Financial gap widening between NFL's haves and have-nots

[buffalobillsfootball]

Financial gap widening between NFL's haves and have-nots

By Mark Curnutte, The Cincinnati Enquirer

 

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INDIANAPOLIS — Coaches, executives and scouts from all 32 NFL teams have gathered here this week for the annual scouting combine, the unofficial start of the new season, when clubs share the cost of getting an up-close look at the top draft-eligible college players.

 

Teams with the worst records last season will have the first picks April 28.

 

At 12:01 Friday morning, another session of veteran free agency — the process in which teams, governed by a uniform spending limit, can compete fairly on the open market for players — will begin.

 

NFL draft and free-agency structures are just two practices that ensure competitive balance, the reason that teams from two small cities, Pittsburgh and Indianapolis, won the last two Super Bowls.

 

But the management of the Cincinnati Bengals, Jacksonville Jaguars and several other small-market NFL teams are warning that the league's competitive balance is being threatened by tremendous growth in revenues that have resulted — in large part — from that level playing field.

 

The likes of Bengals president Mike Brown and other team executives say that without internal economic reform, the NFL will slide into the Major League Baseball model of competitive imbalance. As baseball teams open spring training, more than half face almost impossible odds of winning the World Series. Teams in Kansas City, Pittsburgh, Milwaukee Tampa-St. Petersburg and Cincinnati have little chance of competing with the big-market teams in New York, Boston, Los Angeles and Chicago.

 

"If you look at the baseball pattern, and what happened over there, and which would be the likely result here, over time you would begin to see some teams spending a multiple of what other teams are spending (for players)," Brown said.

 

In other words, there might come a day within the next three or four years when small-market NFL teams like the Bengals are relegated to second-class citizenship.

 

Salary cap

 

Even though the NFL has a salary cap, the equal ceiling teams can spend for players, the current formula for determining the cap is helping to create the disparity, Brown said.

 

Teams in top-third NFL markets, such as Boston, Washington, Dallas, Philadelphia, Chicago and New York, generate revenues on average of $256 million, according to Enquirer research. Teams in the middle third, such as Baltimore, Tampa and Seattle, have average revenues of roughly $199 million.

 

In Cincinnati, Minneapolis-St. Paul, Jacksonville and Buffalo — the league's smallest markets — average per-team revenues are about $177 million.

 

The average per-team revenue is $211 million, and each team is responsible for paying 57.5% of its revenues toward player costs, according to the collective bargaining agreement ratified 30-2 by owners in March 2006.

 

And though each of the 32 teams share equally in the league's national television and sponsorship contracts — about $102 million per team — big-market teams are generating unshared revenue at such a pace that it is causing the salary cap to rise faster than small-market teams can handle.

 

The higher rate of growth in unshared revenue generated by teams with new stadiums in larger markets has created disparity. A little more than a decade ago, Brown said, the revenue gap between NFL teams in big and small cities was less than $10 million. Now it's more than $100 million.

 

And the problem with unshared revenue — such as money from luxury box revenue, stadium naming rights, marketing and sponsorships and local media — is that it all goes into the league-wide tally that is used to determine the salary cap.

 

For example, Brown paid $5 million for the naming rights to Paul Brown Stadium before it opened in 2000. It went toward the $44 million the Bengals contributed for construction. Had a private company wanted the naming rights to the Cincinnati football stadium, the next $11.67 million would have gone to the Bengals.

 

But in New York, the Jets and Giants expect to get a deal worth $25 million for their new shared stadium.

 

In New England, Patriots owner Bob Kraft gets $100,000 to $300,000 for suite rental at Gillette Stadium. At the RCA Dome, Colts president Jim Irsay can get an average of $34,000 annually for a luxury box.

 

"The new stadiums have produced a discrepancy between the top-revenue and bottom-revenue (teams)," Brown said. "That has put the teams in the large markets in prime position. They are doing very well. But the teams in the smaller markets, they are struggling because their cap costs have gone up while their revenues have not kept pace."

 

The Bengals are paying roughly 68% of their revenue on players. Big-market teams are paying an average of 47%. For the Washington Redskins, the NFL's top-revenue team that has broken the $300 million mark, that percentage is even smaller.

 

More money to spend

 

The salary cap is $109 million for 2007. In 2005, it was $86 million.

 

In addition, each NFL team is required to make a mandatory player benefit payment of $21 million each year. The unofficial cap for this season is $130 million. The average non-player expenses for an NFL team are almost $50 million.

 

Large-market teams have additional money to spend on coaches, scouts and facilities. For example, in 2004, Jacksonville spent $3.31 million on assistant coaches. Owner Daniel Snyder's Redskins spent $5.22 million, according to the NFL Coaches Association.

 

Brown points to himself and his daughter and son-in-law, Bengals vice presidents Katie Blackburn and Troy Blackburn, as the team's three-headed general manager.

 

The future

 

The Bengals are on solid financial footing — for now. But the future is precarious.

 

"What is not in question is the Bengals' ability to compete over the next few years," Brown said. "What is in question is the Bengals' viability over the long term."

 

Buffalo Bills owner Ralph Wilson — the other nay vote in March when owners decided to extend the collective bargaining agreement with the NFL Players Association — says his team was expected to lose $5 million-$10 million in 2006. The reason, Wilson told the Rochester Times-Union, was that 65 cents of every dollar goes to his players.

 

The issue is expected to come to a head at the league meeting this March in Phoenix. Commissioner Roger Goodell acknowledged during his state-of-the-league address Feb. 2 in Miami — two days before the Super Bowl — that the issue must be addressed between owners and the union.

 

One solution — a reduction in the players' take — is unlikely.

 

More plausible is additional revenue-sharing among owners. A pool of $100 million in supplemental revenue-sharing is supposed to be available this calendar year. But owners have not agreed how to split it up, and Brown said big-market team owners are looking for ways to give up as little as possible.

 

Large-market owners like New England's Kraft, Washington's Snyder and Dallas' Jerry Jones think they're getting the short end of the deal; on the other side, so do Brown, Jacksonville's Wayne Weaver and Buffalo's Wilson.

 

And fans might see just a bunch of rich guys fighting over millions — nay, billions — of dollars with even richer guys.

 

"Fans have the right to not want to understand the business side of it," Bengals VP Troy Blackburn said. "They have the right to follow their team with passion. They want it to be a fun part of their lives and not get bogged down in the nitty-gritty of it. But I do think fans want to make sure their team has the resources to field a winning team."

 

The Cincinnati Enquirer is owned by Gannett, USA TODAY's parent company.