Adapted from “Becoming a Team Player – Lessons from Professional Athletics” first published in the October 2009 issue of Negotiation.
Show me the money!” That refrain from the 1996 movie Jerry Maguire, shouted by a football player to his agent, continues to echo through U.S. professional sports negotiations today. A public arena, enormous piles of cash, and even bigger egos combine to make sports negotiations a unique context. Yet anyone who has negotiated through agents, faced a competitive atmosphere, or lacked strong deal alternatives can learn a lot from team athletics.
Why are sports talks tough? In his chapter “First, Let’s Kill All the Agents!” in Negotiating on Behalf of Others (Sage, 1999), Harvard Business School professor Michael Wheeler analyzes the key features that can make sports negotiations so contentious.
Here are three of them:
1. The presence of agents.
In recent decades, the rise of players’ unions, collective bargaining, and growing revenue streams from advertising and broadcast fees gave players more leverage than ever before—and created a greater need for experts to negotiate athletes ‘increasingly lucrative and complex contracts. Agents can add value by matching players with the right teams and insulating them from subpar offers and hard-bargaining tactics, according to Wheeler.
But because sports agents typically have relationships with many different teams and players, and earn a portion of their clients’ salaries (typically 4% to 10%), they face significant conflicts of interest.
Sports agents are routinely accused of keeping players in the dark during contract talks and focusing on player salary to the exclusion of other deal features that might please their clients, such as a great location or options for contract extensions.
For reasons such as these, a small number of athletes choose to negotiate on their own behalf. Former Major League Baseball (MLB) pitcher Curt Schilling successfully negotiated an $8 million incentive-laden one-year contract extension with the Boston Red Sox for himself, only to sit out the entire 2008 season with a shoulder injury. On his blog, Schilling wrote in 2007 that “at some point in your career, an agent becomes baggage.”
2. Lack of alternatives.
Consider the saga of baseball player Matt Harrington. For four years straight, between 2000 and 2003, the pitcher entered the MLB draft. Year after year, negotiating through different agents (including Scott Boras; seethe sidebar), Harrington turned down offers from MLB teams.
As Harrington got older, the offers got worse, falling from a promise of $4 million over two years in 2000 to little more than the chance to play in the majors in 2003.The story illustrates a prime feature of most professional sports deals: a lack of strong outside alternatives.
In most negotiations, if talks with one counterpart don’t go well, we can walk away and deal with someone else. But in the major U.S. team-sports leagues, including MLB, the National Football League, and the National Basketball Association, players enter the system through a draft that requires them to negotiate with one particular team. For most junior players, holding out for a better deal means sitting out the season—not an appealing career option.
Only when athletes have served their team for a set number of years are they eligible to become free agents and negotiate with other teams.
3. No zone of agreement.
In negotiations outside the realm of sports, parties typically see value in negotiating with each other only if a zone of possible agreement, or ZOPA, exists.
If you’ve decided to pay no more than $15,000 for a new car, you won’t bother visiting your local Porsche dealership. Yet agents and sports teams often begin their negotiations miles apart. Instead of dealing in the ZOPA, according to Wheeler, they deal in the “NOPA”—the realm of no possible agreement.
In a 1995 study, Wheeler and his colleagues David Lax and James Sebenius test this theory by observing how actual National Hockey League (NHL) general managers behaved in a simulated NHL salary negotiation.
Almost all the pairs, playing the role of player’s agent and general manager, started the negotiation with a large gap in their bargaining range.
That is, those acting as agents demanded much higher salaries for their players than those playing managers were willing to offer.
In NOPA negotiations where the only alternative is to walk away(or, for senior players in some sports, to let an arbitrator decide your fate), parties on both sides of the table concentrate on getting the other party to budge, notes Wheeler. Under these conditions, negotiation becomes nothing more than a matter of hoping the other guy blinks first.