A CLARIFICATION ON A KEY ISSUE OF THE LABOR DEBATE

When the NFLPA and NFL owners resume their negotiations before federal mediator, George H. Cohen, tomorrow morning, the key issue will still remain to be the division of the revenue of the league.  This is really the only issue that matters to both sides.  Other issues, like the 18-games season and a rookie salary cap are issues that will still need to be resolved, but aren’t issues that will be the cause of labor stoppage.

This key issue – the division of revenue - has brought great confusion to many as they try and understand the positions that each side is taking on this major obstacle standing in the way of NFL labor peace and harmony.

In order to understand the basis of this issue, it must first be understood that there is a difference between “total” revenue and “football” revenue.  Total revenue is easy to understand – it’s the total revenue derived by the teams and league.  “Football” revenue, on the other hand, is an artificial creation of past Collective Bargaining Agreements and is the basis for the Salary Cap. 

“Football” revenue is a collection of certain revenue streams, but it also exempts some sources of revenue from the Salary Cap calculation.

Recently, there has been a lot of talk that the NFLPA has agreed to reduce their percentage of “revenue” from close to 60% down to 50%.  This has been seen by many as a major concession by the NFLPA and has garnered the player’s association a decent amount of positive PR; however, it is a gross oversimplification of what the NFLPA is actually offering. 

In reality, the NFLPA’s offer isn’t really a reduction at all.  What the NFLPA has offered is to accept 50% of the “total” revenue of the league, instead of taking the 60% of the “football” revenue that it has been receiving under the present CBA.  What this amounts to is essentially a preservation of the status quo. 

To illustrate, if, for example, the “football” revenue is $10B, then under the expiring CBA, the players were entitled to $6B of that (60% of $10B).  But, if the “total” revenue is $12B, then under the NFLPA’s proposal, they would end up getting the same $6B (50% of $12B).

It now appears that the negotiations have (hopefully) progressed far beyond that initial proposal stage, but as a first proposal, it’s pretty clear why the NFL owners were none too pleased to enter negotiations with a proposal that was nothing more than a spin on the old economic model that the owners say cannot be sustained.