SBJ/March 20 - 26, 2006/This Weeks News

NFL owners to set revenue-sharing plan

NFL Commissioner Paul Tagliabue will appoint an eight-owner committee to decide how to dole out the up to $900 million in revenue sharing the league approved as part of the new collective-bargaining agreement.

While the league earlier this month announced that as part of the new labor deal the top 15 teams would subsidize the lower 17 to varying degrees, that money apparently will not be automatic for lower-revenue franchises struggling with the higher labor costs.

The committee will surely be tugged in different directions as high-revenue clubs want to see their downscale peers work more at generating extra money to qualify for the new program, while teams on the bottom want as few restrictions, or qualifiers, as possible on the bounty.

SBJ / SBD Online Poll*
Who would be the best successor to Paul Tagliabue upon his retirement?
Roger Goodell
(NFL Exec. VP & COO)
39.4%
Condoleezza Rice
(U.S. Secretary of State)
26.5%
Rich McKay
(Falcons President & GM)
17.8%
Steve Bornstein
(NFL Network President & CEO)
16.3%
* A nonscientific poll offering a snapshot of 411 readers' thoughts. Question was posted March 13-15 on sportsbusinessjournal.com and sportsbusinessdaily.com.
This could revive the debate over revenue disparity that has roiled the league the last two years, and which presumably had been put to rest, at least momentarily, by the CBA extension.

“The problem with qualifiers is teams all try hard to generate as much revenues as they can,” said Cincinnati Bengals owner Mike Brown, one of two owners to vote against the CBA. “They don’t get into trouble for lack of effort. They get into trouble because of the system.”

The committee will be composed of two owners from each of the 32-team league’s revenue quartiles, and if the group’s recommendation cannot win a super majority vote of the NFL’s owners, the commissioner is empowered to implement his own solution, sources said.

In Dallas, where the owners approved the CBA after two tumultuous days of meetings on March 7 and 8, several qualifiers were discussed. Among the concepts was denying revenue-sharing eligibility to a team during the first two years in a new stadium, as well as to a new owner.

The latter is a qualifier sure to be pushed hard by higher-revenue clubs. The problem they have is an owner using additional revenue-sharing money to help sell his or her club at a high price. So the idea would be for a prospective buyer to value the team minus revenue-sharing money. Of course, this means the franchise values of lower-revenue clubs could be modestly impaired.

A likely qualifier is one that already exists in the now-retired system, which distributed $40 million to needy clubs annually. Teams would need to be at least at 80 percent of the league average on ticket sales, or otherwise the revenue deficit would be assumed. In other words, if a team is $10 million short of the 80 percent threshold, that gap would be considered team revenue.

“The mood [in Dallas] was there should be qualifiers,” said John Jones, chief operating officer of the Green Bay Packers, which is ranked 10th in the league in revenue. Jones said he expected the commissioner to name the committee by next Monday’s annual league meeting, and for it to report back within six months.

One team source from a high-revenue club said that the qualifiers should include not just ticket income thresholds, but goals for all revenue categories, such as sponsorships.

The Bengals’ Brown has been criticized by high-revenue owners such as Jerry Jones of the Dallas Cowboys for declining to sell naming rights to his stadium. Instead, Brown’s late father Paul, the team’s founder, has his name on the venue.

Citing the local government’s ongoing lawsuit against his team, Brown declined to discuss his naming-rights situation. But he said half the league’s teams have no naming rights, in large part because the local corporate markets could not pay for it.

Seventeen of the league’s 32 teams have naming rights, though several more are planning to sell the rights soon in anticipation of moving into new stadiums.

Brown did want to clear one thing up. He said his relationship with Jones is good, and that contrary to media reports, the Cowboys owner during the Dallas meetings did not mockingly offer to buy the Bengals’ naming rights for $5 million a year because he thought he could easily resell it for twice that.

“I never heard it,” Brown said. Similarly, Jones of the Packers said he was in the meeting room the whole time and never heard the exchange.

Owners such as Brown on the bottom revenue level also say it is unfair to point out that they will be receiving revenue sharing without also emphasizing that the NFL’s stadium funding program will continue. Known as G3, the plan has funded or committed $773.5 million of stadium money, largely to high-revenue teams.

The plan was renewed as part of the new CBA, though there are changes to the plan that still need to be discussed among the owners.

“Details to be worked out,” a league spokesman said.


NFL revenue-sharing facts
League revenue is $6 billion.
The NFL agreed to a new labor deal with an average salary cap of 59.5 percent of this money through 2011.
Of the remaining money, the teams share about half equally, representing money from broadcast deals, and another 30 percent is subject to some form of revenue sharing, affecting such areas as ticket sales.
The remaining 20 percent is unshared, though the league as part of the collective-bargaining agreement significantly increased supplemental revenue sharing from an average of $40 million a year to up to $150 million a year.
Source: SportsBusiness Journal research

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