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Labor Issues And The Four Major Sports Leagues
by Robert Ferringo - 07/11/2005

Whenever it comes to labor disputes in professional sports, I'm always a little torn on whether to side with the players or the owners. The players are the more visible of the two groups -- thugs and mutants getting paid to play games. The owners are the men behind the scenes, perverts and war mongers worried only about the bottom line. So whose side are you on?

For whatever reason it seems easier to side with the owners in these situations. They're businessmen, so it's almost OK for them to be greedy. For the players, it's as if they should be grateful to get paid as much as they do and worshiped as much as they are. Also, the players are more of a target for fans' frustration because they're not as insulated and withdrawn as the owners.

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But then I think about your job. If you could go to battle with your boss to get more benefits and more job security, wouldn't you? And if you did, how could anyone hold it against you? You're the one creating the product or market, but your owner reaps the benefits because he/she owns the means of production.

It's best to think of these labor situations as a form of class war. Yes, it is millionaires fighting with billionaires. Yes they're both greedy, selfish pricks. But it's the principle, not the point, that the people who actually perform the labor and create the commodity are as important as those who own the necessary means to produce it. It's a power struggle that's as old as civilization, and it is acted out in the pubic forum every few years or so.

But I'm also like you, I just want to watch and wager on the games, not concern myself with their socioeconomic issues or politics. I get enough of that at work. However, this stuff is important to know because the labor situation has an impact on the league and team structures, as well as how the actual games are played. For example, since hockey is trying to lure fans back to the game, look for new offense-friendly rules that will increase scoring. If scoring is up that means high numbers for the over/under, more unpredictability in games (more blowouts), and it means that the teams with more talent will be less likely to be upset by some grinders playing a cheesy neutral-zone trap. It's underlying ideas like that which can change the whole landscape of the sport.

The NBA just signed a new collective bargaining agreement, and the NHL is close to a new deal that would start the game back up. Baseball is still a capitalist mess, and the tranquility of the NFL could be disrupted by dark clouds on the horizon. Here's a quick breakdown of the main issues surrounding the labor situations of each of the four major North American sports leagues:

The National Hockey League situation
What a complete and total mess the National Hockey League is. It became the first North American sport to cancel a season due to labor problems. Not only did the players and owners lose millions of dollars, but they caused thousands of people on the periphery of the league (think vendors, shop owners near the rink, etc.) to lose incredible amounts of money as well. Also, the league that was already a very distant fourth to the pro baseball, basketball and football leagues has alienated its fan base and lost any shred of credibility that it had.

Other than that, everything's fine.

The NHL lockout began on September 16, one day after their collective bargaining agreement expired. The owners decided to lockout the players because they claimed that they were losing money. The issue at the center of the divide was that iron maiden to professional athletes - a salary cap.

The union pulled together and held firm against the owners. Following he advice of union leader Bob Goodenow, the players thought they had much more leverage than they really did. It's like when Marlon left the Jackson 5 thinking he had a chance in hell of making it on his own. And like Marlon, the NHL took a savage beating that it will likely never recover from.

The terms of the new deal include the salary cap (which the players said in December that they'd never accept). The cap's ceiling will be around $34-$38 million, with a floor around $22 million. That $38 million represents roughly half of some teams' most recent payrolls, and it's less than the $43 million that the players could have accepted in February to salvage the season. Not only does the $38 million represent at least a 24 percent salary rollback, but the number includes benefits, bonuses and other team costs that could further reduce actual player compensation.

Also, since the Tampa Bay Lightning won the Stanley Cup in June of 2004, the NHL has lost both its national (ABC) and cable (ESPN) television packages in the United States. The previous deals between the networks and the league were worth nearly $600 million. NBC now owns the rights to the league, but the network didn't have to pay a rights fee to acquire it. Also, the lack of a national cable deal will cripple the league's exposure.

Most importantly, the NHL pissed off the fringe fans and gave them a reason never to return, and cheated and betrayed the loyal, diehard fans that previously formed the sport's base. It's going to be very interesting to see how the league - which estimates that the entire business depreciated in value by over 20 percent over the last 10 months from $2.1 billion to $1.7 billion - will be received if/when a deal is signed and the games return this fall.

The Major League Baseball situation
One of the groups most interested in how the NHL bounces back from the lockout is Major League Baseball owners.

"If NHL gets a hard cap and then comes back to less than a 20 percent drop in attendance without a several-franchises collapse, the MLB owners will be on war path," said Gary Gillette, editor of the Baseball Encyclopedia, and co-chairman of a committee that analyzes baseball economics.

That's a big if.

