The National Football League & The 1993 Collective Bargaining Agreement:

With Equality Comes Dominance

Alexander Schultz April 1st 2008 Professor Messier, History 200

Vanderbilt University

Baseball may be best known as our national pastime; however, football has established itself as our national obsession. While the National Football League (NFL) has steadily grown in both popularity and success throughout its existence, it was catapulted into the forefront of our nations top sports leagues after the signing of the 1993 Collective Bargaining Agreement (CBA), which installed for the first time in league history both a free agency system and a salary cap. The end goal of the CBA was to improve all aspects of the NFL; competitive balance, fan interest, league growth, franchise growth, and players salaries. The keystone, however, to the CBA was to increase fan interest in the league, which in turn would increase fan investment allowing all the other pieces of the puzzle to fall into place. It was determined by both the owners and the players that fan interest was predicated on an increase of league parity, or competitive balance; after all, how much interest could the NFL garner if the results of a given season could be easily predicted before the season even began? This paper intends to analyze how the 1993 CBA did just that: improve league parity with the hopes that fan interest would be augmented. Parity, which is the keystone to a successful league, has multiple factors. I will argue that the CBA, and specifically the installation of free agency and a hard salary cap, has reinforced a high level of intraseason parity (competitive balance in any given season) and dramatically improved interseason parity (parity from season-to-season). The measurement of parity can be seen in many different ways; however, in order to efficiently argue my point I will only look at a few, which include the comparison of the ideal standard deviation of winning percentages versus the actual standard deviation of winning percentages for the periods before and after 1993, the number of new Super Bowl1 winners from year-to-year both prior to 1993 and
1

The Super Bowl is the NFLs championship game played at the end of each season.

after 1993, change in playoff teams from year-to-year, and the average greatest swing in wins and losses for individual teams. As I stated above, a competitive league is the foundation to fan interest. If parity throughout the league has improved than surely the amount of fan interest will tangibly be affected and ideally improved as well. An increase in popularity can be seen in a number of different ways including an increase in television contracts, television ratings, the price of a single Super Bowl commercial, and fan attendance. Furthermore, as fan interest rises so too does the total revenue of the NFL and its teams. The ultimate goal of the owners, players, and league was to increase total revenue with the above effects of the CBA in mind. Parity was to increase the popularity of the league, which would raise the amount of investment by both fans and corporations thus bringing more money into the league and for teams through the NFLs aggressive revenue sharing policy. The benefits of the CBA for individual teams and its players can be looked at by analyzing change in team value, the price of expansion teams, increased revenue through league advertisement and television contracts, and the change in players contracts throughout the leagues history. It is my goal to prove to the reader that the CBA of 1993 has had immense consequences on all aspects of the NFL. Its end goal of increasing league revenue, which is then shared equally amongst the teams, has benefited the fans, the teams, and the players as well. The CBA has been an enormous factor in successfully distancing the NFL from the rest of Americas major sports leagues in these aspects as will be evident through a brief, but effective comparison of the NFL and its two biggest competitors; the National Basketball Association (NBA) and Major League Baseball (MLB).

In order to best understand the consequences and the magnitude of the 1993 CBA it is important to take a brief look into the structure of the NFL pre-1993. Free agency was by no means a guaranteed institution in the NFL; on the contrary, the players and the National Football League Players Association (NFLPA) fought a long and hard battle to establish a free agency system regulated by a salary cap in the NFL. Prior to 1957, the NFL had what was called the reserve clause, which essentially gave the owners complete power over their players. In players contracts a reserve clause gave each owner the exclusive rights to negotiate with that player, effectively keeping salaries low by avoiding bidding wars amongst teams. Consequently, players were not paid their true value of labor; instead, they were merely paid more than they would have been making outside of the NFL at that time. The concept of a reserve clause was not a new one; it was first introduced in baseball over 125 years ago, and was established with the goals of stabilizing player movement and reducing salaries in its respective leagues. At the time, teams believed that the ability to keep players was crucial to maintaining competitive balance, claiming that without the reserve clause larger market teams would easily outbid smaller market teams for players services (Baschnagel 2005). Following the end of the reserve clause, which was found to be illegal by the Supreme Court in 19572, the Rozelle Rule (named after then commissioner Pete Rozelle) was instituted. In the Rozelle Rule, teams that lost free agents to another team were compensated by being given one or two players, at the commissioners discretion, from the team that signed the free agent. The compensation, however, was usually of much greater
2

In the Supreme Court case, All-Pro Guard George Radovich challenged the NFLs reserve clause after being blacklisted by NFL teams following his return to the NFL after a brief stint with another league. The Supreme Court ruled in Radovichs favor, stating that the NFL was not the MLB and would not be granted the same antitrust exemption that was granted to baseball following the Sherman Antitrust Act of 1890.

