The sports business rhetoric has been dominated this fall by collective bargaining?discussions in both?the NFL and the NBA.
What I find fascinating is that it is highly likely that each league will adopt an aspect of the other league’s existing economic model — and be?fiscally responsible and justified?for doing so.
Though the NFL still must determine such issues as whether they will play 16 or 18 games, whether players’ salaries will be prorated, frozen or cut conditional on the number of games played, and how small-market and large-market owners will split and share revenues, there is no doubt that the NFL will adopt a specific rookie-scale cap similar to what the NBA starting implementing back in 1995.
Busts like JaMarcus Russell alone are enough reason?to justify why rookie-scale contracts are all but guaranteed to appear within?the NFL’s?new CBA.
The NBA’s motivation for creating rookie-scale?contracts was to decrease the likelihood of holdouts, reduce the backlash from veteran players over?rookies cashing in on their potential rather than their actual performance, and reduce the degree to which veterans’ salaries were getting squeezed due to the large sums going to unproven rookies.
There is little doubt that similar rookie-scale contracts?in the NFL will be viewed favorably by owners and veterans alike.? Owners will get more cost containment, and veteran players may actually receive a portion of the guaranteed money that previously was invested in rookies.
The biggest losers in the NFL from adopting rookie-scale contracts would be the rookies themselves and their agents.
So Sam Bradford my man, you may go down in the record books as receiving the highest guaranteed money of all-time for a rookie…because that money is going to be capped going forward in all likelihood.? Bradford received $50 M guaranteed when he signed with the St Louis Rams in 2010.
Switching gears, the NBA is likely to adopt a much harder salary?cap system?similar to what the NFL currently utilizes.
Recall that?NFL players gained unrestricted free agency beginning in the 1993 season only after numerous legal battles between 1987 and 1993 which saw?the players’ union decertified for the purpose of giving?players the right to individually sue the NFL on antitrust violations.
But to gain unrestricted free agency, players had to give in on the issue of?adhering to a?hard salary cap.
In contrast, the NBA has had different variations of a soft salary cap?dating back to 1984.? Read here for a?brief historical review of the?NBA salary cap.
Of course the reason why the NBA’s cap is considered ’soft’ is due to the numerous ’salary cap exceptions’ that?are allowed.? Given that?NBA rosters?are?comprised of 12 men and arguably a team’s fortunes rest with the performance of?2-3 core players, these exceptions existed to allow teams to maintain their franchise?core over several seasons…thereby?boosting fan interest by allowing for long-term connections between a team’s fans and their core players, and thus avoiding a revolving door of?players that many feared would accompany free agency.
But these exceptions have?created an increasing?degree of payroll disparity?among NBA teams that is bested only by what is seen in?Major League Baseball.? And though a luxury tax system exists to partially?limit free-wheeling owners from?abusing these exceptions, these dissuasions have had little impact on growing payroll inequities in the NBA.
It is true that we should have little sympathy for some franchises (like the New York Knicks) who for the last 5 years have been one of the least efficiently run teams in all of professional sports with their wasteful spending above the luxury tax threshold.
But despite what I believe to be inflated claims of financial distress oft lamented recently?by NBA Commissioner David Stern, I do see some salary cap exceptions being abolished while others become tightened.? In short, there is no question in my mind that the new NBA CBA will take?a?much harder salary cap stance?similar to what we see in the?NFL.
Imitation is the greatest form of flattery, and can also improve a league’s financial state.? As the NHL came back from its season-cancelling lockout?of the?2004-05 season, it adopted portions of both the NBA’s and NFL’s economic models.? Hard salary caps from the NFL, and escrow taxes as well as maximum salaries for individual players from the NBA.
And though not a model of financial perfection, the NHL is certainly on much better financial ground?today than it was before the?lock-out.? According to Forbes data, the aggregate NHL operating incomes for the 2003-04 season?was $4.5 M compared to $160 M for the 2009-10 season.
So expect to see more imitation?and adoption of best?CBA practices in 2011.? The NFL will?make rookie-scale contracts part of their new CBA with little resistance from the?NFLPA,?while the NBA’s new CBA will see a much harder form of salary cap.
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