The whole problem centered on a model that didn’t work. That’s what the owners were saying when the lockout began, that the TFR (Total Football Revenue) model for distributing revenue to the players and to which the owners agreed in 2006, and from which they opted out just two years later, was a failed business model.
In some cases, it only took a few months after agreeing to the ’06 CBA for owners to know they had made a major mistake. In effect, what they had done is to have agreed to pay 100 percent of the costs with 40 percent of the gross.
This lockout, which is nearing five months in length, is all about undoing what was hurriedly and ill-advisedly put into place five years ago. Retracing their steps, however, was not completely possible, so the owners did the next-best thing: They addressed the issue of those costs.
Here’s the plan for doing that, a plan that is the result of long and exhaustive negotiations between the two sides. As Packers President Mark Murphy told reporters in a conference call on Thursday, “We’ve put our pens down.” Murphy, a former player, was expressing satisfaction for the performance of both sides.
Beginning in 2012, revenue will fall into three categories and it’ll be distributed to the players at three different amounts. Players will receive 55 percent of the national TV revenue, 45 percent of NFL ventures (NFL Network, licensing, etc.) revenue, and 40 percent of local team revenue.
That final category, “local team revenue,” was the sticking point and possibly the lynchpin in this CBA proposal. If this gets done, the 40 percent provision for “local team revenue” might be what made it happen.
Local team revenue is, by and large, ticket sales. It is the most costly of the three revenues to generate and service, inasmuch as teams have to employ ticket departments and all costs associated with marketing and distributing tickets, which can include substantial credit card charges. In the previous CBA, the players received a flat 60 percent of the ticket revenue gross.
In effect, this agreement flips the ’06 CBA, at least as it pertains to local team revenue. The owners are, in effect, getting a 20 percent cost reduction. It was something they absolutely had to have, just as it would seem the players were equally adamant on not playing an 18-game schedule.
Compromise is a wonderful thing. Each side gets the one thing it absolutely had to have. In this case, compromise on these two major issues helped stimulate agreement on other sticking points, such as a rookie wage scale, where both sides realized gains.
This is a good deal because it’s good for both sides and, just as importantly, it’s good for the game and its fans. The players didn’t need to subject themselves to another two weeks of abuse and, frankly, there had been no public outcry from fans for two more regular-season games, just for two fewer preseason games. Hey, you can’t have everything, can you?
The previous TFR model was a formula for contraction. Slowly but surely the teams at the bottom of the league’s revenue rankings would’ve run into a financial wall. In that business model, the salary cap system could not have survived because those low-ranking revenue teams could not conscionably have been forced to spend to a cap minimum that would’ve eventually put them into the red. The great fear was that without a salary cap to level the playing field, the low-revenue teams would become uncompetitive.
How bad was the old model? Well, it was so bad that a lot of front office people lost their jobs because they worked in departments that couldn’t produce the profit margin necessary to overcome such a lopsided split of the revenue.
Though players will continue to share in all revenue, as opposed to the defined-revenue system employed prior to ’06, the allowance for costs, combined with a continuation of revenue-sharing for low-ranking revenue teams, will give this system a chance to succeed.
This is a proposal worthy of the players’ ratification. It will grow the game and it will grow player salaries.