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?