A CBA Math Problem

[pbmax]

I don't want an ideological argument in this thread. I want numbers and an answer. Or perhaps I should say I will accept an argument about numbers as long as it has nothing to do with fair, capitalism, marxism, fascism, socialism, communitarianism, totalitarianism, unionism or corporatism. I will ask you to be banned like asbestos if someone uses the word greedy or the four clap emoticon (down from the five clap emoticon due to possible deflation).

Mark Murphy, speaking generally but I think referencing the Packers in particular, has stated that player costs are growing faster than revenues. Is this mathematically possible?

I don't want a hypothetical answer. Dig into this and find something we don't know. Could it be possible for a team but not be true for the league? If so, is this a new phenomenon or a temporary state of affairs for a team getting older and better?

The NFL is said to have earned $9.3 billion in revenue for the last reported period (I am guessing 2010, but it could have been 2009).

The owners take approx $1 billion off the top in the form of expense credits to remove it from player compensation considerations. The rest is split with 59.6% going to the salary cap figure (not the actual players, but the cap).

Owners and teams do spend cash over cap in many cases, but as many teams are closer to the cap minimum than maximum, its not at all clear whether this leads the entire league to spend over 59.6% of Total Revenue (an artificial revenue number lower than the actual revenue the League receives) in a given year.

But the overall costs of players has been surprisingly consistent over the last decade, even with the objections to the 2006 CBA.

From PFT (first link below) via the NFLPA, the percent of player costs versus all revenue:

2002: 51.87%
2003: 50.23%
2004: 52.18%
2005: 50.52%
2006: 52.74%
2007: 51.84%
2008: 50.96%
2009: 50.06%

Things I did not know:

1. The Salary Cap figure includes salary and benefits.
2. CBA guaranteed 50% of Total Revenue (cap figure) to players, presumably through minimum cap number and performance pay.
3. To calculate such numbers, the league and players already have joint auditors

So, is it possible for player costs to exceed revenues for the entire league?

http://profootballtalk.nbcsports.com/2011/02/17/batterman-addresses-current-issues-in-cba-fight/

http://profootballtalk.nbcsports.com/2010/11/27/league-union-squabble-over-semantics/

[Lurker64]

I think the issue is not that player costs are growing faster than revenues for the league as a whole, since that seems mathematically impossible. The issue, I believe, is that player costs are growing faster than revenues for certain teams. Since when one team, say the Dallas Cowboys, starts taking in a whole lot more money that increases the total league revenue which correspondingly increases the salary cap/floor... so a team like Buffalo, who might not have stumbled upon any windfalls in this time finds that it's making the same amount of money, but it's spending much more on players.

[Patler]

Mark Murphy, speaking generally but I think referencing the Packers in particular, has stated that player costs are growing faster than revenues. Is this mathematically possible?

(Deleted for brevity)

So, is it possible for player costs to exceed revenues for the entire league?



Haven't you asked two different questions:

1. Are player costs growing faster than revenues?

2. Have player costs exceeded revenues?

[3irty1]

I think the issue is not that player costs are growing faster than revenues for the league as a whole, since that seems mathematically impossible. The issue, I believe, is that player costs are growing faster than revenues for certain teams. Since when one team, say the Dallas Cowboys, starts taking in a whole lot more money that increases the total league revenue which correspondingly increases the salary cap/floor... so a team like Buffalo, who might not have stumbled upon any windfalls in this time finds that it's making the same amount of money, but it's spending much more on players.

This. And the effect is enough to where Jerry Jones has to donate money to the Bills, Vikings, etc just so that they can operate. Jerryworld bring in so much money that it puts pressure on teams to build stadiums to compete that otherwise wouldn't be necessary. A new plan would keep the rich richer and the poor teams alive.

[sharpe1027]

Haven't you asked two different questions:

1. Are player costs growing faster than revenues?

2. Have player costs exceeded revenues?

Is there some reason we have a limited number of questions available...or is there something behind your question that you haven't brought up yet and are waiting to spring on us?

I think there is at least an argument that the first question helps to understand the second.

[Patler]

Haven't you asked two different questions:

1. Are player costs growing faster than revenues?

2. Have player costs exceeded revenues?


Is there some reason we have a limited number of questions available...or is there something behind your question that you haven't brought up yet and are waiting to spring on us?

I think there is at least an argument that the first question helps to understand the second.

No, we can have as many questions as anyone wants, but PB seemed to want a very focused discussion. When there are multiple questions it will be incumbent upon every responder to make it clear which question they are responding to, to avoid confusion.

[Old School]

I was going to give this an honest shot, but for some reason, the owners wouldn't open their books for me.

[hoosier]

I think the issue is not that player costs are growing faster than revenues for the league as a whole, since that seems mathematically impossible. The issue, I believe, is that player costs are growing faster than revenues for certain teams. Since when one team, say the Dallas Cowboys, starts taking in a whole lot more money that increases the total league revenue which correspondingly increases the salary cap/floor... so a team like Buffalo, who might not have stumbled upon any windfalls in this time finds that it's making the same amount of money, but it's spending much more on players.

