Association also market ring tones spoken by players (Howe, 2005). The most comprehensive deal is between the NFL and Sprint, which provides video highlights of NFL games. Sprint pays $600 million in a 5-year deal through 2009.

The Internet At this time, Internet transmission of sporting events is still in its infancy. Although great potential exists for Internet broadcasts, at this time the

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NBA, NHL, and Major League Baseball use Internet radio packages where, for a fee, one can listen to a particular team’s webcasts from anywhere in the world (Wright, 2003). In addition, every team and league has its own Web site with information and articles about teams, players, and league issues. Sometimes important documents like collective bargaining agreements are found on these sites. For journalists, they are an important source. Fans also have created interesting Web sites, providing commentary (often caustic) about players, coaches, and general managers. These sites are legal, even if unauthorized, unless they start selling goods with any of the trademarks of the team. A good example of this phenomenon is the site www.mikebrownsucks.com. Calling itself “an enraged fan site,” it criticizes Brown, the general manager of the Cincinnati Bengals. The site incurred a threat of a lawsuit by NFL Properties after it started selling merchandise with an altered version of the team’s logo, a tiger. It stopped the sales, but continues to operate.

THE FUTURE Increasing the sources and types of revenue-enhancing deals will be a primary goal of the sports industry, and over the next five to 10 years, new avenues of distribution are likely to evolve. Satellite radio’s penetration on households, and increasingly on out of home venues, such as cars, taxis, restaurants and health clubs may spur more listenership. Additionally, cell phone streaming of text and images providing highlights of sports events offer the potential for a lucrative revenue base. The key is that these services may not compete with the more traditional models for local broadcasts. In 2010, a company like Sprint or Verizon may have content rights deals with a particular league or the NCAA to distribute up to the minute scores, highlights and analysis. With 170 million wireless users in the United States, a huge audience exists. The more traditional forms of program dissemination such as network television and traditional radio will continue to bid for marquis programming. For the networks, the NFL and Major League Baseball still bring a sizeable male demographic that few other broadcasts attract. And cable will remain a major player as well. The multiplicity of channels on cable continues to offer more exposure to niche sports like cycling or lacrosse. The conversion of U.S. television receivers to digital, operating in a high-definition format, will enhance the experience of watching sports. Of course, pitfalls exist. Not every promising technology becomes a commercial success. And format wars cause public confusion. For example, the two leading satellite radio systems are incompatible, requir-

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ing the purchase of different equipment. Eventually, some reconciliation and standardization must result to make a format permanent. Finally, there is the sports viewing public. Will the day come when demand for sports information drops? Rights fees continue to rise, but will a day come when the networks, cable services, satellites and Internet providers simply refuse to pay more, but instead, either cut rights fees or decline to broadcast a certain sport? As of this writing, it’s not likely, but the possibility exists.

INFORMATION CHECK When writing about media issues in sports, a journalist should determine: 1. Does a media rights deal exist? 2. If so, how is it structured? 3. Is it a traditional rights-fee oriented agreement? 4. If so, how and when is the compensation paid? 5. If the deal involves a sharing of profits, when and how are the profits to be shared?

REFERENCES Albiniak, P. (2004, August 9). The name of Olympic promotion; NBC sets up gold-medal Olympics ad campaign to hype new season. Broadcasting & Cable, p. 4. Clarke, M. M., & Seltzer, H. (2003, August 4). The big bucks behind the big leagues. Broadcasting & Cable, p. 10. Cox, P. M. II. (1995). Flag on the play? The siphoning effect on sports television. Federal Commission Law Journal, 47, 571. Fatsis, S. (2003, January 31). NBC Sports maps a future without the big leagues. Wall street Journal, sec. A, p. 1. Futterman, M. (2004). Media conglomerates reach for the golden rings. Newark Star-Ledger, p. 00. Gardyn, R. (2000, April). Putting the “World” in the World Series. American Demographics, p. 28. Gross, A. (2004, May 23). TV Deal a step back. Journal News (Westchester County, NY), p. 8C. Higgins, J. M., & Becker, A. (2004, November 1). Squeeze play; As pro teams launch their own sports networks, some hit it big, but many strike out. One loser: Fans. Broadcasting and Cable, p. 1. Howe, P. (2005, March 14) Major League Baseball Pitches cell phone content. Boston Globe, p. 65. Kazmierski, J. (n.d.). The truth about the LPGA and the PGA. Retrieved January 25, 2005, from http://www.langegolf.com/jkaz-article.html

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MacCambridge, M. (2004). American’s Game (pp. 67–70). New York: Random House. Noland, E. & Hoffarth, T. (1997, June 24). Murdoch plays to win; Fox sports; Major deals put Fox in forefront. Los Angeles Daily News, p. 1. Schaaf, P. (2004). Sports, Inc. 100 years of sports business (p. 13). Amherst, NY: Prometheus Books. Shapiro, L., & Maske, M. (2005, April 19). “Monday Night Football” changes the channel; After 35 years on ABC, ESPN will take over in 2006. Washington Post, p. A01. U.S. v. National Football League, 116 F.Supp. 319 (D.C.Pa., 1953). Ward, G. C. (2004). Unforgivable blackness—The rise and fall of Jack Johnson (p. 229). New York: Knopf. Wright, T. L. (2003, May 7). Web casting call; The latest technology spawned by the continuous growth of the Internet gives fans the chance to follow their favorite teams in progress—no matter where they are. Florida Times-Union, p. E1.

Glossary

Agents—See Sports Agents. Amateur Athletic Union (AAU)—nonprofit organization dedicated exclusively to the promotion and development of amateur sports and physical fitness programs. At one time, it was the predominant amateur sports organization in the United States. Amateur Sports Act—see Ted Stevens Olympic and Amateur Sports Act. American Arbitration Association (AAA)—Founded in 1926, the AAA is the largest provider of alternative dispute resolution services in the United States. The organization offers mediation, arbitration and other out–of–court settlement procedures. It often adjudicates and arbitrates sports disputes. American Basketball Association (ABA)—A rival league to the NBA, which operated from 1967 to 1976. Four ABA teams—the San Antonio Spurs, New York Nets, Denver Nuggets, and Indiana Pacers—joined the NBA, along with the ABA’s star players. 291

292

GLOSSARY

American Football League (AFL)—a professional league that operated from 1960 to 1969 as a rival to the NFL. The AFL successfully challenged the NFL supremacy, prompting a merger of the NFL and the AFL in 1970. The AFL kept all of its teams and become the American Football Conference (AFC). Americans with Disabilities Act of 1990—a 1990 law that prohibits discrimination against people with disabilities in employment, in public services, in public accommodations, and in telecommunications. In the area of sports, it has been utilized in primary and secondary school cases and in stadium design issues. The most famous ADA case involving sports is the Supreme Court’s 2001 ruling permitting golfer Casey Martin to use a cart while competing. Anabolic steroids—drugs that enhance muscle development, which allows athletes to train harder and recover more quickly from strenuous workouts. They are considered “performance-enhancing” substances. Appearance fee—a payment made to an athlete to participate in an event. Allowed in certain individual sports, in an attempt to attract public interest to an event, organizers often pay notable athletes to participate in the event. Arbitration—see salary arbitration or grievance arbitration. Assumption of risk—an important defense to a negligence claim, in the sports context. It applies to a situation in which the defendant voluntarily exposed himself or herself to a known and appreciated danger. Getting hurt when tackled in a football game is an assumption of risk. Often this defense is part of a waiver of liability in a contract. ATP Tour—The organization governing men’s professional tennis. Bonds—a debt security issued by a private corporation or a governmental subdivision. In sports, bonds are used as a means of financing new stadiums and arenas. Several important types of bonds exist: • General obligation bonds: securities used for government financing, for which the debt is repaid from the government’s general tax revenue. • Lease revenue bonds: bonds issued by a governmental authority separate from the actual government. The bonds are issued as part of a lease agreement between the authority and the government, which leases the facility from the authority and then subleases it back to that very authority. • Revenue bonds: securities used for government financing, for which the debt is repaid from special taxes that are passed or

GLOSSARY

293

from the revenue of the stadium for which the government financed with the bonds. • Special tax bonds: securities used for government financing, for which the debt is repaid only from specific tax revenues. • Stadium investment bonds: when a team owner seeks private financing to build a stadium, in which the stadium itself backs the loan; that is, the loan; is secured by the stadium. Clayton Act of 1914—An amendment to the better-known Sherman Antitrust Act of 1890. With regards to sports, the Clayton Act excludes labor unions from Sherman Act enforcement. Workers may form “combinations” (unions) that arguably may restrain trade by virtue of their labor agreements with management. The act legalized peaceful strikes, picketing, and boycotts by unions. Collective bargaining agreement (CBA)—an agreement between a sports league and its respective player association that govern the terms and conditions of the players’ employment with the league. Comparative negligence—a modern version of contributory negligence, whereby juries apportion liability among the parties, and a plaintiff ’s award is reduced by the percentage of fault that the plaintiff exhibited. Contributory negligence—A traditional defense to negligence. If the plaintiff has contributed to his or her own injury, he or she is barred from recovering damages. Copyright—A copyright involves the right of an author to control the communication of an “original work of authorship, fixed in a tangible medium.” This definition imposes three requirements: the work must be original, an expression of an idea or thought, and presented in a fixed medium. Court of Arbitration for Sport (CAS)—an independent institution created in 1983 to settle sports-related disputes. The CAS is under the administrative and financial authority of the International Council of Arbitration for Sport (ICAS) and is divided into two divisions, the Ordinary Arbitration Division (OAD) and the Appeals Arbitration Division (AAD). The OAD resolves disputes arising from all types of legal relations between parties, such as contracts for television rights or a simple sponsorship. The AAD resolves disputes arising from “last-instance decisions” taken by the tribunals of sports organizations, federations, or associations when the regulations or statutes of these bodies (or a private agreement) require the CAS to have jurisdiction.