value than the free agent himself, thus becoming a deterrent for teams to sign free agents (Fort 1997). Many players simply returned to their original organizations without their true labor value being recognized. The Rozelle Rule once again was transformed into the modified version of the Rozelle Rule beginning in 1977 and lasting until 19883. The NFLPA agreed, in the modified version, that a set formula would replace the commissioners discretion when dealing with the compensation of lost free agents. In return, the players negotiated for greater player benefits, such as healthcare and retirement packages. The modified version, however, was almost equally as restraining for the players as the original. Throughout the modified versions 12 year reign an average of 125 players a year filed for free agency; however, only three players ever changed teams (Fort 1997). In 1982, frustration by players and the NFLPA began to boil over as they demanded a change to the system in place; however, their attempt at bringing about free agency ultimately failed resulting in a 57 day strike at the start of the 1982 season4. The players and the NFLPA once again turned to the courts in an attempt to change the status quo, claiming that the modified version was a violation of antitrust laws. This too, however, failed as the courts ruled that because the modified version had been negotiated and agree upon in the 1977 CBA, the leagues antitrust laws did not apply. The only solution, the courts suggested, was to dissolve the NFLPA. In 1988, the NFLPA did just that and disbanded in an attempt to have their previous suits succeed. The free agency that exists today has grown from Plan B Free Agency,
3

Among other things, the modified version of the Rozelle Rule was initially agreed upon in the 1977 CBA and again in the 1982 CBA. 4 The strike began on September 21, 1982 and ended on November 16, 1982. During this time no football was played in the NFL. When the players returned to the field, the season had to be cut from 16 regular season games to only 9 and the playoffs.

which was put into place in February 1989. Plan B gave teams limited rights to no more than 37 player per season, leaving everyone else unprotected. In 1992, the favorable decision of McNeil v. ProFootball Inc. gave the players the legal precedence they had been both longing and needing, making the NFL the last major sports league with free agency. On May 6th, 1993, the NFLPA and the owners negotiated a salary cap to control free agency, officially ushering in the modern era of the NFL5. The salary cap was a vital part to Plan A Free Agency (the name given to the free agency system agreed upon in 1993) as without it competitive balance would decrease as richer teams could spend more on players6. Free agency today has drastically changed how teams conduct business. Organizations once built teams for the long haul with the knowledge that players would remain on their rosters for years to come. Today, however, teams must choose their pieces wisely, as a player on the team one year could very likely be gone the next. After a long road the 1993 CBA marked the culmination of the years of effort to wrestle player control away from the owners and to create a more balanced relationship between the employees and their employers. The CBA was intended to create more competitive balance throughout the league and ultimately improve the financial strength of both the organizations and the players. In the end, it was the agreement between the players and the owners that parity was strongly correlated with fan interest, which would thus bring the league more revenue that brought the two sides together. The rest of the paper intends to look at how parity has changed since the 1993 CBA and how the players and owners were correct in their analysis of the effects of parity on fan interest and ultimately league revenue.

5 6

The 1993 CBA was renewed for 6 years in 1998 and again in 2006 through the 2011 season. The NFL experienced only one year of unregulated free agency in 1993.

League parity is the key to the NFLs ultimate goal of increasing fan interest and thus increasing total revenue. Without competitive balance, the league argued, fans would lose interest in a seemingly predictable game. What fun is it to root for a team that has no chance of beating the top teams in the league? Why would a fan pour out his heart and soul (and money) into a team that has no shot of making it to the Super Bowl let alone the playoffs even before the season began? Fans enjoy knowing that on any given Sunday their team can pull off the upset against a better team or that despite their teams losing record in the season before, a new season represents a fresh start and the very real possibility of watching a playoff bound club. Many factors affect the competitive balance throughout the NFL, including its extensive revenue sharing, reverse-order draft, and compensatory scheduling. However, free agency and the salary cap, perhaps, have had the largest impact on improving NFL parity. Since the 1993 CBA, the NFL has been unmatched in team equality by both their history and by their main competitors, the NBA and MLB. Parity in the NFL can be looked at from two different angles. First, intra-season parity, is a measurement of how competitively balanced teams are in a single season. The idea that any team, last place or first place, can beat any other team on any given day is an example of intra-season parity. The second, inter-season parity, is the idea that there is equality from season-to-season; for example, a change in league champion, the ability for last place teams to improve from season-to-season or vice versa, and the fact that every team has an equal chance of making the playoffs. Both aspects of parity are important to look at in order to analyze how they were affected following the installation of free agency and the salary cap. Furthermore, they are useful in comparing the NFL with the NBA and

MLB from the standpoint of, which leagues have excelled at creating a competitively balanced league and, which have not. The NFLs aggressive revenue sharing, which is much better compared to the other major leagues, plays a large factor in evening the playing field for large market and small market teams. The total revenue the league brings in every year, including national television contracts, national licensing, radio contracts, and various internet fees are evenly distributed amongst its teams. National television contracts, which will be written about in more depth later in the paper, bring in over half of each teams total revenue per year (Baschnagel 2005). NFL teams also split their total gate revenues as the home team receives 60% of the gate and the visiting team receives 40%. This is quite even compared to MLB, which splits their gate about 90%-10% in the National League and about 80%20% in the American League. Revenue sharing in the NFL has done an outstanding job of bringing more stability to the smaller market teams, as without it it would be difficult for them to compete with large market teams that potentially have more fans and marketing opportunities. Tangibly analyzing intra-season parity is a difficult thing to do as many factors can affect a single games outcome; weather, injuries, penalties, ejections, and the like. Charles Baschnagel in his 2005 paper An Analysis of the 1993 NFL Salary Cap on Competitive Balance and League Revenue, however, effectively compares the ideal standard deviation of a teams winning percentage with the actual standard deviation for both the periods before and after the installation of free agency in the NFL. In a perfect world a team would have a 50-50 chance of winning every single game. The ideal standard deviation for an NFL teams winning percentage would be .125, or .5 divided by the square root of the

