Union appeals to Special Master to keep program in place. Andrew Brandt
A Decision to Share Less
As we enter the final month of salary cap football in the NFL for what may be a short or long while, something happened this weekend that could shake the uneasy truce between the NFL and the NFL Players Association in their closed-door discussions over a new Collective Bargaining Agreement (CBA). The move has the potential to escalate a growing disparity between teams in their revenue, player costs and, in theory, success – or lack of it -- on the field.
The NFL, which has many partners, has informed its most important partner, the NFLPA (union), that once the calendar turns to the 2010 league year in March, the Supplemental Revenue Sharing (SRS) program that promotes competitive balance and helps the lower-revenue clubs will cease.
What happened?
Let’s review. On that fateful day in March 2006, when NFL ownership approved a new CBA, the dominant discussion of the day was not what the players were getting but rather the revenue sharing plan. The late Gene Upshaw, the NFLPA’s executive director at the time, relied on the owners’ preoccupation with the SRS while the labor part of the deal sailed through virtually unnoticed.
The SRS was passed to take money from the top 15 revenue-producing teams and distribute it among the lower tier of teams (nine received funding last season). Those SRS amounts have been a nominal slice of overall revenues yet are responsible for distribution of more than $100 million per year in propping up teams struggling to find new revenue streams and build new stadiums.
Meanwhile, the new CBA passed by a 30-2 vote of ownership. The two opposing votes -- Mike Brown of the Bengals and Ralph Wilson of the Bills -- were seen at the time as contrarian voices in the wilderness, but they soon became the majority opinion as owners exercised an early opt-out in May 2008, terminating the CBA following the 2010 season. And, as per the document, the last year of the CBA --2010 -- will operate without a salary cap.
And, apparently, without the SRS program -- although not without a fight. Immediately after the NFL informed the union that the SRS would be discontinued, the union appealed to the Special Master – the person in charge of interpreting CBA issues. The hearing, scheduled for Tuesday, will determine whether the league has the ability to tie the SRS to the salary cap, meaning neither would be applicable in 2010. The union maintains they are separate issues.
What no SRS means
Why is the union so concerned about continuing the SRS? It’s because that $100M that goes to the lower-revenue clubs can be spent, in theory, on players. It’s a mechanism, like the salary cap, to achieve competitive balance and ensure a system where everyone has a chance. As NFLPA executive George Attalah told the Associated Press, “Revenue sharing helps maintain the 'any given Sunday' dynamic in the NFL.”
That, of course, is in theory. While there is a mandatory minimum in cap spending for each team – around $108M this season -- there is no mandate for teams to spend a designated percentage of revenues on players. In other words, there are no strings attached to the SRS money that designate the money must be spent on players as opposed to other uses.
No cap, less spending?
As I’ve written, the prospect of no salary cap next year is less about teams engaging in profligate spending than about teams not doing enough spending. This is the biggest issue facing the players today. Without a cap, there is no minimum; without a minimum, there is the possibility that a number of teams could roll back next year, using the time to recover from previous bad decisions, a downturn in suite and sponsor sales resulting from the economy and their mounting debt service.
NFL to MLB?
Were that to happen, football could look more like baseball from a player spending point of view. The disparities in team payrolls announced last week were eye opening. While the Yankees had an average player salary of $7.66 million, the Pirates and Padres had average salaries of less than $1M! While the Yankees had a payroll exceeding $200M, the Pirates hovered around $30M!
This enormous disparity is only possible without a cap. The NFL – with a $128M cap this season – will have spending ranges for 2009 from a high of around $155M to a low of around $110M, a spread of about $40M, less than a quarter of the gap between the high and low in baseball.
Absent a cap and SRS, that spread will likely grow. While there may be a couple of NFL owners who spend liberally without the restraint of a cap, there may be another group of owners who will pull back. The payroll disparity will not be anywhere near that of baseball, but it will get bigger.
All part of the negotiation
The proposed elimination of the SRS is strategic. It illustrates an approach of continuing to point out to the union the ill effects of not having a deal in place before next year. The league negotiators have appeared completely unfazed by the prospect of operating without a salary cap and are now ready to pull the plug on a plan that would theoretically provide lower revenue teams more funding to buy players. The league is putting itself in a leveraged position to try and forge a better deal.
