CBA Reloaded

Published on April 7, 2014 10:28 PM by dbo.

After the first scheduled CFLCFLPA talks broke down after the initial presentations, Sportsnet broke the player’s demands. shedding some light on the stakes on the table. While the league remains mum on their proposal, this new information provides some insight to revise estimates of each each side’s position and present a fair middle ground.

News

Anonymous criticism of the league from the clubs over the late start in negotiations among other things was addressed by commissioner Cohon with threats of fines. Despite not commenting on the ongoing negotiations, Cohon did take the opportunity of announcing the awarding of the 2015 Grey Cup to Winnipeg to indicate the CFL and clubs are not as flush as players think.

The break down in talks along with the historic position of the CFLPA led to much discussion of these negotiations and speculation on the possible outcomes.

At the end of March it was revealed the player’s association was performing an annual vote of all executive positions and president Mike Morreale was being opposed by Scott Flory. After Flory was elected CFLPA president he stated the players are only looking for a fail deal. The reason for the exit of Morreale is not clear. He had done a lot in the last year in seeking advice with player and labour leaders from other leagues, increasing solidarity amongst the association and preparing the players for the fight to restore the player compensation as percentage of revenue commitment in the CBA. Whether the players felt he was too soft, too militant or something else that required a change is unknown.

Reloading With Facts

Based on the player comments on the initial talks and their breakdown over the fundamental way player’s compensation is calculated — the league wanting a defined salary cap with known increases each year, the players wanting a return to calculating the total amount of player compensation available as a percentage of defined revenue.

Let’s be clear about a few things:

  • Proposed revenue sharing is not profit sharing, as has been referred to by some players.
  • The players did not share their exact defined revenue and player compensation definitions, but I (safely I believe) assume that the same definitions used in the 2006 CBA is what is proposed.
  • Those defined revenues are about 55-60% of a clubs revenue, and generally the revenue with the least amount of associated costs to it.
  • The defined player compensation includes almost all of payments paid to players, only excluding playoff and Grey Cup compensation, pensions, insurance premiums and other expense payments.

When it was reported the CFLPA presented a return to a 56% player share of defined gross revenue, many supported the players’ position or a 50/50 split. How many actually asked what revenue was involved, what 50% or 56% would entitle the players to today and under the new broadcast agreement? Without knowing the numbers how can you profess support for something?

I assume the players are asking for the exact terms from the 2006 CBA in terms of defining revenue and player compensation. In this case, the defined revenue includes gross ticket sales, net CFL revenue and all broadcast revenue. As gross revenue, it is revenue before any expenses are deducted, so gross ticket sales before ticket printing expenses, stadium rental or game day costs. It excludes concessions and other game day revenue, team merchandise, team sponsorships, lottery and fundraising, rental and interest income. For the average team revenue from these excluded sources will total between $7 and $9 million or 40-45% of their revenue (60% of their revenue in the case of the outlier Saskatchewan Roughriders).

I believe revenue sharing between the players and owners was introduced with the 2002 CBA.

  • The 2002 CBA provided for the players to receive 50% of defined league gross revenue consisting of:
    • Gross revenue from ticket sales to all pre-season, regular season, playoff and Grey Cup games
    • Gross revenue from television, pay television and radio broadcast rights
  • Player compensation was calculated on all pre-season, regular season, playoff and Grey Cup compensation, per diem paid, signing bonuses, performance bonuses, insurance premiums and pension payments.
  • It is my understanding the players’ compensation exceeded 50% of the defined revenue during the life of this agreement.

The 2006 CBA substantially changed the formulas for revenue sharing and increased the percentage owed to the players.

  • The 2006 CBA provided for the players to receive 56% of defined league gross revenue consisting of:
    • Gross revenue from ticket sales to all pre-season and regular season games
    • The net revenue of the CFL excluding any new franchise fee, before disbursement to member clubs and including operations of CFL Properties and any other associated or affiliated company
    • Gross revenue from television, pay television, internet and radio broadcast rights not included in net revenue of the CFL
  • Player compensation was calculated on the total compensation paid to players on the roster (including injured and disabled lists) and practice roster (up to 7 players) for the regular season for:
    • Paragraph 3 compensation in the Standard Player Contract
    • All bonuses, including signing and performance bonuses
    • All other payments to Players for practicing and playing professional football including any payments made for the benefit of the Players
  • It is my understanding the players’ compensation exceeded 56% of the defined revenue during the life of this agreement.

