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Management – Player Relations: The History and Effects of Strikes and Lockouts

Management – Player Relations: The History and Effects of Strikes and Lockouts. Mike Scheller PED 4761 Sport Management and Adminstration 6/7/2006 Graduate Project. Strike vs. Lockout (Gifis, 1996).

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Management – Player Relations: The History and Effects of Strikes and Lockouts

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  1. Management – Player Relations:The History and Effects of Strikes and Lockouts Mike Scheller PED 4761 Sport Management and Adminstration 6/7/2006 Graduate Project

  2. Strike vs. Lockout(Gifis, 1996) • Strike – A strike is a concerted action or combined effort by a labor union designed to exert pressure on an employer to accede to certain demands. Today, the right to strike is usually governed by the National Labor Relations Act. The strike is the primary weapon to force owners to either adhere to the players demands, compromise, or prolong negotiations. In a strike for economic reasons, which is the basis for most strikes, the strikers may be replaced. Most strikes occur because of discrepancies between the union and league when dealing with, or renewing the collective bargaining agreement, or contract. • Lockout – A lockout is the employers counterpart of a strike. In a lockout, the employer prevents the players from working in an effort to gain a better bargaining position in labor negotiations. A lockout may occur upon the expiration of a collective bargaining agreement. The lockout gives the employer the tactical advantage because timing is made by the league, rather than the players’ union. Unemployment benefits may accrue to employees who are locked out as opposed to employees on strike.

  3. Disruptive Variables(Staudohar, 1999) • Most strikes and lockouts occur because of disagreements on the basis of one or several of the following issues. • Team Salary Caps • Individual Player Salary Caps • Free agency clauses • Team Tax Rates • Player benefit packages • Pension plans

  4. General History • Most strikes or lockouts are the result of communication breakdowns during negotiation of contracts • Each of the Big Four have suffered strikes or lockouts • Baseball has seen the most interruption • As the sports industry grows, the effects of strikes and lockouts becomes more detrimental.

  5. Big Four History(Schmidt, 2004)

  6. MLB History(Associated Press, 2006)

  7. NBA/NFL/NHL History(Schmidt, 2004; Blum, 2004)

  8. First MLB Stoppage(Wikipedia.com, 2006) • Reason – Players wanted the league to bargain on issues dealing with salary and pension, but the league refused to. The problem began during spring training of 1972. • Outcome – The players went on strike during spring training and into the season until the league finally gave in and paid $500,000 to the pension fund. Players saw the benefit of the strike, and use it each time the collective bargaining agreement expires in the future.

  9. Latest MLB Stoppage(Wikipedia.com, 2006) • Reasons – Worried about the survival of small market teams, the league recommended a salary cap due to falling revenues. The players association rejected the proposal and a strike ensued. • Result – The 1994 World Series was cancelled, the first time since 1904. After the league threatened the use of replacement players, the players voted to return to work after part of the 1995 season was cancelled as well. Baseball suffered in attendance and revenue as fans were repulsed by the financial activities of players and teams. A new agreement was not signed until 1997.

  10. First NFL Stoppage(Helmethut.com, 2006) • Reasons – In 1982 players want several conditions changed during the renewal of the collective bargaining agreement including information availability, free agency, pension, and severance pay. • The league did not give in until the players went on strike. The season was shortened from 16 games to 9, with a revised postseason format. Teams and players gained access to all contracts and an increased salary benefit program. Other issues were not resolved.

  11. Latest NFL Stoppage • Reasons – The players wanted free agency, a higher pay scale, and increased pension benefits which the league was not willing to offer. The players went on strike two games into the season as a result. • Outcome – The strike lasted for 24 days, but players returned to work after the league played games with replacement players. The return was due to television coverage of replacement player games and the break down of player union support. Both parties eventually agreed to a salary cap tied to a players share of league revenue and the league permitted free agency.

  12. First NHL Stoppage • Reason – Players wanted full control of their marketing rights, such as photographs and playing cards, as well as changes in arbitration, free agency, and pension fund policies. The league did not agree at first and a strike ensued. The strike came at the end of the season and threatened the post-season. • Outcome – The strike only lasted 10 days and the 30 lost games were made up at the end of the regular season. The two parties agreed on a two year contract extension, full marketing rights for players, and a compromise on disability benefits.

  13. Latest NHL Stoppage • Reason – The players union and league were unable to agree on a salary cap that would lower the average salary by $500,000. The league forced the issue due to consistent loses. • Outcome – The lockout of the entire 2004-2005 season. Players eventually gave in and played the 2005-2006 season under a salary cap.

  14. NBA Stoppage(Staudohar, 1999) • Reasons - The owners were in a bad situation with the lose of money due to rapidly increasing salaries and falling apparel sales. The owners recommended a salary cap that was not accepted by players. • Outcome – The league and players came to the table after a 202 day lockout and agreed on issues dealing with salary caps, free agency, rookie pay scale, bad behavior, and minimum salary. The first ever individual player salary cap resulted, and the two parties came to agreement.