Both points make sense to me. I think what this really means is that player costs as % of total revenue is actually a red herring. The real problem is that revenue sharing as defined in the last CBA is no longer sustainable but rather than trying to take that on--which would pit the Wilsons of the NFL against the Joneses--it seems easier to try to get the players to agree to take a smaller cut. But if the problem is as deeply ingrained as the Dallas vs. Buffalo example would suggest, the players taking a small cut in % is just a band aid but it's not going to solve the problem.

[pbmax]

Haven't you asked two different questions:

1. Are player costs growing faster than revenues?

2. Have player costs exceeded revenues?

That second question should have been "player cost growth rate to exceed revenue growth rate"

[pbmax]

Is there some reason we have a limited number of questions available...or is there something behind your question that you haven't brought up yet and are waiting to spring on us?

I think there is at least an argument that the first question helps to understand the second.


No, we can have as many questions as anyone wants, but PB seemed to want a very focused discussion. When there are multiple questions it will be incumbent upon every responder to make it clear which question they are responding to, to avoid confusion.

Patler has my point basically right. I am trying to narrow the focus of the debate (for our purposes) to try to discern what the owners are telling us about the problem and their solution. Several owners have said slightly different things and of course, they have been talking about this for two and a half years.

At this point, it must be possible to determine the true crux of the problem.

An by focused, I mean focused. The owners and players discussed the salary cap dollar pegging idea at the end of their last negotiating session and while such an approach is intriguing, it ultimately makes it harder to determine where the owners want to get too in terms of a number. We barely understand the old system, figuring out the details of a new system might be impossible.

For instance, I am still not sure how the players and owners get to $1 million dollar in expense credits. If its a fixed number, it seems to be a very problematic idea. But if corresponds to a percentage or is linked to certain expenses that are evaluated yearly by the league/NFLPA auditors, what expenses would it be linked to?

[pbmax]

I think the issue is not that player costs are growing faster than revenues for the league as a whole, since that seems mathematically impossible. The issue, I believe, is that player costs are growing faster than revenues for certain teams. Since when one team, say the Dallas Cowboys, starts taking in a whole lot more money that increases the total league revenue which correspondingly increases the salary cap/floor... so a team like Buffalo, who might not have stumbled upon any windfalls in this time finds that it's making the same amount of money, but it's spending much more on players.

I tend to agree with this point of view.

As a mathematical concept, it would seem impossible for the player cost percentage to do anything other than approach 59.6 and nothing more. Yes, teams could spend a lot of cash over cap, but with a significant number of teams BELOW the cap, it would seem to balance out. And the consistent total percentage listed above seems to bear this out.

However, Murphy simply could be looking at the approx 51% or 59.6 and saying that under either model, players get more of revenue that the owners. Hence, their growth (or rate) is higher.

What I do not know, is how the credit is set. If that credit grows as costs (or revenue grow), the I think Murphy is making a small point that applies to only a few teams each year. But if that credit is fixed for the length of the CBA, then I think he has a significant point.

[sharpe1027]

I think the issue is not that player costs are growing faster than revenues for the league as a whole, since that seems mathematically impossible. The issue, I believe, is that player costs are growing faster than revenues for certain teams. Since when one team, say the Dallas Cowboys, starts taking in a whole lot more money that increases the total league revenue which correspondingly increases the salary cap/floor... so a team like Buffalo, who might not have stumbled upon any windfalls in this time finds that it's making the same amount of money, but it's spending much more on players.

Maybe, but teams like the Cowboys are making every effort to make sure that the bulk of their increased revenue is revenue that is not shared and therefore I do not think that it would affect the salary cap. The majority of the revenue used to calculate the salary cap is from T.V. revenue, which is shared between the teams. There is some disparity to be sure, but I'm not sure that that it is getting worse. I've never seen any numbers either way though.

[sharpe1027]

Patler has my point basically right. I am trying to narrow the focus of the debate (for our purposes) to try to discern what the owners are telling us about the problem and their solution. Several owners have said slightly different things and of course, they have been talking about this for two and a half years.

At this point, it must be possible to determine the true crux of the problem.

An by focused, I mean focused. The owners and players discussed the salary cap dollar pegging idea at the end of their last negotiating session and while such an approach is intriguing, it ultimately makes it harder to determine where the owners want to get too in terms of a number. We barely understand the old system, figuring out the details of a new system might be impossible.

For instance, I am still not sure how the players and owners get to $1 million dollar in expense credits. If its a fixed number, it seems to be a very problematic idea. But if corresponds to a percentage or is linked to certain expenses that are evaluated yearly by the league/NFLPA auditors, what expenses would it be linked to?

Sorry about my confusion. I didn't pick up on the correlation between Patler pointing out two questions and your original post. Thanks for walking me through it.

What I have read is that the $1 billion dollar expense credit is fixed. On one hand it seems pretty arbitrary if its true purpose is to cover expenses. On the other hand, the owner's take still increases with increased revenue.

