NFL Labor Mess: Open Forum With DeMaurice Smith Raises Questions, Lessens Hope

Yesterday afternoon I was fortunate enough to be part of a conference call with NFL Commissioner Roger Goodell, NFL Lead Negotiator Jeff Pash and about a dozen other SBNation football bloggers.  Much of the rhetoric was the same as the conversation I had with Broncos' President Joe Ellis last weekend.  As many of you said then, it would be nice to get a view form the other side.  I completely agree.  That chance came Friday morning when NFLPA President DeMaurice Smith and NFL linebacker Takeo Spikes took the time to sit down with the same group that spoke with Roger Goodell and Jeff Pash yesterday.  Perhaps, I thought, it would answer some questions and tie up some loose ends - even offer a glimmer of hope that a deal could get done.

Unfortunately the result was more questions and less hope. There is a deep divide between the NFL and the NFLPA - yes, I know the NFLPA is no more, but for ease of conversation I am going to loosely use the term for now.

I want to focus on a topic that De Smith focused on for, I'd say, 80% of the 35 minutes he spent talking with us.  Smith clearly wanted to get a message out there and he wanted to focus on, what he calls, the 'worst deal in sports history'. Specifically, Smith wanted to break down the specifics of the first two years of the NFL's proposal. This is where things get interesting:

Smith describes the proposal this way:

The NFL's deal would have been a 10-year deal. That is the first unassailable fact.

Second unassailable fact: the NFL wanted us to take this deal without offering any audited financial statements of the teams so that we could understand the true financial picture of the NFL. That is unassailable fact number two.

Unassailable fact number three: the NFL made their presentation on the last day of mediation, where they knew that the players union had to notify the courts by 5:30 about whether it was going to take advantage of its option to renounce.

Before I go through the numbers, my guess is that when you spoke to Pash, my guess is he didn't lead off with those three unassailable facts. He's smart enough not to forget them. The reason why number one is critically important, number two is critically important, and number three is critically important, is right now I just want to run through the economic effects of the first two years of the deal alone. Not the last eight, just the first two.

Still with me?  Basically Smith is saying that the NFL's proposal was non-negotiable.  Take it ALL or leave it ALL.  This goes against what the NFL has said was a starting point, not a 'take-it-or-leave-it' proposal.

Now we get into the numbers.  Smith focuses on the first two years of the proposal, and oddly targets the salary cap.  It gets interesting now.  First, Smith outlines what 2011 would look like under to recently-expired system:

In 2011, if we would have stuck with basically the same fifth-fifty split of all revenue, in 2011, revenue would be projected at $10.2 billion. Keeping that fifty-fifty split of all revenue, the cap would be approximately $155 million. That's assuming only a five percent growth of all revenue.

Let's not get too technical; the league has been averaging about eight to nine percent growth per year, but for the sake of argument, let's just assume that football going forward isn't as popular as it's been for the last 50 years. Let's just assume only a five growth instead of an eight percent growth.

The cap in 2011 would be $155 million. The cap under the league's proposal would be $141 million. That's a decrease of $14 million. Times 32 teams. I think you come up with $448 million in year one. Again, remember the three things we started with: the first year check that the players are writing to the richest men in the world is $448 million in year one.

Under year one of the league's deal, the players are writing a check to the owners of $448 million. Our share of all revenue before the ink is dry on that deal now drops to 45% of all revenue. Last year we were at 48.9%. We've had a fifty-fifty split of all revenue with the NFL since approximately 1991. 60% is after they take their billion off the top. Once you include all revenue, it's been a fifty-fifty split since about 1991.

STOP!  WAIT!! HOLD ON!!!

Ok, first of all, I found it interesting that Smith focused on the salary CAP.  You see, the CAP is a hypothetical number, really.  It is the MAX a team can spend.  How many teams actually spend to the cap??  While hard to tell for sure, It appears that, in 2009 - the final year of the cap system - 17-of-32 teams were OVER $5 million UNDER the cap.  Six of those teams were over $10 million under the cap.You can see the flaw in Smith's thinking - even if he was trying to 'dumb-down' his economics for us bloggers.  He speaks as though the players would be writing a check for $448 million if the Cap was reduced from $155 million to $141 million.  That simply isn't true because over half the teams in the NFL weren't spending to the cap anyway!

Just to give you an idea how the recently expired CBA affected the Salary Cap, look at these numbers:

2005: $85.5 million

2006: $102 million(New CBA deal signed in March 2006)

2007: $109 million

2008: $116.7 million

2009: $128 million

You see what is happening.  Of course, those numbers are based on 59.5% of total revenue AFTER $1 billion is taken off the top(about $31 million per team)  PRIOR to 2006, the equation was a bit harder - something called Defined Gross Revenue - which was limited to TV money, ticket sales and NFL merchandise sales.  The CBA signed in 2006 added revenue streams such as naming rights and local advertising.  The results are easy to see.

So, we've seen that cap, and we've heard what De Smith had to say about the NFL proposal and what it would do to the cap.  We've also shown that a majority of NFL teams aren't spending to the cap anyway, so Smith's assertion that the players would be 'writing a check' for $448 million in year one is completely flawed.  What should the focus be?

SALARY FLOOR

The salary floor - calculated annually using the salary cap number - is MUCH MORE IMPORTANT to the players.  Or should be.  It is the MINIMUM AMOUNT a team HAS to spend on players.  In short, it keeps NFL teams from becoming the Pittsburgh Pirates or Kansas City Royals.  Taking revenue sharing money and putting it directly into their pockets instead of investing it back into the team.

Let's look at 2009 again - the final year of the Cap.  2010, remember, was uncapped.  We'll get to 2010 in a second.

