Writers of Pro Football Prospectus 2008

06 Dec 2009

NFL Pulling Plug on Revenue Sharing

In a significant move that could impact the flow of money to potential free agents and the competitive balance of teams, the NFL has notified the players' union that, effective next March, owners will pull the plug on the $100-million-per-year revenue-sharing program that has subsidized lower-revenue clubs, multiple sources said.

Management counters that the supplemental model pertained only to salary-capped seasons; 2010 is scheduled to be uncapped.

I wonder if there are any direct flights from Jacksonville to LA.

Posted by: Bill Barnwell on 06 Dec 2009

85 comments, Last at 08 Dec 2009, 8:22pm by Jim

Comments

1
by BucNasty :: Sun, 12/06/2009 - 1:40pm

Should I be afraid?

2
by Danish Denver-Fan :: Sun, 12/06/2009 - 1:48pm

Isn't this the death of the small market clubs? They HAVE to move to LA now, right? Buffalo has got a problem too...

3
by Or (not verified) :: Sun, 12/06/2009 - 2:16pm

Jerry Jones just ordered the world's largest disco ball for the party he's throwing tonight at the Death Star.

4
by Still Alive (not verified) :: Sun, 12/06/2009 - 2:32pm

This isn't the big pot of shared revenues (~$2 billion?), this is a much smaller program to help out the weakest teams (at least as far as I understand).

Correct me if I am wrong.

Of course losing an extra 10-20 million in revenue or so is not going to be good for the weakest teams.

This may also hurt the Vikings "We might move to LA" argument for a stadium in MN. (The state has already made huge cuts so I don't think there is much chance for a stadium on terms the owners is looking for.) Now there are a few teams ahead of MN in the move to LA emergency line.

5
by sam :: Sun, 12/06/2009 - 2:50pm

4:
Except keep in mind that almost every time has moved, it's been because of a stadium issue. Some might say that keeps MN near the top of the list.

--
sam! or the original sam from the old FO

6
by K Morgan (not verified) :: Sun, 12/06/2009 - 3:02pm

Minnesota can't afford a stadium? Don't they sell out their games? What are the owners doing with their revenues if not reinvesting in the team? I am willing to bet they live quite opulently and their seats are very well appointed. If they are not selling out, then the fans maybe deserve to lose their team. It's really hard to maintain a business without support from public revenues. Support your team.

7
by Mr. Burnz (not verified) :: Sun, 12/06/2009 - 4:28pm

The Vikes sell out all the time. Ziggy has said he's willing to pay for half of a new stadium, but the state is unwilling to offer anything from their side. The Metrodome is one of the lowest profiting stadiums in the NFL, the facilities are terrible and an embarrassment for a professional team. Hopefully a good playoff run this year will make the state realize what they might lose!

9
by drobviousso :: Sun, 12/06/2009 - 5:24pm

I've been to a 'sell out' Vikings game, and almost half the seats were empty.

11
by Still Alive (not verified) :: Sun, 12/06/2009 - 5:46pm

Not sure when that would have been, not in the past three years...

12
by Still Alive (not verified) :: Sun, 12/06/2009 - 5:54pm

I don't think there is anything wrong with the facility. All sorts of events are held there with little problem. This is purely a problem with there not being modern box seats and other ways to make use to tiered pricing to best effect.

All stadiums do is push entertainment spending around from on area to another. Having a state pay for them makes no sense. Much better to have the county/city getting the most benefit pay, as with the Twins stadium.

I wouldn't mind if the Vikings left the state because no one was willing to pay a disproportionate share for keeping them. They should be treated like any other business, and the decision made on the value the community gets. Not to mention the fact that just like hockey if the NFL left Minnesota it would be back within 10 years. It is the 13th or so media market, the 16th MSA. The only places larger that don't have a team are Las Vegas (for obvious reasons) and LA (going to get a team very soon).

81
by M :: Tue, 12/08/2009 - 4:44pm

For football, I agree - it's not that bad. For baseball, I left with a soreneck due to the fact that the seats don't face home plate.

The state has definitely gotten its money's worth out of the humptydome; it definitely will not out of a new Vikings stadium if they give in.

If we are going to try and woo a team back here anyways, why not give the Wilfs what they want now? We spent a hell of a lot more money to get the Wild than it would have cost us to keep the North Stars. If we aren't going to build it now, we should not build it ever, otherwise we just look like spineless jackasses up here.

77
by Richie :: Tue, 12/08/2009 - 4:18pm

Yeah, the state should build the Vikings a new stadium so that the Vikings will be more profitable for Mr. Wilf. Sounds like a win-win to me.

15
by andrew :: Sun, 12/06/2009 - 7:45pm

Its not that Minnesota can't afford a stadium. They just don't want to. Got other priorities in the state. And a lot of people who have a serious issue on princicple of publically subsidizing a business that makes a tremendous profit simply because they want to make more profit.

I'm a vikings fan, but honestly the way the team and the NFL acts I'd say let them go. Los Angeles citizens probably get a better selection of games every sunday since the NFL left town.

21
by Independent George :: Mon, 12/07/2009 - 12:42am

Can California afford anything today?

27
by dsouten :: Mon, 12/07/2009 - 10:09am

Good point. If they're laying off cops I don't see how the government would ever finance a stadium.

41
by M :: Mon, 12/07/2009 - 1:49pm

Any LA stadium would be privately funded - the sticking point to building a stadium there was (I believe) state-specific environmental regulations.

73
by Daniel2772 (not verified) :: Tue, 12/08/2009 - 12:56pm

Didn't Minnesota just publicly fund stadiums for the Twins and the University of Minnesota?

78
by Richie :: Tue, 12/08/2009 - 4:20pm

In LA we get all the Chargers games. When the Rams and Raiders first left, we used to get most of their games as well. But that seems to have finally stopped.

32
by MilkmanDanimal :: Mon, 12/07/2009 - 11:55am

Stupidly, Minnesota has built TWO stadiums within the last few years. Instead of having the dome (which sucks in many ways) handle the Twins, the Gophers, and the Vikings, they built a stadium for the Twins AND a stadium for the Gophers. So, instead of one nice building that can handle three teams, they went the "everybody gets their own playground" route.

I'm not a fan of public financing for stadiums, but Wilf has a point--everybody else got a new toy, why can't I? I think he will get a new stadium, though a significantly less fancy one than he wants.

