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NFL Lockout 2011: Revenue Sharing Is The Elephant In The Room Nobody Wants To Talk About

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If you think today's NFL players are making too much money, you may be right - or you may be wrong. That really depends on your own philosophical leanings, the frame of reference and how much you think is 'too much'. The NFL owners certainly think the players are making too much money.

So let's look at some numbers. The table below shows the percentage of money that has gone into players' salaries over the last ten years, as reported by Forbes. 'All Revenues' is the total amount of money the league takes in, 'Total Revenue' is precisely defined in the CBA and is currently about $9 billion gross, minus a $1 billion credit in the owners’ favor. Both percentages have remained remarkably constant over the past ten years. So what is all the fuss about?

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Players’ Percentage of All Revenues 56.5 52.6 51.8 50.5 52.3 51.1 52.7 51.8 51.0 50.6
Players’ Percentage of "Total Revenue" 61.7 57.1 56.1 54.3 57.0 55.1 58.4 58.0 57.7 57.1

Commissioner Goodell recently said that "Staying with the status quo is not an option". Well, let me ask you this, Mr. Goodell: Why not? It's worked for the past ten years, why shouldn't it continue to work, and why are the players suddenly at fault?

If you thought the labor dispute was about owners vs. players, you’ve been duped. The real issue at the core of this whole CBA mess is the NFL’s revenue sharing agreement or the growing lack thereof. It’s the elephant in the room that nobody wants to talk about. More specifically, it’s about small-market owners vs. big-market owners, with the players caught in the crossfire.

You’ve heard all about the $9 billion that the league rakes in annually. Surely there must be a profit in there somewhere? Of course there is. Teams like the Cowboys, Redskins and Patriots are making so much money it’s not even funny anymore.

But while high-revenue teams are raking in the cash by the truckload, low-revenue franchises make only a small profit - if they’re lucky - and are probably even losing money. And the situation can only get worse – by design.

The way the current labor deal is structured, the following hypothetical example is happening in real life all the time. Say the Cowboys sell the naming rights to Cowboys Stadium for $32 million. Good news for the Cowboys, because they get to pocket all of that money. Bad news for the other teams, because those 32 million count towards the Total League Revenue as defined by the CBA, against which the salary cap is calculated. Effectively, this means that the salary floor for each team just went up by an additional $1 million, because the salary cap and salary floor is determined by the revenues generated by all teams, including the high-revenue teams.

If you’re a low-revenue team like the Buffalo Bills or Jacksonville Jaguars, you don’t like that one little bit, because where the Cowboys just made money, you’re expenses just went up, and there’s nothing you can do about it. Think about that for a minute: every time Jerry Jones has a great idea and increases his revenues, the expenses for all other teams go up. How crazy is that?

"Keeping up with the Joneses" just got a whole new meaning, and keeping up with the high-revenue teams in the NFL could become (and likely already is) a matter of life or death for a couple of franchises and markets in the coming years.

At this point, we’ve all been inundated by what I like to think of as "flashbang" CBA topics (flashbang or stun grenades are used to temporarily neutralize the combat effectiveness of enemies by usually disorienting their senses): how to carve up the $9 billion pie; an 18-game schedule; a rookie salary cap. These topics have succeeded in creating a powerful diversion, with lots of fan emotion thrown in, to distract from what is really going on.

Think about it, how many polls and articles have you seen about the 18 game schedule, how often have you argued the pros and cons of a rookie salary cap and how often have you heard the "billionaires vs. millionaires" argument? A lot. How often have you read about the revenue sharing process in NFL and its impact on the labor impasse? Riiiight. Well, you’ve been bamboozled.

Rather than rehash those "flashbang" issues, over the next couple of posts we’ll take a long, hard look at how revenue sharing works in the NFL and how it drives almost every single aspect of the CBA negotiations. In a loose sequence of posts that is probably going to change as I start writing them, these are the topics I’d like to look at:

* How teams make their money
* Which teams are making how much
* Why Jerry Jones doesn’t like revenue sharing
* Why the have-nots of the league are struggling to survive

[Part II: The NFL's Revenue Gap Problem; Part III: The Haves and Have-Nots of the NFL]

In the meantime, ask yourself: why is the league so violently opposed to sharing the same percentage of revenue with the players that it has for the last ten years? I propose it's because the NFL revenue sharing system is broken, and instead of fixing it, the owners think it'll be easier to fix by getting more money out of the players than from each other.