294

GLOSSARY

Defamation—A false communication, either orally stated or in writing, that injures another’s reputation or good name. Early bird exception—An exception to the NBA salary cap allowing a team to resign its own free agent at a salary, which is the larger of 175% of the player’s salary in the prior season, or when the player has played for the team for some or all of each of the prior two consecutive seasons, the average of his salary. If this exception is utilized, the player must be signed for at least two more seasons. Eminent domain—Eminent domain involves seizure of private property by a state or locality for “public purposes.” Accompanying that governmental seizure of property is the requirement that the prior owner of the property be fairly compensated. Many states have mechanisms to attempt to find the correct level of compensation. This is important, because the right to be compensated for an expropriation of property is guaranteed by the Fifth Amendment to the U.S. Constitution, as well as by many state constitutions. Eminent domain has been used in clearing land for building new stadiums and arenas, if public funds are used and some public benefit is found. Escalator clause—a clause in a player’s contract rewarding the player for extraordinary performance by automatically raising the value of the player’s contract. Expansion franchise—the addition of a new team within a sports league. Federation Internationale de Natation Amateur (FINA)—This organization is in charge of competitive swimming, water polo, diving, and synchronized swimming on the international level. The organization’s members are made up of the national governing bodies in each country that govern aquatic sports. Fiduciary—Relating to the circ*mstance in which, because of a special relationship, such as agency, one party must act with a high degree of loyalty and good faith, taking the interests of the client at all times. Sports agents and financial advisors must act in a fiduciary capacity for their clients. Free agency—The ability of a professional athlete to freely negotiate a contract to play for any team. Grievance arbitration—A process, usually prescribed in a labor agreement, stipulating that certain problems that arise out of a labor relationship emanating from an interpretation or misinterpretation of the player’s contract be settled by an independent party. With a grievance

GLOSSARY

295

arbitration clause in a contract, the claim must be handled through an independent arbitrator. Group licensing—a standard licensing agreement that applies to all professional teams within a league for licensing the use of teams’ names, logos, symbols, emblems, signs, uniforms, and identification of the member clubs. This type of licensing also can apply to players and is often controlled by the players’ unions. Intentional torts—a tort that is committed with the intent or desire to commit the act. In sports, an example would be an assault and battery. International athletic federations (IFs)—the chief governing bodies of particular sports that compete internationally. Responsibilities include conducting international competitions, detailing eligibility rules, choosing judges and referees, and resolving technical issues in their respective sports. These organizations are subject only to the limitations of the Olympic charter. International Olympic Committee (IOC)—the organization responsible for organizing the Olympic games. The IOC has the ultimate authority in deciding where each game will be held and derives most of its funding from broadcast rights and the sale of Olympic memorabilia and merchandise. International Skating Union (ISU)—the organization that governs international standards for skating. The organization is responsible for setting eligibility requirements for participants and for scoring systems. Ladies Professional Golf Association (LPGA)—Founded in 1950, the LPGA is the organization governing women’s professional golf. The not-for-profit organization sponsors 33 events under the LPGA Tour. Larry Bird Exception—an exception to the NBA salary cap allowing a team to re-sign its own free agent for an amount not exceeding the league’s maximum player salary as long as that player has played for the team for some or all of each of the prior 3 consecutive years. Licensing agreements—a contract in which a licensor grants a licensee permission to use his/her property for a specific purpose. In sports, the terms are usually applied to trademark license agreements involving property such as team and league logos. Liquidated damages—when contracting parties agree to a reasonable estimation of damages after one of the parties breaches the contract. Lockout—the employer counterpart of a strike. In a lockout, the employer prevents the players from working in an effort to gain a better

296

GLOSSARY

bargaining position in labor negotiations. A lockout may occur upon the expiration of a collective bargaining agreement. Loyalty clause—a clause in a player’s contract in which the team is able to withhold specified types of compensation if the player breaches his obligation of loyalty to the club. Luxury tax—a tax imposed on portions of a team’s payroll that exceeds set thresholds, with the excess funds being used for designated items, such as, in Major League Baseball, for player benefits and an industry growth fund. Major League Baseball (MLB)—the organization controlling elite professional baseball in the United States and Canada, created through the merger of the National League and the American League in 1903. For years, both leagues operated with considerable autonomy. Each had its own league president. In recent years, this power has been limited as the two leagues have lost some of their independence. Major League Baseball Players’ Association (MLBPA)—players’ union for Major League Baseball. Major League Baseball Properties (MLBP)—the organization that holds the exclusive trademark and licensing rights for the MLB and oversees the marketing and protection of individual trademarks and products. Major League Soccer (MLS)—a league representing professional soccer in the United States. MLS’s structure is closer to a “single-entity” league than the traditional model favored by the NFL, NBA, NHL, and Major League Baseball. Masking agents—a substance that will cover or hide the presence of performance-enhancing substances in an athlete’s system. Naming rights—the right to name a stadium for a stipulated term and fee. Such rights produce an important source of revenue for staduim owners. NBA Properties, Inc. (NBAP)—the organization that holds the exclusive trademark and licensing rights for the NBA and oversees the marketing and protection of individual trademarks and products. National Basketball Association (NBA)—the predominant league for professional male basketball players in North America. Founded in 1947, it has 30 teams. National Basketball Players’ Association (NBPA)—players’ union for National Basketball Association.

GLOSSARY

297

National Collegiate Athletic Association (NCAA)—the governing body that regulates eligibility requirements, recruiting practices, and sports competitions of the over 1,200 member institutions that offer collegiate sports. National Football League—the premium league of American professional football. Founded in 1920, its prestige increased in the 1960s. It merged with its rival, the AFL, in 1970, creating the present structure. Presently, 32 teams compete in the NFL. National Football League Players’ Association (NFLPA)—players’ union for the National Football League. NFL Properties (NFLP)—organization that holds the exclusive trademark and licensing rights for the NFL and oversees the marketing and protection of individual trademarks and products. National Governing Bodies (NGBs)—organizations in charge of running the particular sport in a given country. It is the responsibility of an NGB to set eligibility standards for participation in the sport. NGBs must abide by the rules of their corresponding international federations. National Hockey League (NHL)—a North American league of professional hockey players. Founded in 1917, it expanded from six teams in the 1960s to 30 teams presently. National Hockey League Players’ Association (NHLPA)—players’ union for the National Hockey League. National Labor Relations Act (NLRA)—Law that sets the structure of labor relations in the United States. It allows workers to form unions, engage in collective bargaining, and strike. National Labor Relations Board (NLRB)—The federal agency that administers the National Labor Relations Act. This board is responsible for sanctioning those who participate in unfair labor practices. National Olympic Committee (NOC)—a committee in each Olympic participating country that is the sole authority responsible for the representation of its respective country at the Olympic games, as well as at other events held under the patronage of the IOC. Negligence—a tort involving fault, not intention, defined as a standard of care that is less than what another reasonably prudent person would have exercised in a similar situation. In sports, negligence cases may be brought against supervisory personnel who failed to utilize safety procedures adequately.

298

GLOSSARY

Nonstatutory labor exemption—A legal doctrine that serves as an exemption to the antitrust laws. Essentially, any union–management agreement that was a product of good faith negotiation will receive protection from the antitrust laws. That means that the provisions of the agreement cannot be attacked as collusive or anticompetitive. Personal seating license—a one–time fee paid for interested ticket holders to hold a permanent seat at a stadium, usually a newly constructed facility. Professional Golfers Association (PGA) Tour—A tax-exempt group of professional golfers that play in more that 100 tournaments on three tours: the PGA Tour, Champions Tour, and Nationwide Tour. PLAYERS, INC.—a subsidiary of the NFLPA that handles the marketing and licensing of player names and images. Recklessness—when the conduct of an actor is not intentional, but does forsee the possibility of harm, and the actor acts even though he or she is aware of that risk of harm. If a hockey player high-sticks another player, who falls on the ice with a massive concussion, the act of high-sticking could be deemed “reckless.” Reserve clause—a clause in player contracts that generally allows the team to retain a player for the next season, provided a minimum salary is met, when the player and the team cannot agree on the terms of a new contract. Right of publicity—a right that is grounded in one’s right to privacy. It allows a person to protect and control the use of his or her identity for commercial purposes. Rights fees—a fee associated with the right to broadcast a specific sporting event. “Rozelle rule”—a requirement imposed in the NFL that requires a team signing a free agent to provide fair and equitable compensation to the team losing that player. The rule was included in the league’s first collective bargaining agreement in 1968. Salary arbitration—a settlement method to resolve salary disputes between a team and a player frequently included in collective bargaining agreements. A neutral arbitrator or group of arbitrators renders a decision as to the compensation of the player based on figures submitted by the owner and the player and accompanying evidence of a player’s performance, ability and leadership. The arbitrator’s decision is usually binding.

GLOSSARY

299

Salary cap—an annual limit imposed on a professional sports team on the total salary they can compensate their players. Salary caps vary and often have important exemptions, such as the Larry Bird Exemption in the NBA. Presently, the NBA and NHL utilize salary-cap systems. Seating license—see personal seating license. Sherman Antitrust Act of 1890—a law, based on Congress’s power to regulate interstate commerce, making illegal every contract, combination, or conspiracy in restraint of interstate and foreign trade. Sports Agent and Responsibility Trust Act (SPARTA)—a federal statute prohibiting sports agents from signing student-athletes into representational contracts with bribes or misleading information. SPARTA provides a uniform standard for prosecuting agents who choose to ignore NCAA rules and state law. Sports agents (athlete agents)—professionals, often lawyers and accountants, who represent professional athletes in negotiating player contracts, endorsem*nt deals, and sometimes in personal finance. Sports Broadcasting Act of 1961—permits certain joint broadcasting agreements among the major professional sports. It permits the sale of a television “package” to the network or networks, a procedure that is common today. The law has been interpreted to include the so-called “blackout rules” that protect a home team from competing games broadcast into its home territory on a day when it is playing a game at home. Standard Player Agent Contract—a standard contract that players sign with their agents. It sets out the scope of the agent’s responsibilities as well as the terms of compensation. The players’ associations in most of the major sports often limit the fees charged by agents for their work in negotiated contracts with professional teams. Contracts with endorsem*nt companies are not limited. Student-athlete—usually refers to an amateur high school or college athlete. Under NCAA rules, student-athletes are restricted in accepting payments for their athletic services and cannot sign professional contracts with teams or agents. Ted Stevens Olympic and Amateur Sports Act (Amateur Sports Act of 1978)—A federal law mandating that the responsibility for coordinating all Olympic athletic activity vests in the United States Olympic Committee. It also directs the United States Olympic Committee to encourage and provide assistance to amateur athletic programs and competition for handicapped individuals.