37
by Will Allen (not verified) :: Mon, 12/07/2009 - 12:43pm

One of the problems with the Metrodome is that it is very difficult to maximize revenue in a stadium that hosts both baseball and football; the dimensions of the game are just too different. The University and the Vikings could have shared a facility, and they were on that path, prior to the previous Vikings ownership torpedoing the notion, because they were greedy to capture all revenue from all events held in the facility. By the time the Wilfs bought the team, the University was well down their own path, with a facility more basic than a NFL team would ever agree to. Finally, the Vikings are seeking far larger public subsidies than entailed in the other two facilities.

42
by M :: Mon, 12/07/2009 - 2:10pm

(Disclaimer: My comments below get pretty political, but I think they are extremely relevant to the discussion here. I also know that politicians from various backgrounds and ideologies share these same views - they just get drowned out by yes men of their own parties. In other words, don't delete this post!)

I'm a Minnesota resident and a Vikings fan, but I've been cautious to jump on the bandwagon this year because of the looming stadium issue. I think using "some" public funds for a stadium is OK, but when you are asking a state in billions of debt to pay for well over half of the costs is completely ridiculous. I'm not so upset at our own state legislators as I am pissed at the spineless legislators, mayors, and governors of other cities and states that have been propping up the owners of sports teams with what is absolutely the worst kind of corporate welfare. Sadly, given the complete stupdiity across the country on this issue, I reluctantly have to say that Mr. Wilf has every right to move the team, because that's what owners do to compete in this business - and it IS A BUSINESS before it is entertainment. Given that he has no local ties, I think the Vikings are the FIRST to move to LA, because In Jacksonville & Buffalo the respective owners are much more willing to lose millions to keep the teams in their current cities. That said, there is only so much money that most businessmen are willing to lose, and those teams may ultimately move as well at a later date.

Personally, I'm very jealous of the model the Packers have; I think that is the way all professional sports teams should be owned - they'll never, ever move because the owners are the very citizens of Wisconsin instead of out-of-state businessmen.

Lastly, in Minnesota, we talk about being principled by not giving in to the demands of team owners. However, we have a long and sad history of giving up those principles years later and spending much, much more to get a team back here than it would have cost to fund the team's demands in the first place. If I knew that the citizens of our state would hold firm forever, I'd say "fuck-em" and let them leave. However, since I know how we act historically, I think we should pay for the fucking stadium now even though our state is broke. We'll be saving ourselves because we'll throwing less money away now than we will later.

'sigh'

45
by Will Allen (not verified) :: Mon, 12/07/2009 - 2:33pm

Yeah, the whole situation disgusts me on several levels, the most basic being that having spent most of my life as a business owner, it aggravates me to no end to see a cartel of billionaires with their snouts firmly stuck in the public trough. I wish Congress, several decades ago, had revoked the tax exempt status for bonds issued by any government entity, in any state in which tax subsidies were provided to build facilities for any entertainment business. Of course, that would have entailed members of Congress offending billionaires, so was the chance of that happening?

46
by M :: Mon, 12/07/2009 - 2:53pm

Well put, Will. Being a bit younger than you (based on your recollections of Vikings teams of old), it's been a recent development that I can fully appreciate the absuridities of government fiscal "management". Rest assured, I'm catching up now.

47
by Still Alive (not verified) :: Mon, 12/07/2009 - 3:16pm

Hehe...as a friend who was an aide to a Senator used to say all the time "You should be amazed it [the country] works at all". There is an amazing lack of cost/benefit analysis in private business, much less government where people are not spending their own money.

49
by M :: Mon, 12/07/2009 - 3:41pm

Sorry - sometimes when railing against one particular evil of society, I forget about all of the others. Yes, that is very true as well - it's one of the reasons I cringe and my eyes twitch when people sing the praises of how much better off we'd be as a country if our government was run more like a business. In some ways I wonder if a large part of our modern government problems is that there is too much overlap between business and government - representatives in government often view their current office as a stepping-stone to a lucrative private-sector career as opposed to a civic duty. Of course, maybe it's always been that way...

'sigh'

50
by Will Allen (not verified) :: Mon, 12/07/2009 - 3:52pm

People who say that governnment should be run like a business understand neither.

54
by MilkmanDanimal :: Mon, 12/07/2009 - 6:38pm

I agree with pretty much everything you said. A few weeks ago when somebody was raving about Favre I "joked":

"You know what Favre and the Vikings have in common? Neither will be playing in Minnesota five years from now."

Suffice to say, the "joke" wasn't appreciated much, but I really do think there's a very strong chance the Vikings leave the area before long. Wilf is VERY insistent on a ridiculously expensive new stadium (I really appreciated how, less than a week after the I-35W bridge collapse, he started whining for the stadium, great timing), and, if he doesn't get it, he's leaving. Which will suck, but the man should not use my money to buy himself his own billion-dollar playland.

58
by mjb :: Mon, 12/07/2009 - 9:03pm

Do you mean the same community of Green Bay that paid to refurbish Lambeau field in 2003 with public financing? With that refurbishment being to basically just add luxary boxes to the stadium. Sure the fans knew that the would never move away, but they also could see the economics of the NFL and that the team NEEDED the additional revenues from these luxary boxes that they would never see with just sell outs.

68
by justanothersteve :: Tue, 12/08/2009 - 11:14am

The expansion at Lambeau did more than just add luxury boxes to replace the old luxury boxes that were little more than indoor seats with windows. It also added close to 10,000 seats total. IIRC, about 2/3 of those were the standard bleacher seats. You are correct in stating that the improved luxury boxes (at an increased price from the old ones) along with several hundred club seats (outdoors but with nicer actual seats and other perks) have significantly increased revenues. With these, the Packers are somewhere around #8-10 in revenues despite being the NFL's smallest market.

69
by M :: Tue, 12/08/2009 - 12:23pm

#54 - Don't be afraid to make comments like that regardless of the backlash (online or in person). I think people need to wake up to the reality sooner than later. Yes, this season has been great, but in the odd event that 1) the Vikings win the Super Bowl (BUT...this is MN we're talking about - no George Mikan, no Kirby Puckett, no title), 2) The MN legislature & lame-duck governor hockey-puck refuse to give in to Wilf's demands, we could have the first scenario in which a title-winning team leaves town within a few years since the Dallas Texans of the 1962 AFL. However, I think that situation and this one are light-years apart; this would be about as shattering as the Browns leaving in 1995-96. I don't know the right answer, it is what it is.