number of games played, 167. A comparison of the ideal standard deviation with the actual standard deviation for the periods before and after free agency clearly displays how the 1993 CBA has affected intra-season parity. The two periods of comparison are 1977-1992 and 1994-2004. The year 1977 was chosen because that was the year that the NFL first instituted a new scheduling formula based on how teams did in the previous year8. The 1993 seasons data was not taken into account in this analysis as it was the only year the NFL went through an unregulated period of free agency, thus allowing teams to spend as much money as they wanted on free agents9. The results of the comparison show that free agency and the salary cap had little impact on the already high level of intra-season parity as the two standard deviations were virtually identical. From 1977-1992 the average ratio of actual versus ideal standard deviation was 1.5006 with a variance of .0213, slightly better was the period of 1994-2004 with an average ratio of 1.4872 with a variance of .0206 (Baschnagel 2005). Even before the 1993 CBA, the NFL boasted a high level on intra-season parity, which was only minimally improved following free agency and the salary cap. Although intra-season parity in the NFL with free agency proved to be similar to that of the pre-free agency period, it compared very favorably to the NBA and MLB. The ideal standard deviation for winning percentage in the NBA is .05510. From 1971-1984 the average ratio of actual versus ideal standard deviation for NBA winning percentages was 2.511 with a variance of .329; from 1985-1997 the average ratio was 2.946 with a variance of .054, and finally from 1998-2004 the average ratio was 2.757 with a variance of .054
7 8

The equation of ideal standard deviation of an NFL teams winning percentage is .5/16 The new scheduling was instilled to increase competitive balance as better teams were faced with a harder schedule and worse teams were given relatively easier schedules. 9 The ratio of actual versus ideal standard deviation for winning percentages in 1993 was 1.284. 10 The equation for this is .5/82.

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(Baschnagel 2005)11. These results show that the soft salary cap in the NBA in fact decreased the level on intra-season parity; however, more importantly, it also shows that compared to the NBA the NFL boasts a more competitively balanced league. MLB also lags behind the NFL in terms of intra-season parity. In a model season the standard deviation for MLB winning percentages would be .03912. From 1902-1972 (the year before baseball instituted free agency) the average ratio of actual versus ideal standard deviation for winning percentage was 3.156 with a variance of .268(??). Following baseballs installation of free agency in 1973, intra-season parity drastically improved with an average ratio of 1.772 and a variance of .137. This improvement, however, was still not enough to pass the NFL in competitive equality. Inter-season parity is equally as important as intra-season parity when analyzing how the NFLs competitive balance was affected by the CBA. Furthermore, inter-season parity, like intra-season parity, is a vital factor in influencing fan interest. Any given season may end poorly for a team; however, a high level of inter-season parity keeps fans saying, and believing, the common phrase that there is always next year. While intra-season parity has been maintained at a high level since 1993, inter-season parity has drastically increased since 1993. Parity from season-to-season can be illustrated in the turnover of Super Bowl champions, turnover of playoff teams, and average greatest swings in both wins and losses.

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The period 1971-1984 represents the period in the NBA directly following its merger with the American Basketball Association (ABA), 1985-1997 represents the installation of a soft salary cap in the NBA (a salary cap that allowed teams to exceed the salary cap to match the offer of another team for a reserved player), and from 1998-2004 the NBA instituted a luxury tax (a tax on teams that exceeded the salary cap, which would be redistributed to those teams that remained under the salary cap) as well as kept the soft salary cap in place. 12 The equation for this is .5/162.

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Fans can often hear players talk about a season not being successful unless it ends with a Super Bowl championship, a championship, they say, is the only true measure of success. For fans a successful season might not face such a steep barometer; however, in the end a Super Bowl victory is what fans hope and cheer for every season. The turnover of champion from season-to-season is an important aspect of inter-season parity. A higher turnover represents more uncertainty in the league, which, according to the fan theory, attracts more fan interest. Comparing the pre- and post-salary cap eras clearly shows the increase of Super Bowl winner turnover after 1993. The pre-salary cap era is known for producing memorable football dynasties; the Pittsburgh Steelers of the 1970s, the San Francisco 49ers of the 1980s, and the Dallas Cowboys of the early 1990s. It is widely acknowledge that free agency marked the end of dynasties; however, an argument can be made that the New England Patriots, who won the Super Bowl in 2001, 2003, and 2004, are a modern day dynasty; however this is outside the scope of this paper. The data clearly shows that since 1993 the turnover rate for Super Bowl champions is higher than for before 1993. Tables 1 and 213 show the Super Bowl winners from 1967199214 and 1994-2008, with the different winners in bold. In the period of 1967-1992, 26 years, there were 12 different Super Bowl Champions, ten different American League Conference (AFC) champions, and ten different National League Conference (NFC) champions15. Following the 1993 CBA, the period of 1994-2008, only 15 years, witnessed 11 different Super Bowl Champions, nine different AFC champions, and 11 NFC champions. This statistic is very telling of the turnover rate following the CBA in 1993. While the overall number of different champions from 1994-2008 is actually one less than
13 14

