NFL owners opt out: early wake-up call for a new CBA

The NFL owners today unanimously opted out of the current Collective Bargaining Agreement two years prior to its previously-stated expiration, ending their present agreement with the NFL Players following the 2010 season rather than following the 2012 season. Its stated reasons revolve around the raised stakes of doing business in the NFL due to rising player costs, debt incurred upon the building of stadiums or other potential costs incurred to produce additional revenue.What to make of this? Not a lot beyond the obvious point: NFL owners and the NFLPA now have started the clock on negotiating a CBA that works for both sides. Owners had until November 8 of this year to start that clock; it could, of course, be started anytime prior to that, which made today's announcement merely an earlier version of what was to be announced in November. Having another 6 months of potential bargaining time as we approach a potentially uncapped year in 2010 makes some sense here.What are the issues? They are really all from the league perspective, as the primary objective of the NFLPA will be to not come away with a lesser deal than the one presently in place. In the event the league proposes terms inferior to the status quo, that will obviously be a nonstarter in the union's eyes.Ownership's primary issue is to spend less of overall revenues on players. Teams are dissatisfied with the present model that focuses on team revenues rather than overall profit. Some teams have high revenues yet also high debt. Some teams have low revenues to little to no debt. One would think with the intellectual horsepower present amongst the league and its teams that a reasonable and appealing formula that accounts for revenues and stadium debt could be devised, yet it obviously has not to this point.To this point, Gene Upshaw and the union have encouraged ownership to work out its own revenue-sharing/debt issues amongst themselves. He also notes that no matter how much debt or operations losses that teams have, the asset value of these franchises appreciates so dramatically that their concerns are minuscule compared to the owners' ultimate profit upon transfer of ownership. The recent sale of the Dolphins underscores his point. Ownership counters, however, that it is not that simple.As the only publicly-held franchise in the NFL, our numbers at the Packers were public for all -- including the union -- to see. We consistently showed around 15-20 million of profit each year against no debt. The union and others have used that model extensively. However, for a variety of reasons, the Packers are unique. Packer nation extends far and wide, with Pro Shop revenues that dwarf that of other teams. Simply, the Packers are not a representative model for the NFL.Every team, of course, receives the same amount from the primary revenue source, national television. Beyond that, however, revenues are skewed depending on a team's market and diligence in securing other revenue sources, as some teams gross up to 300 million per year with other teams grossing half that amount. With player costs ranging from below 100 million per year up to 140 million, depending on the team, one can see how dramatic the curve can be in a revenue/player expense model. The billion dollar question is: how to fix it?Again, the union says that it is the owners' issue to fix, not theirs. I vividly recall when this deal was hammered out in March, 2006. There had been several delays in the process, Commissioner Tagliabue was retiring, Upshaw was leaving on a plane to Hawaii, all of which created an immense -- and perhaps false -- sense of urgency. The meeting did not deal with the pressing issue of player costs; rather, it was about a revenue-sharing model to address the inequities that are still being -- or not being -- addressed. Every time I checked in with our president at the meetings in Dallas that day, all I heard was there were ongoing discussion about team revenues. When I asked about the player deal, I was informed that was not really part of the discussion.Gene Upshaw did a masterful job of having the focus of that meeting center of team revenue-sharing issues while a beneficial collective bargaining agreement was quietly sliding through. The deal was ultimately ratified by all but two owners (those opinions from Cincinnati and Buffalo were ridiculed at the time; they are now heartily echoed). The ink was barely dry on this CBA before ownership started complaining about the deal they voted for. Today represents the formal denouement of what happened in Dallas that March afternoon in 2006.There will be other issues besides overall player costs. Ownership is still smarting over a few legal decisions that have dramatically affected teams' ability to recover money from players -- forfeiture of bonus -- in the event of bad behavior. The recent cases involving Michael Vick, Terrell Owens and Ashley Lelie have given players a license to retain bonus money with immunity against immoral activity. Ownership hopes that the union will relent on this issue but, as with everything else, it is now a negotiable item with the leverage tilting the players' way.Another flash point issue will be the Rookie Pool and the possibility of a more defined income level for entering players. Far too much is made of how much rookies make, considering it is quite reasonable past a couple dozen of the 250 rookies, but the disparity of compensation levels at the top of the draft has become a topic for discussion.A month ago at the draft, each NFL team had its turn to be on the clock. As of today, each and every team, the league, and the union are all on the clock to fix the labor situation in the NFL and continue football as we know it beyond 2009.