#58 & #68
- It doesn't hurt that Packers fans are much, much more fervent than Vikings fans. We're very passive, and I think there are a much greater percentage of Wisconsinites willing to dip into their 401K's to have season tickets, luxury boxes, etc. to give the Packers the revenue they need. Again, this is why the Packers model WORKS, and why no current pro league will ever allow it to happen again. The team and the community are intertwined so closely - if you are from Wisconsin you ARE a Packers fan (or are married to one). Hell, I'm surprised the special state quarter for Wisconsin didn't have the giant "G" on it. In Minnesota we are far too passive to invest that much in a team; Wisconsin will invest in the team because it can somewhat legitimately be viewed as an economic investment - the profits don't go to #57 on the Forbes list.

A true professional sports revolution would be to create a league (football would probably work best) where cities or local shareholders own the team. I'm guessing there might be state consitutional laws prohibiting the former, but the latter is basicly the Packers model.

In this league there may be an actual local economic benefit to building stadiums and having good teams; if enough stars could be signed, it could conceivable challenge an established league for supremacy. It would also help if some of the Antitrust laws that are currently supporting modern sports leagues would be revoked; the resulting chaos may be enough to create two leagues: the "Oligarch Football League" (basicly the big market teams in the NFL) and the "Civic Pride Football League" (any smaller city that wants a team but would like to share in any economic benefits).

It's probably populist wishful-thinking, but really, do we want our country to turn into modern day Russia where there are oligarchs (Old "Communist in Name Only" cronies own everything) and everyone else. If we want our taxes lowered and balanced budgets, why not remove the professional sports/corporate welfare cycle and have a new revenue stream for our states and cities? It's no dumber than legalizing gambling and ripping cash out of smoker's pockets (I HATE SMOKERS, BTW) by profiteering off of the vices of the minority.

The ultimate irony in the above scenarios would be the likelihood of the big-market NFL owners either suing the city-owned league or going to the SCOTUS stating that the city-owned league violates US antitrust laws. Hell, they might win given our judicial system.

75
by Will Allen (not verified) :: Tue, 12/08/2009 - 3:35pm

It makes as much sense for governments to own sports teams as it does for governments to own movie studios. The Packers model (which is decidedly NOT a model entailing government ownership) works because the team was formed when a franchise could be purchased for a few hundred bucks, and then they had great success, which helped develop a strong following.

79
by Jim (not verified) :: Tue, 12/08/2009 - 4:20pm

I am not saying its right or wrong but the government not only owns plenty of sports team many of them are run at great profit. Think every public university athletic department and nearly every public high school.

82
by M :: Tue, 12/08/2009 - 4:57pm

Is it better for government to pay for the stadium and not get any of the revenues, or is it better for the government to own the team, pay for the stadium and ongoing costs and reap the future profits? Given that I am a taxpayer but NOT an owner, I would prefer the latter option.

Frankly, the only good business model for sports teams is no public subsidies for their stadiums (stadia?). But this can't happen because the team values are too high. Because enough owners have bullied their way into public financing historically, now the values of teams are inflated because they reflect the fact that relatively little personal debt is used to finance the stadium. The consequences of this are that any team not getting public financing is effectively operating with one hand tied behind their back due to the paying back of any borrowed monies, and that the cost of purchasing a team is now so high that only the richest of the rich can own a team, and anyone who has to borrow money to finance the purchase price can't afford to be making debt payments on a stadium. It has become a vicious chicken-and-egg cycle.

This is somewhat the situation that Mr. Wilf is in; the price paid for the Vikings was so high compared to previous sales that it seemed to implicitly assume some sort of new stadium being built.

There has to be an Economist or Econ major out there who can explain this better and more accurately than I can. Any takers?

8
by Pat (filler) (not verified) :: Sun, 12/06/2009 - 4:49pm

I don't think that people are looking at this right. It's almost certainly a negotiating tactic. It's important to remember that the additional revenue sharing was implemented when the last CBA extension was negotiated - and it was done to stabilize the smaller-market teams due to the salary cap explosion due to the switch from "designated gross revenue" (i.e. TV, split gate receipts, etc.) to "total gross revenue" (i.e. all revenue).

This is more a message to the player's union that the NFL won't accept a salary cap based on total gross revenue again.

10
by Still Alive (not verified) :: Sun, 12/06/2009 - 5:44pm

Thanks for the insight.

43
by M :: Mon, 12/07/2009 - 2:12pm

This may be true, but I still hold firm to my statements regarding the Vikings leaving for LA. Even a new CBA would not change the Wilfs' position on needing a new stadium.

13
by Bright Blue Shorts :: Sun, 12/06/2009 - 6:07pm

Of course it sounds bad, but how many Super Bowls has Dan Snyder won with all his money?

How many playoff appearances did the low-spending Oakland A's make before their moneyball strategy became well understood?

How many 'great' players have the Patriots let go after their SB exploits (Cassell, Givens, Vrabel, Branch, Seymour, Milloy, Vinatieri) while picking up undervalued others cheaply (Brady, Welker, Moss, Cassell, Seau, Dillon).

14
by Theo :: Sun, 12/06/2009 - 7:34pm

I don't get it.
And no one ever got to explain what the non cap year would mean to the NFL.
Everyone seems to talk past it and everyone seems to act like it wouldn't happen.
What I'm asking is, if a no cap years happens, what are the consequences?

56
by Nate :: Mon, 12/07/2009 - 8:33pm

The two big things are:
1) No salary cap; and
2) The guys 4 or 5 years in who would normally have been unrestricted free agents will be RFAs. You need six years to become a UFA, not the previous 4.

70
by Jon Coit (not verified) :: Tue, 12/08/2009 - 12:39pm

Florio on pft also routinely points out there will be no salary floor, meaning teams can pay as little in total player salary as they like.

I think the uncapped rules make it more difficult to shed big contracts (can't remember the details), but I could see teams being less willing to write new big contracts absent a new CBA, and thus instead of a free agent bonanza there might be glut of free-agent talent on the market.

72
by M :: Tue, 12/08/2009 - 12:42pm

This could have even more of a perverse effect on competitive balance than we are seeing in 2009 by encouragin fire sales or salary dumps by low-revenue teams; we could have super teams (on paper) as well as Division III-level squads in the same league. Get ready for more 59-0 games in 2010.

