The Genuflecting Athletes

Are you noticing all of the National Football League players who are “taking a knee” during the American National Anthem this weekend? The gesture is being interpreted as a sign of protest against the recent comments of the President of the United Sates.

Until recently, though, the gesture was never defined as a symbol of protest. Quite the contrary, it always represented a symbol of extreme respect and reverence.

The physical position is called “genuflection.” Most Americans will recognize it as  the traditional posture that people assume to propose marriage.

And throughout history, individuals assumed the stance when meeting royalty, noblemen, and high priests. The practice can be traced back to the time of Alexander The Great, and perhaps even further.

People of the Catholic faith also genuflect at certain times during Mass. There is certainly no hint of protest in that venue!

So why is the gesture now utilized as a sign of dissent during the National Anthem? Perhaps the kneeling players wish to indicate that they continue to honor their nation, even as they protest some of its flaws.

That’s a complicated interpretation, isn’t it? And yet it’s no more complex than the origins of the players’ decisions to engage in it.

Not The Game

If you were browsing through your cable television channels last weekend, you might have stumbled across the most historic sports series in American history. More historic than the World Series of baseball, which was first played in 1903. And even more historic than the Olympic Games, which were first held in 1896.

What series might you have seen? It was the Harvard / Yale annual football game, first played in 1875 and now simply known as The Game. Except for breaks during the first and second world wars, the teams have faced off every year since the dawn of the industrial age. Under Walter Camp, a player on Yale’s 1876 team who later became the father of American football, the game grew into the business juggernaut that dominates our modern sports world.

“Modern,” though, is a relative concept. Had you attended any football game at the Yale Bowl prior to last weekend, you would have taken a seat in a stadium that has never installed permanent lights for night games. Yale is the only team in the Ivy League that plays all of its games during the daylight hours, the way that Walter Camp played football in the 1870s.

Nevertheless, at least temporarily, the day-time tradition did change last weekend. Why? Because this year, for the first time in history, The Game was played into the evening hours under the lights. NBC Sports wanted to televise it, and noted that it could generate higher television ratings by broadcasting into the evening. So Yale University installed a temporary field lighting system, and The Game entered the modern age.

For the fans, of course, a night event under the lights on a chilly November evening is not The Game that was played in the sunlight of an autumn afternoon. The essential fan experience is a different one, whether one is watching in the stands or on television.

Isn’t it ironic, though, that NBC Sports was initially drawn to televising The Game because of its historic nature … and then modified the essential fan experience in pursuit of higher ratings? Although Yale undoubtedly shared in the wealth that was generated by the shift to evening hours, it sacrificed a daytime tradition that was uniquely historic in nature.

News Flash: The NFL Pays Taxes!

Did you catch the surprising news about the National Football League (NFL) last week?

No, we’re not referring to any of the results of the college draft. There weren’t any surprises there at all. The top two marquee quarterbacks in the college game, as expected, were selected #1 and #2.

And no, we’re not referring to any announcement about the NFL’s Deflate Gate scandal. No announcement whatsoever was made. Apparently, the League is no rush to release any information about its investigation into that affair.

Instead, we’re referring to the NFL’s announcement that it has decided to start paying income taxes on its earnings. Before last week, it had always opted to avoid any such taxation liability.

But hold on! Wait a minute. Huh? How can that possibly be true?

Why hasn’t the most profitable professional sports league on earth been paying income taxes on its earnings? And why has it been given a choice to “opt in” or “opt out” of the tax system throughout its existence?

Perhaps surprisingly, the American regulatory system permits various types of nonprofit organizations to declare themselves exempt from income taxation, even though they may not serve any social charitable purpose. Under Section 527 of the federal tax code, for instance, political organizations that accept financial contributions on behalf of candidates can file for exemption from income taxes.

Although such organizations may be “profitable” enterprises in a colloquial sense, they (in theory, at least) pass all of their available funds to their favored candidates. Thus, the tax code treats them as pass-through entities, and not as entities that are seeking to earn taxable profits on an independent basis.

Likewise, the NFL has always been treated as a “trade association” entity that exists to help its member teams optimize their profits, and not as an entity that is seeking to optimize its own independent earnings. That’s why the League, for instance, distributes its television revenues to its 32 professional teams.

