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The full, unabridged story on the "18 percent pay cut" claim

We recently pointed out one of the three areas in which the NFLPA is taking liberties with the facts of the current labor dispute, regarding the ongoing payments the league would receive under the television contracts even if there’s a work stoppage in 2011.

Another factual inaccuracy articulated during the NFLPA pre-Super Bowl press conference on February 4 relates to the extent to which the league has proposed reducing the money currently devoted to labor costs.  On that day, Executive Director De Smith harped on the allegation that the league wants the players to take an “18 percent pay cut.”  At one point, Smith characterized the reduction as $340,000 per player, calculated based on the literal notion of an 18 percent pay cut.

In a conference call that convened after the Smith press conference, NFL general counsel Jeff Pash said that “[t]hese kinds of figures are misrepresentations of what our proposal is.”  Pash then explained that the league has requested an 18 percent credit against the revenue base.  In other words, the league wants to shrink the total pie by 18 percent before applying the 59.6-cents-on-the-dollar formula for determining the players’ total compensation.

As Pash pointed out at the time, the actual reduction is closer to nine percent.  But 18 percent sounds a lot better for the players than nine.

On Wednesday, the league posted a evasive and overly simplistic response to the allegation that the league wants the players to take an 18 percent pay cut at NFLLabor.com:  “Those numbers that Mr. Smith used at his Super Bowl press conference
are inaccurate.  No current player needs to take a pay-cut as a result
of our proposal.  Our goal is to generate a pool of resources in order
to have continued investment and continued growth. This will lead to higher salaries and higher benefits for players.”

Also on Wednesday, Patriots owner Robert Kraft provided a more meaningful reiteration of Pash’s point.

“We’re asking for cost recognition because we want to be able to go out
and take risks and build the business,” Kraft said, per Tom Curran of Comcast Sports Net New England.  “That 60 percent, some people
interpreted it going from 60 percent to 42.  But it’s 18 off 100
percent.  I think there’s a misunderstanding there.”

Kraft is being kind; it’s not a misunderstanding but a deliberate misrepresentation.  No one is asking the players to cut their pay by 18 percent.  In fact, there might ultimately be no reduction at all, if the pie continues to grow as it has over the past 15 years.

Kraft also recognizes that things are going well.  “We have the greatest sport going in America,” he said.  “Both sides have to be smart enough to continue to build a partnership.”

Actually, that’s one of the best things we’ve heard in weeks.

Meanwhile, and in fairness to the union, the current system already provides for an off-the-top reduction.  So the union isn’t currently getting 59.6 cents on the dollar.  As two union sources explained it to me recently, the $8 billion in total revenue is subject to an initial $1 billion reduction for cost credits.  Once 59.6 percent is taken from the remaining $7 billion, the players’ share is $4.2 billion — roughly 52 percent of the total revenue.  (As we understand it, the pre-2006 salary-cap formula based on designated gross revenues resulted in roughly 51.7 percent of all revenue being paid to the players.  If that’s accurate, the players are only getting 0.3 percent more under a CBA with which the owners claim they can’t live.)

Under the league’s current proposal, the $7 billion would be cut by 18 percent, or $1.26 billion, before application of the 59.6-cent formula.  This would result in the players getting $3.42 billion, which equates to 42.7 percent of the total revenue.

So under the current proposal it would be a nine-percent drop, from 51.7 percent to 42.7 percent.  But that’s based on an 18-percent cut in the revenue pool, and it’s widely believed that the 18-percent number is negotiable.  If the league ultimately would agree to a 10 percent reduction of the revenue pool, the players’ total take would be 46.9 percent of the total revenue.

Though that’s roughly five percent lower than the amount the players currently get, the pie will continue to grow.  Since 1994, the per-team salary maximum has expanded from $34.6 million to $123 million.  So that 46.9 percent cut will continue to yield bigger and bigger numbers as the league uses the 18 percent credit against the revenue pool to help position the sport to generate more and more revenue in the future.

To summarize, the union’s assertion that the league wants the players to take an 18 percent pay cut is blatantly false.  Still, the league wants the players to take a smaller piece of the pie.  The league glosses over that fact by pointing to the reality that the pie will continue to inflate.