16
by raider rick (not verified) :: Sun, 12/06/2009 - 8:02pm

If they do this it will be the end of my interest in the not for long--only the big city teams will be able to afford to field good teams and all the smaller town teams will disappear. The idea that all teams can compete is what keeps me coming back-----bye bye greedy owners.

17
by Still Alive (not verified) :: Sun, 12/06/2009 - 9:59pm

This is what keeps me away from the MLB and NCCA FB, where the competitive imbalance is simply atrocious. I love the MLB defenders saying "Well it is still fair, the big market teams can just afford to make a lot more mistakes".

A) That is the definition of not fair.
B) Giving the small market teams 4 strikes instead of 3 would allow them to make more mistakes, no one would argue that was fair. Or you could give them a man on first each inning. Or they could start each game up 1-0, that would be a similar advantage to what the big four or five have in many of their games.

Worst of all it completely distorts people's perceptions of how successful teams/management groups are. In the MLB every 5 million or so over league average buys you an expected win. Which means the Yankees expected base win total the past decade or so is around 95 each year.

Boy Torre and Cashman sure are geniuses...hall of fame locks. Torre's resume is about as good as any of the pirates last 5 coaches (That might be a bit of an exaggeration, but it is closer to the truth than the prevailing dogma).

30
by Temo :: Mon, 12/07/2009 - 10:31am

Worst of all it completely distorts people's perceptions of how successful teams/management groups are

Maybe baseball management, but not business management. Say what you want about Yankee baseball management, but they've been milking all the revenue they can out of their market with superior business management. True, no matter how good the Royals are at marketing, you just can't make as much money in Kansas City as you can in New York.

However, consider that in the '70s, the Royals and Yankees made almost the same amount of revenue. Over the past few decades, Steinbrenner has invested a ton of money in his club and the park and the brand and now they make a ton more than the Royals (as they should, considering the market). The Mets have the same marketplace advantages and don't make as much money as the Yankees. You can cry that the Yankees have history on their side to help with fan interest, but if you were around in NYC before '95 you'd know that there were as many Mets fans here as Yankee fans.

Also, if I'm a Yankee fan paying hundreds of dollars more for a trip to the ballpark, I want to see my money used to support my team, not the Kansas City Royals. Why should I pay more than a person in KC to see a baseball game if my product is exactly the same as theirs? Football is different because most fans don't go to games and instead watch on TV. You can't compare the two.

You could also use the example of the Angels, who for all intents shared the same market as the Dodgers and yet made crap in revenue before the '00s. After being bought by Disney (who then marketed them with near-by Disney Land and movies), they are now one of the more spendy teams who make as much in revenue as the neighboring Dodgers (who are comparatively not as well managed).

40
by Still Alive (not verified) :: Mon, 12/07/2009 - 1:32pm

Personally I am interested in sports because of the the on the field competition and off the field baseball management. If I am interested in business management there are much more interesting sectors with better competition :)

51
by Temo :: Mon, 12/07/2009 - 5:02pm

That's not the whole point though. For one, part of the business decisions that have made certain teams so successful in making money is the decision to invest smartly in the team. The mid-to-late '90s Yankees didn't have the highest payroll in the league and still won multiple championships. They built their brand and their market until they started making ridiculous cash. THEN they went out and bought a ton of veteran players for way over-market prices. And didn't win. For a long time.

The Angels did something similar. They won, then they spent. Revenue sharing punishes owners for attempting this themselves. Why invest in your team when you're going to be sharing the dividends from this investment?

Also, it's still tough to tell big-market fans who pay big-market prices to see games that half of their money goes to supporting the likes of the Florida Marlins.

61
by zlionsfan :: Tue, 12/08/2009 - 12:21am

Wait wait wait, you're using MLB as an example of lack of competitive balance compared to the NFL?

Competitive balance or lack thereof in baseball has much less to do with revenue sharing and salary caps (which they have, they simply work differently than in the NFL) and much more to do with incompetent management and indifferent owners, both of which exist in both leagues. (Lions, Browns, Rams, Raiders, Chiefs ...) Certainly you don't really believe that money buys you wins? Not unless you think that the Mets were actually a 140-loss team this season.

As already mentioned, the Yankees should really be considered a model franchise: they are owned by a man who is willing to do whatever it takes to win, just as they were under his father. The problem in baseball is not the Yankees and Red Sox and Cubs and Dodgers (and Orioles and Mets), it is the Royals and Marlins and Pirates (although moreso under previous ownership in the last case), teams that are run to make a profit regardless of success.

For those owners, and their counterparts in the NFL (like Mr. Ford, for example) and other leagues, there is no system that will compel them to run their teams properly, nor should there be. Why shouldn't Hank Steinbrenner get angry when he has to write a luxury tax check, part of which ends up in David Glass' pocket? The Royals aren't a struggling franchise because Mr. Glass can't afford to spend money on the team: they're a struggling franchise because he chooses not to spend that money.

Yes, the Yankees have some advantages that the Twins do not and most likely will not. But how would you change that to make it actually fair? How much money do the Yankees have to give the Twins? How much to the A's? How much to the Padres? And what happens to it then? Do you raise the salary floor, and if so, how do you prevent ticket prices from going up? (I guarantee that if the salary floor goes up, Kansas City fans will make up the difference.)

It pains me to defend the Yankees, but they aren't the problem. Big money isn't the problem: some franchises spend big money annually and never have a real chance to win. The problem is owners with different goals.

Now, NCAA football, yeah, that's a big-money game. Ask Northeastern and Hofstra ... or schools in conferences like the MEAC and SWAC.

Or a school like Virginia Tech, who missed out on a share of the BCS pie in part because people who don't even watch the games put Iowa ahead of them. (Think about when the ballots are turned in.)

NCAA basketball is the same way ... too many schools in DI (which is part of the reason why there's a moratorium on moves until 2012) chasing the lottery tickets.

63
by Still Alive (not verified) :: Tue, 12/08/2009 - 1:54am

It buys wins by the same statistical measures that 3rd downs help win games, or any other correlation. If I recall correctly team spending in the MLB accounts for 30% of the differential between team records. Given how much luck there is in sports that is a very strong indicator.

It buys wins statistically. Your Mets example is a complete non-sequitor as they simply underperformed. Turnover differential is certainly a very strong indicator of winning football games. Pointing to a team that has a good record but a bad turnover differential doesn't magically make turnover differential irrelevant.

