Aug 2, 2010
Are you ready for some football…collective bargaining agreement talk.
Just in case you’ve somehow been living away from all media over the past few months, the NFL is in danger of a work stoppage in 2011. Although there are many issues on which the labor dispute is based (i.e. player safety, recouping roster bonuses for breaching players, benefits for retired players, etc.), the crux of the issue is the percentage of the NFL revenue pie that goes to each side. Namely, the owners want more money to cover rising costs, while the players generally aren’t willing to give up more money without first knowing some more information. That being said, the most logical place to begin any discussion is to look at the percentages of the pie each side receives. Common rhetoric generally states that the NFLPA (the “PA”) receives 60% of total revenue and the NFL receives the other 40% of the revenue pie.
[format] And that’s where the misconception begins. [/format]
Is that preceding sentence a true statement? Yes. But, the way that data is typically presented, especially on television, usually ignores an important nuance; the NFL receives nearly $1 billion dollars in the form of an expense credit before any revenue is divided. The credit, which is discussed in Article XXIV of the CBA, allows the league to deduct nearly $1 billion in costs (partial stadium costs, day-of-game costs, NFL.com upkeep, etc.) prior to any calculation of total revenue. It is only after this deduction that the players and owners take their respective percentages of the revenue pie. If you look at it using actual numbers,
[quotes]NFL Revenue in 2009 = $9 billion. NFL expense credit = $1 billion. Players revenue share = 60% (approximately). NFL revenue share = 40% (approximately)
$9 billion x 60% = $5.4 billion to Players/$3.6 billion to NFL <————— Incorrect.
$9 billion – $1 billion expense credit = $8 billion. $8 billion x 60% = $4.8 billion to Players/$3.2 billion to NFL
$4.8 Billion is 53% of $9 billion, leaving the NFL a total of $4.2 billion, or 46%.
Now, some may argue that the expense credit shouldn’t count towards the owners revenue because the money covers costs, it doesn’t add to profits. But, on the other hand, if the expense credit helps cover expenses the owners would be obligated to pay even without the credit, how can you argue it doesn’t create more income or revenue for the owners?
[format] Of course, the fact that the revenue picture is made a little more clear doesn’t in and of itself mean that the CBA doesn’t need to change; the players do bring in the lionshare of the total revenue…maybe the owners need the money? Although if that is the case, the players probably aren’t willing to take player revenue back into the early 80′s, [/format]
[quotes]The NFL’s current proposal would keep the player’s percentage of TR at 58%, but importantly it would reduce the amount of money that is included in the definition of TR by 18%, to allow for certain additional expense deductions. These additional expenses would be on top of the already existing $1.0 billion in expense deductions. If the 18% expense deduction were applied to the 2008 league year revenues it would result in an additional expense credit of more than $1.3 billion. The obvious effect of this 18% expense deduction is that the players would get the same percentage of a much smaller revenue pie. Instead of each dollar of Total Revenue being included in the cap calculation, only 82 cents of each Total Revenue dollar would be included. That translates into an 18% reduction in the total amount of money included in the cap. (via the NFLPA)[/quotes]
Tricky, no? Adding more money to the expense credit will decrease the “total revenue” pie. Therefore, offering the players the same percentage-share of total revenue isn’t really that much of a deal, according to the players. But what if the NFL not only needs that money, but could also, according to past decisions, wisely invest that money and increase revenue? The NFL’s response outlines two points: 1. Owners believe that expenses have risen faster than revenue, hence a change to the CBA is needed. 2. Player revenue has nearly doubled in the last decade because the clubs made wise investments (I assume primarily through the usage of expense credit funds).
[format] So why does the increased expenses argument hold no weight? The NFL won’t show their numbers. [/format]
If the NFL’s main argument is that expenses have increased faster than revenues, wouldn’t it make sense that they’d show the players, their agreement partners, that their teams are losing money? Especially when the players would likely be skeptical of team losses when team salary caps are tied into projected total revenues and the salary cap has continued to increase every year? If in 2008, the owners believed the CBA was bad enough that they needed to opt out due to rising player costs, why did the salary cap increase by more than $12 million in 2009, in part because player costs fell below the 59.5% trigger percentage in 2008?
[format] As to the point of prudent NFL investments? While I’m sure that the NFL has made some very wise decisions regarding the NFL (the creation of NFL.com, for example), are those investments “wise enough” that the players should give up a portion of their revenue…especially without knowing whether or not the owners are actually in need of the revenue in the first place? [/format]
At the end of the day, its not a dispute of whether or not the players need to take a pay cut, or greedy billionaires vs. millionaires or vice versa — you never get to argue that point if all of the numbers aren’t on the table.