Got it?  The test will be on Tuesday.

UPDATE:  As several of you have pointed out, the drop from $4.2 billion to $3.42 billion represents a pay cut in excess of 18 percent.  But these numbers are an example of how the adjustments in the revenue percentages would apply under 2009 numbers.  The revenues are constantly increasing; if the players got $4.2 billion under the current system in one year, the players would get much more than $3.42 billion under the proposed adjustment in the next year, because the NFL would undoubtedly earn much more money in the next year.

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35 Responses to “The full, unabridged story on the "18 percent pay cut" claim”
  1. geek says: Feb 24, 2010 11:34 PM

    So, basically, if all 1700 players were to take an even share of the player allocated piece of the pie, they would each get $2,016,509.43? What are they griping about again?!

  2. JustAGuy says: Feb 24, 2010 11:39 PM

    You can’t do math.
    Currently “the players’ share is $4.2 billion”
    “Under the league’s current proposal … This would result in the players getting $3.42 billion”
    So the players would get 780 million less, which is over 18 percent of $4.2 billion.
    Get a clue, idiot.

  3. get louder at lambeau says: Feb 24, 2010 11:40 PM

    Hey Florio-
    Look at your numbers again. $3.42 billion is 81.4% of $4.2 billion, so Smith’s numbers were right- 100% – 81.4% = 18.6% reduction in pay. You’re overcomplicating the math and confusing yourself.

  4. Al Davis is my Christ says: Feb 24, 2010 11:42 PM

    Kraft = second best owner in football

  5. smeghead says: Feb 25, 2010 12:16 AM

    So the owners get the first Billion, and then the pie is divided; but it still isn’t enough.
    How many surgeries does Jerry Jones need? Who has ever bought a ticket to see Bill Bidwell?
    Please oh please let me try to make it on 31 and 1/4 million, (1 32nd of a billion).
    I’ll use the rest to pay bills. (8.75 Million) If I come up short, (never gonna happen) I’ll just blackmail a city until I get what I want.

  6. smeghead says: Feb 25, 2010 12:21 AM

    Oops missed a zero, that’s 87.5 million to pay bills.
    If the owners are looking for sympathy, it’s between Silly and Syphilis in the dictionary.

  7. Jayhawk says: Feb 25, 2010 12:28 AM

    “because the NFL would undoubtedly earn much more money in the next year.”
    Yeah…the NBA assumed that in their bargaining agreements too…ask the owners how that’s working out for them now as they post $400 million league-wide losses. Growth based on investments isn’t always the most stable plan…and you expect a group of NFL players who can’t wisely invest their salaries for their futures to understand the owners taking salary and investing?
    If you want to do the math correctly, you assume a static revenue…if the players kept their 59.6% share with none skimmed off the top in future years, and the NFL makes “much more money” the following year. they’d be in line to make even more than the $4.2bil they are already making. Compare the systems as they’d relate to 2009 revenue, and the players lose 18%…sounds like a bad deal to me

  8. Dave The Panther says: Feb 25, 2010 2:34 AM

    The greed of the NFLPA will ruin this league. Smith seems to be brainless and trying to sabotage the greatest sport in the world. Maybe he is trying to establish his name in the History books.
    Let the men that created this league into the money making machine that it is, keep making money. If they need to trim cost to help it grown the so be it. My heart does not bleed when even the scrub players make 6 figures.
    Sign the Deal and lets move on.

  9. Revis jets says: Feb 25, 2010 2:38 AM

    Your update does not explain what you wrote earlier that it’s a 9 % cut and not an 18 % cut! You based it on the fact that they get 9 percent less of the whole pot but it’s still an 18 percent pay cut! (example: if I make 50 % of a business and then my share gets reduced to 45%, I got a ten percent reduction while getting 5% less of the pot!!!) then again you are a lawyer so distorting facts shouldn’t be something you shy away from.

  10. smashmouthd says: Feb 25, 2010 4:19 AM

    Finally, something put out there that makes a clear point, and doesn’t look like a bunch of Union rhetoric or ‘dooms day’ garbage.