I think calling it an expense credit is misleading. In the end it is all money, so whatever name the give to it is meaningless. The expense credit benefits the owners if growth is stagnant because they have a lower percentage of the shared money. However, the higher percentage of the shared money benefits the players if growth is high. Given that the NFL has done pretty well in growth, I am not surprised that the owners are not liking the deal. My guess is that when they signed the original CBA the owners guessed wrong on how much growth they would have in the shared revenue pot.

[pbmax]

What I have read is that the $1 billion dollar expense credit is fixed. On one hand it seems pretty arbitrary if its true purpose is to cover expenses. On the other hand, the owner's take still increases with increased revenue.

Any chance you remember where you read it?

[Pugger]

Maybe, but teams like the Cowboys are making every effort to make sure that the bulk of their increased revenue is revenue that is not shared and therefore I do not think that it would affect the salary cap. The majority of the revenue used to calculate the salary cap is from T.V. revenue, which is shared between the teams. There is some disparity to be sure, but I'm not sure that that it is getting worse. I've never seen any numbers either way though.

And isn't this the main reason why salaries should be gleaned from the shared TV revenue with a cap? If not, what would keep the Jerry Joneses of the league from using their other revenue to pay fior players and becoming the NFL's Yankees and leave smaller market teams like Buffalo in the dust?

[sharpe1027]

Any chance you remember where you read it?

I had not seen anything concrete, but every single article I read states that it is $1 billion right off the top before any sharing. I've never seen any other number or any assertion that it varies. However, google was able to find a copy of the CBA and it looks like it is calculated as 5% of total revenue.

Someone with more brains can probably parse the language better than myself.

http://images.nflplayers.com/mediaResources/files/PDFs/General/NFL%20COLLECTIVE%20BARGAINING%20AGREEMENT%202006%2 0-%202012.pdf

Expense Deductions
(1) The only expense deductions permitted to be taken in calculating Total Revenue are:
(A) a set deduction of five percent (5%) of TR (which set deduction is already reflected in the amounts defining and percentages prescribing the Salary Cap in Section 4(a) below) which includes Youth Football,
NFL Europe, Players Inc. payments, NFL Charities, all team operating and
day-of-game expenses, and any other category of expenses not previously
netted against specific revenues). Set 5% percentage for TR Cost Deduction
(i.e., both ceiling and floor);
(B) the set deduction of one and eight-tenths percent (1.8%) of
TR described in Section 4(e) below (which set deduction is already reflected in the amounts defining and percentages prescribing the Salary Cap in
Section 4(a) below, and is intended to account for private contributions to
stadium construction qualifying for support under the G-3 program or any
similar successor program, as well as for stadium security expenses), the
amount of which set deduction may be increased with the express approval
of the NFLPA to up to two and three-tenths percent (2.3%) of TR if private
contributions to stadium construction that are approved by the NFLPA
shall so justify (i.e., up to an additional one-half of one percent (.5%) of TR
may be deducted from the amounts defining and percentages prescribing
the Salary Cap in Section 4(a) below, if approved by the NFLPA, as provided in Section 4(e) below);

[sharpe1027]

Here is an article that seems to confirm the 5%:

SHOW US SOME PROOF: Mawae said, "This has always been our point: You want 20% player cost cutbacks, show us the information and the data that would justify you asking to cut costs. And they haven’t done that. They have asked for an 18% rollback from players, plus the 5% that is already cut out before you figure out the total football revenue (which determines the salary cap)." Mawae is referring to the little-known fact that 5% is taken off the top for a number of expenses including "team operating and day-of-game expenses," according to the current NFL CBA. "We found that after cost deductions and the 5% deductions, it's almost a billion dollars that is not in the total football revenue," he added. It has been widely reported that NFL players appear to receive the highest percentage of revenues -- at just under 60% -- compared to players in the other team sports. Late NFLPA Exec Dir Gene Upshaw said publicly that the players were receiving 59-60%. But in a recent letter to NFLPA player reps, NFLPA Exec Dir DeMaurice Smith wrote, "Last year, the NFL Players received 51.3% of Real Revenue."

http://www.sportsbusinessdaily.com/Daily/Issues/2010/02/Issue-99/Leagues-Governing-Bodies/NFLPA-Claims-League-Insisting-Players-Take-20-Pay-Cut-In-New-CBA.aspx

[Guiness]

Good find Sharpe.

I'd always heard ONE BILLION DOLLARS! [/Dr Evil] and never thought about that number, but it makes sense that it is a percentage.

That doesn't quite work mathematically though, because 5% of 9 billion is 450 million - a far cry from a billion. There's another 1.8-2.5% (section B) being deducted, which is $162-207million.

Adding the %ages, 7.5% of 9 billion is $657million. If we extrapolate, 7.5% of 10 billion is $750million. Still not a billion, and frankly I'm surprised the NFL hasn't pointed that out.

Mawae mentions 'cost deductions and the 5% deductions. The excerpt Sharpe posted says only those two %ages may be deducted from total revenue calculations, and as far as we know, the cap is a percentage of total revenue. I'm not sure what he may be talking about, if anything at all. Oops, expressed a non-factual opinion there. A no-no in this thread:oops:

I don't know that I've gotten us any closer to answering the OP's questions (actually, the questions are in the ninth post:lol:) but I think we're moving in the right direction. I'd do some more math right now, but I've got paying work to do.

