Good Revenue Sharing Comments

[lde]

I think its funny that the rumor page has the only intelligent commentary, IMHO, on the revenue sharing I've seen in the press. Its very true. The high revenue teams have higher local cost. Sometimes much higher. Share the revenue across the board and they're in a bad situation. Still, the higher local costs are lower than the higher local revenue, but there ought to be something here.

From PFT

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POSTED 12:47 p.m. EST, March 3, 2006

GANG OF NINE MORE LIKE ELEVEN OR TWELVE

As the NFL attempts to work out a new labor contract, we're hearing that there are as many as 12 teams opposed to an expansion of revenue sharing.

Previously, NFLPA executive director Gene Upshaw said that nine teams are against the idea of an increase in the money that the 32 franchises currently divide. We've recently identified five teams as the drivers of the bus in this regard.

But when it's time to count votes on any firm proposal to expand revenue sharing, we're told that either 11 or 12 are poised to say no way, Jose'.

Only nine votes are needed to block any effort to push through a change, since 24 votes are necessary to impose new rules.

We're also told that the teams aligned against expanded revenue sharing have differing motivations. Some of them (such as the Giants, Jets, and 49ers) are concerned that expanded revenue sharing will make it harder to pay for a new stadium. Others are inclined to share revenues with teams that genuinely need help, and that are willing to try to grow revenues aggressively moving forward.

And others just don't want to share their money. Period.

BREAKING DOWN THE REVENUE DEBATE

Some of the teams that want expanded revenue sharing are framing the issue as one of "cost transfer." They argue that the high revenues earned by some teams are driving up the player costs by expanding the pot of money that will be used to determine the team-by-team salary cap.

Because the discussion centers on revenues instead of profits, it's far easier in our view for teams raking in less total money to cry about the disparity. But the simple truth is that the teams making more money usually have greater costs, too -- often as a result of their efforts to maximize their own revenue.

We've heard that, for example, while the Bengals are one of the teams complaining about the disparity in revenues, records produced in conjunction with the now-dismissed lawsuit filed against the team by Hamilton County, Ohio revealed that the Bengals are the most profitable franchise in the entire league.

The concern, then, is that those profits will be partially consumed by a salary cap number that is inflated by revenues generated by other teams. But many of those "richer" teams also have other costs that eat into their own profit margins. For example, the Bengals play in a free, publicly-funded stadium. They have huge profits on lower revenue because they don't have the same costs that many of the other teams face.

Countering the attempt at increased revenue sharing is the notion among some that the teams that haven't been able to capitalize on the unprecedented strength of the NFL brand should either get off their butts and do so -- or sell the franchise to someone who will.

As any team will explain when cutting a veteran player or firing a coach, football is a business. The problem, as we see it, is that some of these owners aren't applying that principle to themselves.

From what we can gather, some of the teams making the most money are indeed willing to help out the teams who aren't, if the owners of those teams are in turn willing to attempt to generate more revenues of their own. The thinking is that, if teams not realizing high revenues are doing little or nothing to help themselves, why should the more successful franchises subsidize them?

We sort of hate to say it, but we agree. Some of the teams that aren't earning less money might have valid excuses for their predicament, and thus might be entitled to a bigger piece of the total revenue pie. But if there's not firm evidence that the team is trying to come up with ways to earn more money, then the team shouldn't benefit from the labor, ingenuity, and financial risk of others.

Here's our suggestion (and then we'll shut up about it, for now) -- why not require any team that wants to increase its share of the revenue to: (1) demonstrate a quantitative need for it; and (2) commit to working with a league-level department aimed specifically at helping the teams identify new revenue streams and enhance existing ones?

Without both objective proof of a cash crunch and subjective proof of a willingness to do something about it, no team should be entitled to another penny of the 80 percent of revenues that already are shared.
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[Wp28]

This will go down as "the Snyder rule"

"CASH OVER CAP" A NEW TWIST IN CBA TALKS



A league source tells us that the NFL is asking the NFLPA to agree to a firm limit on "cash over cap" as part of the new CBA.



The term "cash over cap" refers to total player payments in a given year that exceed the salary cap for that year. Through devices like signing bonus prorations and incentives, teams have at times paid to players more actual dollars than the cap limit for that year, while at the same time staying under the cap.



The NFL now wants to rein in that practice, limiting the total cash payments in a given year to a set percentage above the salary cap for a given year.



In our view, this looks more like an effort to address one of the concerns raised by low-revenue teams regarding the extent to which the big-money teams can possibly disrupt competitive balance. Owners such as Dan Snyder of the Redskins can pour cash into players' pockets, spending dollars well in excess of the cap limit but staying under the cap for that year via the various available accounting devices.



We first heard the general concerns regarding the concept of "cash over cap" from Chris Mortensen of ESPN, who mentioned it on ESPN Radio this morning.

 

[lde]

This cash over cap thing is very interesting. It may be the thing to get to the heart of the problem without having a ton of bad consequences, especially if they made it like a tax. The high revenue clubs that use that money to pay for stadiums wouldnt pay it. The ones that use it for high bonuses would.