In 2009, the salary cap was $128 million.  The floor, according to this was $111 million, or about 86.7% of the cap.  In the NFL's proposal to the Union on March 11, they guaranteed the Cap Floor to remain at 90% for the first three years of the deal.  That is an additional 3.5% - real money - going back to the players.  In 2009, that would have been around $4.5 million per team.

So while the NFL was proposing a lower cap, the were meeting the players in between by offering to raise the salary floor.

A perfect scenario?  No, it still meant the player were giving money back, and you can see some reasons why the owners would want to get a bit of a refund by looking at the Salary Cap numbers above.

Let's look at 2010.  This is important because of the pending litigation.  If Judge Nelson rules in favor of the players on April 6 and slaps an injunction on the Lockout, the NFL is likely to appeal.  Chances are, however, that Nelson's ruling will be upheld - federal rulings aren't overturned very often.  That means we would play 2011 under 2010 rules.  No cap.

On paper you would think no cap would benefit the players.  In a lot of ways it does not.  Teams do not pay for player benefits, for instance.  That equals about $10 million in savings, according to Smith, per team:

In the uncapped year in 2010, you all understand that the NFL took $10 million from the players for each team. In the uncapped year, the NFL did not pay benefits to the players. In the uncapped year, there were unfunded benefits of $10 million per team. $10 million per team in the uncapped year. So the owners stuffed $10 million per team in their pockets in the uncapped year.

The other disadvantage to the players?  No Salary Cap means no Salary floor.  That means teams could spend whatever they wanted - as much or AS LITTLE - and guess what happened.

On March 5, 2010, only one team - the Washington Redskins - were at the $111 million minimum in place in 2009.  Only four teams - the Dallas Cowboys, Minnesota Vikings, Seattle Seahawks and Redskins - were over the $100 million mark.  Teams began trimming player costs.

There were also four teams that spent under the $100 million mark:

Six more teams, including the Broncos, were under the $111 million floor from 2009.  That means - in real dollars - the uncapped season - compared to 2009 - cost the players about $120 million.

It all begs to question - what are the players hoping to get out of litigation?

Again, the proposal the NFL laid out - a 2011 Cap of $141 million - would be a $13 million increase from 2009.  The salary floor would also rise, from $111 million in 2009 to 126.9 million.  So what's the issue?  Why is this the worst deal in sports history?

There would be some player give back.  But not as much as Smith proposes($448 million).  If Smith's cap numbers are correct, and the cap in 2011 would be $155 million, the salary floor, using the old 86.7% figure, would be $134 million.  Approximately $7 million less per team, or, $239.5 million.

But remember - the NFL also offered the following in their proposal:

  • $82 million to retired players in 2011-2012
  • Current players could remain in current medical plan for life
  • Most importantly, they offered to accept the NFLPA's proposed Salary Cap of $161 million per club

STOP! WAIT!! HOLD ON!!!

Read the third bullet point.  The $161 million salary cap in 2014 - 3 years from now - is only $6 million HIGHER than what Smith says the cap would be in 2011??  HUH?

The Cap rose an AVERAGE of $10 million per year from 2005-2009.  How could it only grow a TOTAL of $6 million over the next four years?

Again, I'm not a smart man, but it just doesn't add up to me.

I'm not saying that the NFL's proposal was perfect.  What I am saying, however, is I've talked to Joe Ellis, who was 'in the room'.  I've talked to Roger Goodell and Jeff Pash, who were 'in the room', and I've talked to DeMaurice Smith, who was 'in the room', and I've come away with the belief that Smith wants this in court.  He's a lawyer and he wants to litigate, and not necessarily because all the facts are on his side, but in a courtroom, as well all know, it isn't ALWAYS about the fact - it's about who can present their argument better and I have NO DOUBT that Smith believes he is the better litigator.

There is anger and resentment on the side of the players that the owner's opted out of the last CBA, and about the television deal.  Smith talked in length today about the NFL's 'Decision Tree, which he claims is proof the NFL wanted the TV deal to be 'lockout insurance':

So now if you go back to early 2009, before I've been elected, the owners have opted out of the deal, they've notified everybody that they intend to not renew the CBA under the same situations, and now you have an internal NFL document that nobody was supposed to see.

It was supposed to be kept silent and kept quiet and kept in the dark. At just about the same time that I'm sending Roger Goodell letters to engage in good faith negotiation, at virtually the same time two months earlier, you're looking at an internal document where the central focus, the central question they are raising about the new TV contracts is that circle in the middle.

So at a time when we are thinking about how to engage in good faith negotiations, they're thinking about how to game the TV contracts to do just the opposite. If you look under that circle that you just read - I apologize, I don't have it in front of me - if you look right under that circle, my recollection is there's a line that says key factors, and my recollection that is the first key factor.

The first key factor for them even before I was elected was cash needs during a lockout that only they can impose. So now you know why they did what they did on the last day of mediation, at a time when they knew that we had to notify the court with our intentions about whether we'd renounced.

Smith is angry.  In my opinion, and it came across this way to me today, he has taken this personal - something you can never do in negotiations.  He continued focus on the TV deal - even after a court of law sided with his argument - is an example of the type of grudge Smith - and by extension, the players - can hold, making a deal nearly impossible to get done.

There is a lot to digest here.  I have mixed the words of DeMaurice Smith with my own opinion and information that was released by the NFL regarding their proposal.  I leave it for you to decide, but there are two very different men at the helm of this labor dispute.  One appears cool, calm and collected.  The other, aggressive and adversarial.  It's not a good mix - whether it is public perception, the mediation room or the court room.

Like I said at the top - more questions, less hope.

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