  11. patpatriotagain says: Feb 25, 2010 5:54 AM

    don’t know whothe best owner is, but Al Davis = 32nd best owner in football. see:
    Michael Huff – #7 overall
    JAmarcus Russell – #1 overall
    Darren McFadden #4 overall
    Darius Heyward Bey #6 overall
    Seymour for 1st rounder (Thanks)
    30 wins in the last 7 seasons

  12. downwithdansnyder says: Feb 25, 2010 7:20 AM

    The owners are going to have a hard time getting the “pay cut” through if they keep stressing how the pie “is growing”. Usually paycuts are linked to declining revenues and an attempt to maintain profitability

  13. chazman1975 says: Feb 25, 2010 7:22 AM

    Instead of not counting the first Billion in the formula before they take their 59.6% which in actuality becomes roughly 52%, why not count all of the money and drop the percentage to an even 50%. There, an even 50/50 split of all revenue. It’s simple but it seems like it would work.

  14. herb says: Feb 25, 2010 7:39 AM

    People who can’t do even basic math, shouldn’t run around thumping their chests calling other people liars. It really makes one look foolish.

  15. mackenzie1983 says: Feb 25, 2010 7:47 AM

    Al Davis is my christ. For one kraft isnt a good owner only in money in his own pocket second who is the first? Please dont say Al Davis because that man as been more of a pain in the ass to the league than the union.

  16. hutch says: Feb 25, 2010 7:56 AM

    To respond to your update…you can’t throw out there that the numbers based on future revenues would be higher because the rev’s would have grown without still admitting they are getting a smaller percentage then before.
    It’s laughable that you show it’s an easy 18 percent cut with before/after 2009 and choose to ignore it.
    Must be the lawyer in you.

  17. DB26 says: Feb 25, 2010 7:58 AM

    If the money is growing annually and the league wants the players to take a cut so they can invest that money and make the share even bigger, then the players need new union representation to understand.
    They are taking a short term cut to get a long term raise. And the money the NFL is investing, the turnaround time for them to see an increase on their investment will be a year and a half or so. So the players will see that increase quickly. And their salaries are raising every year (they are always crying for a raise and new contract #’s). Not to mention, look how many players are missing a big 2010 payday! So is it worth the uncapped season dollars you’re missing out on to prove no point and to cause a good thing to go bad?
    The more I see in regards to the CBA the more proof there is that the Player’s Union consists of a MRDD panel. These guys are quite simply clueless and for sure not working for the players and the game. The players need to FIRE the talking heads of the Union!

  18. PercyBlakeney says: Feb 25, 2010 8:03 AM

    Um, while it is a cut of 9 points and not 18, it is 9 points off of a 50-point base. From the players’ perspective this is an 18% cut, then (or, more exactly, 42.7% is 17.4% less than 51.7%). And that is forever since the percentage is fixed regardless of the revenue increase. The absolute amount the players would make is of course almost certain to increase over time, but the relative amount (relative to the current CBA) would be less, always.

  19. Al Davis is my Christ says: Feb 25, 2010 8:10 AM

    so, let me get this straight. Florio was off by .6% and you guys are jumping all over him? So now we have Grammar AND Math Nazi’s, AWESOME!

  20. Rick says: Feb 25, 2010 8:13 AM

    Robert Kraft knows business. He paid for his own stadium. The problem is these lazy owners (Bengals, Bills) who don’t know business and don’t want to find ways to raise revenue. Instead they came up with revenue sharing. Now sharing revenue from TV contracts and NFL apparal and other items is a great idea, however wanting a piece of the money an owner like Jerry Jones makes marketing the Cowboys is just wrong. Revenue outside of the usual streams should go to those owners who work hard. And players need to realize they are well compensated. They are playing a game not curing disease or keeping our streets safe. When morons like Ty Law say they can’t feed their kids you know the players are living in La La Land.

  21. Nevisyakker says: Feb 25, 2010 8:15 AM

    From Samuel Clemens: “There are lies, damn lies, and statistics.”
    These numbers are massaged, manipulated, emphasized, and/or ignored….as are all statistics and pertinent numbers during labor relations.
    Bottom line, ignore them and all the talk associated with them.
    Both sides are rich and getting richer and those of us who are NFL addicts foot the bill, and are glad to do it. So when you are talking about the new CBA, please, just shut up and get it done!