 

[Foxman]

Here is a followup or verification to the PFT post, from ESPN.com

Updated: March 3, 2006, 8:28 PM ET
'Cash over cap' creating gap among owners
Pasquarelli
By Len Pasquarelli
ESPN.com

Millions of words have been written and spoken in the past several days about the NFL's current labor situation, more of them devoted to empty rhetoric than to reality.

But as the two sides settled in Friday afternoon in New York to resume negotiations aimed at avoiding the kind of labor enmity that has so severely impacted other professional sports leagues, they did so with three little words taking on monumental importance.

As reported Friday morning by ESPN's Chris Mortensen, cash over cap, certainly a hot-button term for the NFL's lower-revenue franchises, has become a key issue in the labor debate. And it's certainly integral to any eventual resolution that successfully addresses the double-edged components currently keeping the league and the NFL Players Association from striking a deal.

That deal was not struck Friday, as the sides broke in the evening after meeting for much of the afternoon, with negotiations scheduled to resume at 10 a.m. Saturday. It is not known how much progress, if any, was made Friday. So tightly guarded were the Friday discussions that a few league owners actually phoned media members seeking news on the crucial negotiations.

It does appear that both sides, operating Friday with only three or four representatives each at the bargaining table, are prepared to go through the weekend in an attempt to bridge their differences.

In the simplest terms, cash over cap is essentially the difference between a team's true payroll and the NFL salary cap in a given season. Many of the league's high-revenue teams, but certainly not all of them, have a considerable advantage over the clubs occupying the low-revenue rungs in terms of cash over cap.

To understand the concept of cash over cap, one must understand that the salary cap is just a bookkeeping number, one that can be massaged by amortizing signing bonuses and with other mechanisms. The cap has never been indicative of a team's payroll. The Washington Redskins, believed to be the highest revenue producing machine in the league, have had payrolls well over $100 million the last few seasons, even though the highest salary cap level ever was in 2005, at $85.5 million.

For the fans who can't get their heads around how this works, here's a simple example: Let's say the Redskins signed an unrestricted free agent to a five-year deal that includes a signing bonus of $10 million and a base salary of $1 million for the first season of the contract. In salary cap terms, the Redskins are charged only $3 million, arrived at by prorating the signing bonus over five years and then adding the base salary. But in real dollars expended, or payroll, that player cost the Redskins $11 million for the first year. That's a difference of $8 million between what the player was actually paid and what his cap charge was for the initial season of the contract.

Multiply that example by several player acquisitions, prominent free agents or high-round draft choices, and the total cash over cap is considerable.

So why is the issue of cash over cap suddenly such a potentially galvanizing element? Because for several years, some owners, such as Mike Brown of Cincinnati, have regarded cash over cap levels as dangerous. And because, over the past 18 months, NFLPA executive director Gene Upshaw has been identifying cash over cap as an element of the widening disparity between the NFL's have and have-not franchises.

Because it cuts at the heart of the revenue sharing debate over which owners have been internally battling for more than a year, cash over cap could be a critical issue in Friday's negotiations. There is a feeling that if the NFL and the NFL Players Association can divine a formula that addresses cash over cap -- maybe one that penalizes franchises for breaching various cash over cap thresholds -- it will somehow ameliorate the low-revenue teams' angst.

As noted earlier this week by ESPN.com, it's actually a well-bonded alliance of nine to 10 low-revenue clubs that has demonstrated far more solidarity in recent days. Sources have suggested to ESPN.com that, in an effort to strike a deal that will preclude them from having to make deep roster cuts, some high-revenue teams have begun to reach out to their low-revenue fraternity brothers. But the lower-revenue teams have not budged from their insistence that they will not ratify an extension to the NFL collective bargaining agreement that does not adequately address their revenue-sharing issues.

"It's human nature," said one owner. "People that have money eventually decide they'll solve an issue by throwing money at it. And people who have less money, and feel the pinch, are by nature going to hang in a little longer, because they feel they have to, that their [financial] security is being threatened."

By dealing with the concept of cash over cap, though, negotiators on both sides of the bargaining table might have a way to bring owners and players together. And, right now, it would seem that Upshaw has more urgency to upgrade the unity in his rank and file.

In the last two days, the one voice previously missing from the ongoing labor negotiations, that of the players, has been heard with more frequency. While lauding the advances that Upshaw has promulgated for the players over his long tenure, Miami defensive end and Dolphins player representative Kevin Carter reiterated during a Thursday appearance on The NFL Network the need to strike a deal. Minnesota Vikings center Matt Birk, in an interview with the Minneapolis Star Tribune, used an especially unflattering term in laying blame on Upshaw for the current situation.

That doesn't quite qualify as an insurgency but clearly, there is some unrest in the ranks, both from players and agents.

Whether all of the dynamics currently at work result in an agreement before the new deadline remains to be seen. That the two sides huddled again on Friday, after declaring earlier in the week that the start of the league year would move forward, presents some reason for optimism. But there has been optimism before in these negotiations, and it remains a long shot that the two sides can accomplish in 72 hours something they've been unable to achieve for a year and a half.

Len Pasquarelli is a senior NFL writer for ESPN.com.