300

GLOSSARY

Title VII of the Civil Rights Act of 1964—a federal law prohibiting discrimination in employment based on race, color, religion, sex, or national origin. Title IX of the Education Amendments of 1972—a federal law prohibiting discrimination on the basis of sex in any federally funded education program or activity. Title IX has led to a major increase in the number of women competing in collegiate sports over the last 30 years. Tort—any civil wrong, excluding a breach of contract, in which a plaintiff would be entitled to remedies, most commonly monetary damages. Examples of torts are assault, negligence, and product liability. Trademark—defined as “any word, name, symbol or device or any combination thereof adopted and used by a manufacturer to identify his goods and distinguish them from those manufactured or sold by others.” A trademark may include the teams, league and unions’ names, logos, symbols, emblems, designs, uniforms, likenesses, and visual representations. Trademark infringement—an unauthorized use of the trademark—defined as “the reproduction, counterfeiting, copying, or imitation, in commerce, of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion among consumer as to the source or origin of the goods sold”. The offender is subject to liability, by damages and/or injunctive relief. United States Anti-Doping Agency (USADA)—the official anti-doping agency governing Olympic sports in the United States. The organization’s mission is to eliminate the practice of doping in sports. U.S. Figure Skating (USFS)—The national governing body in the United States for figure skating. The USFS is responsible for creating rules and for organizing and sponsoring competitions for the purpose of increasing interest in the sport. United States Football League (USFL)—a rival football league to the NFL that functioned from 1983 to 1985. Claiming that the NFL engaged in anticompetitive practices to hurt the USFL, the new league instituted a lawsuit against the NFL. After a highly publicized trial, the USFL won a total award of $1 in damages. Facing $160 million in debt, it folded shortly afterward. United States Olympic Committee (USOC)—the Unites States national Olympic committee, having exclusive jurisdiction over all mat-

GLOSSARY

301

ters pertaining to U.S. participation in the Olympic games, and the ultimate authority with respect to United States representation in the Olympic games. US Speed Skating Association—the national governing body in the United States for speed skating. Vicarious liability—when a supervisory party is deemed liable for the actions of its subordinate. Usually applied in an employer/employee relationship. Women’s National Basketball Association (WNBA)—a professional women’s basketball league based in the United States. Founded in 1997, the league, originally a single-entity league, moved to an owner-based format in 2002. Presently, it has 13 teams. World Anti-Doping Agency (WADA)—an independent organization overseeing and monitoring compliance of the World Anti-Doping Code. Most international sports federations, as well as the International Olympic Committee, accept WADA’s jurisdiction. World Hockey Association (WHA)—a rival league to the NHL founded in 1972. In 1979 the NHL absorbed four of its teams: the Quebec Nordiques, Winnipeg Jets, Edmonton Oilers, and New England Whalers.

Author Index

A Abrahamson, A., 12, 20, 74, 80, 234, 242 Albiniak, P., 286, 289 Alesia, M., 45, 59 Allen, B. M., 138, 155 Allen, P., 6, 20 Ansley, C. C., 64, 80 Appenzeller, H., 204, 217, 226 Arace, M., 203, 226 Aubut, M., 142, 155

B Baade, R., 188, 201 Badenhausen, K., 2, 20 Banks, L., 166, 176

Barker, J., 230, 242 Barr, C., 48, 55, 59, 64, 81, 182, 201 Becker, A., 285, 289 Bell, J., 200, 201, 271, 275 Bentley, E., 252, 259 Berlet, B., 207, 226 Bianculli, D., 225, 226 Bisher, F., 244, 259 Bitting, M. R., 63, 68, 80 Blaudschun, M., 45, 59 Blinebury, F., 77, 80 Bloom, H., 5, 20 Bloom, J., 41, 59 Blum, D. E., 45, 48, 59 Bodley, H., 87, 106 Borden, S., 272, 275 Bouchette, E., 127, 155 Bowen, W., 58, 59 303

304

AUTHOR INDEX

Bradley, R., 136, 155 Brockinton, L., 196, 201 Brown, T., 220, 226 Burton, B. W., 184, 201 Burton, R., xxiii, xxxi Burwell, B., 163, 176

C Caldwell, D., 183, 201 Cart, J., 224, 226 Cassidy, H., 30, 30 Chass, M., 99, 106, 170, 175, 176 Clarke, M. M., 278, 283, 287, 289 Cohn, B., 159, 176 co*kley, M. A., 27, 30, 273, 275 Collinsworth, C., 236, 243 Conrad, M., 98, 106, 215, 227, 234, 243 Coon, L., 140, 155 Cox, P. M. II, 282, 289 Cozzillio, M., 9, 20, 24, 25, 30, 109, 155, 183, 201 Crouse, K., 76, 81 Cunningham, M., 128, 156 Cyphers, L., 89, 106

D Davis, T., 159, 160, 163, 164, 168, 177 DiCello, N., 215, 226 Doman, M., 173, 176 Dorocak, J., 188, 201 Down, F., 117, 156 Downey, M., 10, 20 Dupont, K., 112, 156 Dupont, K. P., 240, 243 Dvorchak, R., 230, 243 Dworkin, J., 112, 114, 156

E Enlund, T., 143, 156 Enquist, E., 14, 20

Erardi, J., 193, 201

F Falk, D., 92, 93, 107 Farmer, S., 12, 20 Fatsis, S., 55, 59, 283, 289 Feigen, J., 195, 201 Fennell, T., 113, 156 Ferber, T., 269, 275 Fetter, H., xxiii, xxxi Fielder, T., 89, 107 Fisher, E., 12, 18, 20, 21, 144, 150, 156, 238, 243 Foldesy, J., 269, 275 Fort, R., xxix, xxxi, 12, 21, 111, 157, 181, 191, 201 Fraas, K. N., 190, 201 Frauenheim, N., 274, 275 Freedman, J., 84, 107 Frey, D., 56, 59 Futterman, M., 286, 289

G Gabriel, M., 29, 30 Gardyn, R., 280, 289 Gaughan, M., 134, 156 Gillis, C., 84, 107 Gloster, R., 234, 243 Goldblatt, J. J., 217, 218, 226 Gormley, C., 170, 176 Graham, G., 217, 218, 226 Gray, J., 87, 94, 95, 96, 107, 185, 189, 191, 192, 193, 196, 197, 198, 199, 201 Green, K., 188, 201 Greenberg, M., 87, 94, 95, 96, 107, 185, 189, 191, 192, 193, 196, 197, 198, 199, 201 Gregorian, V., 37, 59 Groeschen, T., 89, 107 Gross, A., 284, 289

AUTHOR INDEX

Grossi, T., 161, 176

H Habib, H., 215, 226 Hack, D., 151, 156 Hales, M., 53, 54, 59 Hall, T. J., 174, 177 Hangstrom, R. G., 27, 30 Hannigan, D., 18, 21 Harris, S., 84, 107 Harrow, R., 5, 21 Heath, T., 19, 21 Heika, M., 146, 156 Higgins, J. M., 285, 289 Hoffarth, T., 283, 290 Hohler, B., 169, 17, 238, 243 Hook, C., 161, 177 Horovita, B., 194, 201 Horrow, R., 275, 276 Howard, J., 225, 226 Howe, P., 287, 289 Hums, M., 48, 55, 59, 64, 81, 182, 201 Hunter, R., xxiii, xxxi

I Isaacson, M., 161, 177 Iwata, E., 230, 243

J Jackson, J. L., 255, 260 Jacobson, S., 101, 107 Jenkins, S., 241, 243 Jones, S. A., xxiii, xxxi Jones, T., 76, 81 Joyce, G., 225, 227 Just, R., 57, 59

K Kaplan, D., 28, 30

305

Kazmierski, J., 285, 289 Keating, R., xxviii, xxxi, 187, 201 Keeton, W. P., 208, 227 Kemp, J., 63, 81 Kimpflen, J., 264, 276 King, B., xxx, xxxi King, P., 134, 156 Klein, B., 188, 201 Klis, M., 168, 169, 177 Kolah, A., 261, 276 Kroichick, R., 239, 243 Krueger, A. B., 188, 201 Kulfan, T., 154, 156 Kurlantzick, L., 186, 201

L Lance, D., 49, 59 Lapchick, R., 248, 260 Lapointe. J., 145, 156 Layden, T., 149, 156 Lebowitz, B., 188, 201 Lebowitz, L., 15, 21 Lederman, D., 45, 48, 59 Lee, J., 34, 59 Lehrer, J., 109, 156 Lenskyj, H., 61, 81 Leone, K. C., 185, 201 Lester, P., 102, 107 Levinstein, M., 9, 20, 24, 25, 30, 109, 155, 183, 201 Longman, J., 66, 81, 241, 243 Ludd, S. O., 230, 243 Ludden, J., 171, 177

M MacCambridge, M., 281, 289 MacNeil, R., 109, 156 Madden, M., 161, 177 Malkin, M., xxviii, xxxi Manley, H., 222, 227

306

AUTHOR INDEX

Markiewicz, D., 5, 21 Markos, K., 206, 227 Maske, M., 160, 167, 174, 177, 284, 290 Masteralexis, L., 48, 55, 59, 64, 81, 182, 201 Mayo, A., xxiii, xxxi McAllister, M., 220, 227 McCallum, J., 6, 21 McCarthy, M., 54, 59, 268, 276 McLaren, R. H., 68, 81 Merron, J., 63, 81 Michaelis, V., 71, 78, 81, 139, 156 Mihoces, G., 163, 177 Miller, I., 132, 156 Miller, J., 220, 227 Mitten, M. J., 184, 201, 213, 214, 227 Moore, J., 97, 107 Moreno, K., 126, 156 Mullen, L., 102, 107 Munson, L., 224, 227 Murphy, B., 271, 276