I'll take a shot at the first question though, and say I don't think it's possible for player costs to grow faster than revenues. It's going to be close though, which I assume is the point.




I surely hope the mention of Dr. Evil isn't too close to pinkoism (which Pbmax didn't ban anyways) to get me kicked from this thread.

[Guiness]

To clarify your second question once more:


2. Have player costs exceeded revenues?

That second question should have been "player cost growth rate to exceed revenue growth rate"

Were you trying to ask if that already happened? I.E. Has the player cost growth rate already exceeded the league revenue growth rate?

[sharpe1027]

Nice work Guiness. I wonder if there are other (comparatively small) deductions buried in the CBA somewhere or if they are just rounding 750 up to 1,000?

[pbmax]

Thanks Sharpe. I am now reminded why certain people on both sides want to remove the lawyers. :)

I think, if I am reading this right, that PSLs are not considered revenue for the purposes of stadium construction or renovation. Plus, there seems to be a 1.8 % expense credit for the league G3 funds that are used to help teams build stadiums. However, the second point is very unlcear to me.

Article XXIV, Section 1,a,x,1 for PSLs (page 87)
Article XXIV, Section 2,a,iv,1,B for additional 1.8 % deduction for stadium construction (page 92)

[Guiness]

Nice work Guiness. I wonder if there are other (comparatively small) deductions buried in the CBA somewhere or if they are just rounding 750 up to 1,000?

I guess there must be more deductions buried in there. I can't see rounding 750 to 1,000, and I'm sure the NFL would like to use the word 'million' instead of 'billion' because it has less shock value, and this is a pr war. Also, $750 million was for a hypothetical TR of $10billion, which they haven't reached yet.

[pbmax]

Good find Sharpe.

I'd always heard ONE BILLION DOLLARS! [/Dr Evil] and never thought about that number, but it makes sense that it is a percentage.

That doesn't quite work mathematically though, because 5% of 9 billion is 450 million - a far cry from a billion. There's another 1.8-2.5% (section B) being deducted, which is $162-207million.

Adding the %ages, 7.5% of 9 billion is $657million. If we extrapolate, 7.5% of 10 billion is $750million. Still not a billion, and frankly I'm surprised the NFL hasn't pointed that out.

Mawae mentions 'cost deductions and the 5% deductions. The excerpt Sharpe posted says only those two %ages may be deducted from total revenue calculations, and as far as we know, the cap is a percentage of total revenue. I'm not sure what he may be talking about, if anything at all. Oops, expressed a non-factual opinion there. A no-no in this thread:oops:

I don't know that I've gotten us any closer to answering the OP's questions (actually, the questions are in the ninth post:lol:) but I think we're moving in the right direction. I'd do some more math right now, but I've got paying work to do.

I'll take a shot at the first question though, and say I don't think it's possible for player costs to grow faster than revenues. It's going to be close though, which I assume is the point.




I surely hope the mention of Dr. Evil isn't too close to pinkoism (which Pbmax didn't ban anyways) to get me kicked from this thread.

There is an entire section of expenses that can be netted against the revenue the expense generates. So that is deducted as well.

Just for an example, if they buy a $10,000 hot dog stand and sell $35,000 worth of hot dogs (remember, just an example, not sure about concessions), then according to a list in Appendix, they can net the expense against the revenue, thereby lowering the revenue number.

Article XXIV, Section 2,a,iv,1,C (page 92)
Appendix H, (page 261)

I doubt the owner's would let the 1 billion slide if it wasn't close.

[pbmax]

To clarify your second question once more:




Were you trying to ask if that already happened? I.E. Has the player cost growth rate already exceeded the league revenue growth rate?

Murphy has spoken about the issue as though it had already happened under the last CBA.

[Guiness]

There is an entire section of expenses that can be netted against the revenue the expense generates. So that is deducted as well.

Just for an example, if they buy a $10,000 hot dog stand and sell $35,000 worth of hot dogs (remember, just an example, not sure about concessions), then according to a list in Appendix, they can net the expense against the revenue, thereby lowering the revenue number.

While that makes sense in most business enterprises, it kind of defeats the purpose of the following line, doesn't it?

(1) The only expense deductions permitted to be taken in calculating Total Revenue are:I'm not arguing that you are incorrect, just saying it makes it tougher to get a clear picture. You would think the reason for the section posted above by Sharpe was to keep it simple and understandable, so no one could question it. Since there are more deductions, that's probably part of the reason the players are asking to see the books.


I doubt the owner's would let the 1 billion slide if it wasn't close.

Agreed.

[pbmax]

While that makes sense in most business enterprises, it kind of defeats the purpose of the following line, doesn't it?


I'm not arguing that you are incorrect, just saying it makes it tougher to get a clear picture. You would think the reason for the section posted above by Sharpe was to keep it simple and understandable, so no one could question it. Since there are more deductions, that's probably part of the reason the players are asking to see the books.

Very tough to get a clear picture. And the section I quoted about netting expenses was a subsection (C) of the (1) you quoted from sharpe.

