Media & Entertainment Law

The Economy Strikes Again (Sabathia not Worried)

By Rick Karcher, Michael McCann, Geoffrey Rapp, Greg Skidmore, and Howard Wasserman

According to the Denver Post, the Arena Football League ?faces possible dissolution unless it secures an infusion of money by December 19.? Perhaps they can call CC Sabathia, who is reportedly set to sign a 7 year, $161 million contract with the Yankees.

Given the state of the economy, reports of the AFL?s possible demise are not shocking, but they do raise a few interesting issues. First, this sheds some light on the then-surprising decision of team owner Tom Benson to fold the popular New Orleans VooDoo this past October (as well as Commissioner Baker?s sudden resignation). At the time, VooDoo executives claimed that the franchise folded because of ?circumstances surrounding the team and the league,? but some speculated that the end of the VooDoo was an ominous sign for the future of professional sports in New Orleans. Perhaps now?particularly with the Hornets and Saints thriving?we can see Benson?s actions as more of a reflection of the AFL than the city of New Orleans.

Second, the fall of the AFL may be very good news for the rise of the United Football League, which plans to launch in 2009. The UFL will not only have access to a large number of professional football players and coaches looking for jobs, but will also have the ability to slide in to play the role of the NFL?s ?feeder league.?

Third, it is interesting to read statements from various executives involved with the AFL. On the AFL website, the league?s official statement is: ?Despite rumors and reports to the contrary, all AFL teams are continuing to work towards ArenaBowl XXIII. As it has previously stated, the AFL continues to work on long-term structural improvement options.? Brett Bouchy, the new owner of the Orlando Predators said that he "expects the league's 2009 schedule to be released in the next 2-4 weeks?.I will tell you that the overall economy has presented challenges for arena football, just like any other business that's out there, and we are addressing that. We are going to come out of this with the best economic model the arena league has ever had in the next 30 days.? And, Michael Young, the executive vice president of the Colorado Crush stated that ?[t]he business model for the league is broken.?

These statements all focus on the economic model of the league and suggest that league owners are working on a new model for the league going forward (and that would allow them to go forward). What model could they employ that might permit them to lower costs, particularly in the form of player salaries? Well, perhaps our old friend the single entity. Stay tuned?

Update (3:20 pm, Eastern). Well, that didn't take long. According to the Kansas City Star, the AFL will cancel its 2009 season. The article quotes Pete Likens, the director of communications for the Kansas City Brigade, as offering up this interesting tidbit: ?It?s pretty much a done deal to suspend the 2009 season and work toward a single entity-league,? Likens said. ?We plan to start up again in 2010, if the owners vote this way. We?re prepared to play this year, and/or next.?

It will be interesting to see what type of single entity structure the AFL comes up with to immunize itself from a Section 1 attack and how the players respond to the new league structure. Given the Seventh Circuit's "one facet at a time" approach in American Needle, the AFL may have to go to extremes to avoid the risk that a court would conclude that the AFL is a single entity for purposes of the player market.

Full post as published by Sports Law Blog on December 10, 2008 (boomark / email).