Sports Team Owners Are Running Game On Players

No matter which sports team wins, the real winners are the owners…

In one of the most memorable scenes from High Flying Bird, a stellar critique of the sports industry released last February, a wizened basketball coach gives an NBA agent the low-down on how businessmen became the most powerful people in professional sports. “They invented a game on top of a game,” he says of the men who run the league. The players may dominate on the court, but the only ones guaranteed to win are the ones who make the rules.

In nearly every case, the owners of professional sports teams are either titans of industry or their children. These are the type of people who lose track of how many times they’ve read The Fountainhead, who grouse about “inmates running the prison” when their employees speak out, and who pal around with Donald Trump in between visits to underpaid prostitutes. They represent the epitome of free-market capitalists. Behind the closed doors of the owners’ boxes, however, these same men (and a handful of women) are happy to redistribute resources, impose luxury taxes, and generally spread the wealth—so long as it’s their fellow owners who benefit.

Case in point: Starting April 24, representatives from the National Football League and its 32 teams will gather in Nashville to assign each incoming player to a team. The NFL Draft, like all professional sports drafts, was designed by owners to ensure that 1) talent gets distributed fairly, to each team according to its need, and 2) new workers have no opportunity to bargain for the highest price for their labor.

If you’re not familiar with football, the NFL Draft is an overstuffed event where professional football teams take turns selecting one player at a time from a pool of recent college graduates. Despite creating massive amounts of wealth for schools, coaches, broadcasters, and licensees, college athletes are strictly prohibited from receiving compensation of any kind during their college years. Imagine you’ve honed your skills since you were a kid, ignored other opportunities in order to focus on sports, and spent eight years in high school and college risking serious injury for zero compensation. When it’s time to go pro, you’d probably want to drive a hard bargain and get the highest possible salary for your labor, especially considering that the average career of a professional football player is only 3.3 years. Too bad—thanks to the NFL draft, young athletes only get to bargain with one team.

The first NFL Draft was held in 1936, the brainchild of owner Bert Bell and an immediate reaction to his team, the Philadelphia Eagles, losing out on the season’s hottest college prospect because another team offered more money. Bell cried foul, making what was basically a socialist argument on behalf of less-wealthy teams: “The league is no stronger than its weakest link… Every year, the rich get richer and the poor get poorer.”

Within six months, the owners had agreed to impose a massive regulatory framework on the league’s labor market. This pattern—player signs lucrative contract, owners immediately conspire to drive down wages—is a defining feature of labor relations in professional sports.

It happened again in Major League Baseball in 1964. After the Los Angeles Angels agreed to pay outfielder Rick Reichardt a record-smashing $205,000 signing bonus, the rest of the owners decided things were getting out of hand. The following June, the MLB held its first draft, and the scheme worked: The first overall pick received a bonus of just $100,000. It would be a full 15 years (of dramatic inflation) before a rookie signed for a bonus as high as Reichardt’s.

Drafts are by far the most common way for a rookie to enter America’s top professional leagues. It’s still possible for an undrafted rookie to sign as a free agent, but such players are viewed as bargains by teams and can usually expect to make the league’s minimum wage if they do get a contract. Not only do these massive redistributive mechanisms operate in plain sight, they have become major television events. Viewership figures for the broadcast of the NBA Draft hover above 3 million, while the NFL has turned its draft into a three-day spectacle that last year averaged 5.5 million viewers. It’s amusing, if terrifying, to imagine this happening in any other industry: I picture my friend, who graduated summa cum laude from a top engineering program, smiling nervously with cameras shoved in her face while she waits to learn whether GM or Ford will claim the exclusive right to bargain with her for her labor.

