A CBA Math Problem

[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%20-%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

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) 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

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) 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.