There is alot of talk being generated here at MHR about the ongoing Labor Talks and the new Collective Bargaining Agreement that is set to expire at the end of the 2010 NFL season. I thought I would begin to inform the members about what is going on and open a little discussion on this subject. I have quite a bit of information to pass along, so I decided to break it up into three posts. It will be a Past, Present, and Future look of sorts and I hope to break it down enough to keep it interesting and somewhat concise. Now to begin.The Collective Bargaining Agreement, which ushered in free agency and the salary cap, was signed in 1993 and was subsequently extended five times under the leadership of late NFLPA Executive Director Gene Upshaw and former NFL Commissioner Paul Tagliabue.
In March 2006, the NFL owners and the NFL Players Association agreed to an extension of the CBA. Faced with a severely limiting salary cap of $94.5 million in 2006 and the loss of the salary cap in 2007, an accord was reached.
The two sides worked on an extension for nearly two years. This extension let the salary cap rise to $102 million for the 2006 season, and $109 million for 2007. It also extended the maximum prorating period for signing bonuses to 5 years in 2006, and 6 years in 2007, and then returning to 5 years again in 2008.
The 2006 deal included an opt-out provision, one that could be exercised by either side, and the owners last year chose that option to void the final two years of the pact, which was to run through the 2012 season.
The top-earning teams were making it difficult for the lower-earning teams to keep pace with the salary cap. So a revenue sharing program was installed.
Money goes into a pool of what is called "total football revenue" in the CBA. Regardless of how much each franchise makes, all of the money counts toward TFR with the players receiving 59%.
This system has three tiers. The top 5 revenue teams would each pay the highest share into the revenue sharing pool, teams 6-10 would each pay the middle share, and teams 11-15 would each pay the lowest share. The lower 17 teams would then split the revenue pool. This has caused resentment among the owners who are forced to share.
The Main issue, as always, is money and how it’s divvied up. The owners believe they're not getting a large enough slice of the pie, as they pay out soaring player salaries and fund their pricey new stadiums. Although annual league revenue totals more than $7 billion, the NFL has stated the CBA called for teams to spend almost $4.5 billion this year. The need for new stadiums has forced them to dig into their own pockets for building and upkeep while the players have profited from the additional revenue. Combine that with the impact on advertising and sponsorship caused by the poor economy, owners are worried about how they can maintain an acceptable profit while paying the players 59% of the pie. From the players’ aspect, all the talk about renegotiating the CBA smacks of the owners asking the players to solve the revenue-sharing problems, and that simply won't fly.
NFL Commissioner Roger Goodell has acknowledged that the NFL and its owners failed to foresee the economic issues that would face the league when the last CBA was approved. In fact, most teams are having trouble maximizing the cap. As a result, 15 of the NFL’s 32 teams were at least $10 million under the salary cap.
While there are indications that ticket sales for 2009 are off for some teams, the league recently signed a two-year television extension through 2013 that is reported to contain increases of from 3% to 5%. The players, who currently receive 60 percent of most league revenue, feel they should continue to reap the benefits of rising franchise values.
The NFLPA and the owners have met twice in the past two months to negotiate a new deal, but Smith has said that the meetings have not featured much substantive progress.
Will the NFL and the NFLPA reach a new agreement in time to stave off an uncapped 2010 season? It’s too early to tell. Now it is up to new NFLPA Director DeMaurice Smith and Commissioner Roger Goodell to figure out the future of the League.
In Part 2 of this series, we will take a look at The Issues and then follow up with a discussion of an Uncapped Year scenario. Stay tuned.