Oh, and just for the record: As a rule, the teams that did the worst in the previous season will get the best draft picks. Most of the time, the team with the worst record simply gets the first overall pick in the next draft. In the NBA, it’s widely acknowledged that teams have a huge incentive, and sometimes a concrete plan, to perform as poorly as possible once they’ve been eliminated from playoff contention. To curb this behavior, the league uses a “weighted lottery” system, with random drawings deciding who gets the first pick, but the worst-performing teams still have the best odds of winning. The three worst teams of 2018-2019—the New York Knicks, the Cleveland Cavaliers, and the Phoenix Suns—have the best shot at drafting Duke’s Zion Williamson, the consensus number one pick. Williamson himself, of course, will have virtually no say in the matter.

Pro athletes—or, rather, pro athletes who stay healthy and have successful careers—make enough money that a reasonable person could argue it’s worth forfeiting the right to bargain with multiple teams as a rookie. Regardless, no other industry comes close to professional sports in terms of depriving workers of their right to consider multiple employers, and team owners have been the driving force behind all such restrictions. There’s no better example than the players’ fight for free agency.

The term “free agent” simply means a player who has no contractual ties with a team. In most lines of work, this situation is common enough that it doesn’t need a name—you could say that my engineer friend was a free agent between the time she graduated from college and the moment she signed her contract with Ford. If she quits that job, she’ll instantly become a free agent again, able to negotiate and sign with whatever company she pleases. As a freelance writer, I’m in a constant state of free agency (but any editors reading this should know that my DMs are open).

In the early days of pro sports, before drafts existed, rookies began their careers as free agents. After signing that first contract, however, they often never had such choices again. Beginning in the 1880s, every MLB contract featured a “reserve clause,” which stipulated that teams still held exclusive rights to a player even after his contract with the club expired. Unless the club released him or traded him voluntarily, the only recourse for a player who wanted to switch teams was to hold out and demand a trade. If the two parties could not agree on a new contract, the team could unilaterally renew the old one, forcing the player to choose between his old contract and being shut out of the league entirely.

Baseball invented the reserve clause, but it soon became ubiquitous. Players’ unions only began to make inroads towards free agency in the ’60s and ’70s, and even then it was slow going. Every ruling in favor of players was followed by new proclamations from management, leading to a confusing patchwork of different types of free agency, a constellation of asterisks, and a variety of creative ways for owners to exercise control over players even after they became “free agents.”

MLB players began to organize in the late ’60s, leading to a 1975 arbitration hearing in which two players, Andy Messersmith and Dave McNally, won the right to break free of their expired contracts. The league immediately fired the arbitrator, Peter Seitz, but the “Seitz Decision” stood, and Messersmith soon became the first free agent in modern history. NBA players broke the shackles of the reserve clause in the mid-’70s, winning the right to limited free agency in exchange for dropping their lawsuit against the league’s merger with the American Basketball Association. So restrictive was the new state of affairs, however, that it took until 1988 for the first truly unrestricted free agent, power forward Tom Chambers, to start a bidding war for his services.

In the NFL, the reserve clause took the form of the “option rule,” which allowed teams to unilaterally renew contracts for a single season, starting in 1947. It was not until 1962, however, that a player actually tested the rule and went into free agency. Even then, the league mandated that a player’s new team compensate his old team, another practice which would be ridiculous in any other business. If these rules applied in the television industry, for example, Viceland would have been entitled to compensation from Showtime after Desus & Mero switched networks, even though the duo became completely free of any contractual obligation to Viceland after 2018. Having to pay Viceland in addition to their newly-signed employees would have made the deal that much less attractive to Showtime, negatively impacting the comedians’ bargaining power.

In 1993, when the White v. NFL decision freed (nearly) all players (above a certain experience level) from the option rule, the league’s lawyer warned that the expansion of free agency “would be the destruction of the National Football League as we know it today.” His fears appear to have been unfounded. Young players in the NFL and all other major leagues are still subjected to strict rules until they’ve played a certain number of seasons, so players in every sport continue to spend their early careers at the mercy of the teams that drafted them (and again, the average football career lasts 3.3 years). Before becoming free agents, most players enter “restricted free agency,” during which they can entertain offers from new teams but must re-sign with their current team if it decides to match the best external offer.

