resentative team. This is simply not the relationship which exists between Macy's and Gimbel's, or between two Washington law firms, or between Esso and Gulf. NFL teams are partners, not business competitors. The business context in which the NFL player rules operate is therefore quite unusual. The NFL maintains a team in Washington and a team in Baltimore, and two teams in New York and in the Bay area, on one assumption; that the teams do not, in fact, compete with one another in a business sense. If it were established that damaging competitive effects are produced by these situations, it would not be in the interest of either of the teams, or of the league itself, to maintain these situations. These partnership aspects of NFL functioning touch every phase of each NFL club's operations, and represent the principal business of the league itself. The league is designed to permit NFL franchises to compete with one another, but on two planes only; on the playing field, where the fans' primary interest lies, and in the exercise of management skills within the league's equalization rules, for the purpose of fielding the most successful team. The NFL believes that the fans are involved in this latter form of competition as well, as the hanging of coaches in effigy occasionally suggests. But there are neither fan interests, league interests, city interests, or franchise interests in simple, pocket-book competition for successful football teams. The very business context in which these NFL player rules operate, therefore, needs to be basically rethought. There is nothing whatever to suggest that the NFL clubs would be willing to continue to act as partners on all other phases of their operations while they are compelled to eat their young in one of their most significant areas of operation. Of the three fundamental interests involved in professional sportsthe interests of the fans, the players, and the clubs-none can be permitted to have full sway. The owners have their investments to protect. The players have their collective bargaining and contract interests to pursue. But it is the American public which ultimately determines the levels of rewards to all concerned. The bottom-line premise of all antitrust law is that some ultimate public benefit can be expected to flow from the open, competitive process imposed on American business generally, either in reduced. consumer prices or improved consumer service. But the proposal before this committee would have exactly the opposite effect. Public disadvantage, and even player disadvantage, can be routinely expected in terms of franchises lost to various NFL cities, reduced operations nationally, smaller team squads, lost municipal stadium tenants, declining TV and fan interest, lost job opportunities, and higher ticket prices at least until the declines set in. In short, I do not view the present bill as designed to serve the public interest, but as one to disadvantage it. Chairman RODINO. Thank you very much, Mr. Rozelle. Mr. Rozelle, I have a few questions. Considering H.R. 2355, which you have just referred to, and putting aside the specifics of that particular bill, do you believe that it would be in the public interest for Congress to take an overall or comprehensive view of all professional sports? Mr. ROZELLE. It is my personal opinion, without even consulting counsel, that there will be a time when that will be appropriate. I feel that sports today certainly have a tremendous interest for the public. I do not think Congress has disregarded us. I think that I have testified some 20 times before Congress and as a matter of fact, the National Football League will be involved in three congressional hearings this very month. So I think it is an indication of the public interest in sports. To me and perhaps it is an oversimplification-but to me, the bottom line is a full exploration of all sports, including the finances. I think that the bottom line here is, is labor getting a fair share, or is management on the other hand getting an inordinate share, of the pot? To me, that is the bottom line, and at some time, I think that a very thorough congressional hearing of all major sports might be very appropriate. Chairman RODINO. And as a consequence of that, would some kind of uniform legislation clarifying the legal status of professional sports enterprises be useful to professional sports as such, and to the public? Mr. ROZELLE. I think it probably would. I guess that has been suggested since the Radovich case many years ago. It might well be. Chairman RODINO. Mr. Rozelle, we have heard some talk about the merger by those who have been opponents of the merger. And although it is a fact of life now, some have talked about the fact that in their opinion, as a result of their experience, there have not been any advantages, any benefits, as a result of the merger, either to the fans or to the players. How do you view the merger legislation of 1966? In what context do you see it? What is your understanding of what was exempted from the antitrust laws by that bill that Congress enacted in 1966? Mr. ROZELLE. As we testified at that time, Mr. Chairman, and have said since, the only exemption was the act of merger. We fully accepted that at that time, we fully accept it today, that we must be prepared to defend any policies of the single league, and we have been actively doing so through the courts, through Government agencies, and through Congress, for a number of years. Chairman RODINO. You said in your statement, Mr. Rozelle, that as a result of the rules, and as a result of the application of those rules of the league, that the players have got now a larger share of the total pie. Would you say that this merely relates or refers to some players, and not to all the players generally across the board? Mr. ROZELLE. My view of the contracts that come into our office would indicate that it is across the board. In my statement, I gave you an example of one football player who was not injured during the season, was active throughout the season and caught one pass, and made $60,000. Now, I do not say that all players that produce like that during the season were paid at that level. But I do feel that it is across the board. I gave you an example of Mr. Hunt's testimony in Minneapolis, and it covered the very period following the merger, when it has been said that salaries in effect went up in a very limited degree. It has even been charged in the past that they went down. And I pointed out that Mr. Lamar Hunt's testimony and the financial facts show that his payroll doubled from-I believe the period was 1969, the time that his team was in the Super Bowl in January, I believe, to 1974. Chairman