Article XXIV, Section 2,a,iv,1,C (page 92)

[sharpe1027]

Correct me if I am wrong, but it seems that the only way that player cost could out pace league revenue growth would be if the owners were deducting less as expenses. If that is the case, then the owners are spending less, which lowers their expense deductions and gives the players a higher percentage of the "true" gross revenue.

For example, maybe in 2009 the owners expensed a higher percentage of the "true" grow revenue than the did in 2010. Thus, the player's percentage would go up since the owners take less percentage off the top. Of course, this would mean the the owners costs went down.

[Smidgeon]

Are they saying player costs are outpacing revenue or that overall costs are? And on top of that, are they talking about the cost rate of growth outpacing the revenue rate of growth thus decreasing the profit rate of growth?

[Guiness]

Are they saying player costs are outpacing revenue or that overall costs are? And on top of that, are they talking about the cost rate of growth outpacing the revenue rate of growth thus decreasing the profit rate of growth?

Look back to the question - posted most clearly in the 9th post of this thread - we're talking about player costs vs revenue.

[Smidgeon]

Look back to the question - posted most clearly in the 9th post of this thread - we're talking about player costs vs revenue.

I wasn't asking what was being asked on this board but rather what the owners are actually claiming.

[Guiness]

I wasn't asking what was being asked on this board but rather what the owners are actually claiming.

sry. The infamous dept of 'they'

[Smidgeon]

sry. The infamous dept of 'they'

Good point. Sorry about my vague reference to "they".

[retailguy]

Look back to the question - posted most clearly in the 9th post of this thread - we're talking about player costs vs revenue.

I've read through this thread and everyone assumes that "player costs" = Salaries covered under CBA. I'm not convinced that is what "player costs" actually means. There are all kinds of player costs that wouldn't be covered under salaries. Medical costs, travel, weight room, supplements, and food immediately come to mind. I'm certain there are others, and I've probably missed some big ones too.

Those costs would be both variable, and not related to the 59.6%. Interpreting this way allows Murphy's point to stand as true and gives credence to the overall point that costs are raising faster than revenues. I have no hard facts to back up my theory, what are your thoughts?

[sharpe1027]

RG, brings up an interesting twist. Murphy's statement would be somewhat misleading and certainly open to an number of interpretations. What does that term "player costs" even mean? So many expenses could theoretically be classified as a "player expense." Grounds keeping? Yep, it is an expense to avoid injuries and to allow the players to play their best. New team bus? Player expense. etc...

Also, the nature of the "expense credit" presents an interesting dynamic. Wouldn't all teams have an incentive to maximizes their expenses up to the limit? Thus, the owners complain about rising costs, while they have little incentive to reduce the costs unless they exceed the expense credit limits.

[Patler]

These are all defined terms:


“Player Costs” means the total Salaries and Benefits attributable to a League Year for all NFL Teams under all of the rules set forth in Article XXIV (Guaranteed League-wide Salary, Salary Cap & Minimum Team Salary), but not including loans, loan guarantees, unpaid grievances attributions, and unearned incentives.
(b) Benefits. “Benefits” and “Player Benefit Costs” mean the aggregate for a League Year of all sums paid (or to be paid on a proper accrual basis for a League Year) by the NFL and all NFL Teams for, to, or on behalf of present or former NFL players, but only for:
(i) Pension funding, including the Bert Bell/Pete Rozelle NFL Player Retirement Plan (as described in Article XLVII) and the Second Career Savings Plan (as described in Article XLVIII);
(ii) Group insurance programs, including, life, medical, and dental coverage (as described in Article
XLIX or as required by law), and the Supplemental Disability Plan (as described in Article LI);
(iii) Injury protection (as described in Article XII);
(iv) Workers’ compensation, payroll, unemployment compensation, social security taxes, and contributions to the fund described in Article LIV, Section 4 below;
(v) Preseason per diem amounts (as described in Sections 3 and 4 of Article XXXVII) and regular season meal allowances (as described in Article XXXIX);
(vi) Expenses for travel, board and lodging for a player participating in an off-season workout program in accordance with Section 7(e)(iv)(3) below;
(vii) Payments or reimbursements made to players participating in a Club’s Rookie Orientation Program (as described in Section 4(n) of Article XVII);
(viii) Moving and travel expenses (as described in Sections 2, 3, and 4 of Article XLI, and Section 8 of Article XXXVII);
(ix) Postseason pay (as described in Article XLII and Article XLIII); and salary paid to practice squad players pursuant to a practice squad contract during the postseason, unless the practice squad player contract is executed or renegotiated after December 1 for more than the minimum practice squad salary, in which case all salary paid to such a practice squad player during the postseason will be counted as Salary.
(x) Player medical costs (i.e., fees to doctors, hospitals, and other health care providers, and the drugs and other medical cost of supplies, for the treatment of player injuries), but not including salaries of trainers or other Team personnel, or the cost of Team medical or training equipment (in addition, the amount of player medical costs included in Benefits may not increase by more than ten percent (10%) each League Year). Subject to the foregoing, Player medical costs shall include one-third of each Club’s expenses for tape used on players and one-third of each Club’s player physical examination costs for signed players (player physical examination costs relating to the Combine or for Free Agents whom the Club does not sign are not included in Player Benefit Costs);
(xi) Severance pay (as described in Article L);
(xii) The Player Annuity Program (as described in Article XLVIII-A);
(xiii) The Minimum Salary Benefit (as described in Article XXXVIII-A);
(xiv) The Performance Based Pool (as described in Article XXXVIII-B);
(xv) The Tuition Assistance Plan (as described in Article XLVIII-B);
(xvi) The NFL Players Health Reimbursement Account (as described in Article ____);
(xvii) The “88 Benefit” for former players suffering from dementia (as described in Article ____); and
(xviii) The NFL Player Benefits Committee (as described in Article ____).
Without limitation on any other provision of this Agreement, Benefits will not include (1) salary reduction contributions elected by a player to the Second Career Savings Plan described in Article XLVIII; (2) any tax imposed on the NFL or NFL Clubs pursuant to section 4972 of the Internal Revenue Code for the Bert Bell/Pete Rozelle NFL Player Retirement Plan, and (3) attorneys’ fees, costs, or other legal expenses incurred by Clubs in connection with workers’ compensation claims of players. Benefits for a League Year will be determined by adding together all payments made and amounts properly accrued by or on behalf of the NFL and all NFL Clubs for the above purposes during that League Year, except that Benefits for pension funding and the Second Career Savings Plan will be deemed to be made in a League Year for purposes of this Article if made in the Plan Year beginning in the same calendar year as the beginning of such League Year.