  22. GirthyOne says: Feb 25, 2010 8:24 AM

    Mike, you had the numbers but you looked at it wrong at the end. Your the pot grows update is just plain wrong. Please ask someone if you are struggling. You were so close.
    OLD
    $7B x 59.6% = $4.2B or 52% of the total $8B
    NEW
    $3.42 / $8B = 43% of the total $8B
    Here is the piece you lost in your closing: 52% – 43% = 9%
    The growth is something the owners can use to tell them that they lose nothing, but they are, the players lose that growth. Not that I have a problem with it.

  23. Hotwaggy11 says: Feb 25, 2010 9:06 AM

    This ‘labor dispute’ is unique among labor disputes. It seems that when labor unions strike, or negotiate, or complain, they work under the assumption that the company exists to employ them. This, of course, is false. Companies exist to make money. Everything else is just a means to that end. Some make money by providing a service, others by making a product. Employees are needed to do the services and build the products, but their employment is a result of the companies goal, not the companies actual goal.
    Pro sports differs a bit in this regard: we watch because of the employees. No one cares if it was Bob Johnson, or Mike Smith that built their car. They just want a car. Thus, when Bob and Mike go to the bargaining table their leverage isn’t as strong. However, people don’t want to watch Bob Johnson throw a wobbly, duck of a pass to an out of shape Mike Smith who had to cut his route short because he was out of breadth. The players make the pro leagues, so they have greater bargaining leverage.
    However, there is a separate reality that these players need to understand. Without the NFL, the owners are billionaires that will find other business (and often have other business) to earn money. Without the NFL, the players (for the most part) are poorly educated, manual laborers. Be it 9%, 18%, or even 25%, if a cut that keeps you a millionaire is the only thing keeping you from grabbing a shovel (or a spatula) then sign the deal and move on.

  24. mgjnsc says: Feb 25, 2010 9:07 AM

    Wow! Really Florio? Are you congress? Is the league greasing your pockets?
    The players are losing 9 percentage points which equates to an 17.4% decrease.
    If the players share dropped from 100% to 91% then their pool would be decreasing by 9%.
    However, the players pool is dropping to 42.7% from 51.7%.
    Change divided by original gives -9/51.7 which equals -17.4%.
    The math is there, simply do it. If you don’t like math, simply hire a geek to do it for you so you won’t sound like such a baffoon!

  25. Hap says: Feb 25, 2010 9:10 AM

    This whole thing is a diversionary tactic and this situation is getting more like our government DAILY. Misrepresenting/misinterpreting statistics, etc. This is akin to the global warming debate, both sides dancing around and absolutely NOTHING is getting done. Now it’s started crawling my butt. Here’s the NFL fans message>Get together and make something happen. All that has happened so far is that both parties have agreed that they dont agree.

  26. Viper21 says: Feb 25, 2010 9:43 AM

    Ultimately, it is very tough for regualr folks to appreciate negotiations between billionaires, & millionaires fighting over who gets what share of the loot. Even as great a sport as football is, they (both sides) would be wise to keep their financial fued to themselves, & out of the court of public opinion.
    I see both sides in their disagreement however, to average Joe, it is disgusting. As a small business owner, I would never hold labor negotiations with my people in public view. Neither side would want that. The court of public opinion can be very damning, especially when it is impossible for the average person ignorant to the business end, to “understand” the plight of either side.

  27. smashmouthd says: Feb 25, 2010 9:45 AM

    Well lets make a comparison to other things.
    In the army who makes the bulk of the money, and who needs foodstamps to get by … the Private or the General?
    Privates = The players, a dime a dozen, the majority play football because they aren’t intelligent enough to be a chemist, brain surgeon, or broker.
    The General’s = The Owners, they are making sure the war is run so their side wins, making sure their men are fed, paid, etc… the majority are rich, smart, and would probably be very successful and wealthy without football.
    In Microsoft, sho does all the programming, who punches in hour after hour of endless code, and works day after day to work out the kinks and track down the bugs… the Chairman or the Data Entry Clerk?
    Clerk = Players
    Charman Bill Gates = Owners
    All this non-sense that the players deserve more money, more of the pie, that the Nataional Football League is a non-profit… all BS… and if they keep it up, I’m sure the majority of Owners will be just fine without football for however long it takes.

