Some Owners Just Don't Understand Revenue Sharing

[Mr. Laz]

interesting imo

POSTED 12:25 p.m. EST, December 19, 2006

SOME OWNERS JUST DON'T UNDERSTAND REVENUE SHARING
www.profootballtalk.com

We know that the business issues relating to the NFL are at times as interesting as hearing your Uncle Ralph talk about the time that he drove his car from Poughkeepsie to Pawtucket on a half tank of diesel fuel and a pack of stale HoHo's, but the manner in which the guys who make the millions can (or as the case may be, can't) work together regarding issues like revenue sharing will likely have a direct impact on the long term viability of the sport.

And the debate that currently is raging among 32 of the richest folks in the country is how the excess riches generated by the richest of the really, really, really rich teams will be distributed to the less rich of the teams that are only really, really rich.

Complicating the discussions is that guys like Bills owner Ralph Wilson are popping off in the media about the manner in which revenue sharing is (or as the case may be, isn't) occurring. Said Wilson on Sunday, "Hey, listen, don't talk to me about revenue sharing. The high-revenue clubs are not going to give teams like Buffalo any revenue sharing. They haven't done it. They stalled it for years. And I'm sick and tired of hearing about it."

But the truth is that the owners are ready to redistribute the wealth. Either $90 million or $100 million (the final number is still up in the air) will be funded by teams with the most revenue, and given to teams that need it the most.

The problem, however, is that revenue and profit are two very different concepts. There are plenty of teams that are making less revenues than other franchises. But because those teams have little or no stadium debt and/or little or no purchase debt and/or little or no operating expenses, they remain extremely profitable business enterprises.

The example we repeatedly have heard in this regard is the Bengals. They paid nothing for their stadium, they have no purchase debt, and they pocket the entire amount of their Personal Seat Licenses. So even though the Bengals were 27th in revenues in 2005, they were one of the most -- if not the most -- profitable franchise in the sport.

Indeed, low revenues aren't keeping teams from spending money. Per a league source, the Cardinals were last in the league in 2005 revenues, but to date have spent $115.3 million on player expenses in 2006. (Though the salary cap was only $102 million, teams routinely spend "cash over cap" via signing bonuses, etc.)

The Colts, at 29th in revenue in 2005, have spent a whopping $135.4 million in 2006 cash on players. The Vikings, 30th in revenue for 2005, have forked over $128.1 million in player pay.

Even the Bengals, with their No. 27 ranking in revenues, managed to scrape together the fifth highest total payout to players in 2006, at $113 million.

So the top three teams in 2006 player expenses (Colts, Vikings, Cardinals) were 29th, 30th, and 32nd in 2005 revenues, respectively.

We're told that, in conjunction with the recent vote on the league's loan to the Jets and Giants for their new stadium, Jaguars owner Wayne Weaver added an amendment that would have redistributed the supplemental revenue to teams that spend more than 65 percent of their revenue on players, regardless of any other factor. Under this plan, the so-called "qualifiers" for supplemental revenue sharing would have been wiped out of the equation -- meaning that profitable teams like the Bengals would have gotten free money, even though they don't really need it.

This plan would have reduced the amount of money available to teams who need it (like the Bills) by giving money to teams who don't (like the Bengals). Still, several of the seven votes in favor of the stripped-down revenue sharing proposal came from teams who, in the absence of qualifiers, would qualify for less money.

This dynamic raises concerns that the revenue-sharing debate is devolving into an us-against-them fight, with the low-revenue teams voting on any and all proposals in a block, regardless of whether the specific proposal in question helps or hurts on an individual basis. With the CBA possibly being reopened as early as November 2008, the league is dangerously close to losing the 24-vote minimum necessary to adopt a new labor agreement.

We think that this is an issue that won't be resolved unless and until each and every owner makes a commitment to fully understanding the issue, and uninformed rhetoric from guys like Ralph Wilson will do nothing to promote across-the-board enlightenment. In our view, revenue is a far too narrow basis on which to determine whether and to what extent financial inequities exist, and whether such disparities should be smoothed over.

We've got a proposal in this regard, and we'll post it after we wake up from the nap that proofreading this item has induc . . . . . .