Why shouldn't Hank Steinbrenner get angry when he has to write a luxury tax check, part of which ends up in David Glass' pocket?

Because Hank doesn't actually run a business, he runs a branch of a company called the MLB. That the company does not have structures to replace its underperforming branch managers is indeed a fault, but Hank's branch is getting huge benefits from being treated as a single enterprise legally so it seems disingenuous to complain about having to act like one.

66
by Jim (not verified) :: Tue, 12/08/2009 - 3:56am

I wrote a lot of this stuff in another post here so I will do this a lot more generally here.

First, on competitive balance its not the money but the nature of the games that make baseball look more uneven compared to the NFL. In the NFL a team has a 42 percent chance of making the playoffs because there are more divisions and more wild card slots. In baseball at most it is a 34 percent chance and as low as a 24 percent chance depending on league and division. In baseball the Strength of schedule is much closer together and you play multiple games against every team in your league this year for example the difference between the hardest and easiest AL SOS was .022, .019 for the NL and over both leagues just .029. In the NFL the strength of schedule varies greatly this year before the season started it was .180 for the whole and .160 in the AFC and .178 for the NFC. In the playoffs baseball has 5 and 7 game series which cuts down dramatically variance while the NFL is one and done which again punishes the underdog.

Second. The two leagues have almost polar opposite business plans. The NFL makes most of its money with its TV contract witch is divided equally amongst the league. MLB makes most of its money with local deals. NFL teams start off the bat with about 180 to 200 million and anything extra comes from luxury boxes and such. Baseball on the other hand starts at about 25 million and the rest has to be made by the teams themselves. Because of the physical limitations a stadium can have there is a practical limit to local money that can be made for NFL teams. Every NFL city with the exception of Buffalo, Green Bay (but they are a special case in American sports) and Jacksonville have enough money in there market to compete with even the Giants, Jets and Bears of the world. And market size is not everything even in baseball where you have a richer than median city in the top 10 in market size dead last in revenue with the Marlins. You also have the Twins, A's, Blue Jays and Orioles towards the bottom all wealthy cities and medium to large markets.

There is also the nature of the game that would prevent football from having a yankee or red sox like team. Football players are more bespoke where as baseball players are interchangeable. Teams play different systems so a QB might be a great fit for one team and a horrible fit for another where as a 3rd baseman is going to do the same thing for the A's as he is going to do for the Yankee's.

84
by omaholic :: Tue, 12/08/2009 - 6:32pm

In the playoffs baseball has 5 and 7 game series which cuts down dramatically variance while the NFL is one and done which again punishes the underdog.

I generally agree with all of your comments except this. The fewer the games, the more likely the underdog is to prevail.

EDIT: Now that I read your comment again, that might have been what you meant.

85
by Jim (not verified) :: Tue, 12/08/2009 - 8:22pm

Yes that is what I meant, the one and done of the NFL makes it much more likely for an underdog to win, thanks for catching that.

67
by Jerry :: Tue, 12/08/2009 - 4:55am

I submit that it's not a coincidence that between the introduction of the amateur draft and the $500M MSG contract, the only successful Yankee clubs were the '77-78 teams at the beginning of free agency, where Steinbrenner was willing to spend more than other owners. The other teams quickly figured out that they could actually afford to pay that level of salary, and the Yankees slid back to the middle of the pack until competitive New York cable bidding gave them a huge revenue advantage.

Yes, they've managed things well since then, but it's much easier to contend when you can afford to pay your own stars AND sign top-of-the-market free agents as well.

71
by M :: Tue, 12/08/2009 - 12:39pm

Yes, your argument does apply to the Royals. But ask yourself about the Rays and Blue Jays - both have had teams that really should have made the playoffs over the past decade but didn't because of the division they are in. Even as a Twins fan, I definitely think the Rays were a better team this year. The 2008 Blue Jays team would have been at worst a serious wild-card contender in any of the other divisions - and don't use the 2008 Rays as a counter-argument; there are always random events where the right combination of luck, skill, and opportunity can result in a miracle season. In a level playing field, teams like the Rays & Jays (someday Orioles as well) would have a much better chance of making the playoffs when they have their good years. Now they have to be one of the 3 best teams in baseball if they want to assure themselves of a playoff spot - which is almost impossible to do if both the Yankees and Red Sox are competently run and have average luck in close games and injuries.

That said, I don't know of any scenario where baseball could truly be competitive unless they had 1) Salary Cap, 2) Salary Floor (most important component), and 3) a legitimate method of revenue sharing. If they really don't like how some teams approach maximizing revenue, you could penalize their revenue sharing in some manner without hurting owners who are actually trying their best to increase league revenues (ideally without raking over cities and states). Threat of punishment on that level might be enough to get the David Glass-types of the world to actually spend money on players and a competent GM.

18
by AnonymousB10Fan (not verified) :: Sun, 12/06/2009 - 10:57pm

Brilliant move...turn the sport into the joke that baseball's become.

On a day when all of my favorite teams won and the teams I hate lost, this just ruined my entire day.

No, a financial structure like baseball's won't guarantee the major market teams will win; it'll just give them a huge competitive advantage.

I hope to God this is just a bargaining tool.

28
by dsouten :: Mon, 12/07/2009 - 10:14am

Everyone take a deep breath and read comment #8...

19
by Monkey Business (not verified) :: Sun, 12/06/2009 - 11:26pm

Let's differentiate something here: there are "small market" teams like the Colts, which are successful moneymaking franchises, and "pathetic market" teams like the Bills and Jaguars that couldn't make money under ideal circumstances, much less the ones we face today.

Here's the problem: guys like Jerry Jones, Robert Kraft, and Dan Snyder are making and will continue to make literal buttloads of money from now until the end of time or so. Guys like Wayne Weaver and Ralph Wilson can't make money. So, Wayne and Ralph complain to the league, who take a portion of Jerry, Robert, and Dan's revenues and give it to them. Essentially, the top half of the league bails out the bottom half.

Now, Jerry, Robert, and Dan are still rich as hell. But, as anyone that knows anything about money knows, once you have some you want more. So, naturally, they're pissed.

Moreover, it's actually not in the NFL's best interest for a team to move to LA. As long as LA is vacant, it's a viable bargaining chip for clubs to use with their cities. Somehow, threatening to move to San Antonio or Las Vegas or Oklahoma City just isn't quite as intimidating as LA.

