The National Football League & The 1993 Collective Bargaining

Agreement:With Equality Comes Dominance

Alexander SchultzApril 1st 2008

Professor Messier, History 200Vanderbilt 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 nation’s 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 player’s 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 intra-

season parity (competitive balance in any given season) and dramatically improved inter-

season 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

1 The Super Bowl is the NFL’s championship game played at the end of each season.

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and 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 NFL’s 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 league’s 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 America’s 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).

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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 Player’s 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 commissioner’s discretion,

from the team that signed the free agent. The compensation, however, was usually of 2 In the Supreme Court case, All-Pro Guard George Radovich challenged the NFL’s “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 Radovich’s 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.

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much greater 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 commissioner’s 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 version’s” 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 league’s 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

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.

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Agency,” 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

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

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and owners were correct in their analysis of the effects of parity on fan interest and

ultimately league revenue.

League parity is the key to the NFL’s 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 team’s 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

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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 NFL’s 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 team’s 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 game’s 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 team’s winning percentage with the actual standard deviation for

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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 team’s 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 season’s 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

7 The equation of ideal standard deviation of an NFL team’s winning percentage is .5/√168 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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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 (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 baseball’s 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 NFL’s 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

11 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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turnover of Super Bowl champions, turnover of playoff teams, and average greatest

swings in both wins and losses.

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 1970’s,

the San Francisco 49ers of the 1980’s, and the Dallas Cowboys of the early 1990’s. 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 1967-199214 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, 13 Tables 1 and 2 can be found on pages 25 and 26.14 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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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 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-to-

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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season 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

increase fan interest. Using pre-1993 and post-1993 as two comparative periods in the

NFL’s 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 league’s 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 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 year’s 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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augmented as is seen by the increased turnover and swing in greatest average wins and

losses from season-to-season. It was the owners and players agreement that this increase

in parity would bring 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 league’s 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 NFL’s 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 (that’s 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.

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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

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 MNF’s

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

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.22 Table 3 can be found on page 27.

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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 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 game’s 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 NFL’s 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 NFL’s continuously rising attendance

records; however, it should be noted that NFL stadiums have continued to grow in

23 Figure 1 can be found on page 28.

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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 league’s 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.

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 NFL’s 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 NFL’s 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.

24 Figure 2 can be found on page 29.

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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 NFL’s revenue

growth compared to the NBA’s and MLB’s. Although the NBA was the fastest growing

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 NBA’s $2.932 billion and

the MLB’s $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 team’s 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

25 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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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

NFL’s 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 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 league’s 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 NFL’s

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

27 Figure 4 can be found on page 30.

18

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 player’s salary, the

rise in guaranteed money, and player movement, it is easy to understand just how

beneficial the CBA has been for today’s 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 the salary cap (64% of the team’s 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 team’s DGR) that teams must spend as well. The

installation of free agency has made a player’s 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

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.htm31 Table 4 can be found on page 27.

19

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 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

player’s 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

1980’s, 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

20

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 Patriot’s 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 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, player’s 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

21

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 NFL’s successful economic

model. The unmatched revenue sharing and protracted labor peace coupled with effective

marketing has truly increased football’s 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 NFL’s so-called “image”

problem following some notable players’ highly publicized legal problems (for example,

Michael Vick’s 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.

22

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 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

23

was an example of the NFL’s 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 NFL’s hard work will have been for naught.

24

Tables & Figures

Table 132

Super Bowl Winners: 1994-2008

Year Super Bowl Winner

2008 New York Giants

2007 Indianapolis

2006 Pittsburgh

2005 New England

2004 New England

2003 Tampa Bay

2002 New England

2001 Baltimore

2000 St. Louis

1999 Denver

1998 Denver

1997 Green Bay

1996 Dallas

1995 San Francisco

1994 Dallas

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

25

Table 233

Super Bowl Winners: 1967-1992

Year Super Bowl Winner1992 Washington

1991 New York Giants

1990 San Francisco

1989 San Francisco

1988 Washington

1987 New York Giants

1986 Chicago

1985 San Francisco

1984 Los Angeles Raiders34

1983 Washington

1982 San Francisco

1981 Oakland Raiders

1980 Pittsburgh

1979 Pittsburgh

1978 Dallas

1977 Oakland Raiders

1976 Pittsburgh

1975 Pittsburgh

1974 Miami

1973 Miami

1972 Dallas

1971 Baltimore

1970 Kansas City

1969 New York Jets

1968 Green Bay

1967 Green Bay

33 http://www.nfl.com/superbowl/history34 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.

26

Table 335

Super Bowl Year Network Cost of a 30s Commercial

XXX 1996 NBC $1,085,000

XXXI 1997 Fox $1,200,000

XXXII 1998 NBC $1,291,100

XXXIII 1999 Fox $1,600,000

XXXIV 2000 ABC $2,100,000

XXXV 2001 CBS $2,200,000

Table 436

Year Average Player Salary Median Salary1980 $79,000 $50,000

1985 $217,000 $160,000

1990 $354,000 $275,000

1995 $584,000 $301,000

2000 $787,000 $441,000

2001 $986,000 $501,000

2002 $1,180,000 $525,000

2003 $1,260,000 $534,000

2004 $1,330,000 $537,000

2005 $1,400,000 $569,000

2006 $1,700,000 $722,000

2007 $1,750,000 $772,000

35 Schaaf 2004, page 140.36 http://www.usatoday.com/sports/football/nfl/2007-10-06-sw-labor-anniversary_N.htm

27

Figure 137

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

28

Figure 238

Figure 2Figure 3

Figure 339

38 Baschnagel 2005, page 82.39 Baschnagel 2005, page 81, the breaks in the graph represent the NBA and MLB’s respective strikes.

29

Figure 440

40 Baschnagel 2005, page 82.

30

Table of Individual Franchise Growth from 1998-200441

Team 1998 Value 2003 Value % IncreaseWashington Redskins $403million $952million 137.23%

Dallas Cowboys $413million $851million 106.05%

Houston Texans n/a $791million n/a

New England Patriots $252million $756million 200%

Cleveland Browns $557million (2000) $695million 24.78%

Denver Broncos $320million $683million 113.44%

Tampa Bay Buccaneers $346million $671million 93.93%

Baltimore Ravens $329million $649million 95.44%

Carolina Panthers $365million $642million 75.89%

Miami Dolphins $340million $638million 87.65%

Detroit Lions $312million $635million 103.53%

Chicago Bears $237million $621million 162.01%

Tennessee Titans $322million $620million 92.55%

Philadelphia Eagles $112million $617million 450.89%

Seattle Seahawks $324million $610million 88.27%

Green Bay Packers $244million $609million 149.59%

Pittsburgh Steelers $300million $608million 102.67%

St.Louis Rams $322million $602million 86.96%

Kansas City Chiefs $123million $601million 388.62%

New Orleans Saints $243million $585million 140.74%

Oakland Raiders $235million $576million 145.11%

New York Giants $288million $573million 98.96%

Jacksonville Jaguars $294million $569million 93.54%

San Francisco 49ers $254million $568million 123.62%

New York Jets $259million $567million 118.92%

Buffalo Bills $252million $564million 123.81%

Cincinnati Bengals $311million $562million 80.71%

San Diego Chargers $248million $561million 126.21%

Indianapolis Colts $227million $547million 140.97%

Minnesota Vikings $233million $542million 132.62%

Atlanta Falcons $233million $534million 129.18%

Arizona Cardinals $231million $505million 118.61%**42

41 http://www.forbes.com/static_html/football/2003/valuationsFLA.shtml?index=142 Bold in all three columns denotes the highest value.

31

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33