NEW YORK -- NFL officials on Thursday outlined for the media the finances behind some of their proposals for a new collective bargaining agreement, expressing why they believed there should be significant urgency on both sides to complete a deal.
The officials, led by general counsel Jeff Pash, the NFL's chief negotiator in talks with the NFL Players Association, also shared slides from presentations they have made to all 32 owners, as well as to the NFLPA itself, during the months of talks aimed at generating a new CBA.
The current CBA is set to expire March 4, with the sides far apart on an agreement. Pash said there are no "intensive, round-the-clock negotiations" scheduled with the players at this point but stressed again that Commissioner Roger Goodell has no greater issue on his agenda.
NFLPA officials have countered that the league has been reluctant to join them for protracted negotiations, just one of many issues the sides have been unable to agree upon.
Contacted Thursday after the NFL's briefing, NFLPA spokesman George Atallah said, "There is no evidence to suggest that the economic model is broken. There is no evidence to support their claims of a broken business model. Most importantly, there is no evidence that justifies a lockout."
In Thursday's briefing, though, Pash attempted to clarify some of the murky issues spawned by the potential for a work stoppage.
Pash said he expects teams to continue to apply franchise tags in mid-February, even with the current deal set to expire. Pash also said that if progress is made, it is conceivable the sides could agree to push back the March 4 deadline in order to continue negotiations, as was the case in 2006.
Pash was joined at the briefing by Eric Grubman, executive vice president of business operations; Peter Ruocco, senior vice president of labor relations, and Joe Siclare, senior vice president and treasurer, during which the executives tried to clarify the economic hardships that could befall both sides should they fail to reach a deal in early March.
Some, including the NFLPA, have suggested that the league could benefit and perhaps even save some money via a lockout, and others have suggested that since Week 1 of the 2011 season is still so far away, the league is not under pressure to make a deal quickly. The league officials stated, however, that even a short work stoppage could have considerable direct financial impact on the NFL in the short and long term.
"Uncertainty about a labor agreement will have a clear and cumulative effect on our revenue," said Pash, who remains "optimistic" a new deal can be struck despite all of the hurdles in place.
Ruocco, a top official with the NFL Management Council (the body that oversees contractual and salary cap matters), explained the ramifications of a work stoppage on the potential 2011 free-agent class.
According to Ruocco, if the threshold for unrestricted free agency were to return to four accrued seasons (it took six seasons to become unrestricted in 2010, an uncapped year), this would be the biggest free-agent class ever with 495 players eligible. Of that group, 34 percent are deemed starters, having started eight games or more, which also would make it the highest-quality class ever in that regard.
That group would stand to profit heavily in March, as historically half of all free agents get some form of a bonus in March around when they sign, and the average bonus is $2 million, according to Ruocco. The timing of these payments is significant to players' pay cycles, since base salaries are paid over 17 game checks from September to January.
Given those numbers, the economic impact of roughly 500 free agents not receiving those bonuses this March due to a lockout would be high.
Ruocco also said that seven players have March option bonuses worth a total of $34.3 million; not all of that is guaranteed, and in the event of a longer lockout teams could end up drafting their replacements and end up not picking up some of those bonuses. Furthermore, there are 61 players due March roster bonuses worth a total of $77.5 million, according to Ruocco's figures, and six players are due $31.6 million in salary advances -- money that could be lost, jeopardized or indefinitely pushed back due to labor unrest.
Those figures only include March; many players have option or roster bonuses due later in the spring or summer that also would not be paid until a new deal was signed. Furthermore, without a new deal, no draft picks or undrafted players could get signed -- directly impacting their earning potential.
Siclare has worked closely with teams and owners, as well as the league's various business partners, analyzing the economic impact of labor uncertainty on the league. Primarily, the NFL works with large companies and corporations on sponsorships and deals, and those partners expect a level of certainty about if or when games will be played as retailers prepare to stock shelves with merchandise ahead of the season, for example.
"We have already begun to see the effect of the uncertainty of a potential work stoppage, and it compounds over time," Siclare said, adding that his analysis shows "up to a billion dollars in revenues is at risk if a CBA is reached just prior to the start of the regular season."
Risk to the season might result in lower season-ticket renewals and could lead to roughly half the league lowering or keeping current ticket prices, Siclare said, and also threatens many long-term marketing agreements.