Tables 1 and 2 can be found on pages 25 and 26. Super Bowl I was first played in 1967 pitting the Green Bay Packers against the Kansas City Chiefs. Green Bay won 35-10. 15 The Super Bowl is played by the AFC champions and the NFC champions.

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that of the pre-free agency period the sample size for the two periods is drastically different. Clearly, since the 1993 CBA, the NFL has seen an increase in Super Bowl champions compared to the pre-free agency period. The second measurement of inter-season parity is the turnover of teams that make the playoffs from one season to the next. While the ultimate goal of a team and its fans is a Super Bowl victory, success of a season can also be judged by whether the team made the playoffs or not. A higher turnover of playoff teams leads to higher fan interest as the league becomes more unpredictable; furthermore, the playoff implications of any given game positively affects its attendance (Leeds 2002). Before free agency, from 1977-1992, the average percentage of teams that made the playoffs one season, after not being in the playoffs the previous season, was .397 with a variance of .0094 (Baschnagel 2005). In the seasons following the 1993 CBA, however, the turnover percentage increased as the average percentage of teams in the playoffs that were not there the season before was .439 with a variance of .0098 (Baschnagel 2005)16. In addition, the first nine seasons of free agency, 1994-2002, saw all but the Cincinnati Bengals and the Cleveland Browns make the playoffs17. The final measurement of inter-season parity I looked at was the average greatest swing in both wins and losses in a season. A high swing in wins or losses from season-toseason represents greater league volatility. If a team, for example, can go from two wins in one season to ten wins the next, the predictability of the league will decrease and thus
16

In 1990, the NFL restructured its playoff system to allow 12 teams in up from the previous 10. While this increase makes it more difficult for any one team to win the Super Bowl it also gives more teams a chance to win the Super Bowl and to get into the playoffs. 17 The Bengals, who according to Sports Illustrated is the worst team in the NFL since free agency with an average of five wins per season, made the playoffs for the first time in the free agency period in 2005. It is also important to note that the Cleveland Browns, who moved to Baltimore in 1996 becoming the Ravens, became an expansion team in 1999, making the playoffs for the first time in the free agency era in 2002.

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increase fan interest. Using pre-1993 and post-1993 as two comparative periods in the NFLs history one can see how the volatility of the league has changed since 1993. In the 10 seasons from 1979-1992 (excluding 1982, 1983, 1987, and 1988)18 the average greatest seasonal jumps in wins in the NFL was +5.25 per season (+4.8 wins per season in the AFC, +5.7 wins per season in the NFC). In that same period the average greatest seasonal swing in losses in the NFL was -5.2 per season (-4.9 losses per season in the AFC, -5.5 losses per season in the NFC). The leagues unpredictability increased following the CBA in terms of the average greatest swing in both wins and losses. From 1995-2005 (excluding 1994)19 the average greatest seasonal jumps in wins in the NFL was +6.05 per season (+6.09 wins per season in the AFC, +6 wins per season in the NFC). The average greatest swing in losses also increased from 1995-2005 in the NFL as it was -5.91 losses per season (-5.91 losses per season in both the AFC and the NFC). While the jump in average wins and losses is not huge (just under a one game increase for both) the results are noteworthy. While other factors may offer insights for the jump, an increase in league volatility clearly coincided with the signing of the 1993 CBA.

The CBA did a good job maintaining an already high level of intra-season parity and did an outstanding job increasing inter-season parity. The turnover of both Super Bowl champions and playoff teams increased after the installation of free agency and the salary cap. Furthermore, unpredictability, a principal factor in the fan theory, was augmented as is seen by the increased turnover and swing in greatest average wins and losses from seasonto-season. It was the owners and players agreement that this increase in parity would bring
18

The NFL experienced two work stoppages in both 1982 and 1987, which affected the seasons outcome. Since the data is predicated on the previous years results both 1983 and 1988 had to also be excluded. 19 1994 has been excluded because its win/loss swing is predicated on the 1993 season, which was the only unregulated free agency period in NFL history.