Stadium deals are public-private partnerships. Yes, cities and states are shelling out enormous quantities of cash to keep their NFL franchises happy. However, the local benefits, both in the form of civic pride, national recognition, and local revenues, generally outweigh the cash layout problems. That is, unless you're Jerry Jones and build a billion dollar stadium that no one can afford the naming rights to.

23
by Still Alive (not verified) :: Mon, 12/07/2009 - 1:43am

I am not sure there is any evidence that the benefits in "civic pride national recognition and local revenues" come anywhere close to covering a few hundred million dollars. Not to mention the opportunity costs you are giving up.

That said it certainly is a good way to move around some spending within an area. Which makes a stadium a useful tool for redevelopment. But if a team leaves a town everyone doesn't suddenly make less money. They go out to bowling alleys instead, or buy bigger tvs to watch the national games, or take up paintball, or 500 other things.

24
by tuluse :: Mon, 12/07/2009 - 2:39am

You lose out of town fans.

And you lose all the TV revenues from the NFL.

34
by Will Allen (not verified) :: Mon, 12/07/2009 - 12:32pm

Cities get tv revenue from the NFL?

55
by tuluse :: Mon, 12/07/2009 - 7:38pm

They get that money spent in and around there city.

57
by Still Alive (not verified) :: Mon, 12/07/2009 - 8:54pm

Except when they don't...many players spend most or their time and money elsewhere. And that TV money doesn't come from nowhere advertisers, some of them local, pay into that pot. Economic impact analysis is a very tricky thing.

For example everyone loves "buy local", but it all depends on where those local shops get their goods. Say a candy store gets its inventory from California, you buy local there and maybe 90% of the money immediately disappears out of the local economy. The US Chamber of Commerce always loves to cite (and NFL owners also cite) its figures from the 80s/90s stating every $1 spent creates $6 more of spending. Well that research is just garbage and it is a lot more like another $50-1.50 in spending, and highly dependent on the business.

For an NFL team you would need to look at a lot of things:

Where is the team bringing in money and where does that money come from?
Ticket Sales -mostly local
Merchandise Sales -mostly local
TV Sales -mostly national?

So some of that money is coming into your area from out of the area, that is good.

Now how much of that money that is brought in is then spent in your area?

First off fans traveling into area don't help because your fans most likely also travel out of the area at the same rate.

Player salaries (what % of these are spent locally)
Owner Profit (Probably invested all over the place)

Anyway you need to come up with researched figures on all that and much more, and then the money brought in needs to somewhere around a few hundred million dollars.

AND THEN you need to look at other projects you could spend a few hundred million dollars on and see if they would bring in more. You could build a Biotech research campus and entrepreneurial incubator, you could eliminate corporate tax for a year, or a million other projects.

35
by Will Allen (not verified) :: Mon, 12/07/2009 - 12:34pm

Also, hundreds of millions in subsidies isn't really counterbalanced by drawing out of town fans.

62
by zlionsfan :: Tue, 12/08/2009 - 12:31am

Which most franchises don't want anyway ... they want out-of-town fans who will root for the home team, and what were those people going to do without a team, not come up to the big city?

And as Still Alive says, that money doesn't necessarily go back into the community anyway. Of the money that does, how much do real people in the community see? Not much. Yeah, the Colts do a lot of charitable work around Indianapolis, and the players who choose to make this their home help out too ... but other NFL players can help out in Indianapolis whether or not there is a team here, and there are other companies that put a lot of money into the community and provide a lot more stable jobs (relatively speaking) than the Colts do. The NFL jobs that pay the best are already taken when the franchise arrives.

As for TV revenue ... I doubt much of that, if any, goes back to the city itself, and having an NFL team certainly isn't a requirement for showing NFL games. In fact, you probably see fewer NFL games in a city with a team than in a city without a team. (Yay blackout rules - not.)

In my experience, there are a lot of benefits mentioned with respect to an NFL team, but they're largely mentioned by a firm responsible for demonstrating why an NFL team is important to a city, and I don't think they add up to throwing hundreds of millions of dollars into something that doesn't pave roads or teach in schools or whatever. There is this nebulous "money will come from everywhere" idea that I think is just crap.

74
by Anti-Bear (not verified) :: Tue, 12/08/2009 - 2:33pm

All governments squander huge portions of their revenues on projects intended to increase the levels of "in-town civic pride" and "out-of-town civic respect".

Is that the right or wrong way to spend tax money? I don't know, but it's a fact of life. So if that is already the case, how should a good government spend this money? Probably on projects that will provide the biggest increases in pride and respect at the lowest possible cost.

That could mean a lot of things to a lot of different people. Drivers like roads without potholes, readers like good libraries, art lovers like museums, most people like clean streets with few homeless people, sports lovers happen to like sports stadiums (because they attract sports teams to cheer for).

It seems like the thing that is being missed is that winning is what sports fans are cheering for (and are paying for). While losing may actually increase the amount of shame and disrespect for a city.

Does anyone think that Foxboro is agonizing over the money they spent on the Patriots stadium, NO, in fact, with the level of Patriots pride and out of town respect they get, I am guessing that Foxboronians are so proud they would have gladly paid for the whole stadium with tax money!

Maybe, the next time a city is being threatened with a team leaving unless they get a new stadium, the city should tell the owner, we'll loan you all the money to build your new stadium interest free. If you win the championship within 10 years, the loan is totally forgiven. For lesser levels of achievement the loan will be partially forgiven, and so on. For Cleveland Browns level play you will be gleefully required to repay the entire amount.

76
by Jim (not verified) :: Tue, 12/08/2009 - 4:16pm

You are not wrong with what you are saying but there are a few practical places where sports funding differs from other funding. Starting with infrastructure like roads and even libraries these are expenses that have a research supported positive benefit to growth and tax rolls and the benefit everyone in the community in some measurable way outside of some vague pride.

The problem though is that stadiums are sold not on pride but as an economic benefit. There has yet to be an independent study that shows anything but the most negligible benefit. The number of jobs that a stadium produces is about that of a walmart supercenter or 2 would produce and with similar wages but the stadium jobs are temporary for at most 25 days a year. The number of high paying (that is jobs paying 15 dollars an hour or more) full time staff of a football team and stadium is about a 100 (this does not include players). The number of construction jobs are temporary and in most economic conditions could easily be absorbed by other projects. So in reality a stadium should be seen as the same as a arts center or museum which are sold to the public as a civic benefit as often as they are sold as a economic benefit even though museums are many times more likely to end up as an economic benefit to a city.