(c) Salary.
(i) “Salary” means the compensation in money, property, investments, loans or anything else of value to which an NFL player (including Rookie and Veteran players and players whose contracts have been terminated) or his Player Affiliate is entitled in accordance with a Player Contract, but not including Benefits. Salary with respect to any period shall include all Salary actually payable with respect to such period under the terms of a Player Contract and all Salary attributable to such period under the terms of this Agreement.
(ii) A player’s Salary shall also include any and all consideration received by the player or his Player Affiliate, even if such consideration is ostensibly paid to the player for services other than football playing services, if the NFL can demonstrate before the Impartial Arbitrator that the consideration paid to the player or Player Affiliate for such nonfootball services does not represent a reasonable approximation of the fair market value of such services as performed by such player. The Impartial Arbitrator’s determination may take into account, among other things: (1) any actual dollar amounts the player or Player Affiliate received for similar nonfootball playing services from an independent third party; and (2) the percentage of total compensation for nonfootball services received from third parties versus the Team or Team Affiliate.
(iii) For purposes of this Article, Salary shall be computed pursuant to the additional rules below.

[Guiness]

These are all defined terms:

Ouch. Looking at that is a lot like work.

Skimming the text, it seems obvious that costs include a lot more than salary, the extras being sometimes called 'soft costs.' With a regular employee, those can often account for 30% or more of their salary, I'm no sure the same holds true when someone is making $1million/year.

However, Pbmax's post said that the salary cap includes player costs, not just salaries, so there is no need to consider them when determining if player costs are outstripping revenues - they're accounted for in the cap number.

[sharpe1027]

I think Guiness is right:

“Player Costs” means the total Salaries and Benefits attributable to a League Year for all NFL Teams under all of the rules set forth in Article XXIV (Guaranteed League-wide Salary, Salary Cap & Minimum Team Salary), but not including loans, loan guarantees, unpaid grievances attributions, and unearned incentives"

[sharpe1027]

AS to RG's point, if Murphy is using a term (player costs) straight out of the CBA, then it would be misleading to use it different than it is defined.

[Patler]

However, Pbmax's post said that the salary cap includes player costs, not just salaries, so there is no need to consider them when determining if player costs are outstripping revenues - they're accounted for in the cap number.



I'm not sure PBmax is correct about that. Benefits seem to be excluded from what the salary cap is in any year:


“Salary Cap” means the absolute maximum amount of Salary that each Club may pay or be obligated to pay or provide to players or Player Affiliates, or may pay or be obligated to pay to third parties at the request of and for the benefit of Players or Player Affiliates, at any time during a particular League Year, in accordance with the rules set forth in Article XXIV (Guaranteed League-wide Salary, Salary Cap & Minimum Team Salary), if applicable.


(a) Subject to the adjustments and credits set forth below, the amount of the Salary Cap for each NFL Team in years that it is in effect shall be (1) in the 2006 League Year, $102 million; (2) in the 2007 League Year, $109 million; (3) in the 2008 League Year, 57.5% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year; (4) in the 2009 League Year, 57.5% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year; (5) in the 2010 League Year, 58% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year; and (6) in the 2011 League Year, 58% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year. Notwithstanding the preceding sentence or anything else in this Agreement, there shall be no Salary Cap in the Final League Year.

