Since taking over as executive director of the NFLPA, DeMaurice Smith has been campaigning for NFL teams to open up their books to the public. The league objects to that contention on many levels, making it just one of many topics the two sides disagree on as they work toward a new collective bargaining agreement.
However, one club's finances are very much a part of the public domain.
The publically-owned Green Bay Packersrevealed their ledgers Wednesday afternoon. Their annual report was sent out to shareholders this week, a yearly occasion that has taken on unprecedented significance as this labor situation grows more fractious. NFL owners contend that the numbers are sobering, and the latest indication that the current model for paying players is broken. Packers president and CEO Mark Murphy -- an integral member of the league's CBA negotiating team -- said that with players costs still skyrocketing and profits well down from previous years, the current system is "unsustainable."
The financial disclosure was just the latest event to illuminate the gulf between the NFL and NFLPA. Union officials quickly took to Twitter Wednesday afternoon to frame the numbers as they see them. There does not seem to be a solution in sight as we prepare to open 2010 training camps in a matter of weeks.
"It really highlights the concerns that we've had (with the CBA)," Murphy said, "and we saw it last year. It's obviously not a good situation when you've got player costs going at a rate twice of that of your revenue. I think it identifies the issue and the problem and why we need to have some changes. Since the current agreement has been in place [2006], the incremental revenue we've earned [$132M], 94 percent of that has gone to the players."
Make no mistake, every owner, team president, union rep and NFLPA official was watching closely as these numbers came out. Though the Packers have iconic status, and can't serve as a representation of the financial landscape for every NFL team, it's the one prism all sides have to assess the economics of the game. While Murphy remains upbeat about the future of this venerable Green Bay institution, the dollar signs in his estimation are grim in certain areas, player costs in particular.
Green Bay's fiscal year numbers reflect activity from April 1, 2009 through March 31, 2010, and thus incorporates the bulk of their spending for the upcoming season in free agency (and the team's bevy of contract extensions to current players in particular). The team's revenues were $258 million, their highest ever and $10 million more than the previous year. Yet the club, in essence, made no more money than it did the previous year, according to team officials.
Of that $258 million, more than half ($157 million) came from national revenues which are shared by all franchises via the television contracts, road-game revenues, national media rights and sponsorship deals. Local revenues -- money derived from sales at the Pro Shop, for instance -- were actually down $500,000 from a year ago, and have been flat for about three years. Murphy identified the struggling economy as a leading contributor to that.
Meantime, player costs rose from $138.7 million to $160.8 million; thus player costs rose $22 million in one year while total operating expenses went up $20 million. Since this CBA went into place in 2006, Murphy said average costs are up 11.8 percent, while revenue is up just five percent in that span.
"If you look at our expenses, those expenses we have direct control over have been flat or gone down in recent years," Murphy said, pointing out that player costs are tied to the overall CBA system.
In 2006, the Packers spent $110 million on players; they spent $50 million more than that in 2009, and this is a club that makes rare forays into free agency and is without a doubt one of the best managed in the NFL. Much of the roughly $22 million increase in player costs from the previous year were attributed to the team trying to retain its core, signing stars Greg Jennings, Nick Collins, Chad Clifton and Ryan Pickett to new deals. They also had two first-round picks in 2009.
"That's another thing we'd like to address in collective bargaining -- rookie pay," Murphy said.
NFLPA officials pointed out that over the last 10 years for the Packers, the increase in player costs are lower than the rare increase in revenues. And they would emphasize that the Packers are still profitable and competitive and a possible Super Bowl contender within this model despite their decidedly small-market status.
Obviously, the union wants full disclosure from every team, not just the Packers.
"It's 1/32nd of the financial information we've requested in response to their demand that we give back $1 billion and increase our injury risk by playing two additional games," NFLPA President Kevin Mawae said, referring to the league's proposal to cut preseason games and institute an 18-game schedule.
Union officials would also point out that if the owners found a different model for sharing revnues -- specifically their local revenues -- then that would create a more palatable ratio of revnues to player costs for more small market teams as well.
But everything these days is being couched in terms of the current CBA, and it's no surprise the Packers had all the metrics handy since 2006, the dawn of this era of football economics.
We can't lose sight of the fact that the Packers are in many ways unique. They have a rabid, worldwide fanbase, and a waiting list for season tickets over 80,000 names long. Their fans purchase any and all types of memorabilia and the franchise goes beyond sports -- its identity is a source of civic pride. And, in an era where many owners are spending hundreds of millions on new stadiums, the Packers have very limited debt service to deal with.
