- The Washington Times - Friday, March 3, 2006

The scuffle between the NFL and its players over the extension of the collective bargaining agreement has put at risk the very thing that launched football to the top of the sports landscape: the salary cap.

Owners unanimously voted to end talks yesterday morning, after failing to reach a compromise on how much of the league’s estimated $6 billion in gross revenue would be distributed to players. Though the two sides later yesterday agreed to continue talking through the weekend, a failure to reach an agreement would mean the 2006 season likely will begin with the league’s current cap of $94.5 million in place.

But the 2007 season, which would go on without a salary cap, looms.

“It’s about as dire as dire can be,” NFL commissioner Paul Tagliabue said.

Union officials suggested that if players get a taste of life without a cap they would never agree to have it re-installed.

“If we go to an uncapped year, we won’t come back,” NFL Players Association executive director Gene Upshaw said earlier this week.

That could be a tough scenario for small market teams such as the Arizona Cardinals and Green Bay Packers, which collect nearly half as much revenue as their big-market rivals. While much of the credit for the league’s parity belongs to a robust national television deal that spreads revenues evenly to all teams, a salary cap has been largely responsible for preventing larger market teams with more cash — such as the Washington Redskins — from going on spending sprees.

“Football has been the most successful at spreading the wealth,” said Leo Kahane, an associate professor of economics at California State University, East Bay and founder of the Journal of Sports Economics. “This would be a big blow to maintaining the competitive balance the league has enjoyed.”

For example, the Redskins reported revenues of $287 million, with an operating income of $53 million during the 2004 season, according to Forbes Magazine. Both are tops among NFL teams. Meanwhile, the Indianapolis Colts, who have been among the AFC’s more dominant teams in the last five years, reported revenues of just $166 million, with an operating income of just $16.4 million.

Large market teams admit they’d suffer less under a cap-free scenario.

“I think we would be in good shape,” said Bob McNair, owner of the Houston Texans, which has the league’s fifth highest revenue. “I think that small-market clubs would be hurt more than large-market clubs. I think we would be prepared to weather that storm.”

But some people close to the process said the salary cap’s death is unlikely.

“I don’t share the doomsday scenario that others do because I think a deal is going to get done,” said David Cornwell, the NFL’s former assistant general counsel who now represents several NFL players and agents. “There will be another salary cap. It’s just a matter of what happens between now and then.”

NFL players want 60 percent of league revenues, while the NFL has offered a 56 percent cut. That puts the two sides between $300 million and $350 million apart, or the difference of about $10 million a team.

“It seems like given the magnitude of dollars in the pot, it would be silly to jeopardize something so good,” said Dennis Howard, a professor at the Warsaw Sports Marketing Center at the University of Oregon. “Both sides have prospered under this agreement.”

A salary cap model has allowed NBA teams such as the Portland Trail Blazers and San Antonio Spurs to be competitive. In the NHL, owners last year staged a lockout of players as part of a fight to install a salary cap. They succeeded, and now say the cap will help smaller market teams make profits.

Tagliabue said sticking points in these talks have had less to do with the spread in revenue distribution and more with the union’s failure to acknowledge how much money owners have spent on new facilities in recent years.

“We’ve created a structure that has enabled us to build an unprecedented number of new stadiums,” Tagliabue said. “[The players] want to have all the revenues that come out of these facilities but they do not in any way, shape or form recognize the cost to the owners of building those stadiums.”

No matter the result, everyone agrees these labor talks are hugely pivotal.

“There is more at stake in these negotiations than any other sports league in history,” said Rick Horrow, a visiting professor of sports law at Harvard Law School, “because it’s a $6 billion economic goose that laid the golden egg being discussed at this point.”

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