  • The Salary Management System was introduced for the 2007 season with a $4.05 million Salary Expenditure Cap.

  • The SEC was increased to $4.2 million for the 2008 season.
  • In the last year of the 2006 CBA, there was no salary cap increase. It can be assumed the player’s were receiving more that 56% of the defined league gross revenue and going into bargaining, the league decided against an unnecessary SEC increase.
  • In the 2010 CBA, the CFLPA gave up the defined percentage of revenue for guaranteed SEC increases of $50,000 for each year of the deal.

Now the CFLPA wants their share of gross revenue returned to 56%. in 2013, if they had their compensation guaranteed at 56% of the defined gross revenue (using the 2006 definitions of league gross revenue and player compensation), what would their percentage be, and if less than 56%, how much would the CFL have to pay to the CFLPA in the difference as per the agreement?

To determine, I have made a few assumptions and ignore some factors. First, Hamilton played their home games in the University of Guelph’s Alumni Stadium in 2013, half the size of their normal home. I will ignore this fact and assume normal ticket revenue, though this point should be considered when considering the league’s revenue in 2013. To calculate league revenue, I will use some assumptions about gross ticket sales and league disbursements, using min and max values to produce a range. Similarly, some assumptions for player compensation above the salary cap will be provided, with minimum and maximum values used.

Guestimated CFL Revenue and Player’s Compensation (2012-2013)
(Millions of dollars)
MinMax
League Gross Revenue
Gate Receipts$61.5$64.0
Net revenue of CFL16.017.0
Broadcast rights not included0.51.0
Total$78.0$82.0
 
Player’s Compensation
Player salaries and bonuses$35.2$35.2
Injured player salaries, disabled list salaries
(not included in above)
2.03.0
Playoff and Grey Cup compensation
(for 55th+ players)
0.20.5
Other football related payments2.03.2
Total$39.4$41.9
 
Player’s compensation % of league revenue50.51%51.10%
min/minmax/max
Player’s compensation % of league revenue48.05%53.72%
min/maxmax/min
 
56% of defined league gross revenue$43.68$45.92
 
Player difference from 56%$4.28$4.02
Per team increase to 56%$0.475$0.446
League % increase in player compensation10.86%9.59%

Notes

Gate Receipts - Using information from the three public teams 2012 season financial statements, I estimated the other teams receipts and came up with a range. Minimum value is more likely accurate for this estimate.

Net revenue of the CFL - Using the three public teams 2012 season financial statements, I averaged their league disbursements and multiplied by eight teams. Maximum value is more likely accurate for this estimate.

Radio rights fees - The only broadcast revenue not included in the net revenue of the CFL is the team radio rights fees. I estimated this at $100,000 per team, using a range of $500,000 to $1 million. The mid-point is more likely accurate for this estimate.

Player salaries and bonuses - Took the $4.4 million salary cap and multiplied by eight teams. Same value is used for minimum and maximum values.

Injured and disabled list player salaries - I estimated $2 to $3 million league wide, or $250,000 to $375,000 per team, not included in the salary cap numbers

Playoff and Grey Cup compensation for 55th+ players - The definition of player compensation excludes playoff and Grey Cup compensation for maximum 54 players (46 roster players, 7 practice rosters, 1 other (injured)). I assume that any playoff and Grey Cup compensation paid to other players (including expanded practice rosters) would be included, so I estimated this at $200,000 to $500,000 league wide.

Other football related payments - The third point defining player compensation is ambiguous. I have assumed it is meant to cover pre-season pay and per diem payments. This is the most guestimated number in these calculations. I have picked a range based on pre-season and per diem compensation, but they vary based on number of veterans and days travelled. These may also not be included and other payments included since the item is not clear (and may have been a point of contention if it had been enacted in the 2006 CBA). I feel these numbers are the best estimate with the information known. The players may dispute this.

Player compensation % of league revenue - This ranges from 48.05% to 53.72% with 50.51% to 51.10% most likely.