Q Quinn, T. J., 100, 107 Quirk, J., xxix, xxxi, 12, 21, 111, 157, 181, 191, 201

R Raine, G., 272, 276 Reed, T., 100, 107 Reifman, S. Z., 162, 177 Roberts, G., 9, 15, 18, 21, 24, 62, 76, 82, 119, 157, 215, 227, 246, 250, 260 Robinson, L. N., 223, 227 Rodack, J., 5, 21 Roeder, D., 161, 177 Rogosin, D., 246, 260 Rose, J., 67, 81 Rothchild, S. N., 174, 177 Rovell, D., 5, 21, 102, 107 Ryan, B., 117, 157

N S Nack, W., 224, 227 Neirotti, L. D., 217, 218, 226 Nethery, R., 10, 21 Noland, E., 283, 290 Noll, R., 188, 202

O O’Donnell, C., 96, 107 Opie, H., 235, 243 Ozanian, J., 6, 21

P Paskin, J., 253, 260 Pasternak, D., 161, 177 Pearlman, J., 247, 260 Pennington, B., 215, 227, 253, 260 Pound, E. T., 161, 177

Salisbury, J., 169, 177 Saloufakos-Parsons, A., 67, 81 Sandomir, R., 200, 202, 268, 276 Schaaf, P., 281, 290 Schultz, J., 218, 227 Schulz, T., 84, 107 Scott, M. S., 70, 81 Scruggs, W., 32, 59 Seifert, K., 135, 157 Selig, B., 109, 157 Seltzer, H., 278, 283, 287, 289 Seymour, H., 115, 157 Shapiro, L., 160, 167, 174, 177, 284, 290 Shapiro, M., 185, 202 Sheinin, D., 123, 157 Sherman, E., 265, 276 Shipley, A., 67, 75, 81 Shoalts, D., 174, 177

AUTHOR INDEX

Shropshire, K. L., 159, 160, 163, 164, 168, 177 Shulman, J., 58, 59 Siemaszko, C., 247, 260 Smith, D., 28, 30 Smith, M., 96, 107 Smith, S., 247, 260 Snavely, B., 6, 21 Sosnowski, T., 262, 276 Spiegel, E., 84, 107 Standora, L., 247, 260 Strachan, A., 112, 157 Straubel, M. S., 75, 81 Swift, E., 76, 81 Sylwester, M., 32, 60

T Thomas, J., 66, 81, 135, 157 Thorne, D., xxiii, xxxi Topkin, M., 123, 157

U Unger, H., 264, 276 Ungerleider, S., 229, 243

V Valenti, J., 186, 202 van der Smissen, B., 207, 227 Veltri, F., 220, 227

W Wadler, G. I., 229, 243 Walker, D., 268, 276 Ward, B., 75, 81 Ward, G. C., 278, 290 Weiler, P., 9, 18, 21, 62, 76, 82, 119, 157, 246, 250, 260 Whiteside, K., 48, 60 Whoriskey, P., 187, 202

Wilstein, S., 240, 243 Witz, B., 5, 21 Woo, V., 162, 177 Wright, L. B., xxiii, xxxi Wright, T. L., 288, 290

Y Youngblood, K., 146, 157

Z Zimbalist, A., 188, 202 Zinser, L., 151, 157 Zoppo, T., 48, 60

307

Subject Index

A AAA (American Arbitration Association), 75, 233, 291 ABA (American Basketball Association), 136, 165, 291 ABC, 283, 284 Abdul-Jabbar, Kareem, 161 Academic requirements for student-athletes, 43–45 ACC (Atlantic Coast Conference), 49–50 Acts of God, see force majeur clause ADA (Americans with Disabilities Act), 56, 249, 256–258, 292 Adair, Alan, 51 Advertising revenues, 181, 198–199 Affirmative action, 249

AFL, see American Football League; Arena Football League Agassi, Andre, 84 Agents, 159–161, 299 alternatives to, 169–171 certification and standards, 171–175 and collective bargaining, 111 historical rise of, 164–165 in mega-agencies, 161–162 and NCAA, 41–42 role and responsibilities of, xxii, 158–159, 162–164, 165–169 Age restrictions, 144, 151–152 Agnone, Tony, 159 Agreement to participate, 211–212, 224 Alcohol and collegiate sports, 209 309

310

SUBJECT INDEX

NFL policy on, 235 and press coverage, 229 sale of, at events, 206, 220–221 and USADA, 232 Allen, Paul, 111 Amateur Athletic Union (AAU), 291 Amateur Sports Act, 69–70, 73, 74, 273, 299 Amateur status and collegiate athletics, xxvi, 39–41, 56–57 historical context, 40, 62, 67–68 and International Skating Union, 76 American and National Leagues v. Major League Baseball Players Association, 1976, 85 American Arbitration Association (AAA), 75, 233, 291 American Basketball Association (ABA), 136, 165, 291 American Basketball League, 15, 19 American Football League (AFL), 165, 282, 292 American League, 7, 8, 12, 114, 179, 296 Americans with Disabilities Act (ADA), 56, 249, 255–258, 292 America Online, 284 Americrown Service Corporation, 272–273 Amphetamines, 236, 237, 239 Anabolic steroids, see steroids Anabolic Steroid Contract Act of 1990, 230 Anabolic Steroids Act of 2004, 230 Anaheim Angels, 10 Anaheim Mighty Ducks, 191, 198 Androstenedione, 230, 240 Angled seating, 182 Anschutz, Philip, 111 Anthony, Carmelo, 152 Antitrust law, 14–15, 112 and franchise expansion and relocation, 184, 186

and Major League Baseball, xxv, 115–116, 120 and national television broadcasting, 282 and NBA Players’ Association, 136 and NFL, 124–125 and single-entity model, 17, 19–20 Appearance fees, 24–25, 87, 292 Arbitration and conduct clause violations, 88 defined, 294–295, 298 and loyalty clause violations, 89 in national leagues, 154 in NHL, 146, 147 and positive drug tests, 233 of Rocker case, 247 Arena Football League (AFL), 10, 149 Arenas, see facilities Argovitz, Jerry, 164 Arizona Diamondbacks, 198 Arnold v. Riddell Sports, 1994, 213 Arrowhead Pond, 191, 193 Artest, Ron, 6 Assante (agency), 162 Assault and battery, 207–208, 212 Assignment, see trading of players Assumption of risk, 204, 210–212, 292 Athletic conferences, 48–54 Athletic directors, role of, 34 Atlanta Braves, 178 Atlanta Hawks, 286 Atlanta Thrashers, 264, 286 Atlantic Coast Conference (ACC), 49–50 Atlantic 10 Tournament, 34 ATP Tour, 26, 28–29, 87, 102, 292 Attendance statistics, xxi Attitude problems, 92 Attorneys, 170–171 Augusta National Golf Club, 244–245 Australian Open, 29 Automobile racing, see National Association for Stock Car Racing (NASCAR)

SUBJECT INDEX

Autonomy of team operations, 13

B BAA (Basketball Association of America), 135 Babby, Lon, 170–171 Babych, Dave, 215 Baer, Max, 225 BALCO (Bay Area Laboratory Cooperative), 240–241 Baltimore Colts (NFL), 185 Baltimore Colts (CFL), 263 Baltimore Orioles, 100 Bank One Ballpark, 198 Basketball Association of America (BAA), 135 Basketball-related income (BRI), 138, 140, 141 Bay Area Laboratory Cooperative (BALCO), 240–241 BCS (Bowl Championship Series), 53–55 Belle, Albert, 100 Beltran, Carlos, 168 Beltre, Adrian, 168 Benefit contributions, 123 Berezhnaya, Yelena, 75–75 Bertuzzi, Todd, 224–225 “Best interests of the sport” provision, 8, 85, 86 “Best services” requirement, 89 Beta blockers, 232 Bettman, Gary, 5 Big 12 Conference, 51–52, 97 Big East Conference, 50 Big Ten Conference, 51 Bird, Larry, 5, 136, 142, see also Larry Bird Exception Black, William “Tank, ” 161 “Black Sox” scandal, 7–8 Bloom, Jeremy, 41 Bloom, Lloyd, 161

311

Bonds, 189, 292–293 Bonds, Barry, 238, 241, 272 Bon Jovi, Jon, 10 Bonuses, 86, 87, 88, 93 for collegiate coaches, 96 in endorsem*nt contracts, 104–105 in NFL, 133–134 in NHL, 148 for professional coaches, 97–99 signing, 89, 93, 131, 132 and team achievements, 170 Boone, Peter, 45 Boras, Scott, 168–169 Boston Braves, 178, 181 Boston Garden, 198, 219 Boston Red Sox, 10, 170, 281 Bowl Championship Series (BCS), 54–55 Brashear, Donald, 224 Breach of contract, 84–85, 90 BRI (basketball-related income), 138, 140, 141 Broadcasting audience demographics, 279–280 of NCAA games, 286–287 new technologies, 287–288 of Olympic Games, 63, 286 radio, 280 revenues from, xxiii, 12 television, 280–285 Broadcast rights allocation of, in different sports, xxvii and financial disparity between teams, 13–14 as property rights, 278 and single-entity model, 16–17 Brooklyn Dodgers, xxix, 178, 185 Brown, Kevin, 168 Brown, Mike, 288 Bryant, Kobe, 5, 84, 222, 223 Bryan v. Colgate University, 252 Buffalo Bills, 134

312

SUBJECT INDEX

Buick Classic golf tournament, 23 Burns, Brian D., 100 Business governance issues, xxiii Business necessity defense, 245 Butkus, Dick, 215

C Cable rights agreements, 12, 16–17 Campanis, Al, 246 Campbell, Frankie, 225 Canada, 151, 160 Carlessimo, P. J., 225 Cartels, sports leagues as, xxiv–xxvi, 2–3, 19 CAS (Court of Arbitration for Sport), 68, 72, 233, 234, 293 Catlin, Don H., 241 CBA (Continental Basketball Association), 15 CBAs, see collective bargaining agreements CBS, xxvii, 283, 286 Cecil, Brittanie, 203 Centralized operations of sports organizations, xxv, xxvi–xxix Central New York Basketball v. Barnett, 1961, 85 Champions Tour, 29 Chance, Dean, 100 Chandler, Albert “Happy, ” 246 Charlotte Hornets, 178 Cheerleaders, 196 Chicago Bears, 10 Chicago Bulls, 2 Chicago Cubs, xxx, 286 Chicago Tribune, 161 Chicago White Sox, 182 and municipal funding for stadium, xxvii–xxviii and 1919 World Series, 7–8 Chicago White Stockings, 197 Chinese Swimming Federation, 78

