NFL Players Association executive director DeMaurice Smith has a problem with the owners' demand for an additional $1 billion a year of the revenue at a time owners admit they are making money. By Smith's estimation, it's a decision that could cost the players $7 billion.
However, there is a solution:
Smith and the players should give the owners the money.
But make them earn it.
As the NFL grows from what is currently a $9 billion business to what it hopes will be $20 billion in the next 10 to 12 years, there are plenty of creative ways for the owners and players to solve what has become a two-year stare down regarding the CBA that ultimately threatens to hurt the momentum the league has built.
In fact, it's a largely idiotic stare down driven by a bunch of owners who have never gone through labor strife (16 of 32 owners weren't in the NFL in 1987 when the league last had a work stoppage) and a group of players who also don't know that pain (no current players were active and some weren't even alive in 1987).
In short, as the clock ticks toward the March 3 deadline for a new CBA, both sides need to realize one thing: It's time to stop posturing over who has the power in this relationship. An attempt by either side to exercise power will ultimately lead the league down a damaging path.
Here are some ways to solve the problem:
An incentive plan
Here's how the players and owners currently split the $9 billion the league grosses:
The first $1 billion is given to owners.
The remaining $8 billion is then divided with 60 percent ($4.8 billion currently) going to players and 40 percent to owners ($3.2 billion currently).
The end result is that players get $4.8 billion and owners get $4.2 billion.
What owners have been asking players for over the past two years is another $1 billion off the top to offset expenses to "grow the game," as owners and league executives like to put it. It's nice talk, but the request is patently unreasonable, particularly if the owners aren't willing to open their books and demonstrate some type of economic distress.
Moreover, if Smith advised the players to accept such a cut without a reinvestment of some fashion, he'd be committing career suicide.
But there is another way.
For instance (and this is a very broad, general idea), if the two sides flipped the percentages over the next $5 billion that the NFL were to generate, owners would get 60 percent ($3 billion) and players would get 40 percent ($2 billion). After reaching that first $5 billion threshold, the percentages would reverse again at the $14 billion mark over the next $5 billion, players getting 60 percent and owners getting 40 percent.
By the end of the agreement (whenever the NFL hits approximately $19 billion in gross revenue), players would be making $9.8 billion and owners would get $9.2 billion. Most important for the owners would be the ability to change the immediate cash flow to help deal with the need to "grow the game," as they continue to contend is necessary.
The reaction of one team executive to this idea was telling.
"Have you been talking to people in the room?" said Green Bay Packers president Mark Murphy, who leads the one team that is publicly owned and also has been in the recent talks between owners and players. "The idea of phasing in the expenses is something that has been discussed, but we're a long way from answering that part of it."
On Feb. 3, Smith expressed reticence at the idea of taking less from future money unless the owners are willing to open their books. Still, at the end of this plan, players would be getting roughly the same percentage they are now.
Or look at it this way: Even if the NFL doesn't grow by more than $5 billion for a long period of time, an additional $2 billion to the players' share of the revenues is a huge gain. It goes a long way toward not only increasing salaries, but adding even more to the benefits for current and retired players.
To put it another way, the salary cap for each team was $127 million in 2009. By adding $2 billion to the players' side only, the cap could be as high as $180 million. Based on the growth pattern of the NFL, that could easily happen in five to seven years.
As for the league, NFL attorney and lead negotiator Jeff Pash said owners would be open to discussing such ideas.
"You have to be open to anything," Pash said. "The question is, after you run the numbers, where are you?"
There are other reasons the players should agree to give the owners 60 percent of the next $5 billion. As part of that agreement, players should get, among other things:
• An assurance that the floor for salary cap spending be set at something close to 90 percent or more, with that floor being in hard-dollar spending. That would prevent teams from manipulating the cap too much to save money.
• A limit on rookie contracts, under a wage-scale system, of three years (in an 18-game system) or four years (in a 16-game format). Furthermore, the players should demand that the league get rid of restricted free agency. The importance of shorter contracts for young players and no restricted free agency is that top players would get paid faster. For example, Atlanta Falcons quarterback Matt Ryan(notes), Baltimore Ravens quarterback Joe Flacco(notes) and Miami Dolphins offensive tackle Jake Long(notes) would potentially be free agents now or would have been able to sign new contracts by now to get out of a wage-scale system.
