|Read more about how MLS is poised to capitalize on the financial difficulties facing the Big Four sports leagues here.|
The NFL and its Player’s Association have had pretty good labor relations since the 1987 NFL players’ strike. The last NFL collective bargaining agreement, which was struck in 2006, was the cherry on top of over twenty years of NFL football without a labor stoppage.
But with the 2006 CBA expiring after after the 2010 season, the NFL is facing the real possibility of a lockout. Such a lockout would occur at the start of the 2011 free agency period.
The NFL had revenue of approximately $6.3 billion in 2007.
The 2006 CBA increased the salary cap from $85.5 million per team in 2005 to approximately $123 million per team in 2009. The NFL salary cap requires teams to spend at least $86.4 million in salaries.
The 2006 CBA has decreased NFL profits from about 10 percent each year to only 4 percent. The NFL’s 2006 CBA increased the players take from 55.5 percent of NFL revenues to 60 percent. That’s down from a record high of 69% in 1993 (the last uncapped year).
Most of the NFL’s revenue comes from its national TV contracts. One of the main reasons why NFL owners want a new/different CBA is that small market teams feel that they are at a significant disadvantage revenue-wise to the large market teams.
Problems for Small Market Teams
The difference between high revenue and low revenue teams is the result of local radio contracts, local sponsorship dollars and signage in stadiums.
Revenue differences between large and small markets are significant enough that Louisiana had to give a $186.5 million bailout to the New Orleans Saints in 2001 in order to keep the team in New Orleans through 2010.
taxpayers were responsible for funding 87 percent of the stadium. That makes Lucas Oil Stadium the most heavily taxpayer-subsidized stadium in the country.
Colts owner Jim Irsay was able to cover his 13 percent portion of the cost when he sold the naming rights to the Lucas Oil company for $120 million. Taxpayers also picked up the tab for the $48 million cost of breaking the lease on the RCA Dome.
Under the terms of the deal, the city is paying $70 million still owed on the RCA Dome, nearly the same amount originally owed when it was built.
And yet, even after all that, the new stadium may already be in need of a bailout.
Even the big market teams may have reached their revenue ceilings in the current market. The Giants, moving into a new stadium in 2010, have been unable to sell nearly 4,000 season tickets (out of 9,300) in their club sections. The PSL’s are just too high. About half of the 200-plus suites have been sold.
These tickets remain unsold even though the Giants have a 140,000 person season ticket waiting list.
NFL Owners Have Already Opted Out of the CBA
The 2006 CBA was designed to be in place through the 2012 season but gave both the NFL and the NFLPA an option to shorten the deal. Last May, the owners unanimously voted to opt out of the deal after the 2010 season.
The 2010 NFL season will now be played with no salary cap. At first glance, this seems to be a good deal for the players. But there are enough restrictions in the CBA however that its possible that many owners may decide to totally rein in spending in 2010. While there is no salary cap in 2010, there is also no spending floor. There are also significant restrictions on free agency that season which make it unlikely that any 2009 playoff team will be able to significantly improve themselves.
In the 2010 uncapped season it will be difficult for a team like the Redskins to buy a Super Bowl.
The Owners Have Lockout Insurance
The NFL’s new television rights agreement with DirecTV will pay them $1 billion per year from 2011 through 2014.
Even if games are not played in 2011, the NFL’s deal with DirecTV calls for the league to be paid the billion-dollar rights fee. That’s approximately $31 million per team to tide them over through a lockout. The NFL has debt limits of $120 million per team.
There is no reason to believe that the NFL players will be any more successful at holding out than their NBA bretheren. NFL careers are quite short. The league is filled with players in their first through fifth years. The fifth round draft choice doesn’t see a big payday until probably his fourth or fifth season. Until then, he’s not exactly struggling, but he also doesn’t have a $30 million guaranteed contract.
If the NFL locks out the players, the NFL will win.