If a stadium was actually sold to the public as this and the public still choose to pay for it, that is there right and they have been informed. But, I have yet to see this happen and city's can receive a higher bang for the buck by dumping money they where going to spend off the top of there largest building.

80
by MJK :: Tue, 12/08/2009 - 4:27pm

A couple of issues with this. A lot of the examples you cite--pothole-free roads, libraries, art museums, etc--reflect actual quality of life improvements rather than just civic pride/respect. The city of Ottowa is beautiful...it's not kept so clean because the city government wants its citizens to be proud of living in a clean city--it does it because no one likes to live in a mess and it would lower property values. New York City didn't build libraries because it makes people proud that they live in a city with libraries--it did it because it wanted to provide a real service to the people. You don't repair roads so people in other cities will envy your city--you do it so your citizens don't bust their tires and break their axles.

The only actual benefits a stadium brings to a city, other than "pride and respect" if the team is successful, is that, like a library or art museum, it gives people an entertaining activity to go to, and it (arguably) stimulates local business and improves the economy. But the first argument is a weak argument for building a stadium...a library is free and available to everyone, and even a museum is usually pretty affordable, whereas a football stadium gives a few tens of thousand of your rich and upper middle class something to do on eight or nine Sunday afternoons out of the year, when almost (or possibly even more) rewarding experiences could be gained by watching the game on TV. And the second argument is hotly debated. Libraries don't increase traffic, cause litter and vandalism, and lower nearby property values. Stadiums do.

I also take issue with your contention that a losing team brings shame and disrespect on a city. The Redwings were really good recently...but that doesn't mean that I think Detroit is the paragon of wonderful cities in the country. The Bengals were bad for years...but that doesn't mean that I think Cincy is a bad city.

Finally, Foxboro is a bad example of your point, considering Gilette was privately funded by the Krafts...to my knowledge, no public funds were used. And the Krafts poured a lot of money back into the community to compensate the community for the inconvenience of having a huge stadium in their small town.

83
by M :: Tue, 12/08/2009 - 5:10pm

I'm happy to see that I'm not alone in being suspicious of the use of public funds for stadia. It's very frustrating when I see so many people hopping on the "economic benefits" bandwagon even though various studies mostly point to the idea that sports teams usually offer no benefit, and in some cases can hinder a metropolitan area.

25
by DavidL :: Mon, 12/07/2009 - 2:50am

Essentially, the top half of the league bails out the bottom half.

So? They're franchises of the NFL, not independent businesses. Nobody complains when profits from a really successful McDonald's go back to the home office.

31
by dbostedo :: Mon, 12/07/2009 - 10:35am

That's sort of an on-going debate with regard to the NFL's anti-trust exemption. Technically each team IS an independent business who competes with others for resources and income. But since they need each other to survive, they're in a somewhat unique circumstance of wanting to do better than the competition, but not enough to put them out of business.

33
by PatsFan :: Mon, 12/07/2009 - 12:04pm

Of course, in the American Needle case that SCOTUS will be hearing soon, the NFL is arguing that it should be treated as a single entity and thus be exempt from anti-trust laws.

48
by dbostedo :: Mon, 12/07/2009 - 3:23pm

Yeah - that syncs with the fact that they already have a limited anti-trust exemption so that they can collectively split the TV rights and negotiate with the NFLPA as a single unit. The ruling in that case would uphold the same situation for apparel contracts - where each team doesn't need to negotiate its own deals.

But for purposes of local revenue and revenue sharing, some of the owners want a little swing the other way to less cooperation amongst the teams.

20
by andrew :: Mon, 12/07/2009 - 12:17am

wrong thread

22
by andy (not verified) :: Mon, 12/07/2009 - 1:20am

these greedy lil turds don't contribute anything good to the sport

26
by deep64blue :: Mon, 12/07/2009 - 8:44am

This is a squeeze on the NFLPA - these lower revenue clubs will have no salary FLOOR and $10/2o million less to spend next year ...

29
by djanyreason :: Mon, 12/07/2009 - 10:27am

Just like last time, the owners are doing a fantastic job of killing the goose that laid the golden egg.

52
by jds (not verified) :: Mon, 12/07/2009 - 5:42pm

Tune in tomorrow (or perhaps Wednesday) for TMQ's take on this, which will be along the same lines. This seems to be an intermural skirmish among the owners, pending the NFL - NFLPA battle on the new CBA. And I understand that the NFLPA have filed a grievance over this, even though the NFL has said that this is an owner's issue. More labor unrest at the risk of killing the goose. Potentially a bad offseason coming up.

36
by AnonymousCats (not verified) :: Mon, 12/07/2009 - 12:39pm

If they turn the NFL into baseball that's the end of my being a fan. I like one of the small market baseball teams... which since the strike way back in 1994 has been the suckiest suck of MLB. Of course their payroll is enough for maybe three of the New York Bankees bench players, or about half of what PayRod makes in a year.

There should be a salary cap and a salary floor. If the NFL wants to argue that it is one entity, that should especially be the case. If the Cowboys end up having four times the payroll of the Jags, that's more like the Harlem Globetrotters vs the Washington Generals.

44
by M :: Mon, 12/07/2009 - 2:14pm

You are a Royals fan, aren't you? I'm very sorry to hear that, since they had such a rich history before the 1990's (they weren't even that bad from 1990-1995).

38
by crazy legs kitna (not verified) :: Mon, 12/07/2009 - 12:53pm

how is it the fault of greedy owners? as a business owner, wouldnt you want to do everything you can to make money selling entertainment to the public? the true enemy of the NFL is the ridiculous false sense of entitlement rookie players have, and the bitterness by the $40M gurantees that rookies get over the 10 year veteran making 1.5M a year who suddenly wants the revenue percentages to be much higher each year for the players.

the players union wants more and more money each year, a disproportionate amount of money each year. how is it the fault of the owners, to step back and say "no, you guys make enough as it is."

39
by MJK :: Mon, 12/07/2009 - 1:05pm

OK, if I read the article correctly, this IS just the supplementary revenue sharing agreement that was kludged into the last CBA to balance out the difference between actual revenue and designated revenue. So it's not like all revenue sharing is going away (at least not yet), which isn't going to put clubs like Jacksonville and Buffalo out of business. It will just make it harder to sign free agents.