  28. purpleguy says: Feb 25, 2010 10:52 AM

    Hey, at least someone (Mike) is trying to do the math and explain this crap. You don’t see this discussion on ESPN.

  29. TimTheEnchanter says: Feb 25, 2010 10:52 AM

    Wow, you must have represented the Management side in any of your labor law work. That is probably the worst example of statistical BS I’ve seen at this site. The pool of money made available to players is being reduced by 18+ %. Period. Nobody cares what percentage of total revenues that is.
    Furthermore, the contention that this additional money would necessarily go toward growing the businsess is unsubstantiated. There is nothing to say some or all of the money would not go to pure profit-taking.

  30. edgy1957 says: Feb 25, 2010 11:26 AM

    There are those who get the lie and those that spread the lie. The ones who spread it seem to be jealous of all the money that the players make and more importantly, try to equate the players to THEM or their industry or any other industry in the country (In reality, outside of the other major sports, the only equivalent to professional sports is the entertainment industry and yet, I don’t hear 1/100000 of the grief thrown at them).
    What these owners are trying to do is what they’re doing to YOU at the places that they currently own that aren’t sports industry related. Revenue at your company went up by x% and you believe that you deserve y% for a raise and when you go into the office, they offer you z% or even 0%, both of which are far lower than your expectation. Never mind that they fired more people and dumped their responsibilities on you and your co-workers, it is what it is and you will probably find yourself on next year’s list if you bitch. Of course, your boss gets part of what he saves as his bonus and that filters up the chain (A little known fact but for most years, the CEO of companies that dump the most personnel from the previous year end up getting the biggest bonuses because of all the “savings” to the company AND the stockholders). This “redistribution of wealth” that you hear about has many of you bitching about how these players get 59.6% of the revenue when poor old you doesn’t. Well, it’s NOT their fault but you want to blame someone for your problems and you’ve chosen the so-called over-paid athletes.
    If the owners want that money then they should partner with the players on that. It’s a load of baloney for them to say that the players will make more money over the years and they should be happy with that because – wait for it – SO WILL THE OWNERS. If the agreement stays just like it is then the owners will see growth in their revenue so what are they bitching about, especially if their take is REALLY 48% and not 40% like they want you to think.

  31. jlbay says: Feb 25, 2010 12:13 PM

    I actually think that the entire representation of the proposed or new 18% base cost is inaccurately presented here. Unless there is further information that Florio hasn’t presented it appears that the proposed 18% cost credit is in place of the current $1B cost credit. The quotes of what Kraft stated seem to back this up, and it makes logical sense – as a business grows or shrinks you what your base overhead cost for running that business to increase or decrease. So locking in a % makes sense – in essence the league is stating that the SG&A costs are 18% of total revenue.
    So the math should be as follows:
    Old formula:
    $8B – $1B = $7B * 59.6% = 4.2B for players
    New formula:
    $8B * 82% = 6.56B * 59.6% = 3.9B for players
    Percent reduction to players:
    ($4.2B – $3.9B) / $4.2B = 7%
    Where the 9% reduction comes into play is anyone’s guess, it could be off of a higher projected revenue base for the upcoming season, which would make sense. Either way unless the 18% is in addition to the $1B that is already in place, then the players aren’t going to see anywhere near an 18% reduction in their salary pool. On the other hand, if the 18% is in addition to the $1B, well then the Union is correct in stating their salary pool would be cut by 18% versus the terms of the old CBA. If that is the case and the league is stating that no player needs to take a salary cut and future growth will offset the reduction to the salary pool is just a shell game. Unless all the pertainent facts are presented, then either side could and probably is using statistics to lay the best, and most likely inaccurate, foundation for their PR case.
    Regardless, the fact that I just did math in billions of dollars, that will be split between these two equally greedy groups, is simply mind boggling – neither of these groups is hurting for money during the worst US economy since the great depression. The fact that these two sides are even contemplating a 2011 year without football is disgraceful, and the biblical warner for these two groups is “pride goeth before the fall”. Ask the NBA or the NHL if a strike or strike shortened season helped either side, put your pride and petty differences aside and strike an accord that is fair to either side (which by the way would be difficult not to arrive at).