But why did the NFL agree to start paying taxes on its profits at all? Why didn’t it simply continue its status quo tax exempt arrangement with the Internal Revenue Service? Apparently, because the League has always passed through so much of its revenue to its member teams, its potential tax liability in any given year can be characterized as “a pittance,” and is expected to remain so in the future.

More importantly, by electing to pay annual income taxes, the League can avoid disclosing certain sensitive information to the public. For instance, the salaries of the NFL’s senior officers will no longer be available for public inspection, now that the League is foregoing its tax exempt status.

So although we might be surprised that the NFL will now start paying income taxes, its motivation for doing so should be no surprise at all. After all, it’s not as if the League is acting upon an altruistic desire to contribute more resources to society. Instead, it appears to have chosen to pay taxes as the result of a sober business assessment that the benefit of keeping sensitive information confidential exceeds the cost of any annual tax liability.

Shrewd, eh?

The NFL: Forgetting Its Business Model

When did it happen? When did the National Football League, the most successful professional sports organization in the United States, suddenly lose its ability to manage its own affairs after thriving for almost a century?

Many believe that this past month (or even this past week) has been the worst time in the history of the League.  And for good reason: public protests have recently exploded over a startling series of violently criminal acts, debilitating player injuries, and highly questionable corporate behavior.

But the origins of such recent outcomes might be traced back to 2013. Last year, after all, was the time that the NFL first appeared to decisively step away from its traditionally successful sports business model.

Or perhaps it would be more appropriate to describe its decision as “intentionally forgetting” its classic model. After all, at its essence, the traditional game of football generates far more violent physical contact than any other major sport in the United States.

That’s why, for much of its existence, the game was only played on Sunday afternoons. And that’s why each game initially featured (and still features) a half time break midway through its sixty minute period.

League officials always knew that the human body can only sustain “just so much” violent activity before it requires resting and healing time. Weekday, Saturday, and halftime (on game day) rest periods were thus mandated for recuperation purposes.

But last year, the NFL announced an unprecedented agreement for a television network to broadcast Thursday (i.e. midweek) games throughout the season. And earlier this year, the League boldly asked performers at its Super Bowl half time show to begin paying fees in exchange for media exposure.

So what should we make of a full slate of midweek games, staged for the benefit of television networks? And an even more drastically elongated half-time show for the purpose of showcasing musical acts?

Such activities are inconsistent with a traditional business model that is dedicated to placing the fittest (and the most appealing) players on the field to compete for athletic victories. Nevertheless, they are perfectly consistent with a model that is dedicated to optimizing television ratings, music sales, and other media revenue streams.

So it shouldn’t come as any surprise that the NFL’s recent travails betray a surprising forgetfulness of its traditional game-dominant business model. Instead, the League has recently chosen a media-dominant business model, a strategy that is now impacting its fortunes accordingly.

Invest In A Football Player!

Fans of the National Football League’s Green Bay Packers have long been able to purchase shares of stock in the franchise. No other NFL organization sells ownership shares to its fans, though, a fact that is undoubtedly disappointing to the supporters of the other 31 professional football teams.

Last month, however, an investment group named Fantex offered a tantalizing alternative to fans of those 31 franchises. Instead of investing in your home team, why not invest in your favorite players?

Last Thursday, Vernon Davis of the San Francisco 49ers announced that he had sold 10% of his future earnings to Fantex. He joined Arian Foster of the Houston Texans, who had signed a similar deal with the group two weeks earlier.

Fantex intends to create a tracking stock for each of the players, a stock that would be traded by small investors on a privately owned (and thus relatively unregulated) stock exchange. It will represent, in essence, a fantasy football league … albeit one that is “played” with real money.

Fifty years have passed since stakeholders in the Oakland Raiders franchise of the original American Football League launched the world’s first fantasy football competition. Ever since then, fantasy football aficionados have been entertaining themselves by engaging in virtual player drafting and trading activities.

If Fantex is successful, though, individual investors will be able to add their favorite football players to their “real world” financial portfolios. Will they be prepared to do so in a responsible manner? For obvious reasons, many investment professionals are expressing concern; indeed, we might all be well advised to segregate our sporting interests from our financial planning strategies.

