Shortly before NFL owners approved a new six-year labor deal last Wednesday, the scene at the Grand Hyatt hotel at Dallas/Fort Worth International Airport became almost surreal.
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Old-line owners like Davis worried that the new
guard didn’t appreciate league history. |
The league’s discussions had run so long that Commissioner Paul Tagliabue temporarily found himself without a place to work. The room he was using as a makeshift office had been reserved by another company, forcing the league to find him a new space.
Team owners who hadn’t expected to still be in Dallas Wednesday night were being asked to clear out of their rooms because guests with previous reservations were coming in.
And more than a dozen reporters not only found their workspace taken over by another group, but found themselves trying to work on a major story while a technology research company held a cocktail party in the same room.
The chaos was a fitting end to two years of on-again, but mostly off-again, debate among NFL owners about revenue sharing and a new collective-bargaining agreement. Two years filled with enough disagreement that, in the end, with financial chaos looming literally minutes away, the league found itself signing a labor deal that owners clearly thought was too rich, and that leaves high-revenue teams forking over a lot more money in player and revenue-sharing costs than they ever expected to.
“This will really make us make some adjustments in how we operate,” said Dallas Cowboys owner Jerry Jones. “The proposal from the union was a mean mother.”
Two factors drove the so-called high-revenue teams to cave in.
First, the NFL Players Association astutely made revenue sharing a condition of reaching a new labor deal. The union not only didn’t want to see a baseball-like financial disparity among teams, but it also recognized that the league was far from unified on the issue. The union also understood that massive revenue sharing among teams was necessary for some of them to afford the higher payrolls.
Secondly, the teams spent so much time trying to solve revenue-sharing last year that, by the time it turned to the labor question, much of the leverage in negotiations seemingly had shifted to the union.
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Wilson (left) and Jones debated in public. “We
don’t see eye to eye,” Wilson said. |
Deadlines were suddenly approaching that would make accounting for the salary cap difficult, and thus make free agency a mess. And with an uncapped year looming in 2007, the last year of the current collective-bargaining agreement, owners became increasingly frantic to get a deal done.
“For whatever reason,” said Jeffrey Kessler, the NFLPA’s outside legal counsel, “perhaps because resolving revenue sharing was so painful, the owners almost put themselves into a state of denial.”
A new deal
The new agreement will give the players an average of 59.5 percent of NFL revenue, which is expected to be about $6 billion next season. The deal gives the players 59 percent in 2006 and 2007, 59.5 percent in 2008 and 2009, and 60 percent in 2010 and 2011.
The deal also eliminates one of the aspects of the now defunct CBA that caused so much aggravation. Had the current CBA remained in place for another season, teams would have been able to prorate bonuses over four years in 2006, because the deal only allowed amortization two years past the CBA expiration. This was critical because teams wanted to be able to spread bonuses over more years to minimize salary cap hits. A $20 million bonus over four years carries a $5 million a year cap hit, whereas over five years the charge falls to $4 million.
In the new CBA, five years is the minimum prorated period. As with the current deal, the new CBA has a time bomb at the end: The 2011 league year would be uncapped without a renewal.
The other news was the $850 million to $900 million committed in new revenue sharing in the deal. The top 15 teams, to varying degrees, will provide for the rest.
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“This will really make us make some adjustments in how we
operate. The proposal from the union was a mean mother.”
Jerry Jones |
Where that money will come from is still coming together. In the early years, one source said, the league will have to borrow money. But to do that, the league must designate certain revenue as collateral to secure the debt. In the later years, Jones talked about the possibility of digital revenue funding the obligation.
Already, about 80 percent of all revenue that the teams do not pay the players is equally shared, such as the money coming from national media and sponsorship deals. An additional $40 million annually has been given to needy clubs, an amount the new revenue sharing will dwarf.
Teams whose player salaries cost more than 65 percent of revenue are eligible for assistance. But the new levies on high-revenue teams, plus the salary costs, could mean that teams are no longer viewed as such a positive financial proposition, said Sal Galatioto, a sports investment banker.
“This will change the financial dynamics of the big-market teams significantly,” said Galatioto, who was troubled by the fact that the revenue-sharing plan does not account for debt incurred by teams to build stadiums. In other words, the costs associated with generating revenue are not discounted.
And Mark Ganis, a sports consultant with ties to several NFL clubs, worried that the financial disincentives for doing well would cause teams to pull back on their money-making operations. He predicted that several teams would operate closer to the salary floor, rather than near the salary cap.
“There is a greater possibility than ever before of unprofitable teams,” he said.
But both men agreed that, in the end, gaining labor peace was more important than the potential drawbacks, a sentiment echoed by Washington Redskins owner Daniel Snyder, who had been viewed as strongly opposed to additional revenue sharing.
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Tagliabue was among the many forced to scramble
for workspace when discussions ran long. In the end,
owners walked out of Dallas with an agreement that will
cost some of them more than they ever expected to pay. |
“We wanted to get this done for the sake of the league,” Snyder said. “This is big time tonight.”
The new guard
Indeed, if the new CBA signifies anything, it may be that a new generation of NFL owners has assumed the philosophical mantle of their predecessors, who preached revenue sharing and the interests of the league above the interests of the team.
And it was not just the high-revenue owner who made sacrifices. Even though lower-revenue teams will get substantially more money in the shared pool now, the system is not as they would have liked it. They wanted a system in which all local revenue would be shared, instead of just targeted subsidies to individual clubs, sources said.
“No one is clicking their heels over this deal,” said Atlanta Falcons owner Arthur Blank, whose team resides in the bottom half of the NFL in terms of revenue.
The newer owners, 16 of whom have entered the league since the CBA deal was struck in 1993, have paid large sums of money to buy their teams.
Before the vote, speculation raged that low-revenue teams were in a battle with high-revenue clubs. Rumors of lawsuits and grudges emerged, and many owners’ voices were hoarse after two days of arguing.
In the end, nine teams from across the spectrum crafted the revenue-sharing proposal that won the day, defying skeptics who said the old ways of the NFL were falling beneath a new breed of me-first owners.
Before the vote, longtime owners such as Al Davis of the Oakland Raiders and Ralph Wilson of the Buffalo Bills worried that their colleagues did not understand the historical fabric of the league. Davis, now using the assistance of a walker, said mournfully that Tagliabue’s was the only face he recognized in the room.
And Wilson, who joined the Bengals in voting against the package, said he no longer knew anyone, either. Pointing to a cameraman’s gear, he quipped, “I may as well go sit in that bag.” Later, Wilson said he voted against the deal because there was not enough time to review it and because he believed more revenue sharing was needed. In the end, he just couldn’t find himself in accord with the new guard.
Before the meeting, Wilson in front of reporters argued with Jones, who gently grasped the older man’s arm as they debated. They agreed to meet later, but never did. “We don’t see eye to eye,” Wilson said.
While that episode looked for a time like it could portend widespread divisions, it now appears to have been an anomaly.
“People have said there was a changing of the guard,” Galatioto said. “You know what? Yeah, it was tough. But there is a big pie and enough to go around.”
