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NFL Headed Towards no Salary Cap, Less Shared Revenue

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As we enter the final month of Salary Cap football in the NFL for what may be a short or long while, there is a new development. The NFL, which has many partners, has informed its most important partner, the NFLPA (union) that once the calendar turns to the 2010 NFL League Year in March, the Supplemental Revenue Sharing (SRS) program that helps the lower revenue clubs will cease.

What Happened?

Let's review. In March 2006 NFL ownership approved a new CBA. The dominant discussion of the day was not what the players were getting, but rather the SRS between ownership. The late Gene Upshaw, the union chief at the time, relied on the owners' preoccupation with the SRS to allow the labor part of the deal to quietly sail through.

The SRS takes money from the top 15 revenue-producing teams and distributes it among the lower tier of teams (nine teams received funding last season). The SRS amounts have been a nominal slice of overall league revenues of $6.5 billion yet responsible for distribution of over $100 million per year as teams struggle to find new revenue streams and fund new stadiums.

Meanwhile, as mentioned above, the new CBA passed by a 30-2 vote by ownership. The two -- Mike Brown of the Bengals and Ralph Wilson of the Bills -- were seen as voices in the wilderness at the time but soon became the prevailing sentiment as ownership exercised an early opt-out in May of 2008 to terminate the present CBA following the 2010 season. And, as per the document, the last year of the CBA --2010 -- will operate without a Salary Cap.

And, apparently, without the SRS program, as the NFL ties the end of the revenue sharing program to the end of the Salary Cap. The union disagrees with that timing and has appealed to the Special Master - the person in charge of interpreting CBA issues -- to determine whether the league can tie the SRS to the Salary Cap or lack thereof. The union maintains they are separate issues.

What no SRS Means

Why is the union so concerned about continuing the SRS? That $100 million dispersed to those teams could be spent, in theory, on players. As NFLPA executive George Attalah told the AP, "Revenue sharing helps maintain the 'any-given Sunday' dynamic in the NFL."

That, of course, is in theory. The union should be more concerned about where that money is being spent, not whether the teams are getting it or not.

While there is a mandatory minimum in Cap spending for each team -- around $108 million this season -- there is no mandate for teams to spend any designated percentage of revenues on players. There has been no strings attached designating SRS money to be spent on football players as opposed to other uses.

No Cap, Less Spending?

The prospect of no Salary Cap in the NFL next year is less about teams engaging in extravagant spending on players than about teams not doing enough spending on players. This is the biggest issue facing the union today. Without a Cap there is no minimum; without a minimum there is the possibility that a number of teams could use next year to recover from previous bad decisions, an economy-induced downturn in suite and sponsor sales and mounting debt service.

NFL to MLB?

Were that to happen football could look more like baseball from a player spending point of view. The disparities in team payroll announced last week in baseball were eye opening, as the Yankees had a payroll exceeding $200 million while the Pirates hovered around $30 million!

This enormous disparity is only possible without a Cap. The NFL -- with a $128 million Salary Cap this season -- has a spread from high to low of around $40 million, less than a quarter of the gap between the high and low in baseball.

Absent a Cap and SRS that spread will likely grow. While there may be a couple of NFL owners that spend liberally without the restraint of a Cap, it appears more likely that there will be a larger number of owners that will pull back on spending.

All Part of the Negotiation

The removal of the SRS illustrates a bargaining strategy to continue to point out to the union the negative effects of not having a CBA next year. The league negotiators have appeared completely unfazed by the prospect of operating without a Salary Cap and are now ready to pull the plug on a plan that would theoretically provide lower revenue teams more funding to buy players. The league is putting itself in a leveraged position to try and forge a better deal.

The Problem

And what is the problem with the deal they have now? Simply, the NFL believes that player costs -- mandated by a floor and ceiling of a Salary Cap that has risen geometrically in the last five years -- are significantly outpacing club revenues and operating costs of running an NFL franchise. The league wants the union to share the risk. To that, the union says, "Show me your books!" and then the quagmire starts anew.

Where will this go?

I am asked these questions often: Do I think there will be a new CBA negotiated by the end of the 2009 season? No. Do I think there will be a new CBA negotiated by the start of the 2010 League Year in March? Better question. Do I think there will be a new CBA by 2011, a year where all bets are off? I am cautiously optimistic that there will, yes.

The pulling of the plug on the SRS by the NFL is one play of many perhaps the biggest game of any played prior to next season, a season where the NFL could look a lot different than it does now.

 

Follow Andrew Brandt on Twitter: www.twitter.com/adbrandt