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Volume 21 No. 1
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Would proposed split ease NFL’s revenue concerns?

If the NFL resolves its more than four-month-old lockout this week, players will earn between 46.5 percent and 48 percent of league revenue as part of a labor contract of up to 10 years, with some stadium cost credits depressing that share, sources said.

The core 2011 salary cap under discussion, before benefits, is about $120 million, with the grand total around $141 million, sources said, or the same amount the league proposed on March 11 when the players union decertified and then funded an antitrust lawsuit against the NFL and its 32 clubs.

“We’ve taken a significant setback as far as overall revenue,” New Orleans quarterback Drew Brees, one of the named plaintiffs in the antitrust case, Brady v. NFL, pending against the NFL, told a San Diego radio station last week. The union in early March proposed a $151 million cap.

Enough progress occurred last week that owners may vote Thursday on the emerging deal. "I hope we are getting near the end," Patriots owner Robert Kraft (above) said last week.
Late last week hurdles remained, like the system for paying rookies and how to dispose of the antitrust lawsuit. Enough progress has occurred that owners may vote Thursday in Atlanta on the emerging deal. Key players and owners are scheduled to meet Tuesday in Minnesota with the federal mediator, who has required that the participants who attend are empowered to settle the dispute.

“I hope we are getting near the end,” said Patriots owner Robert Kraft, unprompted, last Thursday as he stepped out of a black town car in front of the New York offices of league adviser Proskauer, where negotiations occurred.

The NFLPA did not respond for comment for this story and the NFL declined to comment.

Before the players decertified, the NFLPA offered a 50-50 division of revenue, which is approaching $10 billion and is expected to grow substantially in coming years. The players were receiving in the low 50 percent range of revenue. The league originally proposed in late 2009 significant cuts that lowered the share into the low 40 percent level, though the NFL had sweetened its offer by March. The percent in the potential new CBA fluctuates between 46.5 percent and 48 percent based on the league’s revenue in a particular year, the sources said.

The potential deal also includes some credits for pre-existing stadium debt costs that the NFLPA had previously approved as part of the league’s venue financing program, the sources said. And the league going forward could propose new offsets, such as exempting from revenue personal seat license income that finances a new stadium, but the NFLPA could veto each proposal, the sources said.

While the players look set to be earning no more than the sum that was on the table on March 11, there are elements that are more favorable to them in the potential deal. Teams must pay to at least 95 percent of the cap, sources said, whereas under the old CBA the floor was 85 percent. In the deal the players spurned on March 11, the proposed floor was 90 percent of the cap.

And the March 11 offer also blocked the players from sharing in excess revenue, perhaps the factor that most sparked the decertification and likely caused NFLPA Executive Director DeMaurice Smith to declare the NFL’s offer to be the worst in the history of pro sports.

The NFL structured the March 11 offer with predetermined caps calculated on projected revenue, with any excess revenue flowing wholly to the owners. The players insisted they should also share in excess revenue. The league contended the March 11 offer was negotiable, though the players viewed it is a take-it-or-leave-it proposition because the owners extended the terms 12 hours before the CBA expired and five hours before the union’s deadline to decertify.

The possible new deal is a simple split of revenue, so the players’ share automatically rises along with revenue. The old CBA shaved $1 billion in league revenue, with the remainder shared with players. The league then wanted more credits for costs such as stadium investment.

The NFL sought the givebacks to counter what it maintains are declining profit margins that endanger the owners’ wherewithal to invest in future growth.

So does this deal, if it passes, solve that issue?

To some extent, experts said, though low-revenue teams may still feel squeezed.

“If they move forward on this agreement it reverses the trend on profitability, but it does not get them back to where they were before 2006 [when the last CBA was extended],” said Marc Ganis, a sports consultant with close ties to NFL ownership. “They didn’t get their way.”

As a result, Ganis predicted low-revenue clubs will demand further supplemental revenue sharing. Many of these clubs spend under the cap, so while the overall cap declines with the new potential deal, they still might incur higher costs. The cap in 2009, the last year with one, hit $128 million per club, so the 85 percent floor lay at $110 million. If the 2011 cap is $120 million, and the new floor is 95 percent of the cap, that would set it at $114 million, an overall increase.

If the sides sign a deal, it’s unclear how some of the non-economic issues shake out. The league anticipates terminating federal judicial oversight of the league’s labor deal, in place since 1993, and it wants the antitrust case dropped immediately.

Counsel for the players want the lockout lifted while the antitrust case is class certified and then unwound over a period of months. That could then protect the right of players to decertify and file antitrust cases in the future.

There is also the matter of the looming decision from U.S. District Judge David Doty on how much to penalize the NFL for violating the old CBA in requiring broadcasters to pay their fees even in a lockout. The league contested his finding that the lockout fees violated the CBA. It is expected the players would drop that case as part of the potential umbrella settlement of the disputes.

The rookie wage scale also late last week remained an obstacle. While the sides agree the amount of money paid to rookies should decrease and the savings be passed on to veterans, the owners wanted rookie deals to stretch five years and the players wanted four. And the sides disagreed on how to fund increases in payments to retirees.