Cincinnati Bengals, 89 Civil Rights Act, 300 Civil Rights Restoration Act, 250 Clarett, Maurice, 151 Clarett v. NFL, 2004, 151 Clark, Charles “Booby, ” 208 Clarke, Bobby, 170 Class issues and Title IX, 255 Clayton Act, 115, 293 Clear Channel, 162 Clemens, Roger, 162 Cleveland Browns, 180, 185–186 Cleveland Indians, 220 part-ownership by Bob Hope, 10 tax implications of sale of, xxix Clijsters, Kim, 274 Climate control, 219 Clinton, Bill, 120 Club seats, 198 Coaches attacks on, 220 collegiate, 47–48, 94 contracts for, 94–99 Cohen v. Brown University, 1993, 251 Collective bargaining, see unions Collective bargaining agreements (CBAs), 85, 86, 293 and agents, 167 in arena football, 149 and contract negotiations, 92 in Major League Baseball, 113–124 in Major League Soccer, 150 in NBA, 139–142 in NFL, 125–135 in WNBA, 149–150 Collegiate athletics, 31–32, see also National Collegiate Athletic Association (NCAA) and amateurism, 56 coaches for, 94–97 and disability issues, 256 and Title IX, 248–255 unprofitability of, xxii

SUBJECT INDEX

Colorado Avalanche, 180, 207 Comiskey Park, 182, 193, 220 Commissioners arbitration by, 99 of baseball, 2–3, 7–8, 122 and collective bargaining agreements, 86 and league-player contracts, 90 of NBA and NHL, 5 of NFL, 4, 236 principal duties of, 7–10 Community, team’s relationship with, xxix–xxx Comparative negligence, 210, 293 Competitive Balance Tax, 122 Concession revenues, 181, 187, 195–196 Conduct provisions, 88–89 Consent defense, 207 Construction boom, 182–183 Continental Basketball Association (CBA), 15 Contract depreciation, xxviii–xxix Contraction, 123 Contract negotiations, 92–94 Contracts, 83–86 between agents and athletes, 160, 172–173 for league players, 87–91 in team vs. individual sports, 86–87 Contributory negligence, 209–210, 293 Cooperation vs. competition (within leagues), 11–13 Copyright, 265, 293 Coslet, Bruce, 89 Cotton Bowl, 54, 55 Coubertin, Pierre de, 63 Court of Arbitration for Sport (CAS), 68, 72, 233, 234, 293 Credentialing (of press), 218 Criminal activity, 142 by athletes, 8, 101, 222–225 background checks of agents, 172, 174

313

and coaches’ contracts, 99 at sports events, 218 Criminal law, 222–223 Criticism, public, by players, 89 Crosby, Bing, 10 Cuban, Mark, 111 Cureton v. NCAA, 1999, 45 Cutting players, 113

D Dallas Cowboys, 181 Damage control, agent’s role in, 168 Davis, Al, 184 Dead money, 134 Debt Service Rule, 123 Decertification, 137 Defamation, 221–222, 294 Deferred compensation, 93 in NBA, 140–141 in NFL, 134 Defined gross revenues (DGR), 129–130, 136–137, see also basketball-related income De la Hoya, Oscar, 84 Demographic shifts, 180–181 Depreciation of player contracts, xxviii–xxix Detroit Lions, 164, 180 Detroit Lions & Sims v. Argowitz, 1984, 164 Detroit Pistons, 180, 220 DGR, see defined gross revenues Dilution, 264 DirectTV, 287 Disability and Americans with Disabilities Act, 56, 249, 255–258, 292 benefits and insurance, 99–100, 128, 129 Disaster planning, 216–217 Disclosure laws

314

SUBJECT INDEX

and collegiate coaches’ contracts, 95 and drug testing policies, 236 and finances of privately owned teams, 1–2, 112 and professional coaches’ contracts, 97 Discrimination, 244–245 disability, 255–258 racial, 246–248 and Title IX, 248–255 Disparate impact, 245 Diuretics, 232, 239 Doby, Larry, 246 Dodger Stadium, 187, 193 Doe v. TCI Cablevision, 2003, 266 Domestic violence, 224 Dominican Republic, 123, 151 Draft system, 11–12 and choice of agent, 165–166 and NBA salaries, 139–140 worldwide amateur, 123 Drew, J. D., 168 Drug policies, 61 and Fédération Internationale de Natation Amateur, 78 and International Amateur Athletic Federation, 74–75 in Major League Baseball, 7, 238–240 in NBA, 142, 144, 236–238 in NCAA, 231–232 in NFL, 235–236 in NHL, 148, 240 and United States Anti-Doping Agency, 232–233 Drug use and criminal activity, 224 legal vs. illegal, 228–230 table of penalties, 242 Drysdale, Don, 120 Due diligence, 263 Duncan, Tim, 171

E Early bird exception, 142–143, 294 Earnhardt, Dale, 273 East Germany, 229 Eckert, William, 117 Elite status of professional athletes, 110–111 Eminent domain, 185, 294 Employee status, 24–25 Endorsem*nt contracts and agents, 165, 167 key clauses, 103–106 marketing assessments, 101–103 and rankings in individual sports, 26 Enhanced harm, 214 Enron Field, 194 Entertainment industry, similarity of sports industry to, xxii–xxiii, 85 Epitestosterone, 241 EPO (erythropoietin), 241–242 Equipment revenues, xxiii Equity in Athletics Disclosure Act, 253–254 Erythropoietin (EPO), 241–242 Escalator clauses, 88, 93, 294 Escrow and tax system, 140–141, 144 ESPN, 247, 280, 282, 283–284, 287 Ethical abuses by agents, 160–161 ETW Corporation v. Jireh Publishing, Inc., 2003, 266 Europe, 160 Eustachy, Larry, 96 Events, 23–24, 162 Exclusivity rights, 192, 268 Expansion teams, 180, 186, 294 Expense provisions (in contracts), 88

F Facilities alteration of, 199–200 construction of, xxiii, 181–183

SUBJECT INDEX

economics of, 179 financing for, xxvii–xviii, 187–190 and franchise relocation, 185–186 lease agreements, xxix, 190–193 naming rights, 190, 193–195 revenues from, 181–182, 185–186, 190–191 advertising, 198–199 concessions, 195–196 parking, 199 seat licenses, 196–198 security issues, 217–219 Falk, David, 93 Family members as agents, 170 inducements offered to, 173 Fan Code of Conduct, 220 Fan loyalty, psychological basis of, xxx–xxxi Fatalities, 203, 225 Federal Baseball Club, Inc v. National League of Professional Baseball Clubs, 1922, 115, 116 Federal Trade Commission (FTC), 171 Fédération Internationale de Natation Amateur (FINA), 77–78, 294 FedEx Field, 198 Fehr, Donald, 120 Feller, Bob, 112 Fenway Park, 199–200 Fiduciary duties of agents, 163–164, 294 Fiesta Bowl, 54, 55 FINA (Fédération Internationale de Natation Amateur), 77–78, 294 Final eight plan, 127 Financial advisors, 161, 165 agents as, 163–164, 166 NFLPA regulations concerning, 174 Financial aid for student-athletes, 46–47 Findley, Charlie, 118

315

Fines, 88–89, 141–142 Finley, Charlie, 118, 184 Finley v. Kuhn, 1978, 8 Fireworks, 219 First Amendment, 89, 247 and right to publicity, 266 Fleet Center, 194, 198 Flenoy, Stephen, 75 Flood, Curt, 116 Flood v. Kuhn, 1972, 116 Flutie, Doug, 31–32, 134 Food and Drug Administration, 230, 240 Forbes Field, 193 Force majeur clause, 191, 195 Ford, Gerald, 69 Forman, George, 265 Foschi v. United States Swimming, Inc., 69 Fox network, 283, 284 Fox Sports, 279 Fox v. Board of Supervisors of Louisiana State University, 209 France, Bill, Jr., 27 France, Brian, 27 France, William Henry Getty “Bill, ” Sr., 26–27 Franchise expansion, 16 Franchise players, 126–127 Franchise relocation and cities, 185–186 and facilities, 182, 184–185 history, 179–181 leagues’ attempts to block, 183–184 reasons for, 178–179 restrictions on, 12 and single-entity model, 16, 17 Fraser vs. Major League Soccer, 2000, 2002, 18 Free agency in arena football, 149 and collective bargaining, 111 defined, 294

316

SUBJECT INDEX

history of, 114–116, 118–199 and increased role for agents, 165 in NBA, 136, 138, 140 in NFL, 126 in NHL, 145–146, 148 in sports vs. other industries, xxviii summary table, 153–154 Freedom of speech, 89, 247, 266 French Open, 29 FTC (Federal Trade Commission), 171

G Gag orders, 89 Gambling by athletes, 8, 224 and conduct clauses, 89 and George Steinbrenner, 9 GameDay Audio, 287 Garnett, Kevin, 84, 138 Gate receipts, 12–14 Gay Olympics, 273 Gender equity, see Title IX General obligation bonds, 189 Giambi, Jason, 162, 238, 241 Giants Stadium, 191 Goodenow, Robert, 145 Good faith negotiation, 109, 120 Goodwin, Aaron, 166 Goodwin, Eric, 166 Gordon, Jeff, 273 Gordon, Slate, 190 Governing bodies, xxv–xxvi Grand Slam, 28–29 Great Western Forum, 193–194 Green, Edward “Ted, ” 224 Green Bay Packers, 179 Greenberg, Hank, xxix Gretzsky, Wayne, 265 Griffith, Emil, 225 Griffiths family, 10 Group licensing, 295 Grove City College v. Bell, 1984, 250

