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When the NFL agreed to a new collective labour agreement with its players in the spring of 2006, many owners of both big-market and small-market clubs grumbled about the deal, albeit for different reasons.
Two years later, those feelings have apparently hardened, as the owners voted unanimously yesterday to opt out of the final two years of what was originally a seven-year deal through 2012.
Opting out early means there may be no salary cap in 2010, and a lockout may follow.
The owners' decision was no surprise to those who've been following their mood the past two years.
"The original sentiment among owners was that because of circumstances and issues they had among themselves, this was very much an interim kind of deal and something they would need to revisit," said Scott Rosner, who studies sports economics at the University of Pennsylvania's Wharton School. "You can live with the deal for a couple of years and see what it's like. Obviously, they've decided this is something they can't live with."
The current agreement guarantees 60 per cent of league revenue goes to the players. The owners are unhappy that the guarantee has helped increase the salary cap $31-million (all currency U.S.) in just three seasons, from $85-million in the final year of the former deal in 2005 to $116-million for 2008.
Though the NFL is prospering with annual revenues estimated to be more than $8-billion, its business model is in transition, mostly because of the financing and construction of new stadiums that have produced lucrative new local revenue streams.
For decades, almost all NFL revenue came from ticket sales and television, which was shared among club to put each on a relatively equal economic footing. However, some clubs built new stadiums that produced revenue that did not have to be shared with other franchises or the players, creating a divide between large-revenue and small-revenue clubs.
Two years ago, the players successfully bargained for a share of that local revenue from such things as luxury suites and naming rights. But large-revenue teams agreed to share only a small percentage of that revenue with small-revenue clubs, which put the squeeze on clubs such as the Buffalo Bills. That's part of the reason the Bills opted to move eight games over the next five years to Toronto.
"I don't think the NFL has any labour problems at all," said John Vrooman, a professor at Vanderbilt University who writes extensively on NFL economics. "At 60 [per cent of revenue], there's a lot of room for them to make money. But you've got the classic conundrum of a cartel. It only works as long as no one cheats on the cartel. And the only guys who haven't cheated in the NFL are the guys crying. Ultimately, [the wealthiest teams] will have to share some revenue with those teams because the guys at the bottom don't have any wiggle room.
"Part of the problem is more money is going to the players than they're used to," Vrooman added, "but [the wealthiest teams] are also squeezing their younger brother and the younger brother is screaming about it."
Not that clubs such as the New England Patriots, Denver Broncos and Washington Redskins don't have their own issues, upset that players are sharing in revenue created by the construction of their new stadiums without having to share in costs of financing them through debt.
"A lot of it has to do with the fact that owners are in the mood that when you build a stadium, you take on risk," Rosner said. "But the players share only in the upside, not the risk."
Also yesterday, the NFL raised the issue of reducing the pool of money paid to rookies, an issue that has been a hot topic for several years as unproven players at the top of the draft have been guaranteed tens of millions of dollars.
As well, the league is looking to find a way for teams to recoup signing bonuses from players who run afoul of the law, such as Atlanta Falcons quarterback Michael Vick.
One possibility as part of a new deal is reducing the exhibition season to three games from four, while adding a 17th regular-season game to the schedule.
"Now it's become more of a year-round business," NFL commissioner Roger Goodell said. "Athletes come in better prepared for the season both physically and mentally. Is it necessary to play four preseason games to get the players prepared to play in the regular season?"
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