The actual dollar amount of the Salary Cap shall not be less than the actual dollar amount of any Salary Cap in effect during the preceding League Year, provided, however, that at no time shall the Projected Benefits, plus the amount of the Salary Cap multiplied by the number of Teams in the NFL, exceed 61.68% of Projected TR. See Appendix O.This last section is interesting. Assuming that Murphy is correct, and Player Costs (Salary + Benefits) are increasing faster than revenues, the old CBA seemed to anticipate the problem and provide a limit at 61.68% of Total Revenue.

[Guiness]

This last section is interesting. Assuming that Murphy is correct, and Player Costs (Salary + Benefits) are increasing faster than revenues, the old CBA seemed to anticipate the problem and provide a limit at 61.68% of Total Revenue.

Yet another number, 61.68%. How does that figure in, and how does it relate to the 59.6% number we always hear? Does this imply that the benefits portion is the 'extra' 2.08%?

[sharpe1027]

The way I read it is that the 61% is in place because the dollar amount of the cap cannot be less than a previous year (subject to a maximum of 61%). The projected player benefits are still included in the player costs and therefore are part of the salary cap figure.

[Patler]

The way I read it is that the 61% is in place because the dollar amount of the cap cannot be less than a previous year (subject to a maximum of 61%). The projected player benefits are still included in the player costs and therefore are part of the salary cap figure.


If you follow the definitions through, "Salary Cap" includes "Salary" which specifically excludes "Benefits". The annual definitions for the calculation of the "Salary Cap" also excludes "Benefits".

What makes you say that player benefits are part of the cap figure?

[sharpe1027]

If in any League Year the total Player Costs for all NFL Teams
equals or exceeds 56.074% of actual Total Revenues


“Player Costs” means the total Salaries and Benefits attributable
to a League Year for all NFL Teams under all of the rules set forth in Article
XXIV

Therefore, it seems that the cap is based upon the player costs, which includes benefits. Now, the individual term "Salary" might exclude benefits, but that does not necessarily mean that the Salary Cap excludes them.

What is the context of the exclusion you are referencing? There are so many different uses of the terms that it is confusing.

[Patler]

Therefore, it seems that the cap is based upon the player costs, which includes benefits. Now, the individual term "Salary" might exclude benefits, but that does not necessarily mean that the Salary Cap excludes them.

What is the context of the exclusion you are referencing? There are so many different uses of the terms that it is confusing.

Copied from the CBA:


“Salary Cap” means the absolute maximum amount of Salary that each Club may pay


“Salary” means the compensation in money, property, investments, loans or anything else of value to which an NFL player (including Rookie and Veteran players and players whose contracts have been terminated) or his Player Affiliate is entitled in accordance with a Player Contract, but not including Benefits.

"Salary" does not include "Benefits". "Salary Cap" is the maximum "Salary" a club can pay. Therefore, "Salary Cap" does not include "Benefits".

[sharpe1027]

Copied from the CBA:

"Salary" does not include "Benefits". "Salary Cap" is the maximum "Salary" a club can pay. Therefore, "Salary Cap" does not include "Benefits".

I see your point. The Salary Cap does not appear to include benefits; however, there are separate limitations and trigger points (minimums and maximums) regarding "player costs," which do include benefits.

[Patler]

I see your point. The Salary Cap does not appear to include benefits; however, there are separate limitations and trigger points (minimums and maximums) regarding "player costs," which do include benefits.

Isn't that the issue I brought up on the previous page, the limit of 61.68% of "Projected Total Revenue" for the cost of ("Salaries" + "Benefits")?

As I said before, that would seem to mitigate the problem expressed by Murphy, that some combination of costs (whether "Player Costs" which is defined as "Salaries" + "Benefits" or some other undefined combination of expenses) is increasing faster than revenues. "Salaries" and "Benefits" would seem to be the largest components of whatever Murphy was talking about, and the increase of those is limited.

[sharpe1027]

Isn't that the issue I brought up on the previous page, the limit of 61.68% of "Projected Total Revenue" for the cost of ("Salaries" + "Benefits")?

As I said before, that would seem to mitigate the problem expressed by Murphy, that some combination of costs (whether "Player Costs" which is defined as "Salaries" + "Benefits" or some other undefined combination of expenses) is increasing faster than revenues. "Salaries" and "Benefits" would seem to be the largest components of whatever Murphy was talking about, and the increase of those is limited.

Yes. My point above was that the 61% immediately follows the discussion of the salary cap being at least has high as the previous year, so it appears to be mainly directed toward that situation.

Murphy's point could then still be valid, because the non-salary portion of the player's costs could rise significantly before the 61% was reached. Sure it is mitigated, but I do not think that the mitigation was setup for that purpose.

[Patler]

The mitigating impact of the 61.68% limitation can really have only two purposes; to guard against sky-rocketing benefit costs, or to protect against a sudden decrease in Total Revenue (most likely to happen only if the broadcast rights packages went down for some reason). I don't know what other situation it might seek to anticipate.

[sharpe1027]

I am suggesting that the context indicates that the intent was likely to protect against the latter. Since player benefits are relatively small, I am not sure they would have expected them to ever be high enough to hit the 61% mark. Confirming would require more data and also be more work than I want to do right now. ;)

[NewsBruin]

I never thought about the playoff bonuses, underpaid player production bonuses, and other "found" money counting against the players' total compensation. I was also surprised that pension payments and the head-injury/dementia program, Combine physicals, OTA transportation, and 1/3 of the trainers' tape is considered in the "Benefit" section of "Player Costs."

