NFL appears headed toward a season without a salary cap
Wednesday, December 30, 2009
The NFL is headed toward a season without a salary cap next year, and it will take an unexpected breakthrough in the sport's labor negotiations to avoid it.
Negotiators for owners and the NFL Players Association have made modest progress toward resolving the major financial issues at stake in ongoing discussions about a possible extension of their labor deal, sources familiar with the deliberations said. However, people on both sides of the negotiations said in recent days they consider it unlikely that the owners and the players' union will complete a deal in time to prevent next season from being played minus a salary cap. In fact, one source, speaking on condition of anonymity because he is not authorized to comment publicly on the talks, said it's "becoming close to a certainty."
A system that has helped to promote competitive balance among the teams since being put in place in 1993, greatly boosting the sport's prosperity and popularity, would be replaced by a system in which teams could spend what they wish on players while facing other restrictions on free agency that NFL officials say would serve to preserve competitive balance.
"The forefathers of our league put personal interests aside to promote competitive balance," said Peter Schaffer, a veteran NFL agent. "That prevented the NFL from turning into Major League Baseball with George Steinbrenner and the Yankees. . . . Right now you have two of the smallest-market teams out there, Indianapolis and New Orleans, having these wonderful seasons. The salary cap is part of that. If it goes away, it will eventually affect competitive balance."
For years, revenue-sharing among the teams and a salary cap to regulate spending on players have been fundamental components of the NFL's successful business formula. The teams share the revenues from their lucrative national television contracts equally, with the idea being to keep a franchise in Green Bay, Wis., on relatively equal financial footing with a team in New York.
The salary cap has gone hand in hand with that, keeping one team from too greatly outspending another to assemble its roster. It is a flexible ceiling on player salaries, but it is designed to make a team pay a future price for any extravagant spending. The system stayed in place through a series of extensions of the labor deal negotiated by former NFL commissioner Paul Tagliabue and Gene Upshaw, the late executive director of the union. Upshaw said that the best thing he could do for the players was to ensure they received a fair share of the sport's revenues and then do everything he could to help the owners increase those revenues.
Problems arose before the last extension of the labor deal was completed in 2006. There was a growing revenue disparity between the league's wealthiest franchises and other teams after some owners found ways to maximize revenue streams not shared with other teams. Upshaw also wanted the players to receive a larger portion of the league's revenues under the salary cap.
The deal approved by the owners in 2006 gave the players about 60 percent of total league revenues. The owners also approved a supplemental revenue-sharing plan that was to transfer at least $100 million annually, and potentially up to $200 million per year if the labor deal stayed in effect for its full six-year duration, from higher-revenue to lower-revenue teams. That was needed, owners said at the time, for some teams to meet their increased salary cap obligations to the players under the new deal. But owners found the deal to be too expensive and exercised a clause in the agreement to end the labor deal two years early. That made next season the final season in the deal, and this season the final one in the agreement with a salary cap.
The two sides always had made the final season in their labor agreements a non-capped season, believing that both parties would be wary of venturing into the great unknown of a season without a salary cap. That worked in the past but might not work this time in the first set of negotiations overseen by NFL Commissioner Roger Goodell and DeMaurice Smith, who replaced Upshaw as executive director of the players' union.
Players have said in the past they believe that the owners' overall spending on salaries would increase in a season without a salary cap because some free-spending teams would hand out huge contracts, driving up salary levels for other players.
But others in the sport say that might not be true. The salary cap system contains a player payroll minimum for each team in addition to a maximum for each club. This season's salary cap is approximately $128 million per team. The player payroll minimum is 87 percent of that, or about $111 million per team. The payroll minimum also would disappear in a season without a salary cap, and it's possible that overall spending on players would decrease.
There also would be new free agency rules that would go into effect automatically for an uncapped season. A player would need six seasons of NFL service time to be eligible for unrestricted free agency, instead of the four seasons now required. Each team would be given an additional transition-player tag to use, along with its current allotment of one franchise player or transition player designation, to restrict the mobility of its players in free agency. And the top eight playoff teams could sign a free agent only to replace a lost player.