The problem
And what’s the problem with the deal they have now? Simply, the NFL believes that player costs – mandated by a floor and ceiling of a salary cap that has risen geometrically in the last five years – are significantly outpacing club revenues and operating costs of running an NFL franchise. The league wants the union to share the risk. To that, the union says, “Show us your books,” and then the quagmire starts anew.
Where will this go?
Tuesday’s decision by the Special Master will have some impact, but the slow negotiating pace of the meetings so far gives us no confidence that 2010 will be played with a salary cap, having all kinds of ramifications for player spending – or lack thereof – and thinning the free-agent pool considerably (more on that later this week).
I’m often asked these questions: Do I think there will be a new CBA negotiated by the end of the 2009 season? No. Do I think there will be a new CBA negotiated by the start of the 2010 league year in March? Better question. Do I think there will be a new CBA by 2011, a year when all bets are off? I’m cautiously optimistic that there will be, yes.
The pulling of the plug on the SRS by the NFL hit the union in the blind side. This is one play of many, perhaps the biggest game of any played prior to next season, when the NFL could look a lot different than it does now.
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Not a whole lot of good has happened under Goodell's watch so far.
Thanks for the important news Andrew. This is the first I've (we've) heard of the SRS being eliminated. This is a very important and interesting chess move by the owners and it is not being reported by any newspaper or blog I've read today.
Someone is keeping this quiet in the papers. Or maybe I'm wrong. But if it is being kept quiet, I wonder why, how it's kept quiet, and who benefits. ?
Thanks for the important news Andrew. This is the first I've (we've) heard of the SRS being eliminated. This is a very important and interesting chess move by the owners and it is not being reported by any newspaper or blog I've read today.
Someone is keeping this quiet in the papers. Or maybe I'm wrong. But if it is being kept quiet, I wonder why, how it's kept quiet, and who benefits. ?
Correction to my last post: all the media players picked up the story.....AP, NBC, etc. So there's no conspiracy.
Maybe it just sounds like "inside information" coming from Andrew.
Whatever. peace
Thanks for your take Andrew. Let me just say I'm not impressed with the new Commissioner. I know it's just a negotiating ploy, but his public take on expansion to Europe and an 18 game season make absolutely no sense. I know the players don't want either of those possibilities. If the NFL becomes like MLB with Jerry "Huck" Jones and Daniel Snyder becoming the George Steinbrenner's of the world with NO cap, then count me OUT as a fan. I need to work on my golf anyway.
While I don't agree with how the owners are adressing the problem, I can understand why they want to explore their options on a global level and why they are considering extending the season another week or two. Running an NFL team is the most expensive type of franchise to run in all of sports. On average they have the highest expenses in terms of player salaries, team equipment, coaching expenses, travel expenses, etc. Also consider that the NFL season is the shortest season of all professional sports. Including pre-season games, a franchise only has 10 home games to collect the money they need to run the franchise. Any other type of franchise has at leat 30+ home games to help pay the bills. That makes every NFL home game a must sell-out. Now think of the handful of franchises that are struggling to avoid blackouts because of poor attendance this season. I'm not trying to sell a sob story here for the multi-millionaire owners in the NFL but if I had to guess, half the teams in the league are probably loosing a ton of money this year.
That being said, I think it was a horrible idea for the owners to pull out of the current revenue sharing plan. I almost wonder if the more sucessful teams are cutting the strings on some of the weaker franchises hoping they will go under. It's an extreme idea but I wonder if we may be looking at the beginning stages of the league attempting to downsize. Once a few of the weaker teams drop of the map, this survival of the fittest approach would mean more money would go to each team if the owners reinstated a revenue sharing plan and it would improve the quality of play on the field. With less franchises means their are less roster spots available so only the best players make the 52 man roster.
I'm not saying I'm right, but it could happen.
Thanks for this interesting piece, Andrew. Something I don't understand: why would the owners AS A GROUP want to drop the SRS? I can see why the richer ones would want to, but equally the poorer ones would presumably be against it. Why (or how?) have the richer ones got their way on this?
On the other hand - if in fact they have no intention of going ahead with this change, and it's just a negotiating tactic, won't the union see through that?