RODINO. That seems to be, of course, rather inconsistent with the testimony we received just a while ago from Mr. Garvey; and seems to be rather at the opposite end of the pole. Mr. ROZELLE. Well, Mr. Garvey, as he said, does not have all facts available to him. He occasionally has surveyed players, and I assume has not gotten a full response. I do not know. He has made efforts. However, there were financial figures that could be somewhat helpful that were submitted to the court in Minneapolis, that were prepared by Arthur Anderson and Co. for the entire league. They were further reviewed by a court-appointed auditor, as I recall; and I would like to ask permission, inasmuch as they were submitted, as I understand it, to the Labor Committee that had hearings some 10 days ago—I would like the opportunity of submitting those figures to you for your consideration as an exhibit. Chairman RODINO. I think that that would be of interest to the committee, and I would appreciate your submitting those. [The material referred to follows:] ARTHUR ANDERSEN & Co., TO THE NFL MANAGEMENT COUNCIL: At your request, we have compiled the accompanying pro forma combined statement of income of the member clubs of the National Football League for the 1974 playing season. Such statement combines the historical statement of income of each of the member clubs for its respective fiscal yearend which included the 1974 playing season, and reflects certain conforming and pro forma adjustments as set forth in Note 2. We examined the statements of 5 of the 26 member clubs included herein. Our examinations of these clubs were made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The audited statements of the other 21 clubs, together with the reports thereon of the other auditors, have been furnished to us and our opinion insofar as it relates to the amounts included for such clubs is based solely upon the reports of the other auditors. There are a number of suits pending against the National Football League and its member clubs. Legal counsel believes that there are substantial defenses to all of these suits. There is, however, the possibility that one or more of these suits will not be successfully defended and that liability (presently indeterminable), if any, may be incurred by the League and its member clubs. In our opinion, based on our examinations and the reports of other auditors referred to above, and subject to the effect of such adjustments as may result from the litigation discussed in the preceding paragraph, the pro forma combined statement of income has been properly compiled from the historical statements of income, and the conforming and pro forma adjustments set forth in Note 2 have been properly applied to the historical statements. ARTHUR ANDERSEN & Co. EXHIBIT I NFL MANAGEMENT COUNCIL-MEMBER CLUBS OF THE NATIONAL FOOTBALL LEAGUE-PRO FORMA COMBINED STATEMENT OF INCOME FOR THE 1974 PLAYING SEASON NFL MANAGEMENT COUNCIL-MEMBER CLUBS OF THE NATIONAL FOOTBALL LEAGUE-PRO FORMA COMBINED STATEMENT OF INCOME FOR THE 1974 PLAYING SEASON-Continued Note. The accompanying notes and exhibit are an integral part of the above statement. NFL MANAGEMENT, COUNCIL-MEMBER CLUBS OF THE NATIONAL FOOTBALL LEAGUE-PRO FORMA SCHEDULE OF AVERAGE OPERATING PROFIT FOR THE 1974 PLAYING SEASON NOTE. The 26 member clubs have been ranked based on the amount of operating profit. NFL MANAGEMENT COUNCIL MEMBER CLUBS OF THE NATIONAL FOOTBALL LEAGUE NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME FOR THE 1974 PLAYING SEASON (1) Method of combining statements of income The accompanying pro forma combined statement of income has been prepared by combining the individual statements of income of the member clubs of the National Football League for the 1974 playing season. The financial statements of the member clubs were prepared in varying formats and accounting classifications. For the purposes of this report, the classifications have been conformed to a common presentation format. The clubs do not report their individual results of operations as of any common fiscal year-end. The accompanying statement of income, however, reflects the results of operations for the 1974 playing season and includes actual operations for twelve-month periods. (2) Conforming and pro forma adjustments Individual clubs in certain instances have followed alternative accounting practices in reporting similar transactions, Accordingly, conforming adjustments have been applied to the combined financial statements to conform the accounting where amounts were material. In addition, a pro forma adjustment has been made to reflect income taxes on the combined net income. A reconciliation of combined net income as reported in the financial statements of the member clubs to the accompanying pro forma combined statement of income is set forth in the following tabulation: Combined net income as reported in the historical statements of the member clubs.___ Conforming adjustments: Excess of income over amortization relating to expansion and Pro forma adjustment to provide income taxes at an assumed rate of Combined net income as set forth in the accompanying pro forma combined statement of income. __ (3) Expansion and merger payments and receipts $4, 372, 000 (1, 114, 000) 2, 107, 000 2, 000 559, 000 241, 000 7,422, 000 101, 000 5, 126, 000 In connection with franchises granted to Miami in 1965 and Cincinnati in 19€7, and with the terms of the merger agreement between the American and National Football Leagues, certain of the former AFL clubs have agreed to make payments to each other and to certain of the former NFL clubs. The accounting treatment for the payment and receipt of these amounts varies among the clubs; however, an adjustment to conform the accounting was not required because the net difference in recognized income and expense is eliminated. (4) Seattle and Tampa expansion In December, 1974, the National Football League and each of its 26 member clubs entered into agreements granting NFL franchises in Seattle, Washington and Tampa, Florida commencing with the 1976 season. The total contract price is $33,200,000, including interest, payable in installments to 1983. Of this amount, $100,000 is paid to the League and the remainder divided equally among current member clubs, including $250,000 received in December, 1974. The agreements require, among other things, that the clubs relinquish a pro rata portion of their share of the network television rights, including amounts due under the existing NFL network television contract for the 1976 and 1977 seasons, and make available for selection by each franchise a number of contracts of veteran players prior to the 1976 season. |