  15. Parties Effected by Lockouts/Strikes • Owners- loss of revenue • Players- loss of salaries • Fans- loss of entertainment and “their” team • Sponsors- loss of contracts and exposure • Cities- tax revenue and draw of tourists • Restaurants/Bars/Hotels- Loss of customers and income

  16. Parties Effected by Lockouts/Strikes • Retail stores - Decrease in apparel sales • Employees- loss of jobs for individual teams and league (concessions, cleaning, hosts, etc.) • T.V. & Radio - Loss of broadcasting rights and viewers • The sport - loss of support and general appeal • ALL stakeholders in the league and organizations will be effected financially and/or psychologically

  17. Financial Loses from Strikes/Lockouts(Baade, 2006) • NBA owners lost $1 billion from the 1998 lockout • Players lost $500 million in salaries from the same lockout • Since 1987, 78 major league stadiums have been constructed at a cost of $22.6 billion, of which $16 billion was financed with public funds • The Cardinals brought $301 million in annual economical benefits to St. Louis, with the potential of an additional $48 million from the post season in 2000. • The Seahawks generate $234 million annually for Seattle • The Saints generated $402 million in 2002

  18. Financial Loses from Strikes/Lockouts (cont.)(Baade, 2006) • The Saints generated $402 million in 2002 • Studies have shown that a MLB strike or lockout can have an economical impact for the host city ranging from $16.2 million to $300 million • The financial effects vary with the size and economical condition of the host city • Smaller markets are effected more by a lockout or strike, regardless of the amount of money lost compared to larger markets • True economical impacts are impossible to measure since many parties are effected

  19. Most Recent Lockout Facts(TSN.ca, 2006) • NHL lost entire season • Average salary in 1995 = $773,000 • Average salary in 2004 = $1.83 million • Teams lost $224 million in the previous season • 75% of revenues went to player salaries • Owners implemented the lockout due to heavy losses and high salaries of players

  20. Most Recent Lockout Facts(TSN.ca, 2006) • The players association paid $29 to $44 million to its nearly 700 locked out players • Lost contracts with major television companies, now shown on OLN • For a discussion on the NHL situation prior to the lockout, click the link and chose the “NHL Insiders discuss the lockout - September 15, 2004” video link • http://www.tsn.ca/nhl/feature/?fid=9932&hubname=

  21. Trends • Player salaries discussions are the main cause of strikes and lockouts. The link below traces player salaries and ticket prices for the past 7 decades for the MLB • http://eh.net/encyclopedia/article/haupert.mlb • The following slide follows MLB salaries from 1984 to 1997. Notice the increase in percentage change in the years prior to the 1994 season long strike.

  22. MLB Salaries

  23. Effects on Fans • While fans are lost during strikes and lockouts, studies show that eventually they return to the sport • The sport will suffer during the interruption and in the following year, or years, but ultimately fans return • MLB suffered 20% decreases in attendance after the 1994 strike until the homerun race in 1998, when attendance began to increase (Beasty, 2005)

  24. Effects on Fans (cont.) • NHL realized the effects of lost support after the 2004 lockout and undertook marketing campaigns to sway back fans. • Attendance for the NHL was down and television ratings took dramatic hits • The following link covers fan reactions to the NHL lockout and the emotional effects fans undergo in such situations. Chose the “What the fans think - September 15, 2004” video link. • http://www.tsn.ca/nhl/feature/?fid=9932&hubname=

  25. Future Expectations • Strikes and Lockouts have been implemented in the past and will continue to be used in the future • They are very inexpensive to implement, and with many organizations in each league losing money each year, it can be expected that lockouts will be used as a weapon to lower player salaries. (Gifis, 1996) • To combat this, players will threaten strikes during post-season play (the most profitable games for owners) • With player salaries growing, conflicts are inevitable • Whether fans continue to support players and teams after play stoppages is completely up to them, but if history repeats itself, strikes and lockouts will have no permanent effects on fan support

  26. Discussion Questions • What can management do to avoid the need for lockouts or strikes when dealing with collective bargaining contracts? • Should every league implement a salary cap for teams? Give reasons to support your opinion, and at least one contradicting reason. • What can fans do to reprimand leagues for striking or locking out players, and would you be willing to take such actions against your favorite team?

  27. References • Associated Press, “Players’ union sets Aug. 30 strike date”. www.snnsi.com. May, 2006. • Baade, Robert, Baumann, Robert, Matheson, Victor, “The Economic Consequences of Professional Sports Strikes and Lockouts: Revisited”. www.holycross.edu/departments/economics/website. April 2006 • Barret, Wayne M, 1995, “Fools for fans”. USA Today. • Beasty, Colin. “The Post-Strike NHL: Set to Score”. Customer Relationship Management. Oct. 2005. p. 19. • Blum, Ronald. “NHL will lock out players today”. Daily Iowan. May 2006. • Briones, Maricris. “How NBA could make it up to fans”. Marketing News. Jan. 1999. p.1,11. • Burnette, Roberta. “Walking out on wages”. Workforce Management. Aug. 2005. p 12-13. • Cold War. May 20, 2006. TSN.ca. • Gifis, Steven, “Strike vs. Lockout”. Barron’sLegal Guides Law Dictionary. 1996. • National Football League Player’s Association, May 20, 2006. http://en.wikipedia.org/wiki/National_Football_League_Players'_Association. • NFLPA, helmethut.com, 2006, May 20, 2006. • Schmidt, Martin; Berri, David. “The Impact of Labor Strikes on Consumer Demand: An Application to Professional Sports”. The American Economic Review. Vol. 94, no 1. March 2004 • Stanford University News Service. “Fans will decide outcome of baseball strike, sports economist says”. www.Stanford.edu/dept/news/pr. 6/5/2006. • Staudohar, Paul. “Labor relations in basketball: the lockout of 1998-99”. Monthly Labor Review. April 1999. p. 3. • Schmidt, Martin; Berri, David. “The Impact of Labor Strikes on Consumer Demand: An Application to Professional Sports”. The American Economic Review. Vol. 94, no 1. March 2004. • We’ve been here before, http://www.cbc.ca/sports/indepth/cba/features/flashback.html, 2006. • 1994 baseball strike, May 20, 2006. http://en.wikipedia.org/wiki/1994_baseball_strike

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