Likewise, lower-round picks (such as St. Louis Rams center Jason Brown(notes), a fourth-round pick by the Ravens in 2005, or New Orleans Saints guard Carl Nicks(notes), a fifth-rounder in 2008) would get paid faster. Currently, the disproportionate difference between what first-round picks and lower-round selections get in guaranteed money causes huge ripple effects.
"If you're a fifth- or sixth-rounder, you can never make up the difference, especially if you sign an extension after the third year and that's hard to turn down," agent Tom Condon said. "You might be a $7 or $8 million a year player, but if you only made $1 million over your first three years and they're offering you $5 million a year, there's a lot of pressure to take that deal."
• Limit the ability of owners to use the "franchise" tag on a player to two years, at most. In return, the players could allow teams to have more franchise tags to protect clubs from losing players quickly.
From an owners' perspective, there may be some reticence with phasing in the $1 billion shift because they don't make as much money in the short term. However, this agreement would give them a strong incentive to grow the game quickly, which is in the realm of possibility. For instance, the amount of revenue in the NFL grew from approximately $7.5 billion in 2006 to $8.8 billion in 2009, at a time the rest of the economy was in a down-spiral.
Kick-starting that growth for the owners would be the expansion of the regular season to 18 games, which the NFL has estimated will increase revenue by at least $500 million in the first year. That expansion is expected to include two bye weeks, essentially making the regular season 20 weeks long rather than 17 weeks currently, two sources said.
In addition, the league is hoping to expand the season to conclude on President's Day weekend, according to those sources. That would add to the travel appeal of the game for families and, as a result, for the host cities. More games overseas and perhaps putting a team in London to tap the European market – ideas that have been openly floated – would be other ways to increase revenue.
Ultimately, an agreement in the near future would provide peace with the players and keep the owners from perhaps ending up in court against the players, a place where the owners consistently lose, particularly when it comes to player freedom.
The root problem
Of course, this all assumes that what owners are really concerned with is growing the game and not just trying to line their pockets with additional money.
Or, worse, simply trying to show the players who is in charge. One of the concerns by some owners is that there are a few in their brethren who are more concerned with gaining the upper hand after the players got the best of the 2006 negotiations.
"There are some owners out there who didn't like how the last round went," one league executive said. "You're talking about some smart business people who felt like they were beaten at what they do best … there are some hard feelings about that."
One of the prime examples has been Carolina Panthers owner Jerry Richardson, who has been leading the call for owners to "take back our game," as he said during a firebrand speech at the league's three-day meeting in March 2010. According to multiple sources, Richardson's anger is an outgrowth of having to get an agreement from the NFLPA in 2007 to upgrade his stadium.
There are other examples of the problems between the owners and the players. Simply put, there are some people on the owners' side who have no understanding of the art of negotiation. And even more, there's more a tone by owners of dictating terms opposed to finding a middle ground.
While Pash said during the days leading up to the Super Bowl last week that the goal was to have an agreement "that both sides could be happy with," other statements contradict that sentiment. When another member of the NFL's negotiating team was asked recently how Smith and the union could possibly accept a $1 billion cut in revenue and claim victory, the response featured a startling lack of understanding of good negotiating.
"He's protecting his players' W-2s," the NFL source said in a harsh tone. Simply protecting wages in a business that's making money can hardly be considered victory.
Likewise, players need to understand that owners are faced with some high-risk expenditures in coming years. For example, the league is hoping to have at least two new stadiums built in California over the next five years: one in the Bay Area and the other in either Los Angeles or San Diego. In addition, Minnesota is hoping to build a new stadium and Miami is hoping to upgrade its current facility. Given the lack of public funding available in almost every city, a large portion of the investment will have to come from the league.
Finally, and most importantly, NFL owners will likely never be able to solve one of the biggest problems they face: The ability to share all revenue. Currently, owners share TV and ticket revenue, but other revenue from items such as naming rights is not shared. Throw on top of that that some owners have better stadium deals than others (the Cincinnati Bengals get almost every dollar from a stadium that was publicly funded while the Minnesota Vikings get next to nothing) and you have drastically unequal situations.
It has led to huge resentment between high-revenue owners (Jerry Jones of Dallas, for example) and low-revenue owners (Zygi Wilf of Minnesota, for example).
Or as one union source said: "What the owners want is for the players to solve their revenue-sharing problem. The owners can't agree on how to split the profits, but they all can agree to take the money from the players."
Indeed, but if both sides are clever and willing, there's even a way to solve that.