NFL CBA 2011 Analysis: Stadium Credit Deductions

The most important part of any agreement was always the money situation. Once a revenue sharing agreement was reached that was ok with both sides the rest of the issues on the table would fall into place eventually. A little review might be helpful. In 2010 the CBA called for a $1 billion deduction for the owners, after which the revenue was split 58% to the players and the rest to the owners. Since the NFL brought in $9 billion in 2010 this meant that the players would get $4 billion allocated to them via salary cap and benefits. This revenue plan made no distinction between revenue generated via tv contracts and revenue generated by the individual clubs through their stadiums.

The players proposed that there should be a straight up 50% split of the revenue with no deductions at all. The owners countered saying that they needed extra deductions due to rising costs of benefits and asked for an extra $1 billion in deductions after which they would give the players 60% of the adjusted revenue. This worked out to be 45% of total revenue, so the two sides were apart by 5% of total revenue.

Numbers were tossed around such as $500 million, and $1 billion, and 18% pay cut and (according to DeMaurice Smith) the worst deal in the history of sports, but when it comes down to actual percentages the initial offers were only 5% apart.

Four months after the players decertified and the league locked them out it looks like we have an agreement ready to go with a new split that both sides have agreed to.

So what makes this labor agreement so different than previous ones? Well the one that the owners opted out of was essentially the same one that was agreed to in 1993 after the players took the owners to court. It had been modified a bit and extended but there had not been any real overhaul done to it until this time around. Since 1993 tv revenues have risen dramatically, to the point where they are now the bulk of the league revenue. Following tv revenues is the revenue from the NFL Properties (all the licensed items that you can buy including the exclusive license for EA sports), and then the revenues earned by the local teams (from ticket sales, concessions, etc.)

This labor agreement splits the revenues along those same lines. There's a percentage split of TV revenue, a different one for the NFL Ventures, and a third one for what the local teams make. There's a much smaller section dealing with deductions than there has been in the past agreements.

Deductions

The previous labor agreement famously had "cost credits" that the owners wanted to extend. These credits were given for various business expenses such as stadium expansion and renovation, various promotional undertakings by the league (costs of running the NFL Network came under this), and costs associated with expanding the brand overseas (the most visible of these being the expenses associated with the annual London game).

In the new CBA there is only one small deduction to be taken from revenue, and that is a 1.5% stadium credit. In 2010 that stadium credit would have been almost $95 million. This is not quite as much as has been available in previous years, but it should still be enough to provide each team with $125 to $150 million credit for new stadiums. This is great news for the 49ers, since that would cover more than 10% of the cost of any new stadium. If they end up sharing a stadium with the Raiders the new stadium could expect a $250 to $300 million credit (based on the amount of credit given to the Jets/Giants for their new stadium).

That 1.5% for stadium credit is actually going to come out of the player's share. During 2012-2014 the player's share of total revenue will be no less than 47% and no more than 48%. During the rest of the CBA player share will not be more than 48.5%. Factor in the 1.5% for stadium credits and that means effectively that the lower band of revenue sharing can be no less than 46.5%. Despite this deduction over the course of the agreement the total share of revenue can not average less than 47%. (I'm going to toot my own horn here and say that this is exactly what I predicted they would decide on way back when the first proposals were announced.)

For a comparison, according to The Associated Press in 2010 the NFL brought in $8.88 billion. $4.5 billion of that went to player costs (this includes both salaries and benefits). This means that in 2010 the players were actually taking home just over 51% of the total revenue.