With the conclusion of the Super Bowl, the attention has turned to whether we will have a football season next year. This week, the news centered around the NFL ownership negotiators cutting short a scheduled 7-hour negotiation session, after the NFLPA initially offered a 50/50 split of “all revenue.” At this point, it appears that the two sides are about a billion dollars per year apart.
Maury Brown had a good summary of many of the issues in Forbes last month. I thought I would do a quick run down of some of the terms and issues you are likely to hear as the owners and NFLPA battle over a new agreement.
- “total revenue” versus “all revenue”: “all revenue” is what it means–all sources of revenue by the NFL, from television contracts to ticket sales to sponsorship deals to merchandising. “Total revenue” is a specific term of art used in the Collective Bargaining Agreement, after the owners have received certain credits that exempt amounts from calculating the player percentage. According to the summary in Brown’s article, all revenue has increased at a faster rate than “total revenue” in the last five years.
- Expense credits: These are the things the players allow to come off of all revenue, before calculating total revenue. A large amount of these credits have to do with new stadium development and construction. The owners want to increase expense credits (which have been around 1 billion dollars a year recently) which would lower the amount of “total revenue” and thus lower the total amount of player income (even if the percentages stayed the same). The league is purportedly asking for closeer to 2 billion dollars in credits off the top.
- The Percentage of Revenue devoted to Player Income: If we are talking about all revenues, the player salaries make up a little more than 50%. When talking about “total revenue” the players have received between 57% and 58% over the last three years. I suspect the NFL wants to have the appearance of the percentages being the same, while whittling away at the pie. This is likely why they wanted nothing to do with a discussion framed in terms of all revenue, with no loopholes or exceptions.
- Rookie Wage Scale: I talked about my view on young players being overpaid as rhetoric, but future players are not represented here. You can bet a rookie wage scale will be part of the agreement, because current players can surrender unrepresented future players to keep a little more now. The fight on the NFLPA end will be structuring it so as not to lower veteran player salaries. NFL players have short careers. You know management would love to not pay young players as much, through cost control, then still say to guys past their peak at age 28 entering free agency that they play for future performance, not what you did in the past. The NFLPA has offered what they call a Proven Performance Plan, which would shorten contract lengths in exchange for reduced initial contracts, where the money would shift to veterans and young players with proven performance
- 18-Game Schedule: The NFL says they are doing this for the fans, but let’s be honest: they would do it for an increased revenue stream, particularly with additional regular season television weeks to sell as part of upcoming contracts. At the same time, ownership would hope to adopt it while simultaneously lowering wage percentage, so they get greater profits combined with the addition of those games. The players obviously don’t want to play more games at the end of the season for less money per game.
- The Anti-Trust Exemption and Congress: The NFL wants to say that the NFLPA is attempting to use Congress. In reality, the business of the NFL has always been tied to Congress, at least since the major sports leagues were granted an exemption from anti-trust legislation, and the American Football League and National Football League were allowed to merge, eliminating competition and allowing the joint league to better control player salaries and not have to compete. Make no mistake, the NFL is a monopoly, and but for Congressional intervention in the form of legislation specifically allowing it do be so, would not make as much money. People will complain about government intervention-government has intervened many times over, and it may well take political pressure on ownership to resolve this.
I really don’t have an opinion on whether the players should get 57% of “total revenues” or 48% of all revenues or give certain credits, or whether the owners should get more money. They are a business, and just because we happen to view their business publicly doesn’t mean they aren’t entitled to make money. There is also no imprimatur that says the players must get a certain percentage; that stuff is all business and fair game. In fact, I think the players should and will move some to get the deal done. The issue for me is just how much the owners are asking for, because they are more than a billion dollars a year and two more games beyond the status quo, in a league that has seen its revenues increase by almost 50% since the last deal was signed.
It’s an aggressive strategy seeking a sea change from the recent deal. I just haven’t quite bought the NFL’s rhetoric at this point (promoting safety while asking for more games, talking about young players being overpaid, crying poor without producing evidence), and I’m pretty sure I’m not the only one. But I’m also pretty sure they don’t care what you or I think.
[photo via Getty]