Groves v. Firebird Raceway, 1995, 212 Guaranteed contracts, 87–88, 92–93, 139 and disability insurance, 99 in Major League Baseball, 113 in NFL, 127–128 summary table, 153

H Hackbart, Dale, 208 Hacker, George, 220, 221 Hall, Gary, Jr., 274 Hallas, George, 10 Hard cap systems, 129 Harding, Tonya, 71, 77 Hard salary caps, 137, 149 Hardy, Leland, 163 Harrison, Alvin, 234 Harrison, Calvin, 234 Health, Education, and Welfare, Department of, 249 Health Insurance Portability and Accountability Act (HIPAA), 204 Health Policy Advisory Committee (HPAC), 239–240 Heisman Trophy, 31 Helton, Mike, 27 Henry, John, 10 High school sports, 55–56 and disability issues, 256 and Title IX, 253–254 Hill, Grant, 84, 171 HIPAA (Health Insurance Portability and Accountability Act), 204 Holmes, Oliver Wendell, 115 Home territories, 7, 186 Honors incentives, 133 Hooks, Benjamin, 246 Hope, Bob, 10 Host cities (Olympic Games), 64, 65–67 Houston Astros, 194

SUBJECT INDEX

HPAC (Health Policy Advisory Committee), 239–240 Huizenga, Robert, 215 Hulbert, William, 113 Human growth hormone (HGH), 238, 239 Hunter, Jim “Catfish, ” 118

I IAAF (International Association of Athletics Federations), xxv, 73–75, 234 IFs, see International Federations Image, public, 101–103 Images, licensed, 91 IMG (agency), 162 Immunity laws, 213 Impasses (in collective bargaining), 109, 120 Incentives in contracts, 133–134, 163, 174 Independent contractors, athletes as, 86–87 Indiana Pacers, 6, 220 Indianapolis Colts, 263 Individual sports, 23–26, 86 Ingress and egress to facilities, 219 Injunctions, 90, 98 Injuries, 203–205, see also liability; risk management in high school sports, 56 and medical malpractice, 213–215 and NFL collective bargaining agreement, 127 of spectators, 203, 206 Insurance, 99–100 Intellectual property, 261–262 and expanding scope of sports industry, xxiii management by agencies, 161 and Olympic Games, 64 types of

317

copyright, 265, 293 right of publicity, 265–266, 298 trademarks, 262–265, 300 Intentional torts, 207–208, 212, 295 Internal Revenue Service (IRS), xxviii–xxix International Association of Athletics Federations (IAAF), xxv, 73–75, 234 International athletic organizations, 61–63 International federations (IFs), 62, 72, 295 Fédération Internationale de Natation Amateur (FINA), 77–78 International Association of Athletics Federations, 73–74 International Skating Union, 75–76 International Olympic Committee (IOC), 295 and broadcasting rights, xxvii dispute resolution, 68 drug policies, 232, 241 licensing agreements, 273–274 scandals, 66–67 structure of, 62–65 trademark, 273 International Skating Union (ISU), xxv, xxvi, 63, 75–76, 295 Internet, 287–288 IOC, see International Olympic Committee Irsay, Robert, 185 ISU (International Skating Union), xxv, xxvi, 63, 75–76, 295 Iverson, Alan, 5, 101, 103, 247 Iverson, 5, 247

J Jackson, Jesse, 255 Jackson, “Shoeless Joe, ” 8

318

SUBJECT INDEX

Jackson, Stephen, 6 James, LeBron, 84, 100, 152, 166 Jerry Maguire, 159 Jeter, Derek, 84 Johnson, Ben, 229 Johnson, Byron Bancroft “Ban, ” 8, 114 Johnson, Erwin “Magic, ” 5, 136 Johnson, Robert Wood (Woody), 111 Johnson, William “Hootie, ” 244 Jones, Jerry, 269 Jordan, Michael agency representing, 162 conflict with USOC apparel sponsor, 274 endorsem*nt contracts of, 103 and NBA collective bargaing agreement, 137 protected property right of name, 265 and superstar era of NBA, 5, 136 withdrawal from NBA group licensing agreement, 269 Joseph, David, 160

K Kansas City Athletics, 180 Kansas City Royal Baseball Corp. v. MLBPA, 119 Kansas City Royals, 220 Kantarian, Arlen, 28 Keenan, Mike, 97–99 Kerrigan, Nancy, 71, 77, 217 Knight, Bob, 96–97 Knock-offs, 264 Koufax, Sandy, 120 Kournikova, Anna, 102 Krueger, Charles, 215 Krueger v. San Francisco Forty-Niners, 1987, 215 Kuhn, Bowie, 117

L Labor laws, 108–110

and league system, 15 Ladies Professional Golf Association (LPGA), 30, 284–285, 295 LaGougne, Marie Reine, 76 Landis, Kenesaw Mountain, 8, 246 Larry Bird Exception, 139, 141, 142, 295 Lawrence Eagle-Tribune, 112 Lawsuits, see risk management League-player contracts, 87–91 Leagues, see sports leagues League-wide licensing, 268–269 League year (defined), 129 Lease agreements, 190–193 and facility attempts to stop relocation, 184–185 and revenue sharing, 182 Lease revenue bonds, 189 Lester, Pamela, 101 Leverage (in negotiations), 92–94 and 1998 NBA lockout, 138–139 and unions, 109, 110 Liability, 205–206 defenses to negligence claims, 209–211 and medical malpractice, 213–215 and participation agreements, 211–212 product liability, 212–213 of states and municipalities, 213 types of, 206–209 Libel, 221–222 Licensed images, 91 Licensing agreements, 266–268, see also intellectual property centralized nature of, xxvi–xxvii defined, 295 and NCAA, 274–275 and Olympics, 273–274 Likely to be earned (LTBE) incentives, 133–134 Limbaugh, Rush, 247 Limited partners, 10

SUBJECT INDEX

Lincoln Financial Field, 196 Lindros, Carl, 170 Lindros, Eric, 170, 222 Liquidated damages, 184–185, 295 Lockouts, 109–110, 295–296 in NBA, 110, 137, 138–139 in NHL, 146 Lombardi, Vince, 164 Los Angeles Angels, 7, 124 Los Angeles Clippers, 193 Los Angeles Dodgers home territory of, 7 media ownership of, 286 move from Brooklyn, xxix, 178 Los Angeles Forum, 193–194 Los Angeles Lakers, 2, 181 Los Angeles Memorial Coliseum Commission v. National Football League, 1984, 184 Los Angeles Rams early television broadcasts, 281, 282 move to St. Louis, 182 part-ownership by Bob Hope, 10 Lowe, Derek, 168 Loyalty clauses, 89, 296 LPGA (Ladies Professional Golf Association), 30, 284–285, 295 LTBE (likely to be earned) incentives, 133–134 Luxury seating, 181, 187, 197–198 Luxury tax and collective bargaining, 111 defined, 296 and Major League Baseball, 113, 121, 122, 130 and NBA, 11, 137, 138, 141, 144

M Mack, Connie, 10 Mackey v. NFL, 1976, 124 Maddux, Greg, 168 Madison Square Garden, 218

319

Madrid Protocol, 264 Major Indoor Lacrosse League (MILL), 15 Major League Baseball (MLB), 296 agents in, 159 age restrictions in, 151–152 antitrust law exemption, xxv, 3, 184 audience demographics, 279 broadcasting rights, xxvii, 12, 281–282 radio, 280 satellite and wireless, 287 television, 284 collective bargaining agreements, 113–124 creation of, 2–3 drug testing policy, 238–240 franchise relocations in, 181 labor disputes in, 109 licensing agreements, 262 merchandising, 271–272 trademark, 267–268 minorities in, 246–248 revenue distribution in, 183 salary and benefits in, 84, 87, 99, 113 structure of, 6–7 uniform player’s contract, 88 Major League Baseball Players’ Association (MLBPA), 112, 296 and agents, 167, 175 drug testing policy, 238 history, 116–121 Major League Baseball Properties (MLBP), 268, 271–272, 296 Major League Soccer (MLS), 15–16, 18, 150, 296 Maki, Wayne, 224 Malpractice, medical, 213–215 Manning, Peyton, 84 Manufacturing industry, xxii Maras family, 10 Marijuana, 142, 236, 237, 238

320

SUBJECT INDEX

Marketing assessments, 101–103 Martin, Casey, 257–258 Mascots, 196 Masking agents, 230, 232, 236, 296 Master P, 94 Matsui, Hideki, 162 McCormack, Mark, 162 McEnroe, John, 103 McGrady, Tracy, 162 McGwire, Mark, 240 McNabb, Donovan, 247 McNally, Dave, 118 McNeil v. NFL, 1991, 125 McSorley, Marty, 224 Media ownership of teams, 285–286 Medical issues emergencies at events, 219–220 malpractice, 213–215 physical condition clauses, 89–90 Mega-agencies, 161–162 Memphis Grizzlies, 178 Merchandising revenues and league structure, 12 Messersmith, Andy, 118 Mid-level salary exception, 143–144 Milkovich v. Lorain Journal, 1990, 222 MILL, see Major Indoor Lacrosse League Miller, Marvin, 117, 120 Miller, Reggie, 162 Millwood, Kevin, 168 Milwaukee Braves, 178, 181 Milwaukee Brewers, 181 Minneapolis Community Development Agency, 185 Minneapolis Lakers, 181 Minnesota Timberwolves, 138, 143, 185 Minnesota Twins, 10, 191, 285 Minorities as players, 247–248 as spectators, 279–280 Minor league baseball, 183

Minute Maid Park, 194 Misconduct, 88–89 NBA sanctions for, 141–142 MLB, see Major League Baseball MLBPA, see Major League Baseball Players’ Association MLBP (Major League Baseball Properties), 268, 271–272 MLS (Major League Soccer), 15–16, 18, 150, 296, see Major League Soccer Modafinil, 234, 242 Montreal Canadiens, 11–12 Moore, Steve, 224 Morals clauses, 97, 101, 104 Morris, Jack, 119 “Most valuable player” awards, 87 Municipal funding of sports facilities, xvii–xviii