"We've been advised by sponsors, certain sponsors, that they will not renew in a work-stoppage scenario," Siclare said. He added that the league has also had a "major revision" from one licensing contract due to the labor uncertainty, resulting in a reduction of revenue in 2011.
Siclare said that an 11th-hour deal this March still would result in a loss of $120 million in revenue. Further, Siclare projects that getting a CBA deal done in August, just before the preseason, would lead to $350 million in lost revenue. A protracted work stoppage would also raise issues of losses from gate receipts for preseason or regular-season games and stadium naming rights. The league projects $400 million per regular-season week in losses if the lockout extends into September.
A work stoppage also would impact the league's television contracts, the officials said. Some matters regarding the money from those contracts, as it could pertain to a work stoppage, are before the Special Master, limiting what could be said at this time (the NFLPA believes that TV money, with deals extended to 2014 in many cases, amounts to "lockout insurance").
The NFL will make $4 billion from its various television contracts in 2011, including its deal with DirecTV, but Pash said if games are lost, those payments would have to be returned "with interest," framing it more like a home equity loan, where you can get the check now but it will be "a source of debt," that must be repaid.
Looking at all of these factors for both parties, Pash said: "There is a substantial incentive for both sides to get a deal by March. The players have a lot of risk, and the clubs have a lot of risks. We know the financial consequences of no agreement."
The NFL officials also elaborated on why the current CBA has not worked to their benefit, in part with materials from their various presentations to the NFLPA. This economic data is all made available to the players and is mandated to be audited independently by a third party, according to the league and as per the CBA.
From 2005 -- when the prior labor deal expired -- to 2009, the NFL has made $5.5 billion in incremental revenue and, according to these figures, $3.8 billion of that has gone to player costs, which amounts to 70 percent. The players' share of revenues in regards to the CBA has been 58 percent, but when all of the various owner expenses are factored in (salaries of all team employees except for players, etc), the percentage of dollars brought in going to players becomes higher.
Owners also increasingly are putting more of their own money into stadiums and therefore assume the responsibility for all of the upkeep needed with massive scoreboards and updating amenities. So while the owners are generally pleased with the growth of the game and overall revenues, they are not happy with the degree to which those gains are being offset by rising player costs.
"We have a healthy business," Grubman said. "We're not losing money. But we don't have a healthy business model."
To that end, the officials pointed to the money that has been spent on new stadiums since 1999 (when the league and union became partners in a program, G3, aimed at spurring investment in better facilities, which would then boost revenues for all). Since then, the league has invested $4.4 billion to get new stadiums built and spent $31.6 billion on aggregate player costs during that time, while the salary-cap credits from the union toward the program during that span total $525 million, according to the league's numbers. Pash pointed out that since this current CBA has been in place there have been no new stadium deals completed (several new stadiums have been built, but the construction deals were in place before 2006).
Owners would like a new labor model to reward more innovation, as well. According to the numbers presented, currently an average team's local sponsorship deal of $1 million, once accounting for the percentage that goes to the players, as well as signage, sales commissions, event hospitality and all the hand-holding involved in fulfilling the commitment to that sponsor, will result in a profit of roughly only $70,000 for the team itself. They'd like to see that increase in a new deal.
The league's Kickoff event, a celebration of the first game of the season on a Thursday night, hosted by the Super Bowl winner, has been well received. However, the league officials present Thursday said that even though the event grossed $7.3 million in revenue in 2010, it actually cost the league $4.1 million to put on. The players' share of $4.2 million, plus additional costs associated with the event -- among them television programming at $1.9 million, event costs of $2.2 million and hospitality at $1.4 million -- put Kickoff in the red. The excitement and buzz the event creates makes it more than worth it, but owners would prefer if more of the direct costs of staging such an event could be deducted before the players get their share toward the salary cap.
Pash, while not wanting to speak for the union, said NFLPA officials have not "accepted" the league's analysis of some of these finances. "They've said the current agreement has worked well for the players," Pash said, "and I assume they perceive more risk for the players in changing than they do in maintaining the current structure."
While the union has proposed keeping the current deal in place for 2011, and beyond, the league wants some major changes. The league officials say they aim to learn from their mistakes from the current CBA, which some owners signed with trepidation, and accept responsibility for finding themselves in this situation.
"We've said that we don't have anyone to blame but ourselves," Pash said, "But it's not an agreement that has worked out in a satisfactory way. So rather than kick the can down the road another four or five years, let's figure out how to get a system in place that will be positive for the players and positive for the clubs."
