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http://www.nationalfootballpost.com/Owners-seek-doubledigit-cut-in-player-salaries.html
Owners seek double-digit cut in player salaries
by Robert Boland
January 28, 02010
Peyton Manning will wear jersey No. 18 on Super Bowl Sunday. That number, 18, also reflects the percentage the NFL Players Association says owners are asking its members to cut from their share of league revenues that go to player compensation and benefits.
Giants owner John Mara said last week that the economy necessitates some cuts. Credible sources confirm that the owners are asking for an 18-percent rollback of compensation, which is currently pegged at almost 59 percent of the total football revenue earned by the league and its teams. This seems fairly extreme for an enterprise -- the NFL -- that is basically in the black, so it’s not surprising that the players’ union, led by executive director DeMaurice Smith, is reacting loudly and negatively to such a proposal.
It seems that the two sides are intractably apart, but a look inside these numbers indicates there may be some room for both sides to negotiate and reach the kind of win-win that Commissioner Roger Goodell and Smith need to deliver for the game to survive without a work stoppage. We’re still early, and nothing is going to get done without both sides using as much of their respective leverage as they can and without some pressure provided by the last minute.
Why are we here?
We are talking about rolling back players’ salaries not because owners are losing money but because already thin margins have tightened in this new economy. But mostly we’re here because the NFLPA won too great a labor victory in the 2006 CBA. The late Gene Upshaw was the undisputed winner, getting far more categories of revenue included under the cap and revenue sharing. He won a whopping share of the NFL revenue pie. Upshaw may deserve criticism for how that pie was served to his players, retirees and those suffering from debilitating injuries, but he won a huge victory. But much like the Treaty of Versailles, which ended World War I but helped cause World War II, too great a victory can sometimes have very negative consequences. The salary cap, which is based on revenue, rose from $80 million per team in 2005 under the old CBA, to $102 million in 2006, $107 million in 2007, $116 million in 2008 and $128 million this year, not because the NFL added new revenue, but because the 2006 CBA changed the calculation of the cap and eliminated a variety of carve-outs, mostly from luxury amenities, that had allowed owners to keep money in their own pockets. The floor also now sits at about $112 million. This is why no owner fears the coming uncapped and unfloored year the way they did back in 2006. The shrinking economy, especially business entertainment spending, has hurt owners, and they’re demanding a change.
The difference may not be as wide as perceived
Despite the owners opening negotiations with a demand for an 18-percent rollback in player salaries and benefits -- the NHL, a league that had very few profitable teams, only demanded a 25-percent rollback -- the sides still have room to negotiate. I’m not buying the gloom and doom scenarios. We’ve said before that there aren’t massive disagreements on other issues, with owners wanting Vick and Lelie forfeiture clauses, the biggest non-money point of disagreement. The fact the cap grew from $80 million to $128 million in just five years offers some room to both recognize that owners are stretched thinner than before in the current economy and for players to preserve some benefits of the current system but avoid a lockout and a total cave-in.
What 18 percent would mean
Using the $128-million-per-team cap allotment and subtracting 18 percent from that figure, owners are asking for a cap or new kind of ceiling on team salaries of somewhere around $105 million -- recognizing we are using round numbers and calculation conventions from an old agreement that might not exist in a new one. That would put between $750 million and $1 billion of the approximately $8.5-billion NFL pie back in the hands of ownership.
Where there’s room for the sides to come together
But any good negotiator knows where to look for helpful benchmarks or slack in an opponent’s proposal. An effective benchmark here is likely not rolling all the way back to 2006 numbers but limiting big jumps in salary growth in future years, and perhaps both sides looking heroic by taking a 10-percent cut. That would put player salaries at $115 million per team, just about the 2008 number. Owners would get more than $400 million back from their current spending, surely enough to ease margin pressure.
Since owners seem more troubled by the current floor than the current cap, perhaps Smith and the union can limit any trim off the top of a cap by taking a larger cut on the floor, maybe leaving the cap at $128 million but letting teams cut the floor from $112 to $92 million. It might have a short-term drag on overall player salaries, but it would allow some teams to continue to overpay some players, and it’s the big contracts teams do that blow up on them and that push salaries higher.
While this negotiation is the biggest off-field story in American sports, reading too much into a first proposal may be premature. There is much room for the sides to work. It’s critical that they do.