It's great that the NFL has expanded its role to support and protect past players, but once that Player Cost figure hits 61.68%, then a dollar added to those programs is a dollar taken away from current player compensation.

Since Salary is directly proportional to Shared Revenue, I completely see how the "Player Costs" is rising faster than Shared Revenue.

[Guiness]

NewsBruin?
NEWSBRUIN?
NEWSBRUIN?

Been a while since I've seen you in these parts!

[NewsBruin]

Meh. I keep up with the board on my crappy 4-year-old BlackBerry (as a side note, what do NFL staff read when they're trying to procrastinate? Widget-maker messageboards?), so I'm content with following the conversation, rather than posting. We have some great posters here, so my thoughts and questions are usually well represented before I get home to post.

I just wanted to chip in that the rising "Player Costs" may not always have something to do with current players, and that kind of irritates me. I wish the 86 Plan and pensions were not included as "Player Cost" values, and I feel similarly for pre-drafted players' costs. To be fair, I haven't read the owners (Except that Jones idiot in Dallas) actually blame the players for rising costs, but the implication is there.

I also don't think the owners should look at anyone but themselves for any extravagant services and facilities they've built "for the players," like practice facilities and the like, if they weren't required in the CBA. Much like salaries, the owners choose what capital they're investing. Same goes for escalating coaches' salaries. They may cause a problem with usual profitability, but none of that should be laid at the players' feet.

Anyway, the better points are made without my help, so carry on and give me something better to do than my job.

[pbmax]

Great work folks. I have only a limited amount of time, but the idea that the cap covers salaries and benefits was in the second link of the OP, from an interview of Smith and off the Union's CBA website.

Its possible that contention is consistent with the 61.xx% figure that some have found and is not included in the 59.6% cap calculation.

I actually look forward to rereading it later, as I have had trouble with insomnia lately. :)

[Guiness]

Anyway, the better points are made without my help, so carry on and give me something better to do than my job.

Don't be so self-deprecating NB - I'm sure a lot would love it if you posted a little more around here.


Ok, let's see if I can make sense of this last string of posts.

59.6% of TR is the salary cap number, for salaries only.

61.68% of TR is the number that can not be exceeded by total player costs*. This means that an NFL team that is up against the cap has 2.08% of TR to spend on 'soft costs.'

*Total player costs include all of the regular soft costs like health care, worker's comp and pension plans. Items like work related travel, food and lodging are also pretty normal. There are also some unique items in there, like the '88 benefit' and post-season pay, although a parallel to that last might be performance based bonuses.

[Guiness]

Re-reading this section carefully


The actual dollar amount of the Salary Cap shall not be less than the actual dollar amount of any Salary Cap in effect during the preceding League Year, provided, however, that at no time shall the Projected Benefits, plus the amount of the Salary Cap multiplied by the number of Teams in the NFL, exceed 61.68% of Projected TR.

I've got another idea what the purpose of this clause may be, and the key is in the unbolded part.

It states that the amount of the salary cap can not decrease. If the cap was calculated at 59.6% to be $100million, and TR went that year so 59.6% is actually $99million, the cap would actually stay at 100. This could quickly cause problems.

The 61.68% number would be a safety net in case TR decreases too much. Continuing the previous example, if TR decreased to the point that 59.6% was going to be $90 million, but the cap was stuck at $100million, this clause would take effect.

Damn, maybe I should've been a lawyer. I certainly owe one enough!

[sharpe1027]

Re-reading this section carefully


I've got another idea what the purpose of this clause may be, and the key is in the unbolded part.

It states that the amount of the salary cap can not decrease. If the cap was calculated at 59.6% to be $100million, and TR went that year so 59.6% is actually $99million, the cap would actually stay at 100. This could quickly cause problems.

The 61.68% number would be a safety net in case TR decreases too much. Continuing the previous example, if TR decreased to the point that 59.6% was going to be $90 million, but the cap was stuck at $100million, this clause would take effect.

Damn, maybe I should've been a lawyer. I certainly owe one enough!

Yeah, that was my point, but I think you explained it better. I theorized that 61% is intended to protect against a drop in revenue because the salary cap would not go down if that happens.

Without that situation, I am not sure that the "benefit costs" would ever get close to the 61%. For example, although theoretically, the teams could spend 59.6%, they reality is that they spend much less (closer to 50%). I do not see anyway that the benefit costs would ever get to 11%...

[Guiness]

So where are we now, overall? Have we come close to answering the original question, or over the 3 pages of this thread, have we muddied the waters even more?

[sharpe1027]

So where are we now, overall? Have we come close to answering the original question, or over the 3 pages of this thread, have we muddied the waters even more?

My take is that Murphy's statement could be correct. The player costs could rise faster than the revenue because benefit costs are not used in the salary cap number. However, the total player costs couldn't have risen more than the hard cap of 61%, but that hard cap would only be hit if there was a very huge increase in benefit costs.