The main problem is fighting over revenue. I find it interesting that the MLB, NBA, and NFL all use words like “revenue sharing” when their owners who are usually billionaires are more accustomed to profit sharing. The league could have even hundreds of billions in revenues by if the cost to maintain the league is just one dollar above the cost then there is no profit. Right now the NFL has $9.4 billion in revenue. Yet I think the more interesting question is how much profit the league makes. Also considering how much public money sports stadiums get it’s pretty clear that the taxpayers in the cities where NFL franchises are located are losing. I would be in favor of more corporate sponsorship. Citigroup and Barclays paid $20 million ever year for 20 years just to get the naming rights for stadiums. Clearly, if we have more of this there would be less of a burden on taxpayers who don’t even go to a single game.
What is also interesting is the idea of salary gap. In 2009 the salary gap for a team in the NFL was $123 million. This is a large increase from 1994 when the salary cap was close to $35 million. Since each NFL team is only allowed to have 53 players the average annual salary a player would make is $2.3 million. Last year the highest paid player in the NFL was Phillip Rivers who made over $25 million and is quarterback for the San Diego Chargers. Just paying the quarterback would consume 20% of the salary cap and we haven’t even filled the roster for the rest of the offense or defense.
Another problem with NFL contracts is that high prospect rookies are guaranteed millions of dollars even before they step on the gridiron. Could you imagine a Fortune 500 company hiring a CEO and saying, “Well we have heard great things about you so here is $20 million no matter what happens”? Matt Stafford comes to mind when I think about this. Stafford was a very hot prospect who was quarterback and drafted by the Detroit Lions. The team guaranteed him $41.7 million. His stats for the 2010 season were nothing to write home about as he had more interceptions than touchdowns. Sam Bradford signed a six year deal worth $78 million of which $50 million is guaranteed. His performance last season was better than Stafford’s but still not Pro-Bowl material. Agents often sign multiyear contracts for players because agent’s get paid based off the contract value. Agents try to convince everyone that because their client had one good year they should be rewarded with a long term high paying contract. I think there are few if any other compensation packages that work like this. Imagine you are working at a company and have a very productive year and exceed expectations. The company calls you in and tells you they want to reward you with a large multiple of your current salary and a guaranteed bonus so you don’t leave. If companies had a compensation system like this workers would slack and decrease productivity especially when they have guaranteed money coming to them. Although, players and agents would be opposed to it a one or even two year contract would make more sense than multi-year deals on a short period of time. The players that were consistent and productive would actually get paid more and the players that were just a flash in the pan would be the most hurt.
Something else that might help the NFL is to allow teams to issue stock. Selling off the ownership to individuals would allow teams to be more run like a business. Shares could be traded on the financial markets and the value of the stock would be derived off wins, losses, attendance, and factors that would affect the team valuation. Sports fans could actually have as they say a piece of the action which would be great for them and teams wouldn’t have to rely on funding from one individual investor but could be supported by millions of fans across America.
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