New stadiums upset US NFL competitive balance

The United States National Football League, the governing body of the professional version of the indigenous American gridiron code, has been assumed to be the model for ensuring competitive balance of competing clubs through salary cap and player drafts. But the management of several small-market NFL teams are warning that the league's competitive balance is being threatened by tremendous growth in revenues that have resulted — in large part — from that level playing field.

"Even though the NFL has a salary cap, the equal ceiling teams can spend for players, the current formula for determining the cap is helping to create the disparity," Mark Curnutte observed for The Cincinnati Enquirer:

Teams in top-third NFL markets, such as Boston, Washington, Dallas, Philadelphia, Chicago and New York, generate revenues on average of $256 million, according to Enquirer research. Teams in the middle third, such as Baltimore, Tampa and Seattle, have average revenues of roughly $199 million. In Cincinnati, Minneapolis-St. Paul, Jacksonville and Buffalo — the league's smallest markets — average per-team revenues are about $177 million.

The average per-team revenue is $211 million, and each team is responsible for paying 57.5% of its revenues toward player costs, according to the collective bargaining agreement ratified 30-2 by owners in March 2006. And though each of the 32 teams share equally in the league's national television and sponsorship contracts — about $102 million per team — big-market teams are generating unshared revenue at such a pace that it is causing the salary cap to rise faster than small-market teams can handle.

The higher rate of growth in unshared revenue generated by teams with new stadiums in larger markets has created disparity. A little more than a decade ago the revenue gap between NFL teams in big and small cities was less than $10 million. Now it's more than $100 million. And the problem with unshared revenue — such as money from luxury box revenue, stadium naming rights, marketing and sponsorships and local media — is that it all goes into the league-wide tally that is used to determine the salary cap.

For example, the Bengals received $5 million for the naming rights to the Cincinnati football stadium but in New York, the Jets and Giants expect to get a deal worth $25 million for their new shared stadium. The Indianapolis Colts get an average of $34,000 annually for a luxury box but the New England Patriots get $100,000 to $300,000 for suite rentals.

"The new stadiums have produced a discrepancy between the top-revenue and bottom-revenue (teams)," Bengals President Mike Brown told Curnutte. "That has put the teams in the large markets in prime position. They are doing very well. But the teams in the smaller markets, they are struggling because their cap costs have gone up while their revenues have not kept pace."

The salary cap is $109 million for 2007. In 2005, it was $86 million. In addition, each NFL team is required to make a mandatory player benefit payment of $21 million each year. The unofficial cap for this season is $130 million. The average non-player expenses for an NFL team are almost $50 million. The Bengals are paying roughly 68% of their revenue on players. Big-market teams are paying an average of 47%. For the Washington Redskins, the NFL's top-revenue team that has broken the $300 million mark, that percentage is even smaller. Large-market teams have additional money to spend on coaches, scouts and facilities. For example, in 2004, Jacksonville spent $3.31 million on assistant coaches while the Redskins spent $5.22 million, according to the NFL Coaches Association.

The issue is expected to come to a head at the league meeting this March after NFL Commissioner Roger Goodell acknowledged that the issue must be addressed between owners and the union. "One solution — a reduction in the players' take — is unlikely," Curnutte commented. "More plausible is additional revenue-sharing among owners. A pool of $100 million in supplemental revenue-sharing is supposed to be available this calendar year."