Did the salary cap push the NFL to the brink of a canceled season? 

Rick Horrow explains the salary cap’s effect on America’s major professional sports

CHAMPAIGN, IL—“It wasn’t free agency that changed the NFL; it was the salary cap.” The words of high-profile sport agent Leigh Steinberg help explain why negotiations between players and owners in all four of America’s major professional sports are taking on so much importance in 2011. As outlined by America’s leading sport business expert Rick Horrow in the upcoming Beyond the Scoreboard: An Insider’s Guide to the Business of Sport (Human Kinetics, August 2011), the collective bargaining agreements (CBA) of football, baseball, basketball, and hockey are due to expire over the next two years. Most leagues argue that setting a salary cap, like the one used by the National Football League, provides competitive balance, ensures profitability at the team level, and promotes widespread sharing by players of the sport’s total revenues.

“As agents try to get their players the most money possible, executives are asked to turn limited dollars into championships,” says Horrow, who serves as a sport business analyst for Fox Sports, Bloomberg TV, Bloomberg Businessweek, and the BBC. “Teams are asking more and more of their athlete workforce—more playing time for less money and fewer perks. This issue is at the heart of the negotiations, placing the onus on agents and executives, just as much as it’s placed on players and owners, to find common ground since, at the end of the day, responsible management means more money for everyone.”

Horrow points out that while the National Hockey League has so far stayed relatively quiet about its yet-to-come CBA talks, team owners in the National Basketball Association, where the current CBA is set to expire in just a few weeks at the conclusion of the 2010-2011 season, are reportedly planning to drop the players’ salaries immensely during negotiations with the NBPA. They are also looking to shorten the maximum length of a contract to four or five years, with only the first two years guaranteed. Making the third and fourth years guaranteed only if a player reaches certain performance-based incentives would make the labor scenario in the NBA look much more like that in the National Football League.

There is also support for the Major League Baseball model, where the clubs with the highest payrolls have a higher likelihood of success on the field.

“The New York Yankees had a $208 million payroll in 2009, by far the highest in baseball,” explains Horrow. “Was it sheer coincidence the franchise won its 27th World Series title that year?” But in baseball, without a salary cap, salaries seem particularly out of whack at a time when national unemployment hovers around 10 percent. Even the most inexperienced rookies in the majors are guaranteed a $400,000 minimum salary, the same salary paid to President Barack Obama. Yet MLB, facing the same down economy as everyone else, has slowly started to rationalize its pay structure, which looks to be the crux of upcoming baseball labor talks.

It’s in the NFL where CBA talks have sport industry executives, as Horrow puts it, “doubling up on their blood pressure medication.” Since a new deal wasn’t consummated by Commissioner Roger Goodell and NFLPA head DeMaurice Smith by March 2010, the 2010 season operated without a salary cap. And in early March 2011, the league’s current agreement with its players expired, leaving in question whether or not the 2011 season will even take place.

Beyond the Scoreboard, coauthored by Horrow Sports Ventures vice president Karla Swatek, tackles the salary cap and many other hot-button topics head on, giving readers insider access to the boardrooms, negotiating tables, and executive suites of sport’s most influential powerbrokers.

For more information, see Beyond the Scoreboard: An Insider’s Guide to the Business of Sport.

About the Authors

Rick Horrow is the leading expert in the business of sport as the architect of over 100 deals worth more than $13 billion. The CEO of Horrow Sports Ventures (HSV) hosts “Beyond the $coreboard” on the PBS Nightly Business Report and serves as a sport business analyst for Fox Sports, Bloomberg TV, Bloomberg Businessweek, and the BBC.

As the leading commentator on sport business and as a well-connected entrepreneur, Horrow has access to many of the top names in sport, including commissioners, owners, general managers, coaches, and athletes. His clients have included some of the biggest organizations and companies in the world of sport and business: NFL, MLB, NASCAR, PGA, Great White Shark Enterprises, Cisco Systems, Golden Bear International, Enterprise Rent-A-Car, LPGA, and MLS.

Horrow is nicknamed the Sports Professor thanks to his time spent as a visiting expert on sport law at Harvard Law School.

Karla Swatek is vice president of Horrow Sports Ventures. With Horrow, Swatek pens a weekly column on sport business for Bloomberg Businessweek. She has worked on book projects with Ken Blanchard, Peter Ueberroth, former USC football coach John Robinson, and Robert Hagstrom (The NASCAR Way), as well as business leaders like Anthony Smith (The Taboos of Leadership).