  32. smashmouthd says: Feb 25, 2010 9:22 PM

    Edgy, you’re a funny guy.
    If the players want, the owners will lock them out, and when football kicks in again, it will be according to how the owners want it.
    In the mean time, the players have a very limited amount of years to play football. Every year they lose, is money they can never get back. None of them will make more money doing something else.
    The players have a real good set up right now… the mistake they are making, is not realizing they are behind the eight ball… and if they allow a lock-out to happen the only ones who will really suffer, the only ones who will really lose what they worked so hard the past 20 years to gain, are the players.
    You can dress all the BS up any way you like it. The players have the losing hand, they should figure out how best to minimize their losses and get a deal done… a lot of players will lose out in 2010 as it is because their is no new CBA/Cap… it only gets worse from here on out for them.

  33. edgy1957 says: Feb 26, 2010 11:00 AM

    # smashmouthd says:
    Edgy, you’re a funny guy.
    ********************
    Let me ask you, financial wizard, just how did the players get to this point if they have no leverage and all the power is in the owners’ hands?
    Do you believe that for one second that the owners, out of the generosity of their hearts, just woke up one day and gave the players a healthcare plan, a pension, free agency, muffin baskets? Seriously, are you that naive to believe that this all showed up magically or do you understand that when the PLAYERS hold together, the OWNERS are the ones that are screwed.
    What the players need are guys like Peyton Manning and Phillip Rivers and Drew Brees to show up to those meeting to exert their will AND to stand up for the rest of the guys. NO OWNER in any of the major leagues has bent to the will of the common player and it’s only when they’ve seen that the super stars are as committed that they finally decide to play along. Look at the NBA strike of 1999. It went on until the superstars got involved and then it got resolved. It cost them 32 games but it took a while to get the superstars to risk their goodwill with the owners but when they did, the deal got done (and they’ll probably have to do that now).
    Look, a lot of people have NO IDEA about how much sacrifice it took and there were guys who DID put their short careers on the line and when they went in united, they got what they wanted. The owners don’t want to see Peyton show up because that sends a message to his teammates and they start thinking about putting their career on the line for a one year lockout and THEN who do you think has the upper hand? The players aren’t getting paid but in the end, the owners are going to have to give back and they don’t like giving back.
    YOU are playing the owners’ hand and if that is always the winning hand then why are there pensions, healthcare, free agents, skittles in the club house? Are you honestly or naively going to tell me that it was all the owners’ doing?

  34. charlie says: Feb 27, 2010 6:04 AM

    Are you kidding me? These players should take alook around them at the psople going hungry and unemployed. Then start talking money. There gifted athletes and toally warrant making great money. But for Christ sake come on. I go back long enough to remember the under 100,000 players and the leauge was a diffrent type of leauge. But I will tell you that you had real men giving 100% and no DRAMA! These guys need to check themselves and really take a look at what there asking for. The owners are the owners. ITS THERE CLUBS! They should really be humbled to even be able to play for a living. Where did that mentality go? 3M a year to run a ball around. 25M a year to throw a ball. YOU PLAYERS BETTER WAKE THE F UP AND SEE WHATS IN FRONT OF YOU. IT WONT ALWAYS BE THERE AND THIS S*** IS OUT OF CONTROL. LET THEM WALK OUT. LET THE HUNGRY, HUMBLED PLAYERS PLAY IN THERE PLACE. THE 80’S LOCK OUT WAS A GREAT SEASON.

  35. monkeesfan says: Apr 4, 2011 3:57 PM

    In other words the percentage would change but real cash payouts would go up. This is the problem the NFLPA* has – the fundamental absurdity of obsessing with percentages instead of actual cash.

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