But there are also factors working against the team.
They are in a tiny market that has been impacted hard by the economy (after three years without raising ticket prices the Packers are doing so in 2010). There isn't the kind of corporate backing available as there would be in more metropolitan settings, and thus suite revenue is down, Murphy said. They can't compete with the heaviest-spending teams on the free agent market -- and wisely choose not to try ("Our policy has always been to draft players, develop them and pay them," Murphy said).
So these numbers can't be extrapolated directly to revenue-generating behemoths like the Dallas Cowboys and New York Giants, where the profit lines could be more substantial (even despite their heavy investments into new stadiums, which over time will surely be richly rewarded). Nor does this necessarily reveal how bleak the picture might be in struggling markets like Jacksonville or Buffalo.
The reality of this CBA struggle is that we are talking about the rich, and the uber-rich, locked in a tussle for the windfalls that the American consumer, big business and television networks put into the game. Both sides -- players and management -- are already winners to some extent. Indeed, the Packers have $70-$75 million in cash available ("That's really crucial for us, particularly as we face an uncertain (labor) situation," Murphy said), and the Packer Preservation Fund is worth $127.5 million (including land purchased around Lambeau Field for possible economic development and expansion).
One could look at Green Bay's financial ledger -- and the fact the Packers have made the playoffs in 12 of the 17 years in the free-agency era -- as a sign the system is working. The Packers, a small-market team, has won a title and been this competitive despite some inherent disadvantages, while still turning a profit. It also serves as an indictment on some poorly-run franchises that have spent haphazardly, failed in the draft, been married to free agency and given back precious little to their fans in terms of playoff wins.
But those trends, since 2006 in particular, will garner the attention of the other 31 owners. With this system in place for another five years, owners might ask, 'would expenses eventually start to dwarf revenues?' And it's an answer they're not inclined to ever find out.
"The owners are very strongly united that the system needs to be changed," Murphy said.
No business would make light of years of dwindling profits at the same time that expenses are soaring. It's a slide any owner or operator would attempt to curb, and it speaks to the heart of why the league opted out of this bargaining agreement. And it's also an indication of why the NFLPA has extended an overture to continue the current CBA for years to come.
The solution to this issue won't come from merely keeping the status quo, and it won't come without major concessions in certain areas by the owners as well. Both sides have made lots of money, and there is even more of it to be had. That's why ultimately I continue to believe, steadfastly, that we will have football in 2011 and this golden age for the NFL will live on.
Just don't count on it happening without a barrage of verbal punches and counter punches over the coming months, and not until both sides get to the very precipice of self-destruction next year -- a labor Armageddon -- with a season in the balance, and their relationship with the American fan at stake.
Extra points
» Despite his years of problems with the Raiders and his run-in with the law in Alabama over illegal possession of Codeine, JaMarcus Russell might still find work in the NFL this season. A week ago I would have said no way, but some close to the former first-overall pick are adamant that he will be exonerated on those chargers. A few teams have remained in contact with him through this latest ordeal, and maybe someone will still take a chance on his talent, gambling that he will mature. In a perfect world Russell would love to end up in a quarterback-friendly environment like Minnesota or Washington (teams lacking in proven backups as well) -- not that he's in any position to pick and choose.
» No team is close to signing its first-round pick yet, though talks with most second-rounders are getting under way. It's the same every year and not a cause for any real concern. I don't anticipate any Michael Crabtree-like impasses this season. No doubt, several rookies will miss a week or two of time, but in a long preseason it can be overcome at most positions. I wouldn't sweat it.
» Steve Smith's rehab from that broken arm he suffered in a flag football game is going well. He's working hard in Carolina with the club's trainers and making good strides, I'm told. The Panthers are holding out hope he will get into the final preseason game, and they are confident he will be ready for Week 1. The receiver is a notoriously fast healer.
» Not much left on the free agent market, but guard Chester Pitts is drawing attention. He's coming back from major surgery, but is a few days away from being able to fully workout for teams, according to a source close to him. Philadelphia, Seattle and San Francisco are among the teams who have monitored his recovery. Pitts, a long-time starter for the Texans, is weighing whether to conduct one workout for several teams, or visit teams individually. He expects to have a club by the time camps open at the end of the month. Flozell Adams and Brian Westbrook have offers on the table as well, but have yet to make a decision about where they will play.