Contents

Foreword: Paul Tagliabue, Former NFL Commissioner

Introduction: Looking at the World Through Rose Bowl-Colored Glasses

Chapter 1: The Mega-Master Super Series XLXL

Meet the Commishes: Roger Goodell, National Football League

Chapter 2: Remote-Controlling What You See on Sport TV

Chapter 3: Not Far From the Madden-ing Crowd

Meet the Commishes: David Stern, National Basketball Association

Chapter 4: The Big Labinski

Chapter 5: The Government Gets Into—and Out Of—the Game

Chapter 6: So You Wanna Own a Sport Team?

Meet the Commishes: Gary Bettman, National Hockey League

Chapter 7: One Union Under Center

Chapter 8: Sport Sponsorship 101

Meet the Commishes: Brian France, NASCAR      

Chapter 9: Ticket to the Future

Questions for Rick Horrow

• What are the biggest issues being discussed during the current NFL labor negotiations, and how will that relate to or affect the upcoming NBA labor negotiations?

• How would a canceled season for the NFL in 2011 affect the overall American sport industry?

• What kind of effect have revolutionary changes in modern ticket selling, such as online outlets like StubHub, had on teams and fans?

• How has social media changed the ways in which teams and players generate media coverage and reach out to fans, and how are teams incorporating social media into their overall business strategies?

• How has the NFL’s salary cap influenced the ways in which other professional sport leagues in the United States conduct business?

• Why is there more coverage of what happens behind the scenes in sports, from contract negotiations to stadium deals, than there has ever been in the past?

• How much power do the commissioners of professional sport leagues in America really have?

• How is technology shaping the world of sport in the 21st century?

• How has the popularity of fantasy sports affected the way in which people follow sports, and how are teams adjusting to the changing landscape of sport in America?

• What new challenges are on the horizon for professional sport leagues and franchise owners?
  
  

Background Facts

• The National Football League ranks as the world’s most valuable sport property at an estimated value of $4.5 billion.

• While the Dallas Cowboys are the top-rated team property in the United States, at close to $1.3 billion, the highest-rated franchise in the world is the English Premier League’s Manchester United, at $1.5 billion.
  
  
• Bolstered by his thriving golf course design business, Tiger Woods tops the list of top-earning athletes at an estimated fortune of $1.25 billion.
  
  
• The most valuable competitive events in the world are the FIFA World Cup, at $1.7 billion; the UEFA Champions League, at $1.1 billion; and the Summer Olympic Games, at $1.04 billion.
  
  
• It is estimated that revenues from the 2012 Major League Baseball All-Star Game will amount to $70 million for Kansas City and its environs, and local charities will benefit by $4 million or more.
  
  
• In 2008, the University of Texas led the nation in total athletic revenue, amassing $138.4 million, almost $20 million more than second-place Ohio State.

• The Game Seven victory for the Los Angeles Lakers over the Boston Celtics in the 2010 NBA Finals helped set a Twitter record, generating 3,085 tweets per second as the game ended. On an average day, Twitter generates around 750 tweets per second.

• In 2010, attendance for Major League Soccer cracked the four-million mark for the first time in league history, with the average per game up 5.5%. Much of the success can be credited to the Seattle Sounders, who averaged more than 36,000 fans per game, 15,000 more than the number-two franchise.

• Westin Hotels’ sponsorship of 2010 PGA Tour Player of the Year Jim Furyk requires Furyk to wear the Westin logo on his hat at more than 20 events. He must also appear at Westin marketing campaigns and make appearances at resort locations throughout the year.

• Based on the amount of money he earned in 2009, it takes Alex Rodriguez of the New York Yankees only six pitches to make $100,000. It takes Ben Roethlisberger of the Pittsburgh Steelers only four snaps to make $100,000.

Sources: Beyond the Scoreboard, MLB.com, Sports Illustrated, Los Angeles Times, Ad Age, Business Wire, The Wall Street Journal

Endorsements 

"Beyond the Scoreboard offers a behind-the-scenes look at professional sport. From players’ contracts to event bidding, the book reveals the real components driving business and the hot-button topics of this high-stakes business."

Jerry Jones

Owner and General Manager, Dallas Cowboys