A Labor Renaissance?

We’re living in an era of economic malaise. Workers around the world are losing their jobs, their pensions, and their hopes for the future. But their government leaders, intent on balancing their budgets and repaying global creditors, are focusing on other concerns. So where can workers turn for support?

For much of the twentieth century in the United States, the American work force turned to the labor movement during times of economic strife. The United Auto Workers union, for instance, was established in the 1930s, during the very heart of the Great Depression. And the New York City strike of public transit workers in 1980 was launched during the final months of the Carter Administration, a time when the Big Apple had yet to fully emerge from its 1970s brush with bankruptcy.

The ensuing two decades of economic prosperity, during the 1980s and 1990s, were marked by dramatic declines in union membership and political power. And earlier this year, public sector unions suffered dramatic defeats in Wisconsin, New Jersey, and other states.

Late last month, though, the union movement in the United States achieved a pair of improbable victories. Can we be witnessing the stirrings of a labor renaissance?

Touchdown!

The most recent labor victory involved a triumph by a union of part-time workers over the most successful and prosperous professional sports league in the world. The NFL Referees Association, having been locked out and replaced by so-called “scab” amateurs during regular season games, unexpectedly negotiated a triumphant return to the game last week.

How were they able to pull off such an improbable upset? The amateur replacement referees had produced a series of gaffes and blunders, leading many to question the integrity of the game itself. The final straw appeared to be a “blown call” on the last play of a game between the Green Bay Packers and the Seattle Seahawks; a referee’s decision awarded the victory to the wrong team.

The call itself was made by a full-time small business loan official from the Bank of America who had been hired as a weekend replacement referee by the National Football League. The ensuing ridicule over the blown call compelled the League to settle the dispute; in fact, the striking referees were back on the field four days later.

School Holiday!

Two weeks ago, the Chicago Teachers Union also scored an unexpected victory against the school system. Incidentally, the Teachers Union, like the United Auto Workers organization, was founded in the middle of the Great Depression in order to protect the interests of its labor force.

The Teachers Union had decided to engage in a strike in the middle of the school year over issues regarding compensation, layoffs, curriculum content, and corporate privatization. The decision was a risky one, in light of recent setbacks suffered by the public labor force in the neighboring state of Wisconsin, and in spite of the supportive presence of Mayor Rahm Emanuel, the former White House Chief of Staff for Chicago resident Barack Obama.

In mid-September, the Union and the Board of Education both rejected a tentative arbitration settlement, and the strike extended into a second week. It was suspended when the City agreed to make a number of concessions in matters involving job security and teacher performance assessment activities.

An Outsourcing Rebellion

Interestingly, a nascent labor movement has been stirring in the developing world as well. Last month, for instance, almost 2,000 employees at a Foxconn factory in China engaged in a full-fledged riot to protest working conditions.

Although Foxconn is not an American corporation, it manufactures electronic components and finished goods for various Western firms. In fact, many technology professionals worried that the riot might affect Apple’s ability to produce sufficient iPhone 5 devices to meet the consumer demand created by its own marketing juggernaut.

FoxConn, incidentally, had previously announced major improvements in employee compensation levels and working conditions in response to a rash of worker suicides. Nevertheless, as a result of the recent riot, FoxConn may need to again reassess its “military method” of administrative management.

Made in America

American labor history, of course, has been marked by violent riots as well. Chicago’s Haymarket Riot in May 1886, for instance, inspired the institution of International Worker’s Day on May Day (i.e. May 1st) in over eighty nations. And in 1936, auto workers in Flint, Michigan seized control of a General Motors factory and fought pitched battles against police officers and corporate strike breakers.

Except for an occasionally rowdy Occupy Wall Street protest, though, the recent labor movement has been peaceful in nature. The Teacher’s Union, for instance, is now planning a series of town hall meetings and workshops throughout the United States; all of them are expected to be civil events.

It’s been a long time since the American economy experienced a strengthening union movement. In light of these recent events, though, and considering the improving prospects for a Democratic Party victory in the November national elections, conditions may indeed be ripe for a labor renaissance.