FanPost

Just a thought from a random fan

Everyone wants to see football in the fall. The players need the salaries, the owners need the revenue, the fans need the entertainment, and many hardworking individuals need the extra income. Football has to happen. I believe it will, but still, this period of limbo absolutely sucks. I started thinking about possible solutions for the labor agreement. Now, I understand I am just a college kid with little understanding of the business side of this multi-billion dollar industry. But I did come up with a couple of ideas and I'm curious to see your thoughts as well. Who knows, maybe during his free time, Arthur Blank reads the Falcoholic for entertainment. Maybe he will get a few ideas from my comments and those by my fellow posters. Regardless, here are my ideas for the future of the NFL.

There are several key issues that are being discussed in the labor deal. They include season length, salaries, revenue sharing, financial information, and rookie salaries. I will try and discuss each of the issues individually and then give my overall opinion.

Season Length: 16 or 18 game season? That is the big question. Personally, I could care less which one is the end result. Some people believe an 18 game season would put less value in each of the games. Well, let's face it. This isn't college football. A team with six losses can win the Super Bowl. A team with more losses than wins can win an entire division. Each game has a lot of value, but I still struggle to believe six teams will completely separate themselves in each conference with the edition of two more games and make the end of the season meaningless (hence why baseball, incredibly, can have two teams tied after 162 games). I'm not opposed to the 18 game season, but I won't be disappointed if it remains a 16 game season either.

Salaries: This is incredibly dependent on the number of games in a season. If it goes up to 18 games, players believe (and deservedly so) that their salaries should increase as well. I don't believe there is much debate there. A different hot topic as far as salaries go is a salary cap. Owners don't want to pay ridiculous salaries. Players want as much money as possible. I feel like this can be addressed rather easily and let the market do the hard work. More on that later.

Revenue Sharing: Ah, yes. Who gets what percent of the cut. I believe I saw somewhere that the typical split is 60% to the players, 40% to the owners. I am shocked that everyone on a salary gets only fifty percent more than the one guy (or small group) who actually owns the team. It seems to me like the owners are making an exorbitant amount of money in comparison to the financial risk they are actually taking (consider the players risk their lives on every play, while the owners sit up in the luxury boxes sipping on a bottle of wine that costs more than most tickets in the stadium). I believe you can tell whose side I am on for this issue.

Financial Information: Ok, this issue baffles me. What exactly are owners scared of putting out in public? If they really believe that players need to cut $800 million dollars to prevent "dire financial circumstances," then open the books completely and show us. How about the owners consider looking at the books and seeing the number of people who will be negatively affected by their lockout? I believe over 3000 people work at every football game. They are losing a part of their income that they probably can't afford. If the owners are hiding something, they are probably trying to not look bad. To me, they look pretty bad right now, so I can't imagine seeing a few financial records would make them look much worse.

Rookie Salaries: Finally, something we can all agree on. Rookies make too much money. Sam Bradford was guaranteed more money than Peyton Manning? Are you kidding me? The owners complain that they need a bigger cut of the money because they are making huge financial risks. Dear owners, stop paying the rookies so damn much. No veteran wants to see some bratty kid come in and earn twice his salary. I'm not sure why this is an issue. Everyone seems to be in agreement on it.

So, now we get to my hypothetical scenario. I will attempt to make everyone happy and fulfill everyone's needs (ha fat chance, if a federal negotiator can't do it, there's no way I can do it. But I am a stubborn college student so I'm going to say it anyways). I say implement a rookie wage scale (shocker) to help protect the owners from the "dire financial circumstances" they apparently are dealing with. Also, the owners will provide all financial information. I'm not giving them any sympathy for their "tough financial struggles" with the lives they are living. Maybe when they start blowing their noses with toilet paper like I did for twelve years of grade school (tissues were a luxury donated by parents, t.p. was a much more value-friendly alternative) will I consider hearing their sad stories. Next, increase it to an 18 game season. Players, however, should be compensated for the increase in season length. Salaries increase 12.5% (or 1/8 of their current salary for those of you not willing to grab a calculator). There will be a soft salary cap with a luxury tax. If owners want to pay the extra money, they can get the extra players. If they don't want to pay the price, they won't sign the players. Market value is a great concept. If Peyton Manning wanted $50 million a year, he would be hard pressed to find a team willing to pay it. The value just isn't there. Instead his salary drops to a reasonable amount and he can get up to that $50 million through endorsements and those fantastic commercials he makes. Players will continue to earn a 60% cut of the revenue (they deserve it, I go to the games to watch Biermann make diving interceptions, not to watch Arthur Blank pace up and down the sidelines the last five minutes of the game). Now here is where I throw in my twist. Owners continue to make the same dollar amount as before. Based on a 40% cut of $9 billion in revenue, they get $3.6 billion. Let's do some quick math. $9 billion divided by 16 games equals $562.5 million per week. $562.5 million per week times 18 weeks equals $10.125 billion dollars a season. Players take a little over $6 billion (their 60%). Owners get their $3.6 billion (or approximately $112.5 million per owner). This totals to $9.675 billion. The remaining $450 million dollars? Put back into the community where it can help everyone. Owners get the tax write-off. They also get the good publicity they need to help resurrect their dying image they currently have. Too much of a struggle for the owners? Well, maybe they can pawn off one of those yachts they have. Or maybe pay a little bit less for the wine in their suites. If I am paying six dollars for a beer and $65 dollars for my seat in the upper corner of the stadium, I better not hear anything about margins not being met. This doesn't even consider the ridiculous amount of money that is spent with the tv contracts, ads, and sponsorships. 

