NFL Lockout Officially Ended. A Look Back at the Issues and the Settlement

NFL lockout ends, assuring that there will be a 2011 football season.  A look at how the impasse was solved.

Back in April, I posted this essay on the NFL lockout.  In it I chronicled the major issues leading to the owners locking out the players, and made a few predictions as to how I thought things would shake out.  Using this breakdown from Pro Football Talk as a primary guide, I’ll take a look at the settlement, add my own analysis, and look at how my predictions played out.

First, the major issue was the league revenues and how they would be split between the owners and the players.  As I noted in the original post, the previous Collective Bargaining Agreement (CBA) called for the players to receive roughly 60% of revenues save a sizeable chunk taken off the top for expenses.  The players clearly came out ahead in that deal.  I said that the owners wanted to close that gap closer to a 50/50 split, but I predicted they would probably settle for somewhere in the neighborhood of a 55/45 split in favor of the players.   I was wrong.  The owners came out on the higher side of that ledger, earning a roughly 53/47 split in the owners’ favor.

That’s not to say that this was all about greed as ESPN’s Ashley Fox asserts.  I thoroughly disagree with that statement.  Rather, I believe that all along this was about the long term health and viability of the NFL.  Fox is right that The League was financially very healthy and stable, and that everyone was making plenty of money.  But it wasn’t going to remain that way for very long, as the finances on the team side were starting to take a hit.  This was about rising expenses—for which the owners were exclusively responsible—and shrinking profit margins that threatened The League’s viability several years down the line.

The League’s owners got what they wanted:  A greater share of the revenues that will assure their profitability in the long term in the face of rising expenses across the board.  But the players came out the victors in a number of ways, too:  They got a larger salary cap limit, with a mandatory minimum amount that teams must spend on player salaries.

In simple terms, the salary cap for 2011 will be just over $120 million per team, with an extra $20+ million in benefits to players.  The cap will be adjusted yearly according to league revenues—ALL league revenues, no exceptions.  In 2011 and 2012, each team must commit to spending at least 99% of the salary cap on player salaries.  Beginning in 2013, each team will be mandated to spend AT LEAST 89% of the salary cap.

Veteran players will also receive a 10% increase in the league minimum salary.  But perhaps most importantly (at least to the veterans) is the establishment of an “entry level compensation system,” where draft pick salaries are limited and new holdout rules are implemented.  For example:  2010 overall #1 draft pick Sam Bradford of the St. Louis Rams received a $78 million contract, with $50 million of it in guaranteed money.  2011 #1 overall pick Cam Newton of the Carolina Panthers will only be able to reap half that haul.  This benefits veterans because all of that money that would have been committed to high first round draft picks can now be used to retain veteran players who might otherwise have been out of a job.

And oh-by-the-way, it was something I predicted would become a reality.

Also included in the deal are significant enhancements to the NFL player retirement programs.  Between $900 million and $1 billion will be invested over the next 10 years to improve retirement benefits, including $620 million to bolster the benefits/pensions of those players who retired prior to the 1993 season.  Current players will also have the chance to retain their medical benefits for life, and in the event they suffer a career threatening or career ending injury, the player will receive up to $1 million of his contracted salary in the year following the injury, and up to $500,000 in the second year (assuming the player is still under contract).

So the players didn’t exactly get ripped off here.  They made out pretty good, too, as I suspected they would.

The owners also get credit for direct investments that they make in their stadiums.

Just for fun, let’s take a look at what I got right:

There’s the revenue split, although the owners made out better than I expected them to (technically speaking…….the breakdown is a bit more complicated as indicated in the NFL Labor.com link above).

There’s also the enhanced benefits for both current and retired players.  That should be a huge relief to many of The League’s more senior alums.

The continuation of the salary cap (although that was more implied in my original piece, but still an important part of The League’s success since its implementation).

The rookie salary cap:  A major victory for both the owners and the veteran players in my mind, although not so much for future draft classes.  As a side note, the new rules also take away much of the influence agents had over the process.  And the new rookie wage scale will almost surely make holdouts a thing of the past—although the rookie limits really only affect the top 15 or so picks of the draft.

The 18 game schedule was nixed, will not be revisited until 2013 at the earliest, and cannot be implemented without the approval of the NFLPA.  I figured this was mainly a bargaining ploy on the part of the owners and never a very serious proposal.  I still think I’m right, and I don’t think we’ll be seeing an 18 game slate anytime soon, as I don’t see the players going for it.

I was right and wrong about the use of the “Franchise” and “Transition” tags.  The tags will remain in place, and there are no further limitations on how a team can use them.  However, instead of being valued at the top 5 salaries at a particular player’s position, the tags will now be calculated as a percentage of the salary cap.  What that percentage is, I’m not sure, but it should amount to a higher one year salary for a tagged player, which should ease the pain of not being granted outright free agency.

Also included in the new CBA is a reduction in offseason practices and limitations in the number of fully padded practices a team can hold in the preseason and the regular season.  From my experience, this won’t directly affect very many teams—assuming that what the Chargers have traditionally done is the norm across the league.  During two-a-days, teams are no longer allowed to be fully padded for both practices, something the Chargers teams I was involved with rarely—if ever—did.  Marty Schottenheimer’s Chargers teams were, to my recollection, never fully padded up for both practices of two-a-days (meaning no full contact twice in one day), and they were typically only in full gear on Wednesdays during the season—and sometimes only for half the practice at that.  The new rules merely serve to mandate what was already common practice throughout The League.

I want to reiterate that I do not believe for a moment that this was a money grab on the part of the owners.  Knowing what I know about The League and how it works, they had some very real, legitimate concerns about their ability to maintain a level of profitability into the future.  This was not about crying poor or insisting that they were losing money in the here and now.  They weren’t, and no one on the owner’s side ever said they were.  Rather, this was about their ability to meet rising expenses and still be able to make the investments necessary to grow the NFL brand.

The lockout was primarily about how to split roughly $9 billion in revenue, but that’s a bit misleading.  That leads the lay reader to assume that the teams are making billions of dollars in profit.  They’re not.  Typically a team earns profits of a few million per year.  But as I’ve said before, the owners aren’t in this to make a ton of money.  The only way to make a lot of money by owning an NFL team these days is by selling an NFL team.  They simply don’t want to reach the point where they begin to lose money, which in their estimation, under the previous contract, was not far off.  This was entirely about the long term health and viability of the NFL, and with a 10 year CBA about to be ratified by the players, that has been achieved.

Now hopefully the owners will be able to lower some of their ticket prices to make attending an NFL game more affordable to more fans.  But perhaps that’s just wishful thinking.