Management

1
Management Player RelationsThe 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 500000 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 500000. 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 773000
• 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/fid9932hubname

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 followingfollows 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/fid9932hubname

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.111.
• 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. Barrons
  Legal Guides Law Dictionary. 1996.
• National Football League Players Association
  May 20 2006. http//en.wikipedia.org/wiki/Nationa
  l_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.
• Weve been here before http//www.cbc.ca/sports/i
  ndepth/cba/features/flashback.html 2006.
• 1994 baseball strike May 20 2006.
  http//en.wikipedia.org/wiki/1994_baseball_strike