Now, I understand this wouldn't solve all of the problems. This is also very player friendly (but let's be honest, do the owners really garner much sympathy? If you have a reason for me to shed a tear for them, please acknowledge it below in the comments). But it has several great points. One, it stops the ridiculous rookie contracts. They make too much money and everyone knows it. Two, it helps the community. There is no question the economic impact of losing an entire season would be catastrophic to everyone involved. But to be able to have the season AND reward the community with additional funds seems like a win/win to me. Finally, it allows us to have a football season in the fall. College football is great, but I really enjoy spending my Sunday afternoons watching my beloved Falcons take the field.

Well, there you have it. A few thoughts that crossed my mind. Feel free to critique, object, praise, or discuss down below. I know there is a lot I don't know, but I think we can learn a thing or two from each other. Keep your fingers crossed for a resolution sooner rather than later!

__________________________________________________________________________________________

I'm using this line to distinguish between my original post and my further research. I admit this is ridiculously complicated (hence why these lawyers are being paid oodles of money). Anything else you guys know, please feel free to post below. I am interested in learning as much as possible. I will again try and break this up again into separate sections again for ease of understanding.

What are the approximate percentages? Owners take $1 billion off the top to offset the fixed costs they incur. After that money is removed, players take approximately 60% of the remaining, owners getting 40%, in numbers from last year this breaks down into $4.8 billion to the players for salaries and incentives, $4.2 billion to the owners for their operating costs. If you look at the link to the article on bloggingtheboys, you can see the approximate percentages of total revenue that goes to the players.

What contributes to the total revenues? About 2/3 of the total revenue comes from the yearly tv contract deal. As the tv deals go up, so do player salaries in accordance with the percentages. NFL merchandise is also included in this. This includes official NFL jerseys, rights to games like Madden, etc. Ticket sales are split between the two competing teams with 60% going to the home team and 40% going to the away team. 

What revenue is not shared? This is where things get a little slimey. Box seats that are bought by corporations are not shared money. Some teams like the Cowboys are making their own official merchandise. That revenue is not shared. Money that is made on concessions is not shared. I believe most places typically outsource to anther company that is in charge of concessions. That company pays for all staffing and food costs. The teams would then receive gradually increasing percentages of profits. I'm unsure of how much the outsourcing fee would typically run, but this seems like a huge budget saver for owners if they don't have to pay the people at the registers for each game on their own. Sponsorships like stadium naming rights are not shared. However, they do contribute to to the overall total revenue. Hypothetically, say the Falcons build a new stadium and sell the naming rights for $32 million. The Falcons collect that $32 million, but the price floor in the NFL goes up $1 million, because of the increase in total revenue. We get $32 million in revenue and a mandated $1 million increase in team salary. The Bills earn nothing but their required team salary goes up $1 million. Fair? The link to bloggingtheboys also has the percentages that players receive of all revenues, not just total revenue. It makes a drastic difference when you consider this is billions of dollars.

What monitors player salaries? The NFL, until this past season, employed a salary cap. Teams could not pay above that amount. In an uncapped year, that went out the door. The NFL also operates at a price floor. This is an attempt to keep all teams competitive. In MLB, there is no price floor, so teams like the Marlins can have a team salary of 1/5 the Yankees, and still compete against each other? Sound fair? How about the fact that with revenue sharing in MLB, the Marlins have empty stadiums for every game, yet the owners are still making a profit. They are able to pocket that extra money if they would like. They are currently using that extra money to build a nicer stadium. But let's be honest here, do you go to the games to see the stadium, or watch the team compete? No matter how nice the stadium is, if the Pirates can't make the playoffs in my lifetime, I don't know if I would want to go to games (mad props to Pirates fans, you guys have been through hell and still support the team. You have my respect).

Basically, those are some of the main points I have discovered. My opinion? I don't love the revenue sharing from a business standpoint. If my team was making a lot of money by spending a lot of money, I wouldn't want to share it with teams who were struggling to make ends meet. However, as a fan of the game, I appreciate it because it allows the smaller guys to stay competitive. The biggest advantage I see is the price floor. This prevents owners from being cheap with salaries. No owners have a team salary 1/4 of the Cowboys, while both teams earn equal amounts from revenue sharing. I believe the price floor is a good thing for the game because it forces the owners to spend money to better their teams. This causes a discrepancy between my personality as a fan and my personality as a future businessman. I realize more and more that there is no easy answer to this problem.

Possibilities? Well, here are a few more ideas that popped into my head. I think having competing merchandise brands is a bad thing. I think the official NFL merchandise should change its practice. I don't know the current details very well, but I think a good outcome would be for teams to get a large percentage of the profits of their merchandise that goes in pocket, while a smaller percentage goes to the NFL to be dispersed in revenue sharing. I don't believe naming rights should go towards the total revenues of the league if it is not split. I also think the luxury boxes that are sold without contributing to the total revenue should become part of the shared revenue, since they are quite similar to tickets. A price floor needs to stay in place. It prevents teams with lower revenues from putting out a perennial loser and thriving off the revenue sharing. Like I said before, I am a fan of a soft cap with a luxury tax. It allows the team who wants to spend more that possibility, but it makes them pay extra for it. Here are some of the links I used. Big thanks to one.cool.customer at bloggingtheboys for his insightful article, Nick Bruner for his piece in the courtside post, and Mark Lawrence on his description of revenue sharing. Hope this was a little helpful for everyone.

http://www.courtsidepost.com/2010/02/15/imagining-the-nfl-without-revenue-sharing/

http://www.bloggingtheboys.com/2011/2/18/2000707/nfl-lockout-cba-2011-revenue-sharing

http://football.calsci.com/SalaryCap.html

<em>This FanPost was written by one of The Falcoholic's talented readers. It does not necessarily reflect the views of The Falcoholic.</em>

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