N Naming rights, 190, 193–193, 296 Nandrolone, 234 Narcotics, 232 NASCAR, see National Association for Stock Car Racing Nassau Veterans’ Memorial Coliseum, 193 National Association for Stock Car Racing (NASCAR), 23, 24, 26–28 licensing agreements, 262, 272–273 National Basketball Association (NBA), 296 agents in, 159 audience demographics, 279 Board of Governors, 150 broadcasting rights, xxvii radio, 280 satellite and wireless, 287 television, 284 collective bargaining agreements, 135–145, 237, 238

SUBJECT INDEX

drug testing policy, 236–238 Fan Code of Conduct, 220 franchise relocations, 180–181 minorities in, 248 player draft, 152 revenues gate receipts, 12 licensing agreements, 262 merchandising agreements, 268 salaries and benefits, 84, 87, 93 structure of, 5–6 Uniform Player Contract, 88–91 National Basketball League (NBL), 135 National Basketball Players’ Association (NBPA), 112, 296 agent certification by, 175 collective bargaining history, 135–139 drug testing policy, 236–237 merchandising contracts, 270 National Center for Drug Free Sport, 231 National Collegiate Athletic Association (NCAA), xxv–xxvi, 32, 297 broadcasting rights in, xxvii, 282, 286 championships, 53 coaches, 47–48, 95, 96, 97 controversies, 32, 48 licensing agreements, 274–275 and recruitment, 42–43 agents, 41–42, 167, 171–172 structure divisions, 36–37 enforcement, 37–39 governance system, 33–36 student policies academic requirements, 43–45 amateurism, 39–41 drug testing, 231–232 financial aid, 46–47 transfer students, 45–46

321

National Football League (NFL), 297 age restrictions, 151 agents in, 159 audience demographics, 279 broadcasting radio, 280 revenues, 12 rights, xxvii satellite and wireless, 287 television, 282, 283–284 current CBA, 125–135 drug policies, 235–236 franchise relocation in, 179–181 injury disclosure, 204 labor disputes in, 109 revenues, 12 licensing agreements, 262 merchandising agreements, 268 revenue sharing, 183 salaries and benefits, 84, 87–88, 113, 128, 129–135 signing bonuses, 93 structure of, 4–5 National Football League Players’ Association (NFLPA), xxii, 94, 112, 297 agent certification by, 173–174 drug policies, 235–236 history, 124–125 merchandising agreements, 271 rules concerning financial advisors, 164 National Football League Team Physicians Society, 215 National governing bodies (NGBs), 63, 73–78, 297 and Amateur Sports Act, 71 swimming organizations, 78 USA Track & Field, 74–75 U.S Figure Skating, 76–77 National Hockey League (NHL), 297 agents, 159 age restrictions, 152

322

SUBJECT INDEX

audience demographics, 279 broadcasting rights, xxvii collective bargaining agreement, 145–149 drug testing policy, 240 expansion of, 180 history, 145 minorities in, 247 revenues gate receipts, 12 and licensing agreements, 262 2004 profitability study, 112 structure of, 6 National Hockey League Players’ Association (NHLPA), 6, 112, 145 agent certification by, 174–175 defined, 297 National Labor Relations Act (NLRA), 297 history, 112 and 1994 MLB strike, 120–121 provisions, 108–109 National League, 7, 8, 179, 296 early salary restriction in, 113–114 franchise relocation in, 181 and gate receipts, 12 National Olympic committees (NOCs), 62–63, 68 defined, 297 and licensing agreements, 273–274 National Wrestling Coaches Association, 254 Nationwide Tour, 29 Nat’l Wrestling Coaches Ass’n v. U. S. Dept. of Education, 2004, 254 NBA, see National Basketball Association NBA Properties, Inc. (NBAP), 268–270, 296 NBA v. Williams, 1995, 137 NBC, xxvii, 284 NBL (National Basketball League), 135

NBPA, see National Basketball Players’ Association NCAA, see National Collegiate Athletic Association NCAA v. Tarkanian, 1988, 39 Negligence, 208–211, 293, 297 Negro Leagues, 246 Network Associates Coliseum, 197 New England Patriots, xxviii New Orleans Hornets, 178 New Orleans Saints, 93–94, 163 New York Giants, 10, 180, 191, 193 New York Islanders, 186 New York Jets, 191, 193 New York Knicks, 10, 286 New York Rangers, 286 coach’s contract, 97–99 and draft system, 11 high revenue stream of, 14 ownership of, 10 New York Times, 151, 244 New York Times v. Sullivan, 1964, 221 New York Yankees, 285 broadcasting revenues, xxvii and luxury tax, 113 ownership of, 10 playing in Shea Stadium, 193 Nextel series, 24 NFL, see National Football League NFL Network, 284 NFLPA, see National Football League Players’ Association NFL Properties (NFLP), 268, 270–271, 297 NGBs, see national governing bodies NHL, see National Hockey League NHL Enterprises, 268 NHLPA, see National Hockey League Players’ Association Nick Bollettiere Tennis Academy, 162 Nixon, Richard, 249 NLRA, see National Labor Relations Act

SUBJECT INDEX

No-cause drug tests, 142 No-compensation requirement, 39–41 NOCs, see national Olympic committees Noll, Roger, 128 Non-Bird exception, 143 Nonresident taxes, 152 Nonstatutory labor exemption, 125, 298 Norbolethone, 241 Not-for-profit organizations, major leagues as, 3–4 No-trade clauses, 90

O Oakland Athletics, 124, 178 Oakland Coliseum, 197 Oakland Raiders, 184, 215 OCR (Office of Civil Rights), 249, 250 Octagon, 162 Offensive statements, 101, 104 Off-field activities, 96 Office of Civil Rights (OCR), 249, 250 Olympic Games, see International Olympic Committee host cities, 64, 65–67 O’Neal, Jermaine, 6 O’Neal, Shaquille, 84 Orange Bowl, 54, 55 Ordoñez, Magglio, 168 Orlando Magic, 192 Orlando Miracle, 19 Oscar Robertson litigation, 136 “Other athletic activities” clauses, 91 Owens, Terell, 167 Owens, Terrell, 160

P PAC-10 Conference, 52 Palace of the Fans, 193 Panama, 151

323

PanAmerican games, 73 Paralympic games, 73 Parente, Benny “Kid, ” 225 Parity, payroll and Marvin Miller, 119 and present MLB collective bargaining agreement, 121 and single-entity model, 16, 17 Parking revenues, 181, 187, 199 Participation agreements, 211–212, 224 Payoffs by agents to players, 160 Pedersen v. LSU, 1996, 251–252 Pelletier, David, 75–76 Pension plans, 128, 129 People v. Kobe Bryant, 223 Peptide hormones, 232 Performance based pool, 128 Performance-enhancing drugs, 229–230, 241–242 NBA testing policy, 236–238 NFL testing policy, 235–236 Permanent seating licenses, 298 Persona, 265–266 Personal injury, see injuries Personal seat licenses (PSLs), 190, 196–198 PGA, see Professional Golfers’ Association PGA Tour, 23, 24, 298 PGA Tour, Inc. v. Casey Martin, 2001, 257–258 Philadelphia Eagles, 196, 282 Philadelphia 76ers, 180 Philadelphia Flyers, 170, 215, 222 Philadelphia Phillies and Flood v. Kuhn, 1972, 116 ownership of, 10 Philadelphia Soul, 10 Philadelphia Warriors, 181 Philadephia Athletics, 180 Phoenix Coyotes, 180 Physical condition clauses, 89–90 Pickens, Carl, 89

324

SUBJECT INDEX

Pippen, Scottie, 161 Pittsburgh Pirates, xxvii Pittsburgh Steelers, 197 PLAYERS, INC., 271, 298 Players Association, 4 Players’ associations, see individual palyers’ associationsPlaying-time incentives, 133 Political statements by athletes, 89, 104 Portland Trailblazers, 215, 285 Pouring rights, 187, 196 Powell v. NFL, 1989, 125 Practice dates, NCAA policy on, 47 Prescription drugs, 235, 239 Presenting sponsors, 23 Press credentials, 218 Price, Mike, 96 Primary sponsors, 23 Privacy issues, 230–231, 232–233, 241 Private lives of athletes, xxii Product liability, 212–213 Professional coaches’ contracts, 97–99 Professional Golfers’ Association (PGA), 29–30, 285 PGA Tour, 23, 24, 298 Profitability, owners’ claims concerning, 112, 116 Program expansion (Title IX), 251–252 Prohibited substance clauses, 90 Proportionality (Title IX), 250, 251, 254 PSLs (personal seat licenses), 196–198 Public address system, 219 Public funding for facilities, 187–190 Puerto Rico, 151 Pyrotechnics, 219

Q Quasi-public nature of sports teams, xxix–xxx Quebec Nordiques, 180

R R. F. K. Stadium, 218 Racial discrimination, 246–248 Radio broadcasting, 280, see also talk radio talk radio, 222, 247 Raines, Tim, 119 Random drug testing, 230 in NBA, 144, 238 in NHL, 148 by United States Anti-Doping Agency), 231–232 Rankings, 25–26 Real estate industry, xxii Reassignment of collegiate coaches, 95–96 Recklessness, 208, 298 Recreational athletes, 204 Regina v. Green, 1970, 224 Regina v. Maki, 1970, 224 Regina v. McSorley, 2000, 224 Rehabilition Act of 1973, 256 Release forms, 211–212, 224 Relocation, see franchise relocation Renegotiation of contracts, 132–133 Replacement workers, 109–111 Reserve clause, 114–119 defined, 298 and limited scope for agents, 165 in NFL, 124 Retirement of players, 135 Revenue bonds, 189 Revenue sharing, 12, 121–122 Revenue streams historical changes in, 115, 116 modern sources of, 111 vs. financial resources, 13–14 vs. profits, xxii Reverse discrimination, 245, 254, 255 Reynolds, Butch, 75 Rice, Jerry, 162 Rich Stadium, 193