Wow, how ironic that Ralph Wilson and Mike Brown were the first voices who started things on this trajectory. If I understand the article, doesn't that mean that they were, if effect, leading the charge to eliminate the SRS?
It's like watching the Sith rise to power. "We a new chancellor.. a STRONG chancellor."
I want to gag a bit when I hear that teams are trying to cut back on everything to make some profit. If so, why is this use of "throwback" uniforms become so popular? It can't be cheap to order new uniforms for 53 players to use for just one game. Buffalo does it and I believe the Bills are one of the teams in "dire" financial straits. Now I'm sure 53 uniforms aren't going to bust any team but it illustrates that many team are NOT looking for ways to cut spending in all areas. They continue to spend where they see fit.
I'd like someone to run a comparison evaluation. Say the current salary cap running $128M, with the average of the 32-teams being say $114M for 1696-players, equates to about $2.15M (average) per player. If you use the disparity model of baseball (considering the elimination of the SRS) the range for spending could be $40M-$155M, averaging $80M per team, the average salary per player drops to $1.5M. The perceived best of the best would be getting more money, but the rookies and vets (non-elite) salaries would be less. I believe you would also see a huge drop in early draft choice money (good bye J.Russell like numbers). Remember, that the whole reason the owners opted out, was they (the owners) wanted to make more money. JJones has set himself up pretty well with his new stadium, he will likely lord of the NFL for some time. The Vikings are likely to be the biggest loser in this, but as small as the dome may be, they still have trouble selling it out.
I'd like someone to run a comparison evaluation. Say the current salary cap running $128M, with the average of the 32-teams being say $114M for 1696-players, equates to about $2.15M (average) per player. If you use the disparity model of baseball (considering the elimination of the SRS) the range for spending could be $40M-$155M, averaging $80M per team, the average salary per player drops to $1.5M. The perceived best of the best would be getting more money, but the rookies and vets (non-elite) salaries would be less. I believe you would also see a huge drop in early draft choice money (good bye J.Russell like numbers). Remember, that the whole reason the owners opted out, was they (the owners) wanted to make more money. JJones has set himself up pretty well with his new stadium, he will likely lord of the NFL for some time. The Vikings are likely to be the biggest loser in this, but as small as the dome may be, they still have trouble selling it out.
Hopefully this is all posturing. If it is not ... Well, then you're hamstringing a third of the league, Mr. Goodell, which means roughly a third of NFL fans will become disinterested. If this is not mere posturing then Goodell and DeMaurice Smith are sending the message that the longevity of the league's success and financial health are unimportant. Of course, nether Goodell nor Smith would read this website or care what fans think.
The good news is that the UFL has been established. And although presently it is being billed as a secondary and/or developmental league, it will grow stronger and expand as the NFL collapses under the weight of this type of disaster. It's a shame. But, hey, that's business I guess.
"The Vikings are likely to be the biggest loser in this, but as small as the dome may be, they still have trouble selling it out. "
What makes you say this....the Vikings have not had a blackout in 12 years...
When the Green Bay Packers have to reimburse money to teams like the Minnesota Vikings, something needs to change. The Vikings spend money like drunken sailors, the Packers are conservative, so they should have to share revenue with the Vikings? The rest of the league should not have to fund teams that have made poor decisions, like the Vikings have. Former GM Mike Lynn is still getting the revenue from the sale of privates suites? NIce deal!
Someone is keeping this quiet in the papers. Or maybe I'm wrong. But if it is being kept quiet, I wonder why, how it's kept quiet, and who benefits. ?
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I think it was a horrible idea for the owners to pull out of the current revenue sharing plan
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Took me awhile to read all the comments, but I really love the article. It proved to be very helpful to me and I am sure to all the commenters here! It's always nice when you can not only be informed, but also engaged! I'm sure you had fun writing this article.
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Dec 07, 2009
01:28 PM
Doesn't it seem very contradictory for the NFL to look at expansion into European markets, including international travel, expansion into an 18-game season with an increased roster, at the same time that it's lower-revenue teams may have to adopt a frugal operation procedure? Come on, fix this Commish.
You got a lot of credit when you first became Commissioner (way too much credit in my opinion) because you were a disciplinarian. Don't let the NFL become bogged down in teams with more cash buying themselves success because they don't have the intellect and ability to get success the hard way.