Traces of a Deal?
As the optimistic drumbeat continues towards eventual resolution of the long-running labor dispute between the NFL Owners and Players, we are starting to hear reports of proposed deal points about what may be part of a settlement of Brady v. NFL and an eventual Collective Bargaining Agreement (CBA).
I am optimistic but cautiously so. Again, until everything is agreed to, nothing is agreed to. However, there appears to be some momentum.
As first reported by my colleague at ESPN and someone trusted by both Owners and Players -- Chris Mortensen -- there are proposed deal terms being discussed that reflect key issues analyzed in this space in recent months.
The negotiating team for the Owners presented the basic deal terms to the full membership yesterday in Chicago, with a goal of taking a positive response to a meeting with the Players outside of Boston today. The following details have started to emerge. Let’s take a look.
Revenue split
While the Players have maintained their position for a 50/50 split of all NFL revenues – simplifying the math and setting aside discussions of credits, set-offs, expenses, etc. – the Owners’ offer has steadily climbed from a percentage in the low forties to a present offer of approximately 48%. These two percentage points may end up being the crux of this two-year negotiation, an amount worth $200 million this year and perhaps as much as $400 million by the end of the deal.
Using a present revenue total of $9.3 billion, 48% of that number would result in a Player allocation of $4.464 billion or a team Cap starting in 2011 of just under $140 million. The key would be how much of that number is allocated to salaries and how much to benefits. My sense is the player cost allocation may be around $121 million per team with the other $19-20 million toward benefits.
The Cap and its formulas and allocations are explained here.
As I have said for a year, the revenue split is the issue from which all others flow. It appears to be headed towards a 52/48 split between the Owners and Players.
Downside/Upside
Within the ultimate question of “Who gets how much?” to be “fair” in future years, there must be downside and upside protection.
In the CBA that expired in March, there was a mechanism called the Cash Adjustment Mechanism (CAM) which credited or debited future team Caps depending on whether Player spending exceeded or fell short of certain thresholds. In most years, the CAM adjustment was an addition to future Caps, meaning there was less spending on players than the established threshold.
I explained the CAM mechanism here when almost $5 million was added to each team’s Cap in 2009 due to it being the last Capped year.
Owners and Players are talking about a similar mechanism now that protects both sides through a formula similar to CAM. With this formula, it is expected that the Player share of revenue will not dip below 46.5% during the life of the CBA.
Cash Minimum
I have always felt that – for the Players – this is the most important issue of all. Having managed an NFL Salary Cap for nine years, I am well aware that a Cap can be molded and massaged to show whatever a team wants to show. Cap minimums can be reached using various mechanisms that eat up a team’s Cap while providing an excuse to agents and players not to spend.
Cash is king to Players. In March, the Owners offered a 90% cash minimum, which I thought was the most meaningful part of their offer. They have reportedly raised that offer to 95% or even higher. Were I advising Players, I would try to push that Cash minimum as close to 100% as possible.
I would think this potential concession may be receiving the most resistance among ownership.
This would reward teams with solid front offices and savvy “pay as you go” Cap management. With the Packers, I always tried to match our cash spending with our Cap, paying as we went rather than racking up potentially large future “dead money”. That style of management will be rewarded with the proposed new system.
Free agency
ICONThe Colts will not lose Manning if Franchise tags continue.
Unrestricted free agency is expected to return to the requirement of four years in the NFL – and an expiring contract – rather than last year’s six-year requirement.
If true, there will be a glut of free agents in a frenzied shopping period; not a good thing for 2011 free agents as it will be a buyer’s market.
Franchise tags are expected to remain, as the NFLPA will not make a big issue of something that affects 10-15 players per year. This would ensure that Peyton Manning stays a Colt and Jim Irsay and Bill Polian need not enroll in witness protection.
Rookie Pay
We know players at the top of the Draft will be sacrificed. The riches of franchise-killing players such as Ryan Leaf and JaMarcus Russell will never embarrass owners again and Sam Bradford will be the last bonus baby.
Issues still remain between the two sides in addressing the length of first-round deals, guarantee levels and potential upside in rookie contracts.
18-game season
Despite the strong negative reaction from Players, this issue will hang around the periphery of the new agreement, with a potential ETA of 2014 or 2015, when a good percentage of players currently in the NFL are no longer part of the league.
New television package
With Owners looking under every rock for new revenue streams, it was only a matter of time for this to happen. In recent years, Owners have allowed sponsor inventory to include liquor, lotteries and training camp practice jersey patches, previously unavailable for inventory of sponsors.
The biggest revenue stream of all, of course, is broadcast. With rights fees soaring (see Olympics/Comcast), the possibility of opening up another package for bidding has Owners salivating. Now the Players can share the riches, as they will receive their designated share of what is to be an extremely lucrative 16-game Thursday night package starting in 2014 (after the current deals expire). The NFL Network will likely remain part of the package but certainly not all of it.
Ironically, with the NFL having been scolded by Judge Doty on the negotiation of television contracts for lockout funding – Doty is standing down while the two sides negotiate – it may be the inclusion of the negotiation of another television contract negotiation that helps resolve the lockout.
Stadium funding
Owners have used the lack of public appetite for stadium funding as a major reason why their profitability numbers have declined. The Players have accepted that concern to some extent, willing to allow some credits from their Cap for new stadiums to come online.
Retirees
After the infighting between different groups purportedly representing former players, there will be an enlarged pot of money – with funding from both sides – for this group, especially players that retired before 1993 when benefits increased considerably.
It is noteworthy that Carl Eller was in attendance at the Owners’ meeting with his proposed settlement including the creation of a neutral retiree organization.
Judicial oversight
Owners are dead set on ending the oversight of the Minnesota court system, the province of Judge Doty and now Judge Nelson. Both sides have warmed to mediator Arthur Boylan, who is both in the negotiations and keeping the Eighth Circuit and Judge Doty at bay from ruling while the talks continue. Boylan may well have a continuing role in the new CBA.
There are obviously more issues to discuss and wrangle over. I look forward to breaking down all of the deal when it is an actual deal rather than a proposed one.
Hope floats, although we’ll keep a lifeguard around, as it can still sink with these fragile negotiations.