SUBJECT INDEX

Right of publicity, 265–266, 298 Rights fees, 298 Ringo, Jim, 164 Risk, assumption of, 204, 210–212, 292 Risk management, 204, 216–221 and alcohol sales, 220–221 common issues in, 217–220 and defamation, 221–222 Robbie, Joe, 198 Robertson v. NBA, 1970, 136 Robinson, Jackie, 246 Rocker, John, 247 Rodriguez, Alex, 84, 168, 169 Rodriguez v. Riddell Sports, 1999, 213 Rogge, Jacques, 64 Rollback of salaries, 148 Roosevelt, Theodore, 33 Royalties, 105, 268 Rozelle, Pete, 282 Rozelle rule, 124–125, 298 Runyan, John, 196 Rush, Rich, 266 Ruth, Babe, 164, 265 Ryder Cup, 29

S Salaries for collegiate coaches, 96 football vs. other sports, 128 in league-player contracts, 87–88 reductions, 89–90 summary table, 153 variations, 111 Salary caps, 299 and agents, 160, 168 and 1994 MLB strike, 120–121 in NBA, 136, 139, 140, 142–144 in NFL, 113, 129–135 in NHL, 145–147 and professional coaches’ contracts, 97 summary table, 153

325

Salary control, xxviii and collective bargaining, 111 and cooperative nature of sports leagues, 11 as goal of management, 113 in Major League Baseball, 121 in Major League Soccer, 18 in NBA, 14, 139–140 in NFL, 129–135 and single-entity model, xxv, 16 Salé, Jamie, 75–76 Salt Lake City, Olympic Games at, 66–67, 72, 75–76 Samaranch, Juan Antonio, 67 San Francisco Arts & Athletics, Inc. v. USOC, 1987, 273 San Francisco Forty-Niners, 181 San Francisco Giants, 180 San Francisco Warriors, 181 Satellites, 287 SBC Park, 187 Scheduling and individual sports, 25 Schilling, Curt, 169–170 Schott, Marge, 246–247 Seating, stadium, 181–182 Seat licenses, 196–198 Seattle Mariners, 190–191 Seattle Pilots, 181 Secondary sponsors, 23 SEC (Southeastern Conference), 52–53 Securities and stadium financing, 189 Security at Olympic Games, 64–65 personnel considerations, 217–218 Seitz, Peter, 118–119 Seles, Monica, 217 Self-representation, 169–170 Selig, Bud, 7, 9, 120, 169, 247 Senior PGA Championship, 29 Service clauses, 88 SFX (agency), 162 Shapiro, Ron, 161 Sharapova, Maria, 102

326

SUBJECT INDEX

Sheffield, Gary, 169 Shell, Art, 246 Sherman Anti-Trust Act, 14–15, 115, 293, 298 Signage, 195, 199 Signature products, 105 Signing bonuses, 131 and contract negotiations, 93 and loyalty clause violations, 89 Sikhularidze, Anton, 75–76 Simpson, O. J., 101, 222 Sims, Billy, 164 Single-entity leagues, xxv, 3, 15–17 Sirius Satellite Radio, 280, 287 Slander, 221–222 Slaney, Mary, 75 Smith, Joe, 143 Snider, Ed, 222 Snow removal, 219 Snyder, Daniel, 111, 134 Soft cap systems, 129 Southeastern Conference (SEC), 52–53 Sovereign immunity, 213 Spano, John, 186 SPARTA (Sports Agent and Responsibility Trust Act), 171–172, 298 Special tax bonds, 189 Speech, freedom of, 89, 247, 266 Sponsorships and Olympic Games, 66 of tournaments, 23 and United States Olympic Committee, 71–72 Sports Agent and Responsibility Trust Act (SPARTA), 171–172, 298 Sports Broadcasting Act, 282, 298 SportsBusiness Daily, xxi Sports Illustrated, 247 Sports leagues commissioners, 7–10 cooperation vs. competition, 11–13 drawbacks of league system, 13–15 hybrid nature of, 2–3

owners, 10 private nature of, 1–2 single-entity model, 15–20 structure of individual leagues, 4–7 Sports medicine, 214–215 Sprewell, Latrell, 225 St. Bonaventure University, 33–34 St. Louis Cardinals, 182 St. Louis Globe-Democrat, 114–115 Stadiums, see facilities Stall Tactics, 199 Standard player agent contract, 299 Stanozol, 229 Staples Center, 193 Statistical performance incentives, 133 Steinberg, Leigh, 92, 93, 162 Steinbrenner, George, 9, 10 Stern, David, 5–6, 9, 247 Steroid precursors, 230 Steroids, 142, 229–230, 232, 292 Major League Baseball testing policy on, 123 NBA testing policy, 239 NFL testing policy on, 235–236 undetectable, 240–241 Stimulants, 232 Stock ownership, 20 Strict liability, 221 Strikes, 108–110, 120–121 Student athletes, see also athletic conferences; high school sports; National Collegiate Athletic Association and agents, 171–173, 172–173 defined, 299 injuries to, 204 and NFLPA, 173 solicitation of, 165–166 Substance abuse treatment programs, 142 Sugar Bowl, 54, 55 Supervisory personnel, 206, 209 Survey testing, 239

SUBJECT INDEX

Suspensions for conduct clause violations, 88 in NBA, 141–142, 144 for on-field violence, 224–225 for poor physical condition, 89–90

T Taft-Hartley amendments, 109 Tagliabue, Paul, 4, 5, 9, 200 Talk radio, 222, 247 Target Center, 185 Taxes, xxviii–xxix and collegiate athletes, 41 and financial planning, 165 and stadium financing, 190 state, 152 Tax-exempt securities, 189 Taylor, Brien, 169 TD Banknorth Garden, 198 Team elimination, 123 Team-operated networks, 285 Team relocation, see franchise relocation Ted Stevens Olympic and Amateur Sports Act, 69–70, 71, 73, 74, 77, 273, 299 Television broadcasting history, 280–282 local television, 285 types of deals, 282–285 Telfair, Sebastian, 152 Tellem, Arn, 162 Tennis, see U. S. Tennis Association (USTA) Termination, 91, see also guaranteed contracts of collegiate coaches’ contracts, 96–97 of endorsem*nt contracts, 103–104 of lease agreements, 191 power of, 113 Terrorism, 217, 218

327

Testosterone, 241 Tetrahydrogestrinone (THG), 230, 240–241 Texas Rangers, 84, 181, 220 Therapeutic use exemptions, 231–232, 235 THG (tetrahydrogestrinone), 230, 240–241 Thorpe, Jim, 67 Title IX, 57, 245, 248–255 criticisms of, 254–255 defined, 300 TNT, 284 Tomjanovich, Rudy, 225 Torts, 300, see also liability Tournaments, 23–24, 162 Toyota Center, 195 Trademarks, 262–265, 273, 300 Trading of players and league-player contracts, 90 in NFL, 135 Transfer students, 45–46 Transition players, 127 Trenbolone, 241 Turner, Ted, 264 Twist, Tony, 266

U U. S. Open, 28–29 Ueberroth, Peter, 119 Under-the-table agreements, 143 Unfair competition, 264 Unfair labor practices, 109 Unions, xxii, 83, 86–87, 108–112, see also collective bargaining agreements and individual sports, 24 and league-player contracts, 90 players associations (see individual players’ associations) and single-entity model, 16 Unique skills clauses, 90, 98

328

SUBJECT INDEX

United Center, 194 United States Anti-Doping Agency (USADA), 232–234 and BALCO investigation, 240–241 defined, 300 disclosure rules, 236 United States Figure Skating (USFS), 63, 76–77, 300 and International Skating Union, xxv, xxvi United States Football League (USFL), 164, 300 United States Olympic Committee (USOC), 63, 69–72 defined, 300–301 and drug testing, 232 and national governing bodies, 73 and Olympic trademarks, 273–274 and USA Track & Field, 75 United States Speed Skating Association, 63, 76, 301 United States Tennis Association (USTA), 24, 28–29 United Steelworkers Union, 117 U.S. v. National Football League, 1953, 282 U.S. v. Walters, 1993, 161 U.S. Speedskating, 77 USADA, see United States Anti-Doping Agency USA Track and Field (USATF), 74–75, 232, 233–234 USFL (United States Football League), 164, 300 USFS, see United States Figure Skating USOC, see United States Olympic Committee USTA (United States Tennis Association), 24, 28–29

V Vancouver Canucks, 207

Vancouver Grizzlies, 178 Varitek, Jason, 168 Veeck, Bill, xxix, 184 Venezuela, 151 Venturi, Ken, 258 Vicarious liability, 206, 301 Vincent, Fay, 7, 9

W WADA, see World Anti-Doping Agency Waivers, 211–212, 224 Walters, Norby, 161 Walters v. Fullwood, 1987, 161 Walton, Bill, 215 Warnings and product liability, 212–213 Washington, Kermit, 225 Washington Post, 187 Washington Redskins, xxix, 134, 198 Washington Senators, 10 WHA (World Hockey Association), 165, 301 White, Kelli, 241 Williams, Bernie, 168 Williams, Ricky, 93–94, 163 Williams, Serena, 102, 265 Williams, Venus, 102, 265 Wimbledon, 29 Winfield, Dave, 9 Winnipeg Jets, 180 Winston Cup, 24 WIP-AM, 222 Wireless technology, 287 WLAF (World League of American Football), 15 Women’s National Basketball Association (WNBA), 15, 18–20, 149–150, 301 Women’s United Soccer Association (WUSA), 15 Woods, Tiger, 29, 84, 100, 101, 265, 266 Workers’ Compensation, 41, 214

SUBJECT INDEX

World Anti-Doping Agency (WADA), 234–235, 301 creation of, 67 disclosure rules, 236 penalties, 239 and USADA, 233 World Hockey Association (WHA), 165, 301 World League of American Football (WLAF), 15 Worldwide amateur draft, 123 WTA (Women’s Tennis Association) Tour, 28–29 WUSA (Women’s United Soccer Association), 15

X XM Satellite Radio, 280, 287

Y Yankee Stadium, 193 YES network, 285 Yocca v. Pittsburgh Steelers Sports, 2002, 197 Young, Jerome, 74, 234 Youth sports, 207, 211 and Title IX, 253–254

Z Zerlentes, Becky, 225 Zoeller, “Fuzzy, ” 101 Zygmunt, Jay, 135

329

The Business of Sports: A Primer for Journalists (Lea's Communication Series) - PDF Free Download (2024)

References