NFL owners have even figured out a way to restrict “unrestricted” free agents: the franchise tag. Basically, every team can “tag” one player per season, forcing him to remain with them even if he was set to become an unrestricted free agent. His salary for that season is set at the average of other top players at his position, ensuring a decent wage but explicitly preventing him from testing his worth on the open market and from driving up salaries league-wide. As Sports Illustrated’s Gary Gramling has pointed out, there is an obvious contradiction here. In a league with a hard salary cap—we’ll get to that in a minute—there’s a limit to how much teams are allowed to offer players. By applying the franchise tag, owners simultaneously claim that a player is too valuable to lose and not valuable enough to be paid the market price. Imagine wanting to leave your job and planning a move to a new town, only for your boss to inform you that you’re too important to be allowed to leave, but not important enough to be allowed to negotiate a new contract.

Though free agency is still only accessible to players once they’ve been in the league for a while, pro athletes have an easier time escaping from their teams than they used to. Dramatic and lucrative free agent signings have made for some of the biggest headlines in sports in recent years, especially in the NBA and MLB. Say what you will, but when Lebron James turned his 2010 free agency decision into a television special, it was a celebration of the worker freedom for which his sports predecessors had fought. Even as unions chipped away at the reserve clause, however, owners cultivated a new means of regulating the labor market. If you didn’t know better, you’d think the idea came from a socialist: It’s called “the luxury tax.”

Both the luxury tax and its cousin, the salary cap, sound like the kind of sensible market controls the Koch Brothers have dedicated their lives to eradicating. So, what latte-sipping brocialist introduced these concepts into the free market of American sports?

*checks notes*

Ah, yes—it was the owners themselves.

As the name indicates, the luxury tax (or, as the pinkos at MLB call it, a Competitive Balance Tax) is a tax levied by the league on teams whose payroll exceeds a certain amount. Similarly, a salary cap is a maximum amount a league will allow a team to spend on payroll. “Hard” caps cannot be exceeded under any circumstances, while breaking “soft” caps merely incurs a fine, which makes a “soft cap” more or less the same as a luxury tax. Whatever the terminology, these mechanisms set an upper limit on the total amount that a team can pay its players, something which sounds like a restriction on owners but, when you think about it, ultimately restricts players’ earnings to the benefit of the boss.

When the cap is soft, teams regularly break it. Since the introduction of the NBA’s soft cap in 1984, the Knicks have been hit with luxury taxes 10 times, while both the Dallas Mavericks and the Los Angeles Lakers have gone over the cap nine times. Growing up a fan of the Baltimore Orioles, I often griped about the tendency of their divisional rivals, the New York Yankees, to flaunt the MLB’s soft cap—the Yankees paid an average of $22.7 million a year in luxury taxes between 2003 and 2017. In my mind, those fines represented the club’s comeuppance for violating rules meant to keep the league competitive. In reality, they represented owners getting exactly what they’d asked for: a slap on the wrist (by their standards) in exchange for a set of rules that limit players’ salaries while letting owners do whatever they want.

After failing to work it into collective bargaining agreements in 1990 and 1994, MLB owners finally pushed through the Competitive Balance Tax (again, their quasi-socialist sounding luxury tax) in 1997. As Marc Normandin spelled out in a recent Deadspin article, luxury taxes and soft caps allow owners to have it both ways: If they want, they can ignore the payroll limit and simply pay the fine, but they can just as easily refuse to shell out for big-name players and blame the salary cap. Every time an owner decides against an expensive free-agent signing, the player in question has fewer options—so even when the cap is soft, it allows the owners to work together to drive down salaries.

This is not hypothetical. In 1990, an independent arbitrator found MLB owners collectively guilty of colluding against free agents by sharing information about offers and making “gentlemen’s agreements” regarding who would sign whom. The 2006 collective bargaining agreement included restitution for “claims of collusive activity” in 2002 and 2003. This offseason saw the two biggest free-agent signings in MLB history, but blockbuster deals obscure the fact that 2/3 of clubs are cutting their payroll, largely at the expense of free agents.