What a lot of folks don't realize is that the last CBA was actually a 3-party negotiation. Prior to that, only a portion of the revenue a club brought in was shared (a much-greater-than-half portion, but a portion nonetheless). Basically, TV revenue, ordinary ticket sales, and (I think) merchandise revenue was shared, while stadium-naming revenue, luxury box sales, and a few other things relating to an owner's special efforts at marketing his franchise were not. This lead to stadiums actually being designed to mazimize non-shared revenue (i.e. by maximizing luxury box space at the expense of normal seats...see Gillette). The non-shared revenue, which was initially a tiny percentage of total revenue, grew to a non-negligible portion.

So then the NFLPA wanted its cut, and wanted to tie the salary cap to total revenue, not shared revenue. This made sense in their eyes, and it looked like the big-market owners were willing to concede that. But the small market owners dug in their heels. They claimed that if the cap (and more importantly the floor) were tied to total revenue, and yet they only got a portion of shared revenue from the big market clubs, player salaries would necessarily eat a bigger portion of their profits than of big market clubs, and they wouldn't be able to build new stadiums/attract free agents/buy yachts, etc. Big market owners countered that sharing all revenues would de-incentivize small market owners from making an effort to grow their revenues (leading to owners like Wilson forgoing sale of stadium naming rights so that they could name it after themselves), and, like a poster above, wanted to know why fans in the Washington or New York area should line the pockets or improve the stadium in Jacksonville.

I believe that the negotiated fix was to designate a SECOND revenue sharing pool for these additional revenues, which, I believe, has more modest sharing regulations. It is this second pool that, I think, the article above is talking about axing.

53
by M :: Mon, 12/07/2009 - 6:09pm

Has anyone posted the odds on their being no season in 2011 or 2012 if they decide to delay "Armageddon" another year in order to try and force an agreement? Given the stubbornness of both sides, I could see it happening.

Given a very recent movie release, the idea of there being no football in 2012 and some writers unironicly referring to it as "Armageddon" is priceless.

Is anyone up for an FO almanac for a UFL season?

59
by mjb :: Mon, 12/07/2009 - 9:19pm

That is if there is a UFL in 2012, as the league lost $30 million this year. Which is, according to the Sports Business Journal, 25% (or $6 million) more then thier estimated losses before the season. And if they were off that far in calculating thier projected losses, than one has to wonder how far they were off in thier revenue projections of $56 million?

60
by AnonymousB10Fan (not verified) :: Mon, 12/07/2009 - 10:35pm

Not that it will come down to this but I'd rather see one (or even two) seasons cancelled than to have the NFL turn into MLB.

64
by Jim (not verified) :: Tue, 12/08/2009 - 2:11am

The players in both baseball and football have almost nothing at all to do with competitive balance surrounding the two sports.

First, Baseball has a lack of an appearance of competitive balance due to its regular season and post season structures more so than any other reason. In baseball there is only 6 divisions and 8 teams allowed in the post season for a 29/34 percent chance of getting in on the AL side and a 24/29 percent chance of getting in on the NL (depending if you are in the large or small divisions of each league). In the NFL there is 8 divisions and 12 teams or close to a 42 percent chance of getting into the playoffs. Once in the playoffs the NFL is a 1 and done system that is more likely to see variance compared to a 5/7 game series. In the regular season in baseball the schedule for the most part are much closer to equal strength and have ten times the games. Football a schedule quirk can radically change the strength from one season to the next along with the two weighted game. So a team could be for all practical purposes exactly the same in 2 years but in one year go 13-3 and the next year go 10-6 for no other reason than in the first year they got to play the 2008 AFC West and the 2008 AFC East where the best team was 9-7 along with the Lions and Chiefs while they play the 2007 AFC South and the 2007 NFC East where the worst team was .500. Also, the parity in football is very much more hype than reality with no team going to the Superbowl with a record worse than 7-9 the season before going (exceptions for teams teams that went to several league championship games or superbowls in either the previous 3 or following 3 years).

Second, if you discount my first point and want to stay with the money card its the business plans of the two sports that create this and not the CBA. In baseball most of the revenue is generated locally from ballparks, merchandising but most importantly local media contracts with very little coming from a national media deal. In football the majority of the money comes from the national TV deal and collective merchandising contract with the rest coming from special revenue streams aka club seats and boxes. These business plans are between the owners with almost no input at all from the respective player unions so even if the unions wanted to change these agreements they really can't do anything about it. The current NFL system will guarantee each franchise at least 180 to 200 million a year before a single ticket is sold just from the TV contract and the Reebok deal. Baseball on the other hand have deals that collectively share about 20 to 25 million a year to each team. With baseball being so local money driven its natural that NY teams will be at an advantage when they are splitting a 20 million person market and you have a team in Milwaukee around 1.5 million.

65
by Enigma (not verified) :: Tue, 12/08/2009 - 3:34am

#14

In the event of an uncapped year, the most important changes would be:

1. Players would need to accrue six seasons to reach unrestricted free agency rather than the four seasons that are required now. Teams would have longer to develop players, get productive players signed to extensions, et cetera.

2. There would not be a cap on salary expenditures. In other words, an owner / franchise could spend as much as it pleased without worrying about salary cap amounts.

3. There would not be a salary floor. Franchises would not have to spend a certain amount of the maximum (cap) in order to be in compliance with league rules as they currently do. Some speculate that frugal owners or teams that have not been making as much of late would cut back on player costs and be content with fielding less competitive teams.

4. Free agency would have additional rules. Teams would be able to use one franchise tag and two transition tags. Furthermore, teams making the divisional round of the playoffs would be limited in their ability to sign free agents come March. The Final Eight Plan would limit conference championship contenders to re-signing their own free agents, signing players cut by other teams, and signing players to replace free agents of similar value that had been lost. Teams eliminated in the divisional round would have the same set of restrictions plus the ability to sign some free agents that the final four would not. Hypothetically, this combined with the #1 could dramatically reduce the number of players available in free agency / make the draft more important.

5. Also related to #2, dead money would no longer matter. Poorly performing or older players could be released without a cap hit. Some speculate that this might result in disappointing top picks (Vernon Gholston?) being released sooner than if there was a cap. This could would the other way, though. Without a cap to worry about, poorly performing players might have the opportunity to have more time to live up to their potential as money spent on the player would not be at the expense of being able to fit another player under the cap.