Player difference from 56% - $4.28 million under the minimum estimates and $4.02 million using the maximum figures.

Team increase to 56% - Each team would have to contribute about $475,000 to make up the shortfall under current conditions (2013).

League % increase - The player compensation percentage increase at a league wide level. Note an increase of 6% of revenue results in a 10% raise for the players.

New CBA, New Team, New Broadcast Rights Fees

How does adding a new team and the expected revenue from the new television contract change the numbers for a 2014 CBA? Again, I will make some assumptions.

Guestimated CFL Revenue and Player’s Compensation (2014)
(Millions of dollars)
MinMax
League Gross Revenue
Gate Receipts$69.5$72.0
Net revenue of CFL32.437.8
Broadcast rights not included0.5621.125
Total$102.462$110.925
 
Player’s Compensation
Player salaries and bonuses$39.6$39.6
Injured player salaries, disabled list salaries
(not included in above)
2.253.375
Playoff and Grey Cup compensation
(for 55th+ players)
0.2250.562
Other football related payments2.253.6
Total$44.325$47.137
 
Player’s compensation % of league revenue43.26%42.49%
min/minmax/max
Player’s compensation % of league revenue39.96%46.00%
min/maxmax/min
 
56% of defined league gross revenue$57.379$62.118
 
Player difference from 56%$13.054$14.980
Per team increase to 56%$1.45$1.664
League % increase in player compensation29.45%31.78%

Notes

Gate Receipts - Using the 2013 numbers, numbers were extrapolated to nine teams, the minimum value being more likely.

Net revenue of the CFL - Using media estimates on new television contract and 2012 league disbursements, I estimated new disbursements from a minimum of $3.6 million to $4.2 million per team, with the minimum value more likely.

Radio rights fees - Radio rights revenue increased by the value of one additional team for both the minimum and maximum values.

Player salaries and bonuses - Same values based on $4.4 million salary cap multiplied by nine teams.

Injured and disabled list player salaries - Increased the minimum and maximum values by one additional team share.

Playoff and Grey Cup compensation for 55th+ players - Increased the minimum and maximum values by one additional team share.

Other football related payments - Expanded this guess for nine teams.

Player compensation % of league revenue - This ranges from 39.96% to 46.00% with 42.49% to 43.26% most likely.

Player difference from 56% - A minimum of $13.054 million and maximum of $14.98 million.

Team increase to 56% - Each team would have to contribute a between $1.45 million and $1.664 million to make up the shortfall

League % increase - The player compensation percentage increase at a league wide level.

These numbers are ballpark and give an indication of the relationship between revenue and player compensation. I can surmise that under the last agreement, the players’ compensation was around the 50% mark of defined revenues. Under the new broadcast agreement, revenues increase, and so the player’s share drops. However, making up that shortfall and jumping to 56% are very different.

A 50% guarantee of defined revenue for the players would result in a $750,000 to $925,000 salary cap increase per team. Is such an immediate jump affordable for all teams in the league? I understand the league’s reluctance to tie salaries to revenue. It is still very much a feast or famine league, and guaranteed television contract or not, a poor season can affect ticket revenue drastically.

The method of guaranteeing the player compensation percentage is also incredibly bold. At the end of the year an audit is completed, and if the players are short of their 56%, the league must cut the CFLPA a cheque for the difference immediately. That is great for the players, but a better method considering the the shape the league is in would be to mandate salary cap increases the next season to maintain that percentage, such as done in other leagues. The CFL would also be expected to desire clauses that reduced player compensation (the salary cap) if the player percentage exceeded a specified percentage.

The Score

Understanding what the players are proposing in terms of hard numbers, let us review my previous guesses.

I originally came out very high for the league, then revised my estimates down for their position (likely as a final deal) to about half over the life of the agreement. I still appear to be way off. At least in opening, the CFL is said to be only offering standard $100,000 increases to the salary cap annually over an eight year deal.

The player numbers I am more accurate on. I guessed about $10 million over the life of the deal. Instead the players opened with perhaps with $13 million immediate increase in regular salaries.

I was off believing their was going to be a look at the total package of compensation. Instead, the salary cap and base salaries are the focus. Other points aren’t even entering into discussion until the compensation question is answered.