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about higher fan interest, which would raise league total revenue that ultimately led to the 1993 CBA. Fan interest can be measured in many tangible ways; however, I will be looking at the leagues media contracts, the price for a single Super Bowl commercial, and the available attendance records for the league. Football, which was once only played on Sundays and broadcasted on two networks, is now watched up to four days a week, broadcasted on three major networks, a cable station, and can be found on numerous channels being analyzed and talked about seven days a week. The NFL certainly has come a long way from its first broadcasted game in 1951 by the DuMont Network. The current television contract for the NFL both immensely increase league revenue and display an increase in fan interest. Today, television contracts are the NFLs main revenue source and it seems that networks will continue to invest more and more into the proven product that is football. Over half of Americans claim to follow football and the television networks know this; inking record contracts with the NFL in 1997 that brings in an average of $2.2 billion per year for the league (thats more than double the four year contract the NFL signed in 1993), which translates into over $73 million per team (Schaaf 2004) (Zimbalist 2006). The enormous television contracts that the NFL continues to negotiate (1990, 1993, and 1997) infer that television networks find their investments to be worth it. Television has been proven to be the best medium to bring football to the masses and the masses clearly have been watching. While Nielsen Ratings20 are not released to the public, ratings are available for the popular Monday Night Football21 (MNF) program. The popularity and rankings for MNF steadily rose leading up to 1993 from its 1970 inception. Before 1993, MNF boasted an
20

The Nielsen Ratings were developed by Nielsen Media Research to analyze the audience size and composition for certain television programs. 21 Monday Night Football kicked off in 1970 as an experimental program of ABC and has become an important face of the league.

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average rating of 16; furthermore, the popularity and ratings following the CBA remained at a high level (Baschnagel 2005). It can be argued that the CBA maintained MNFs popularity, especially because the increased league parity made it more difficult for the league and network to predict quality match-ups. Although MNF has become a constant in the NFL, the largest single game is by far is the Super Bowl. Year after year people gather together to watch the game, sometimes for the game itself, sometimes for the Super Bowl parties and the food, and sometimes for the commercials. Companies spend millions of dollars trying to create the funniest, catchiest commercial that will have everybody talking about it the next morning. As the popularity of the NFL has grown, so too has the price for a 30 second Super Bowl commercial spot. In 1972, a company could purchase a 30 second spot for $86,000 that would reach 57 million people (Schaaf 2004). In 2001, while viewership since 1972 only grew 55% (88.5 million people), the price for the same 30 second commercial grew over 2400% ($2.2 million) (Schaaf 2004). Table 322 shows how the value of a 30 second commercial spot has increased from 1996-2001. Clearly, companies believe that even a short commercial is worth such a large price tag as it will be viewed by over 88 million people and will ideally be talked about by even more. The rise in value of a single Super Bowl commercial represents an increase in NFL viewership, whether it is solely for the game itself or merely for the commercials, more people are watching the Super Bowl and companies are keying into this. After all, if the Super Bowl ratings were poor it would not be worth it for a company to invest over two million dollars into a 30 second advertisement. Television contracts, MNF ratings, and the cost of a Super Bowl commercial are all telling factors in the increase of fan interest; however, perhaps nothing is more significant
22

Table 3 can be found on page 27.

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than attendance records. While television might be the medium through which most NFL fans follow their teams, attendance records are still a significant factor in both analyzing how fan interest and team revenue have changed. Ticket revenue represents one-third of teams total revenue (Spenner, Fenn, & Crooker 2004). Many factors increase any given games attendance: rivalries, playoff significance, higher winning percentage for either the home or visiting team, or the expectation of a close game (Welki 1999). Figure 1 shows the average NFL attendance from 1932-200223. Clearly, throughout the NFLs history its attendance records have consistently risen. In 1975, the NFL boasted an average of 54,520 fans per game. Five years later in 1980, the NFL set an attendance record for the third year in row with an average of 59,787 fans per game. Again, in 1991 the NFL set an attendance record for the third straight year with an average of 61,792 fans per year (NY Times 1992). Even before the 1993 CBA the NFL was continuously breaking its own attendance records as fan attendance kept on rising. The CBA, however, did nothing to slow this growth as the NFL broke yet again its own attendance record for the fifth straight year in a row in 2006 with an average of 67,738 fans per game. The CBA has maintained the NFLs continuously rising attendance records; however, it should be noted that NFL stadiums have continued to grow in capacity, which has undoubtedly helped increase overall attendance records throughout the years.

The CBA has successfully raised league parity, which has helped lead to more fan interest; however, the CBA was negotiated to ultimately benefit both the leagues total revenue and the players. The rise in fan interest has consequently raised media and fan investment in the NFL, which has been equally redistributed to the teams and its players.
23

Figure 1 can be found on page 28.

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By looking at league growth, individual team growth, team profits, expansion values, and comparisons to the NBA and MLB one can see how since 1993 the NFL has been unmatched in its financial escalation. Following the NFLs signing of television contracts in 1997, the league surpassed the NBA as the fastest growing league in America. Even before 1997, however, the NFL was quickly growing; passing the NBA and MLB was inevitable. The NFL, however, was not put on pace to be the fastest growing league in America until after inter-season parity improved. Figure 224 shows the NFL revenue growth since 1990 (Bashnagel 2005). The NFL revenue growth had been steadily rising before the CBA; however, it was after the 1993 season that the NFLs revenue growth really took off. While 1994 may be looked at as slow growth compared to the years following it, one possible explanation is the fact that free agency and the salary cap were unproven to the NFL buyers. Revenue growth in the NFL really took off after the television contracts were signed in 1997. This jump reflects an increase in fan interest after free agency had established the NFL as a proven product; both fans and network executives saw the NFL as worth investing in. Since 1993, the NFL has been financially outperforming both the NBA and MLB25. In 2005, for example, NFL teams received $90 million from all national media revenue; whereas, $90 million was the total revenue from all sources for an average NBA team (Zimbalist 2006). Figure 326 uses 1993 as a base year to compare the NFLs revenue growth compared to the NBAs and MLBs. Although the NBA was the fastest growing
24 25

