Closing Shot: Trying To Keep Up

Owners were able to reach agreement on a deal 15 years ago that prevented fracturing among the ranks.getty images

Fifteen years ago this month, NFL owners were in a position that seems foreign by today’s standards: fighting amongst themselves over revenue distribution, with fraught battle lines drawn between high-revenue and low-revenue clubs.

The NFL had tried to minimize those dynamics through equal sharing of broadcast rights fees since the earliest days of television. But the 2006 collective-bargaining agreement, tilted heavily to players, had put smaller clubs in a tough place and fostered division within the ownership ranks.

In short, the revenue-sharing deal with the NFLPA at the time created perverse incentives. When big-market teams generated new revenue — by building stadiums or striking big new sponsorships — it then raised the salary cap, forcing other teams to increase payroll spending whether  or not their top line grew.

The ultimate solution wouldn’t come until the next union deal in 2011, but owners needed to find a stopgap sooner than that. Heading into the 2007 offseason, it was not clear if owners could agree on a deal. Without consensus, they’d send it to Commissioner Roger Goodell for a unilateral decision. Goodell was just six months into the job.

“We have to get the room back,” New England Patriots owner Robert Kraft told the Boston Globe at the time. “I think in this last labor negotiation, there was a lot of division from within. And a lot of fracturing, and I think we have to work very hard to bring it together.”

The eventual policy created a pool of $430 million over four years, funded by the top 15 clubs by revenue, to be distributed to the bottom 15 clubs by revenue. It passed 30-2 (Cincinnati’s Mike Brown and Jacksonville’s Wayne Weaver dissented; Brown objected on philosophical grounds against subsidies and Weaver because it didn’t include 2010 and 2011). As proof that it was a good compromise, then Houston Texans owner Bob McNair said, “Nobody is happy.”

In practice, the deal is nearly forgotten today. Substantial exceptions ended up minimizing the practical effect of the agreement, said Frank Hawkins, former NFL senior vice president of business affairs, cutting subsidies for teams playing in new stadiums or those with gate revenue under 90% of the league average.

But Marc Ganis, the longtime adviser to league executives and some owners, said it accomplished a critical political goal: It unified owners heading into the next union talks, which ended with a far better system for determining what money would go to salaries and what wouldn’t. That eliminated some perverse incentives to growth and created labor peace.

“There have been milestones that led to this balanced approach, and [the 2007 owners deal] was a meaningful one,” Ganis said.

Today, the NFL continues to equally split national media and sponsorship revenue as it has for decades, but no team draws on supplemental revenue sharing from other clubs.

“Fortunately for the league, in 2011 they got a CBA that made the whole revenue sharing issue moot,” said Hawkins. “Because it was a really goofy system with a lot of embedded bad incentives, just because the nature of how it was adopted. And fortunately, they didn’t have to live with it for a particularly long term.”