Friday, May 29, 2015
Taxing Our Credibility and Our Legal System
Giant professional sports leagues have massive amounts of cash, generated from their management of lucrative television and merchandising deals, brand and rights licensing in general, often managing their own content-providing Websites, including OTT and mobile content packages. Most of these behemoths ripple with power and money, bask in the glow of the generally accepted (although recently challenged) exemption from U.S. antitrust laws, are aware that the necessity of “live” consumption of sports makes their value to advertisers incalculably high and are often imperious in their dealings with the rest of the world.
Until the NFL finally agreed to shed its “non-profit” status earlier this year, almost every such mega-league has maintained the tax exempt status enjoyed by officially “non-profit” trade organizations. They even have had a traditional excuse to manage their power to keep a level playing field among their competitive teams, the antitrust exemption (being challenged, at least in the world of consumers’ being required to buy whole packages of any particular league’s games) is part of the joy.
“The antitrust exemption dates back to a 1922 Supreme Court ruling, Federal Baseball Club of Baltimore v. National League, that dealt with a former competitor to the American and National Leagues. The high court's opinion held that baseball was ‘purely state affairs’ and not interstate commerce, even if players traveled, which was ‘not the essential thing.’ The Supreme Court got more opportunities to address the antitrust exemption in 1953, Toolson v. New York Yankees, and 1972, Flood v. Kuhn, which dealt with the restriction on player movement and compensation.” Hollywood Reporter, August 9, 2014.
As the battle for the right to license Los Angeles Dodgers games illustrates, sports leagues are acutely aware with so much time-shifting of television viewing, often with the ability to edit out commercials, the fact that 98% of sports is watched live give sports a unique value to advertisers has made the value of sports franchises soar to heights no one could have envisioned a decade ago. All this has given sports leagues, amateur and professional, more power in the television/Web-based marketplace… and raw wealth.
Untaxed and exempt from laws that apply to everyone else, taxpayers have to wonder why most of these mega-wealthy organizations should not be the obvious “for-profit” institutions that they truly represent. They are getting away with financial murder, in my eyes.
But nothing, and I do mean nothing, reflects the massively arrogant, imperious and “we’re above the law” attitude that represents FIFA, the pernicious purveyors of platitudes and power at the top of the hubris pile… the soccer gods who control global competition and, most particularly, the coveted and globally mega-popular World Cup.
No one seemed to be able to stop a pattern of alleged corruption, whereby major competitive values, which telecasters would be accorded lucrative rights agreements and where other economically valuable FIFA rights would be allocated under the dubious cloud of probable bribery and corruption of key FIFA officials. With a purported $1.5 billion filling its coffers, and its seemingly unassailable leadership under long-term President (dictator?) Sepp Blatter (pictured above) impervious to challenge (numerous candidates have dropped out of the running for tomorrow’s election for president), FIFA seemed beyond the reach of any extrinsic power that could matter. Until a new American Attorney General, who had been investigating FIFA as a U.S. Attorney, entered the fray.
“The Justice Department unsealed a 47-count indictment early [May 27th] charging 14 world soccer figures, including officials of FIFA, with racketeering, bribery, money laundering and fraud. Four of those accused, including two sports marketing companies, have already pleaded guilty and are likely to be cooperating.
“Among the ‘alleged schemes,’ said the Justice Department, were kickbacks to FIFA officials by executives and companies involved in soccer marketing and ‘bribes and kickbacks in connection’ with ‘the selection of the host country for the 2010 World Cup and the 2011 FIFA presidential election.’ FIFA is the French abbreviation for the international Federation of Football Associations, the global governing body of soccer.
“Those charged, the Justice Department said, ‘include U.S. and South American sports marketing executives who are alleged to have systematically paid and agreed to pay well over $150 million in bribes and kickbacks to obtain lucrative media and marketing rights to international soccer tournaments.’
“‘Jeffrey Webb and Jack Warner — the current and former presidents of CONCACAF, the continental confederation under FIFA headquartered in the United States — are among the soccer officials charged with racketeering and bribery offenses,’ the Justice Department said.” The Washington Post, May 27th. Were Russia and Qatar selected as World Cup sites because of merit… or as alleged… out-and-out bribery? What was FIFA’s reaction? Shrug? The FIFA presidential election would be held as scheduled.
While Sepp Blatter was not named in any of the indictments, the Justice Department has not suggested that Mr. Blatter has been cleared of any wrongdoing. But how does the captain of the ship walk away unscathed? “‘A lot of people have asked me why Sepp Blatter wasn’t involved in this seemingly historic day, and the answer is, that’s how true power works,’ said Alexi Lalas, a soccer analyst and a former member of the United States men’s national team. ‘It’s called plausible deniability.’… For the moment anyway, Mr. Blatter, who is 79, does not seem to be treating this scandal any differently than any of the others that have unfolded on his watch…
“Asked about Mr. Blatter’s state of mind at a news conference in Zurich, FIFA’s director of communications, Walter De Gregorio, described him as ‘quite relaxed.’ He quickly clarified this characterization, noting that the president was not ‘dancing in his office.’… Several hours later, Mr. Blatter released his own statement in support of the U.S. and Swiss investigations into his organization. ‘Let me be clear,’ he said, ‘such misconduct has no place in football and we will ensure that those who engage in it are put out of the game.’ He did not appear at the news conference or make himself available for interviews.” New York Times, May 27th. Will Blatter retain his presidency? We’ll tomorrow. Sports leagues have way too much power these days.
Although Russian President Vladimir Putin, one of the countries accused of bribing its way to being a World Cup venue, has his own opinion of this mess: “In a statement on the Kremlin web site, Putin compared Blatter to other victims of U.S. ‘persecution,’ the whistleblowers Edward Snowden and Julian Assange, calling the investigation ‘just one more brazen attempt to spread its jurisdiction to other states.” Fortune.com, May 28th.
He noted most of the accusations involved non-U.S. people acting outside of the United States. You mean this highly-credible Vladimir Putin? “Vladimir was Putin on a show in Sochi [on a mid-May] weekend. The Russian president scored eight completely legit, not-at-all-staged, worthy goals against a host of professional hockey players, including former NHL stars Pavel Bure and Valeri Kamensky. Putin's team won 18-6.” SBNation.com, May 16th.
In the end, the unsubtle spectacular growth in the value of sports and sport programming in a world seeking to grab on to consumers in the advertising space, often having multinational impact, merits a concerted effort of world governments to contain such seemingly uncontainable power and the dubious elements that accompanying these massive changes. FIFA is perhaps the most visible and biggest player in this space, but the questions beg governmental intervention at every level.
I’m Peter Dekom, and when modern realities shift too much power way to fast to a narrow band of players, where taxpayers are sidetracked by imperious attitudes, this is a signal for governments everywhere to do their job and protect their citizen-consumers.