Despite the millions they’ve had to pay as punishment for prior collusion, MLB clubs appear determined to keep colluding. The Athletic recently reported that delegates from all 30 teams award a WWE-style championship belt to the club that does the most to keep players’ salaries down every season. (Again, try to imagine that happening in any other industry.) Officially, the belt is awarded to the arbitration department that has done the most to “achieve the goals set by the industry,” and that phrasing illustrates a basic fact that every sports-plutocrat understands: They’re all in this together.

It is in that spirit that every major American league engages in massive wealth redistribution. The NFL is the poster child, dividing its ungodly broadcasting and merchandising revenues evenly among every franchise. It’s practically communism, but how else could a team from Green Bay, Wisconsin, pop. 105,000, hope to stay competitive with teams from some of the largest media markets in the world?

The NBA, MLB, and NHL all share revenues on a sliding scale, essentially taxing the wealthiest teams and subsidizing the poorest. Their systems vary, but each league has a handful of teams with gigantic local media contracts—the Los Angeles Lakers and Angels have local TV deals worth around $4 billion and $3 billion, respectively—and a number of smaller-market teams that rely on those subsidies in order to turn a profit for their owners. Pro teams, after all, do not exist in a vacuum, and the entire league benefits from keeping the most vulnerable franchises financially healthy.

The urge to pool and redistribute resources to the benefit of those in need is admirable. It’s just a shame that owners are so willing to share with each other while refusing to acknowledge their players’ role in creating this wealth. For over a century, but with a newfound openness in recent years, owners have made it clear that they will never consider their players equal partners.

When the press got ahold of a trove of emails from Joe Ricketts, patriarch of the family that owns the Chicago Cubs and a seven-figure donor to Donald Trump’s presidential campaign, it became clear that most of his energy was dedicated to financing bigots and spreading anti-Muslim conspiracy theories. Nonetheless, he found time to call unions “corrosive” and say of public sector unions: “It is a crime and in a roundabout way makes me a slave.” Roundabout, indeed. According to Forbes, Ricketts’ net worth is $2.6 billion.

In 2016, when NFL owners convened to discuss how to respond to Colin Kaepernick and other players’ protests for racial justice, Houston Texans owner Bob McNair infamously told his assembled peers, “We can’t have the inmates running the prison.” After significant blowback, McNair apologized, then announced that he regretted apologizing. Another Lone Star blowhard, Dallas Cowboys owner Jerry Jones, has been one of the most fervently anti-Kaepernick men in the NFL, forbidding his players from participating in the protests. We don’t have time to get into Robert Kraft’s strange friendship with Donald Trump, or any of the other major sports business figures who spend millions supporting anti-labor candidates, but it’s fair to say that, as a class, sports team owners generally oppose luxury taxes, wealth-sharing, and any kind of restrictions on free markets—unless it happens within their league.

Perhaps no one has done more to expose “the game on top of the game” than Kaepernick, who became a free agent shortly after he began his iconic protest. In a free market, there’s no question he would have received an offer from one of the NFL’s 32 teams, at least for a backup quarterback position. But the market for his labor was never free. As always, the owners make the rules, and they stick together. They recently agreed to pay Kaepernick a relatively small settlement, tacitly acknowledging their continued dedication to ownership-class solidarity and to keeping workers in their place.

Owners made their power grabs early in the history of professional sports. Since then they have treated their workers like feudal subjects while enjoying what David Roth aptly called “an extremely luxurious bespoke mutation of socialism.” Though fans, the general public, and many players have accepted this preposterous situation without question for decades, it doesn’t have to be like this. Players owe the limited autonomy they now enjoy to the organizing efforts and determination of their predecessors, and the more they push their case, the more obvious it will become that the game on top of the game has been rigged from the start.

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