The league’s other points were on work hours, changing from a 4.5 hours/day to a total number of hours per week formula, expanded practice rosters and injured lists and two-way contracts, all sticking points with the players. While I included an increase in the work day in the league’s proposal, I didn’t anticipate the change to a work week, nor the expansion of practice rosters and two-way contracts. These may be points the league is hoping to be negotiated away.

Also missing mention that was expected to be addressed was a fix to the quarterback problem. It appears the clubs, general managers and league are too scared to change their model and modernize their game.

Overall, a failing grade. Both sides were much more prepared to play hardball in their opening offers than I expected, with the union trying to get back what they gave up and the league not interested in advancing themselves, but maintaining being the league 30 years behind the times in many policies.

CBA Revolution

It is the same old story, both sides using negotiation tactics to not show weakness and not give up more than the other side is willing to agree to. So much for a partnership. How about a revolution in collective bargaining negotiations?

As a mediator, what would I propose as a fair deal? Here is a run down and explanation of my thoughts.

Agreement length

  • 5 year agreement, extending 1 year if the network picks up broadcast contract option for 2019
    • Takes control of extension out of either side’s hands and align’s agreement with television contract.

Compensation

  • increase to the salary cap by $200,000/year for the first three years of the agreement and $100,000/year for the remaining years of the agreement, including the option year.
  • for years 3-6 of the agreement, an additional CPI adjustment of 50% of the Statistics Canada CPI % increase from the previous calendar year against the previous year’s salary cap (rounded to the nearest 1,000) unless defined player compensation exceed 52% of defined league gross revenue, then no adjustment shall be made.
  • beginning in year 4, if 2006 CBA defined player compensation definition falls below 50% of 2006 CBA defined gross revenue definition, the CPI adjustment will increase the salary cap for the following year to make player compensation from the previous year equal 50% of the previous year’s defined gross revenue
    • using the 20 year average CPI of 1.8% per year, this would add $43,000, $45,000, $47,000, $48,000 to the salary cap over the final four years of the agreement (including the option year)
  • immediate increase in the minimum salary by $5,000 to $50,000
  • annual increase in the minimum salary of $2,000 for the remaining 5 years of agreement (including option year) to end at $60,000.
    • conservatively assume 18 players (46 man roster less 24 starters, 2 QB’s and 2 special teams) are making league minimum; first year cost to teams would be $5,000 x 18 = $90,000. This is worst case scenario that no team could face, so there will still be funds to distribute after mandatory increases.
  • set a minimum salary for practice roster players of 90% of standard player contract minimum salary
    • no two-way contracts, player still has to be released and signed to practice roster contract
    • eliminate the $600/week agreements and disparity in practice roster salaries, which affects the image of the CFL. Codify it in the CBA so those agreements can no longer exist, even if it means teams are paying more for these roster positions.

Rosters

  • adjust roster requirements to 21 non-imports, 21 import players (eliminate quarterback clause), 4 man reserve list
  • permanently expand practice rosters to 10 players, no more than 5 import players. Autumn 30 day practice roster expansion of additional 5 players, all of which may be imports.
  • only 10 permanent practice roster spots count against the salary cap (i.e. 10 x $45,000 = $450,000 in the first year).

Playoff Compensation

  • increase semi-final participation and playoff bye share by $100 per player in the 1st, 3rd and 5th year of the agreement
  • increase final participation share by $100 per player in the 1st, 3rd and 5th year of the agreement
  • increase Grey Cup runner-up share to $9,000 and Grey Cup winner share to $18,000 in the 3rd year of the agreement

Other

  • increase the player workday from 4.5 hours to 5 hours.
  • pension contribution increase of club contribution of $100 per player in the 1st, 3rd and 5th year of the agreement, with a matching contribution from the player

Total Cost

Taking 2013 as a base, here are the costs to the league for each year over today.

