Getting to the 2011-2020 National Football League Collective Bargaining Agreement

By Quinn, Kevin G. | International Journal of Sport Finance, May 2012 | Go to article overview
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Getting to the 2011-2020 National Football League Collective Bargaining Agreement


Quinn, Kevin G., International Journal of Sport Finance


Abstract

This paper examines the economic issues leading up to the 2011 NFL lockout and the resultant Collective Bargaining Agreement with the NFLPA. The history of labor relations between the league and the union is presented. The league's antitrust situation that led up to the 1993 CBA is discussed in detail, along with the economic consequences of that agreement and its successors through 2006. The issues dividing the players and the league in the wake of the 2006 CBA are discussed. The key events during the 2011 lockout and the details of the 2011-2020 CBA are provided.

Keywords: NFL, CBA, NFLPA, collective bargaining, salary cap, revenue sharing, free agency, antitrust

Introduction

The National Football League (NFL) is by leaps and bounds the largest sports league in North America. Its annual revenues were estimated to be $8 billion for the 2010-11 season, with nearly $1 billion of that in operating profits, and its franchises are estimated to be worth a total of over $30 billion (Badenhausen et al., 2011). Various reports peg 2011-12 NFL season revenues to be in excess of $10 billion. By comparison, Major League Baseball's 2010 revenues, operating income, and average franchise value were about $6 billion, $500 million, and $500 million, respectively (Forbes, 2011). Eight of the most viewed U.S. television telecasts during the 2011 calendar year were NFL contests, led by the Packers-Steelers Super Bowl, which drew 111 million viewers.1 The 2012 Super Bowl between the Giants and the Patriots was the most watched program in television history, drawing 300,000 more than the prior season's edition (Guthrie, 2012).

The economic manifestation of such popularity is the NFL's set of network television contracts, which paid the league a total of $3.7 billion during the 2011-12 season and $4.1 billion in 2012-13 (Vrooman, 2012). This money is split evenly across the 32 teams in the league, as are revenues from licensing, a substantial share of league-wide ticket sales, and other monies generated by teams with the highest local-generated revenues. All told, about two-thirds of total league revenues are shared evenly by the teams. The Green Bay Packers, the NFL's only publicly-held entity and therefore the only team required to report its financials, generated a total of $259 million in revenues from football-related operations in 2010-11 (Bercovici, 2011). The team is believed to be in the top of the middle third of NFL franchises in this category.

Labor Relations in the NFL Before the AFL Merger

The NFL was founded in 1920 as an alliance among the most successful professional football clubs in Ohio, Pennsylvania, Illinois, and other states in the American Midwest. Unlike MLB, which had in hand a specific exemption from antitrust law in the form of the Federal Baseball U.S. Supreme Court decision in 1922, the NFL has enjoyed no such exemption.2 However, the league pursued its labor relations during its first three decades as though it did, a seemingly reasonable assumption, for several decades, and even included a MLB-style reserve player reserve system in its first constitution- which was ratified the year before Federal Baseball (Algeo, 2006). The annual player entry draft, an effective monopsonization device, was instituted unilaterally in 1936 by the owners in response to a bidding war over University of Minnesota star Stan Kostka, and not as the result of collective bargaining with players. In 1948, during a period of player bidding wars with the All-American Football Association, the league eliminated the reserve system in favor of an option clause to be included in every player contract. This allowed the team of renewing a player's contract for an additional year (Lyons, 2010). However, in practice, there was little material difference between the two systems as owners interpreted the one-year renewal to include an additional option year, in effect creating a perpetual reserve right for teams.

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