Baseball's current labor agreement is up on December 19, 2006. There have been promising signs that further labor strife can be avoided, but if the NHL can bounce back from its lost season then baseball owners might start to get shady ideas about another lockout. However, it took a McGwire miracle to save the sport after the strike in 1995 cost everyone a World Series. I don't think the sport will bounce back from another stoppage.

The 2002 deal has addressed the issue of revenue disparity and competitive imbalance, but it has done little to resolve it. For instance, the Yankees had a payroll of $208.3 million on Opening Day this year. That puts them at $80 million over the luxury tax threshold. They could pay 40 percent on the $208 million, running their tab up to $240 million for this season. That's more than the combined total of Toronto ($45.7 million), Cleveland ($41.5 million), Milwaukee ($39.9 million), Pittsburgh ($38.1 million), Kansas City ($36.9 million), Tampa Bay ($29.3 million). The total of those six teams is $231.5 million.

I know, the Yankees are slightly better than a .500 team so far, and the Devil Rays have owned them this year. But give me a break. Basically, about 5-10 of the teams in the majors will never win a World Series. Ever. The D-Rays? Are you kidding me? Until something is done to bridge the gap, baseball will remain a ridiculously unbalanced and elitist sport.

The National Basketball Association situation
The players and owners managed to reach a deal on June 21, just two weeks before a lockout would have potentially crippled the league. It's a six-year collective bargaining agreement that ensures labor peace in the immediate future. The former CBA was up on July 1, and another stoppage would have been devastating to a league that is still suffering from the lingering effects of the 1998 lockout, decreasing ratings and interest, and backlash from the Pistons-Pacers brawl.

But disaster was averted and both sides were able to score some legit victories. The salary cap has been raised from 48 percent of revenues to 51 percent, increasing the amount each team can spend on salaries. The players will be guaranteed 57 percent of all league revenues. Active rosters expanded from 12 to 14, and players now have the right to challenge Stern's dictatorial grip on league discipline by challenging any suspension over 12 games.

All that is kid's play compared to what Stern was able to accomplish. American players aren't eligible for the draft until one year out of high school, and foreign players must be at least 19 years old to be drafted. This move effectively ends the prep-to-pro portion of NBA history. Also, Stern shortened the maximum contract length from seven years to six, opened up the door for younger players to get "minor-league" experience, lowered barriers to trades, and he stiffened penalties for drug users.

In all, getting a new deal done without any public humiliation was a step in the right direction for the NBA. It helps promote stability in a league that's suffering an identity crisis. To that end, the NBA recently enlisted the services of Matthew Dowd, a political strategist who worked on George W. Bush's re-election campaign, to come in and help clean up their image. We'll see what impact, if any, these two moves will have on the sport.

The National Football League situation
Besides baseball, the labor situation of the NFL should cause the most concern among the common fan. The NFL is clearly America's Sport, and has been successful because it has the best business model and most fan-friendly system. It is the league of parity, and the sense of collective interest has helped promote financial stability and escalate sport to the top of the food chain.

However, all of the recent success and popularity is being threatened. The current CBA has been in place since May 6, 1993, and the deal runs out after the 2008 season. However, the deal calls for one uncapped season in 2007. That would pretty much be the Apocalypse in the sport, and once the genie of unlimited salaries gets out of the bottle, it may never get back in. Competitive balance would be shattered (see: baseball) and a work stoppage could loom.

For those that think that this is all just Doomsday paranoia, NFL commissioner Paul Tagliabue described the situation as "critical" and expressed his frustration over the fact that a new deal isn't close to being in place.

In the NFL's world, the struggle isn't just between players and owners, but also between the owners themselves. Large-market and small-market teams are at odds over what types of revenue should be shared and over how much locally-generated revenue (stadium naming rights, luxury boxes) should be kicked into the pot. The NFL made $3.5 billion in 2004, and with new stadium deals and increased television deals, that number could easily hit $5 or $6 billion before 2010. That's quite a pot.

High-revenue teams such as the Redskins, Cowboys, Eagles and Patriots have a big edge in revenues over the lower-end teams such as Arizona and Indianapolis. The differences can be more than $100 million in some cases, and the NFL has always been a league that shares. Owners like Daniel Snyder in Washington and Jerry Jones in Dallas, and heavily leveraged owners like Bob McNair in Houston, are understandably hesitant to share any more than they already are.

Currently the players get $64 percent of all gross revenues, the highest in any of the four major sports. Green Bay, one of the smallest market teams, recently announced profits of over $24 million from last year. Everyone is making money hand over fist in the NFL, but for it to continue the owners need to get their house in order. Only then can they go to the players and negotiate a deal that will keep everyone satisfied.