Figure 2 can be found on page 29. The NBA and the MLB have not experienced the same financial growth as the NFL; however, it should be noted that both leagues have experienced work stoppages since 1993 (the NBA from 1998-1999, which lasted 191 days, the MLB from 1994-1995, which lasted 232 days). During their respective strikes, both leagues lost millions in revenue; however, this should not take away from the impressive growth the NFL has shown since 1993. 26 Figure 3 can be found on page 29.

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league from 1993-1996, the NFL surpassed it and never looked back. In 2005, the NFL brought in over $5.3 billion in total revenue compared to the NBAs $2.932 billion and the MLBs $3.837 billion (Baschnagel 2005.) All of the leagues revenues are up since 1990 (the NFL and MLB brought in about $1.3 billion, the NBA about $840 million); however, the NFL has firmly established itself as the leading league since (Baschnagel 2005). A faster growing league means more money for the teams and thus greater team value. A teams value before 1993 was substantially lower than its free agency era counterpart. Expansion team price tags are a telling statistic in seeing just how much the worth of owning an NFL team has risen over the years. In 1976, it cost only $16 million to buy the Seattle Seahawks and the Tampa Bay Buccaneers. Nineteen years later, in 1995, the price tag for the Carolina Panthers and the Jacksonville Jaguars jumped to $140 million a piece. The price of an expansion team was still on the rise, however, as it cost $530 million for the Cleveland Browns in 1998, and a whopping $700 million in 2002 for the Houston Texans (Weismann). Jerry Jones, the owner of the Dallas Cowboys, bought the team in1989 for $199 million, today the Cowboys are estimated to be worth about an unprecedented $1.5 billion. It is easy to understand why someone with the means might see the NFL as a worthwhile business venture. In 2003, the average profits for an NFL team were $27.6 million with a high of $69.6 million (the Washington Redskins) (Zimbalist 2004). Michael Ozanian of Forbes Magazine estimated that all but one of the NFLs 32 teams, the Arizona Cardinals ($-4.9 million), made a profit in 2003. Figure 427 shows the average increase of NFL franchise value from 1991-2004. In 2004, the average value for an NFL franchise was $733 million, just under a 470% increase from the 1993 average value

27

Figure 4 can be found on page 30.

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of $129 million (Baschnagel 2005). Like the change in league growth, the two pertinent shifts in team value coincide with the 1994 and 1997 television contracts. The NFL and its teams have been financially rising for much of its history; however, never as much as since the 1993 CBA. While free agency itself may not have directly put more money in the leagues pockets it has had a hand in making the league more entertaining for fans to watch and follow. The increased entertainment has led to an increase in quality, and consequently, demand for the NFL, which has never been as clear as it is today. Television networks are inking record contracts, advertisement revenues are up, and fans are attending games more and more every year. As the prices for the NFLs services have risen, investors have been more than happy to try and buy a piece of NFL pie, which has only led to more growth of the league.

The league growth has also directly benefited players as they are getting a larger piece of a faster growing league than their 1993 counterparts. The 1993 CBA has, perhaps, benefited the players more than any other aspect of football. Players once played in a league where the owners only needed to pay them just more than what they would have made outside the NFL. Today they play in a league where they can auction off their skills to the highest bidder. By looking at the increase in the average players salary, the rise in guaranteed money, and player movement, it is easy to understand just how beneficial the CBA has been for todays NFL players. Free agency has allowed each player to find his true market value as players can shop their skills around from team to team. Players contracts are now higher then ever, as

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the salary cap (64% of the teams defined gross revenue28) was raised from $62.2 million in 1994, to $85.5 million in 2005, to $109 million in 200729. From 1987-1992, the average number of players making at least $1 million was only 40. From 1993-1998 that number jumped to 341. The average jumped yet again in the period from 2002-2006 to 634 players making at least $1 million per season30. While many teams spend the maximum amount of money possible to sign free agents, the CBA instilled a minimum percentage of total revenue (59% of a teams DGR) that teams must spend as well. The installation of free agency has made a players skill and performance a much bigger factor in his salary compared to before free agency when players received more money based more on their position (Leeds & Kowalewski 2001). Table 431 shows the increase of average player salaries beginning with 1980 and ending in 2007. Player salaries were on the rise even before 1993; however, from 1990-2007 the average player salaries have had an increase of 394%. The increase in average player salaries over the years can be attributed to the increase in legal mobility (free agency), rise in sports agents, greater sources of revenue, and increased revenue from media coverage, and fan and corporate investment. While the continual rise in average players contracts is beneficial for the players, even more so, is the dramatic increase in guaranteed money players now earn. The 1993 CBA did not guarantee player contracts, meaning a player can be cut from a team at any time and his salary would disappear. Guaranteed contracts, like in the NBA, are very risky for owners because they must still pay the player for the contract length regardless of
28

Defined gross revenue (DGR) includes stadium signage, concessions, luxury box seats, club seats, parking, and naming rights. 29 Although the salary cap ensures financial parity amongst all the teams; coaches, assistants, and trainers salaries do not fall under salary cap restrictions. Teams can invest more money here, which can potentially give them a competitive on edge on the field. 30 http://www.usatoday.com/sports/football/nfl/2007-10-06-sw-labor-anniversary_N.htm 31 Table 4 can be found on page 27.