Year 1Year 2Year 3Year 4Year 5Year 6Increase
over length
of agreement
Salary Cap Increase (Team)$200,000$200,000$200,000$100,000$100,000$100,000$900,000
Salary Cap CPI Adjustment (Team)
(Estimated 1.8% CPI)
$43,000$44,000$46,000$47,000$180,000
Salary Cap in millions (Team)$4.6$4.8$5.043$5.188$5.335$5.483
League salary cap in millions$41.4$43.2$44.487$45.783$47.097$48.420$9.747
Semi-Final/Bye$27,600$27,600$55,200$55,200$82,800$82,800$331,200
Finals$18,400$18,400$36,800$36,800$55,200$55,200$220,800
Grey Cup$138,000$138,000$138,000$138,000$552,000
Pension$41,400$41,400$82,600$82,800$124,200$124,200$496,800
League Increase from 2013 in millions$1.887$1.887$2.499$1.617$1.723$1.732$11.347
Player compensation
% of gross revenue (Estimated)
44.1-45.0%45.7-46.8%47.7-48.9%48.9-50.2%50.1-51.5%51.3-52.8%

I would expect the league to reject this proposal over the term and synchronization with the broadcast deal and the amount of the increases, including the variability portion. The players will reject it over a complete percentage of revenue model and immediate increases for them.

Reasoning

I feel this proposal provides a fair compromise in a hybrid model that contains fixed increases along with a variable portion tied to inflation. Players are guaranteed to get 50% of revenue by the middle of the agreement, but their growth is restricted with CPI adjustments if they exceed 52%. After 5 or 6 years, the partners can revisit their situation and continue this model, or move to a percentage of defined revenue model. However, the CFL is still in a transition period, and I don’t believe it is capable of immediately handling the large jump in player costs a percentage of revenue model introduces.

I also believe tying shortfalls in compensation to next year cap increases is a better system than cutting the association a cheque for the difference. The players must understand that the CBA defines a salary expenditure cap and floor. If one team spends to the floor, compensation as a percentage of revenue will fall below the threshold when the threshold is based on everyone spending 100% of the cap, so each team will then owe money. For the league to figure out the CFLPA will say. The system must work for all parties. Washing your hands of the situation is not how a partner acts.

Not all clubs are equal in the league in revenue and expenses. After many years of using a revenue sharing system, reinstating such a system now is voted down by the clubs that used to be the benefactors. It is understandable for the CFLPA to consider the equitable distribution of revenue not their problem, but without it, a salary cap alone does not provide a level playing field. Other leagues have discovered this. While not a bargaining point, as a partner the players should be able to address this with the league in seeking a balance amongst all clubs. This helps the players in arguments that every team can’t afford to spend to the cap. Even a simple solution that provides for 3 depositors, 3 neutral and 3 benefactors to a maximum of $200,000 being received or paid out would be a start. I believe this discussion will be a non-starter because the very thought of subsidizing a partner (another team) is morally detestable to some. In the end this imbalance between clubs will hurt the CFL as much as the lack of a salary cap.

The other major sticking point is the work hours, which is handled by a small increase. In the next CBA the players may exchange a work week hours system for a percentage of revenue system.

The increases on the playoff, Grey Cup and pension payments are standard and very affordable. The other items like roster changes are for my purposes only. I have no idea what either side is interested in in that area any more.

I prefer a simple system. The more complex it becomes, the longer the CBA, the more teams need to employ accountants and lawyers to interpret and follow the agreement. As I’ve written it, this hybrid agreement would surely never stand, but the spirit of it works, even if it does need clarification or tweaks.

It is the players’ opinion that they are the game, they deserve that 56% share of revenue they generate (ticket sales and broadcast revenue — the eyeballs). The owners have never had an issue finding people to play for what they are paying, and there are always more waiting. The decision is whether increasing player compensation will increase the revenue and popularity of the CFL. The owners actions don’t appear to indicate they believe that. Control costs because costs are going up in stadium payments and rental for all teams faster than revenues. How much is spin and how much is truth?

Conclusion

You read this far?

I’ll get lots of comments about me being pro league and pro players for this one. All I want is football, less ridicule from those who read the Compensation FAQ and no news about teams in the red. There has to be a way to achieve this without a huge year one jump in the salary cap or token increases over a long agreement. I hope they find a compromise and become true partners, not adversaries.

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CBA Reloaded was published on April 7, 2014 10:28 PM by dbo.

4,439 words.

This article is categorized under Finances and tagged with cba and cflpa.