Even With Cap, System Works Against Small Markets

The National Football League’s version of “Deal or No Deal” begins today as players who have four years of service and do not have a contract for the 2007 season can now shop around for a new deal. The 2007 maximum and minimum team salaries have not been set yet, but teams should be able to consider numbers like $110 million for the ceiling and close to $100 million as the floor. The NFL salary cap is complex yet simple. A player who signs a contract gets a signing bonus and a salary for playing football. The signing bonus is guaranteed while the salary can disappear at any time because that player can be cut at any moment.If a player signs a five-year deal, the club can pay the signing bonus upfront or spread it over the length of the contract. When the Baltimore Ravens released running back Jamal Lewis on Wednesday, the team had to pay him his 2007 signing bonus of $3.3 million, which was negotiated years ago, but the Ravens are off the hook for the remaining $8.3 million that he was scheduled to make in 2007.Teams have been cutting players to clear money in an effort to sign free agents who can make their franchises better in 2007. Yesterday, such big names as Steelers’ linebacker Joey Porter and Saints’ receiver Joe Horn were released by their respective teams. That’s the most visible part of the NFL salary cap structure. But there is far more than meets the eye. The salary cap is also tied into revenue sharing. NFL teams take in a staggering amount of money from Viacom’s CBS, Disney’s ESPN, News Corporation’s Fox, and General Electric’s NBC television networks, as well as from DirecTV and Sirius Radio. That money is all shared by the 32 teams. In fact, roughly half of the estimated $6 billion that comes into the NFL is shared equally, about 30% is shared unequally and the remainder is not shared at all. Midsized and small-market owners feel they deserve more of this percentage of revenue.The NFL and its Players Association signed a new collective bargaining agreement last March, which, among other things, raised the salary cap ceiling and floor but also provoked the wrath of Buffalo Bills owner Ralph Wilson and Cincinnati’s Mike Brown, who felt that their fellow owners were giving too much money to the players and that the survival of their franchises in small markets was at stake.Bigger market teams like Daniel Snyder’s Washington Redskins, Jerry Jones’s Dallas Cowboys, Robert Kraft’s New England Patriots, Robert McNair’s Houston Texans, and Jeffrey Lurie’s Philadelphia Eagles have more revenue — estimated between $50 million and $100 million more annually — because of larger local markets and a richer customer base for club seats and luxury-box sales than Wilson or Brown has.All five need money to pay off stadium debts, something Wilson does not have to worry about. After some bills are paid with the extra local money, those owners can use the remaining dollars on football-related costs, such as coaches, scouts, and promotions. Snyder and Jones opened the vaults for big-name coaches in Joe Gibbs and Bill Parcells. Because they paid more for coaches, that had a trickle-down effect and forced other owners to ante up for their coaching staffs.Synder has given Gibbs carte blanche in terms of running the football operations, and Gibbs in turn hired 20 assistant coaches. In Buffalo, Dick Jauron had 16 assistants. Marvin Lewis has 16 in Cincinnati. Chicago didn’t want to pay Lovie Smith a king’s ransom but did so in the end. But Smith lost Ron Rivera because Chicago management has drawn the line on assistant coach’s salaries.It’s in the coaching staffs and the front office where the small-market teams feel the pinch. They have to pay players a minimum amount of dollars, but creative accounting can take care of cash and cap problems. Player contracts can be renegotiated but franchises have to cut corners in other areas.Two commissioners, Paul Tagliabue and his successor, Roger Goodell, have not been able to get the owners to come up with a revenue sharing agreement that would take some of the unequally shared and unshared revenues from the huge big-market teams and supplement the lower revenue sharing cities like Buffalo, Green Bay, Jacksonville, Cincinnati, and Kansas City or give the money to owners who reluctant to pay more than they want to reach the salary floor, with Pittsburgh and St. Louis among others falling into that category.It seems neither Tagliabue nor Goodell wanted to push a solution onto the owners, so a committee of owners was appointed with both large- and small-market representation to work out an agreement. So far, there is a framework to distribute millions of dollars to the so-called have nots, but that has not happened yet and that might preclude some teams from going after players that might help them.But there are always variables. Indianapolis, at present, is a smallmarket team. But Colts owner Jim Irsay will be getting a new stadium that Indiana taxpayers are funding in 2009. Because Irsay is certain to get a significant increase in revenue starting in two years, he was able to restructure Peyton Manning’s signing bonus and will pay for Manning’s services down the road. By getting the restructiuring done, Irsay will be able to spend more money for players in 2007 and 2008 and hope that there is a bump-up in the cap down the line — if not, there will be a wholesale firing of players to meet the salary cap ceiling. In the past, San Francisco and Dallas had to bite the bullet and release players to get under the cap, yet those teams still had to pay bonus money. That’s why all 32 NFL teams have a salary cap specialist whose sole job is to monitor the cap closely.But there is more to the NFL than players and coaches. There are facilities to be maintained and trainers, therapists, nutritionists, public relations specialists, and administrative staffs which add to the payroll. That is where Atlanta Falcons owner Arthur Blank may look to save money if indeed his team suffered a cash flow loss in 2006.Three franchises figure to be very active in the free agency period. Both San Francisco and Cleveland have about $30 million to spend while Tampa Bay is about $24 million under the cap. Buffalo probably won’t be too active in pursuing free agents, but that doesn’t mean Bills owner Wilson will have a quiet March. Wilson wants a revenue sharing deal that will allow him to keep the Bills competitive with Washington, Dallas, Houston, Philadelphia, and arch-rival New England. If Goodell can’t twist enough arms to get an agreement, Wilson has signed on Senator Schumer to carry the ball for the Bills. Schumer is asking senators from small-market teams’ home states to pressure the big revenue producers to spread the wealth.Free agency season could be a very interesting time for not only players and their agents, but NFL owners as well.evanjweiner@yahoo.com

Even With Cap, System Works Against Small Markets

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