The NFL CBA: Costly Future Effects?
Wednesday, March 15, 2006
The NFL CBA: Costly Future Effects?
After two postponements, New Year's Day finally arrived in the National Football League.
With the passing of midnight on Friday, the sounds of crunching cleats and shuffling dollars could be heard throughout the weekend as players began their annual migration from one owner to another. Fans could again imbibe in the festivities of the NFL's Hot Stove League, secure in the peaceful accord hammered out between owners and the NFLPA on Wednesday. But now that the first weekend has passed, let us sober up and take stock in what was gained and what was lost.
There were resolutions aplenty this year. Players sought a bigger piece of a bigger pie. Owners resolved to maintain financial control over their game in a way that other games cannot. The fans just want the engine of professional football to purr along to September. With these many resolutions, something had to give, so why not New Year's Day itself?
Unlike most of us who cannot simply erase the first squares on the new calendar until we're ready to start that diet or exercise program, NFL Commissioner Paul Tagliabue and NFLPA Executive Director Gene Upshaw moved the start of their new year from square to square like another game piece on their real-life Monopoly board. At stake was more than just the $320 million difference in their proposals. The entire system of parity that sets the NFL apart from other professional team sports was quivering at its foundation.
Ratification of the NFLPA proposal would laser-level an already even playing field. Teams would divvy most local revenue sources Ã¢â‚¬â€ the ones dreamed up by resident MBAs in Apprentice-like brainstorming sessions Ã¢â‚¬â€ with both players and other owners. Businessmen like Daniel Snyder and Bob Kraft would toss the revenues they leverage from stadium naming rights and logo branding into a pot where Ralph Wilson and Michael Brown await with ladles in hand. It is the epitome of socialism in sports.
Rejection of the NFLPA proposal would create an immediate depression as teams scramble to comply with a $94.5 million cap holding ownership in its chokehold. Then this chastity belt of the purse would be unlocked in 2007. Free market forces would initiate a recovery the likes of which this league has never seen. Major League Baseball's plagues would be set upon the NFL as eager players await the incarnation of George Steinbrenner from within their sacrosanct walls. Capitalism unfettered would have its field day.
We all know by now how the owners capitulated to the players. Most analysts said it was their turn anyway after Gene Upshaw played Ned Beatty's character in the NFLPA's 2002 remake of Deliverance. By a vote of 30-2, they handed the players 59.5% of total revenues, consoling themselves in the half-point discount off Upshaw's original resolution that the percentage shall start with a "6."
So, the gain is money. Plenty of it. Right from the private vaults of the 15 most enterprising teams standing on the cutting edge in terms of leveraging team identity and stadium assets. Enough money to drive the salary cap from last year's $85.5 million to $102 million in 2006 and $109 million the year after. Enough money to arm revenue-light franchises and to feed the egos of players who were on the cusp of substantial pay cuts or the unemployment line. Either would be their fate under the $94.5 million cap going into effect without owner concessions.
The system is already at work in Cleveland, where the Browns used Other People's Money to snag LeCharles Bentley, Kevin Shaffer, and Joe Jurevicius on Saturday, then Ted Washington and Dave Zastudil on Sunday. In Indianapolis, the have-not Colts couldn't spend OPM fast enough. Edgerrin James, stripped of any loyalty, moved on to Arizona, leaving owner James Irsay the unique distinction of being outbid by William Bidwell.
Parity and the strength of competition seem to be preserved through 2011, so what was lost?
NFL owners, especially the top 15, were on the wrong side of this New Year's ledger. They lost face, they lost profits, and they lost solidarity.
The final vote itself cast aspersions on their quizzical states of mind. Ralph Wilson and Michael Brown, as lone dissenters, were squarely among the 17 have-nots who figure to reap in local revenue sharing where they did not sow. These two are the last bastion of vanity in the NFL, foregoing lucrative naming rights for the pleasure of seeing their surnames on the faÃƒÂ§ade each Sunday. Now they will accept as consolation for their defeat a piece of Gillette's and FedEx's and Alltel's annuities.
In ratifying this collective bargaining agreement extension, owners may have mollified economic differences, but they did not quell the civil war rising in their ranks. By sapping the resources of its entrepreneurial faction, this CBA has pulled the drain plug on their drive, as well. Rather than setting performance standards and financial metrics to which all must endeavor, this agreement hands less-visionary owners the fish rather than the proverbial fishing pole. The true losses accruing must be tallied over the next six years as revenue streams are dammed and fewer fish become available for distribution.
Jonathan Kraft said it best in an interview given Friday morning. The Harvard Business School grad and vice chairman of the New England Patriots, whose team has grown from last to among the top in revenue generation under his family's control, was on his way into Gillette Stadium for another day of work after 72 sleepless hours in negotiations. Radio talk show hosts taunted him by conjuring images of Ralph Wilson in pajamas heading into bed.
He chuckled and asked for the next question. For the time being, he kept on course for Gillette.
Re: The NFL CBA: Costly Future Effects?
Early signings illustrate CBA extension's impact
By Pat Kirwan
NFL.com Senior Analyst
(March 15, 2006) -- It is clear that the CBA extension was the best thing to happen for the NFL players and clubs, but after four days of free agency, it is time to think about what almost happened.
Had the sides failed to reach an agreement, then next year would have been an uncapped year, and all potential free agents with four or five years of experience were going to be restricted instead of unrestricted. That was a big pressure point that would have made lots of young, talented football players unhappy.
The proof of just how critical of a "trigger" that restriction on free agency would have been is the signings in free agency so far this year. When I took a look only at the players who went to new clubs, the four- and five-year players dominated the player movement.
Take a look at this chart after four days of free-agent movement:
YEARS OF EXPERIENCE VS # OF PLAYERS SIGNED TO NEW CLUBS
3 1 (trade)
As you can see, the trend in the NFL is to sign young, rising stars, which is significantly different than how teams treated free agency back in the late 1990s. Fifty-four players have changed teams in four days, and almost 60 percent of them (32) would not have been unrestricted free agents had the CBA extension talks failed.
Does anyone think Will Witherspoon, Antwaan Randle El, LeCharles Bentley or David Givens -- to name only a few -- of the four-year veterans who became rich overnight would be smiling a year from now if their home clubs still controlled them?
The next reality of how well the players have it with the new CBA is the number of five- and six-year contracts being signed now that there is a CBA.
Had the league and the union not worked out the deal, then bonuses could be prorated over only four years. I'm pretty sure with little cap space and a short prorating period, the signing bonuses would have been much smaller.
For example, Bentley got a six-year deal with an $8.25 million signing bonus and a $3 million roster bonus. Without the new CBA, the signing bonus could be spread out for only four years, so the yearly cap hit would have been over $2 million a year for the signing bonus alone. Instead, it is now $1.375 million per year. That is a difference of close to $700,000 of cap space on one contract. Compound that by seven or eight free agents and seven draft picks, and most clubs would have been forced to pass on most of they players they would have needed, and the most players wouldn't have gotten the guaranteed money they sought.
If I told you a year ago that it would take $27.5 million to sign Ron Dayne, Bart Scott, L.J. Shelton, Ben Leber and Brian Williams, you would have told me I was crazy. Dayne was cut by the Giants and was a backup in Denver, Scott came off the bench to replace an injured Ray Lewis, Leber lost his job to Shawne Merriman, and Williams lost his starting corner spot to Fred Smoot. But they all got bonuses this March that added up to $27.5 million. There would have been no chance of that happening had the CBA been put on the shelf.