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.