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factors such as a career ending injury, diminishing talent, or detrimental club house attitudes. While guaranteed contracts benefit the owners, the players negotiate over half of their contracts with guaranteed money in order to secure their financial stability; furthermore, teams offer guaranteed money in order to lure better free agents. Of a players guaranteed money, signing bonuses make up almost half. While bonuses existed before 1993, the number has more than doubled and significantly increased in value since the CBA. The average value of player bonuses has risen over 440%, up from an average of $125,728 before 1992 and $679,934 after 1992 (INSERT CITATION). Since the early 1980s, when the NFLPA first began to receive player contract information, the total value of all signing bonuses is $9.2 billion, over $8.2 billion, or 92%, since 1993 (INSERT CITATION). While free agency has certainly provided the players with substantially more financial benefits, it has also had benefits that go beyond money. As free agency has given players the ability to move from team to team, it has given them more freedom. Before 1993, players were all but stuck on one team for most of their careers whether they liked it or not. Today, players can find teams that provide the best fit for themselves and for their families as well. On the other side of the same coin, teams can get rid of players that turn out to not fit their style of play or disrupt team chemistry. Randy Moss, the now New England Patriots wide receiver, is a good example of how player mobility can help all the parties involved. Moss, a once-in-a-generation talent, was disrupting the last place Oakland Raiders with both his explicit discontent with the team and with his large contract. Moss was traded to the Patriots from the Raiders in 2007, where he went on to have a record breaking season causing no trouble as the Patriots went undefeated and the Raiders rid

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themselves of a player who was tearing apart their team and taking up millions of dollars of salary cap. While in this instance Moss was traded and not acquired in free agency, this example displays how the freedom players acquired in 1993 can benefit both players and teams both financially and personally. Lastly, returning to the issue of guaranteed money, players gain more assurance with increased signing bonuses that they will remain on the team for longer. The NFL, sometimes called the Not For Long League, is a vicious business that sees young players coming in and out of the league every season. A $2 million signing bonus gives players a higher probability that they will remain on the team for longer (95% of players who received a $2 million or more bonus stayed on their team for one or more seasons) (INSERT CITATION). Prior to 1993 only 40 signing bonuses were worth more than $2 million, whereas, since 1993 there have been almost 470 bonuses worth $2 million and up (INSERT CITATION).

The 1993 CBA was passed with the fans, league, and players in mind. The overall goal was to improve these three main aspects of football in America and bring the NFL to the top of major American sports leagues. The CBA was predicated on the fact that the fans, league, and the players all contributed to a cycle of success. Fan interest led to increased total revenue, which was redistributed to the teams and players, which helped overall competitive balance, which in turn added to fan interest. The league has been enormously successful in creating a product that fans want to invest in. The entertainment value of the NFL has been dramatically improved following the installation of free agency and the salary cap, with much of the credit due to the NFLs successful economic model.

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The unmatched revenue sharing and protracted labor peace coupled with effective marketing has truly increased footballs popularity in America. The owners and players have embraced a league first mentality that has paid off enormously for not only themselves, but for their fans as well. The question, however, remains how long can the NFL stay ahead of other major professional sports leagues? Financially it looks as though the NFL will be able to stay ahead of the NBA and MLB for sometime to come. Despite the NFLs so-called image problem following some notable players highly publicized legal problems (for example, Michael Vicks dog fighting arrest), the league seems to still be the most popular professional sports league in America. Despite being our national pastime, baseball will most likely remain behind football for many more years as the steroids issue has become a black cloud over the game. Finally, basketball, while it is still a popular sport does not seem to have enough to overtake the NFL anytime soon; perhaps, the young charismatic stars like LeBron James and Greg Oden can take the place of Michael Jordan and carry the NBA to the next level. Although the NFL can credit its economic structure and the CBA for its rise to the top, it also benefited from the work stoppages of both the NBA and MLB. As the two leagues remained stagnant, even regressing as fans decreased, the NFL continued to grow. The NFL has been lucky to enjoy such a long period of labor peace; however, this is no guarantee for the future. The current CBA expires after the 2011 season and a lockout looms in the air. Tensions between the owners and the players have been on the rise as owners believe that the current salary cap, which is expected to rise to $129 million in 2009, is too steep. The league faces the potential of a lockout that could jeopardize the

