Brad Causey
Brad Causey,
Editor and Publisher
R. Shannon Pollard
Kevin Sommers
David R. Wehry
James E. Foy
The Freedom Letter
NFL solution
It is March of 2011. The 2011 NFL season is in jeopardy. The owners have locked out the players. The union has decertified and is suing the league on antitrust grounds. Although the first regular season game is not scheduled until September, the "league year" usually begins in March. The beginning of the year results in free agency, roster bonuses and other elements of front office work. As it stands, with the exception of the draft in April, teams cannot release players, and they cannot trade or sign free-agents.
Let's see how we got here. The last strike or "work stoppage" in the NFL was 1987. After playing a few replacement games, the union folded and the real players finished out the season. In 1993 a new Collective Bargaining Agreement (CBA) was signed resulting in the current system of shared revenues and the salary cap. Since then the league has had unprecedented success. New stadiums have been built. Players and owners are making more money than ever, TV ratings are through the roof. Most objective observers think that professional football has replaced baseball as the true national pastime.
The current (or just expired) system works like this: The NFL does numerous things to achieve "parity."
Reverse order draft: The worst teams the previous season pick before the good ones.
The Salary cap: The salary cap is an accounting device to keep the large market/high revenue teams from bankrupting the small market teams. Each team has 53 players on the active roster, 7 on the practice squad. Using the salary cap, each team is provided a maximum they can spend on the active roster. Last year this was about $125 million dollars. This is an average of over $2 million dollars for each player. Unlike industrial unions, individual players and agents are allowed to negotiate as good a deal as they can, within the confines of the cap system. There are minimum salaries for individual players and overall minimum and maximum spending on player compensation for the team as a whole.
Free agency: Under the current agreement players become a restricted free agent after their 4th season, and unrestricted after their 5th. An unrestricted free agent can sign with any team without compensation to their former team. A restricted free agent can sign with another club, but their current team can match the offer and keep the player.
At present the NFL does not offer guaranteed contracts. This is unlike baseball where, once signed, the player gets the money regardless of whether he actually plays or performs as expected. In the National Football League, a team can cut you at any time and your salary ends that day. The only part of NFL contracts that is guaranteed is up-front money, better known as a signing bonus. This money, although paid all at once, is pro-rated over the life of the contract for cap purposes. If the player is cut before the end of the contract the bonus money counts against the cap immediately, and therefore reduces the amount available to other players.
The players are asking for better health care benefits, a partially funded retirement plan, and the status quo of the percent of defined league revenues they are currently receiving. The league is OK with the first two requests. However they want a reduction in the percent of revenue going to player salaries and also have proposed turning two pre-season games into regular season games therefore creating an 18 game schedule. As it is now there are "league revenues" and team revenues. The players this past season received 59% of league revenues. Basically "league revenues" are the sum of the ticket revenue, the TV contract and some merchandise sales. Merchandise is known as NFL Properties. Also at present the Patriots, the Cowboys, the Giants and the Redskins contribute more to the pool than the other 28 clubs. (They can afford it.) Some things not included in league revenues: Concessions, parking, local team advertising, radio, stadium revenue for events other than NFL games, and rental of luxury suites.
Teams have numerous expenses other than player salaries: Rent/or debt service on stadiums, salaries of coaches, trainers, medical staff and front office personnel. Utilities, travel expenses, practice facilities, etc. All businesses have a target percent of revenue they can afford to spend on labor. The percentage varies, dependent upon the market situation and industry. But whether or not you operate an airline, a convenience store, a machine shop or an sports franchise, labor expenses must have a limit. What is the correct percentage of revenue for NFL players? Not being privy to all the information the league and players have, I can only guess at some rational percentage. In my business experience, most labor percentages for hourly workers are somewhere between 25% and 35% of gross. Just like in football all businesses have expenses other than the workers. I am willing to admit that most fans do not buy tickets to see the owners or the coaches. They come to see the players. So, let's say that is worth substantially more than a normal business. How about 50%? Nice easy round number. 50% of what? Part of today's argument is what to base the percentage from. Total revenue? Defined league revenue? Should the percentage be different in Dallas and New York vs. Green Bay and New Orleans? If we accept the premise that parity is working since the last labor negotiation, then we should only tweak the current system not change it substantially.
The TV contract currently generates the majority of shared revenue. The current contract is as follows:
  ESPN: $ 1.1 Billion (Monday Night Football)
  NBC: $ 600 Million (Sunday Night Football)
  FOX: $ 712 Million (NFC regional games)
  CBS: $ 623 Million (AFC regional games)
These figures are each year! Wow! The total is $3,035,000,000.00. If my math is correct, that is a little more than $3 Billion every year just from television. Direct TV and Dish Network contribute another few million every year. Ticket revenue (the gate) generates another Billion dollars or so every year which the teams share equally. Last years salary cap was about $125,000,000.00 per team. Do the math; that is about $4 Billion dollars total. I don't know about you, but it is hard to feel sorry for an NFL player. They choose to play the game. Even the minimum salary is approximately 10 times what the average person makes. The rare players with special talents, such as Peyton Manning, make between $8 and 12 million a year under the current system. Regardless of league revenue, team revenue or whether you like specific individuals, such salaries cannot be rationally considered low. I would be happy to be on the practice squad of most teams. Even their pay is well beyond that of the average person.
This is my solution to the National Football League labor dispute:
Define league revenues as: TV contract, gate and some small percentage of NFL properties. Next year this will be in the $5 Billion range. Other revenues, regardless of size or type are not counted towards the salary cap. Per team, this is about $150 million each. This is not a static figure. It can go up and down over time dependent upon current revenues. Live with it!
Owners need to forget about the 18 game schedule. Football is a brutal sport. We do not need a longer season. Also, why not just forget 2 of the pre-season (exhibition) games entirely? Have two glorified practices before the regular season starts. One home, one away. And stop charging full price for the tickets!!! It is only a practice game!!! Be honest!
Get rid of most of the goofy OTA's. (Organized team activities) It is OK to have an off-season!! Increase team rosters to 55 players. How about 5 on the practice squad? Stop making teams expose their practice players to other teams via the waiver wire. You should be able to move players back and forth within your team without having the good ones snatched up by the competition.
Rookie contracts need to be restricted to no more than one half of what the highest veteran player makes on the same team at the same position. It is ridiculous to pay any rookie in excess of $50 million before he plays a single down. This would free up money for the veterans. Also a team should be given a cap discount for signing its own player. Maybe 10%? Along the same lines perhaps a point of negotiation can be the length of original contracts/free agency. One idea would be allowing the player to become a free agent after only 3 years.
In a perfect world, ticket and concession prices would be a lot lower. It is truly outrageous to spend over $100 for a seat in the upper deck. And then be gouged on the price of pizza and beer. What's next? Pay toilets? However, I am all for free enterprise. So, if we as a society continue to show up the games and buy the advertised products, then more power to them for taking advantage of the opportunity.
I love the NFL! I hope the owners and players can get beyond their current positions and get back to playing a great game. I am also hoping that this essay can, at least, be a starting point for the solution. Football anyone?
Comments Are Appreciated
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