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2011 season if the owners decide not to renew the current CBA, which seems, at the moment, very likely. If a lockout occurs the NFL and its players could face a similar battle as the one they fought in 1987, which led to the 1993 CBA. Labor unrest is detrimental to both financial growth and the sports popularity, as is evident following the NBA and the MLB strikes. The National Hockey League (NHL), who experienced a lockout that killed the 2005-2006 season, is still struggling to regain the popularity it had before the lockout. For any NFL fan, the CBA marked a positive turn for the league. Perennial losers now have a shot at winning it all, teams can get that key free agent to put them over the top, and we are able to enjoy more exciting competitive games every season. The CBA did exactly what it intended to do and then some. If the NFL can maintain its labor peace there is no telling how much more the NFL can grow. There have been talks about a team outside of the United States and the goal to increase the number of international players in the league, much like baseball. A recent NFL regular season game was played in London at famed Wimbley Field during the 2007 season with mixed results; however, it was an example of the NFLs attempt to keep on growing and broadening its horizons. It will only take a couple seasons to see, which direction the NFL will take: unprecedented growth or a step backwards. For the fans, league, and players sake I hope it is the former or all the NFLs hard work will have been for naught.

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Tables & Figures

Table 132 Super Bowl Winners: 1994-2008 Year
2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994

Super Bowl Winner

New York Giants Indianapolis Pittsburgh New England New England Tampa Bay New England Baltimore St. Louis Denver Denver Green Bay Dallas San Francisco Dallas

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http://www.nfl.com/superbowl/history

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Table 233 Super Bowl Winners: 1967-1992 Year

1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 1968 1967

Super Bowl Winner

Washington New York Giants San Francisco San Francisco Washington New York Giants Chicago San Francisco Los Angeles Raiders34 Washington San Francisco Oakland Raiders Pittsburgh Pittsburgh Dallas Oakland Raiders Pittsburgh Pittsburgh Miami Miami Dallas Baltimore Kansas City New York Jets Green Bay Green Bay

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http://www.nfl.com/superbowl/history The LA Raiders are the same team as the Oakland Raiders. The team moved from Oakland to LA in 1982, but eventually returned to Oakland in 1994.

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Table 335 Super Bowl

XXX XXXI XXXII XXXIII XXXIV XXXV

Year
1996 1997 1998 1999 2000 2001

Network
NBC Fox NBC Fox ABC CBS

Cost of a 30s Commercial

$1,085,000 $1,200,000 $1,291,100 $1,600,000 $2,100,000 $2,200,000

Table 436 Year

1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007

Average Player Salary

$79,000 $217,000 $354,000 $584,000 $787,000 $986,000 $1,180,000 $1,260,000 $1,330,000 $1,400,000 $1,700,000 $1,750,000

Median Salary
$50,000 $160,000 $275,000 $301,000 $441,000 $501,000 $525,000 $534,000 $537,000 $569,000 $722,000 $772,000

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Schaaf 2004, page 140. http://www.usatoday.com/sports/football/nfl/2007-10-06-sw-labor-anniversary_N.htm

28

Figure 137

37

Spenner, Fenn, Crooker 2004, pg 1. Their information was gathered from NFL Record and Fact Book

29

Figure 238 Figure 2 Figure 3

Figure 339

38 39

Baschnagel 2005, page 82. Baschnagel 2005, page 81, the breaks in the graph represent the NBA and MLBs respective strikes.

30

Figure 440

40

Baschnagel 2005, page 82.

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Table of Individual Franchise Growth from 1998-200441

Team
Washington Redskins Dallas Cowboys Houston Texans New England Patriots Cleveland Browns Denver Broncos Tampa Bay Buccaneers Baltimore Ravens Carolina Panthers Miami Dolphins Detroit Lions Chicago Bears Tennessee Titans Philadelphia Eagles Seattle Seahawks Green Bay Packers Pittsburgh Steelers St.Louis Rams Kansas City Chiefs New Orleans Saints Oakland Raiders New York Giants Jacksonville Jaguars San Francisco 49ers New York Jets Buffalo Bills Cincinnati Bengals San Diego Chargers Indianapolis Colts Minnesota Vikings Atlanta Falcons Arizona Cardinals

1998 Value
$403million $413million n/a $252million $557million (2000) $320million $346million $329million $365million $340million $312million $237million $322million $112million $324million $244million $300million $322million $123million $243million $235million $288million $294million $254million $259million $252million $311million $248million $227million $233million $233million $231million

2003 Value
$952million $851million $791million $756million $695million $683million $671million $649million $642million $638million $635million $621million $620million $617million $610million $609million $608million $602million $601million $585million $576million $573million $569million $568million $567million $564million $562million $561million $547million $542million $534million $505million

% Increase
137.23% 106.05% n/a 200% 24.78% 113.44% 93.93% 95.44% 75.89% 87.65% 103.53% 162.01% 92.55% 450.89% 88.27% 149.59% 102.67% 86.96% 388.62% 140.74% 145.11% 98.96% 93.54% 123.62% 118.92% 123.81% 80.71% 126.21% 140.97% 132.62% 129.18% 118.61%

**42

41 42

http://www.forbes.com/static_html/football/2003/valuationsFLA.shtml?index=1 Bold in all three columns denotes the highest value.

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