Wednesday, February 17, 2010

NFL Uncapped Year 

The NFLPA and the NFL are negotiating a new collective bargaining agreement. As you may know, the NFL decided that it would not extend the current CBA set to expire soon. A number of issues about the "uncapped year" arise, but they are for another day.

Today's issue is "How we arrived at this point in NFL labor" which just happens to be a post heading (dated February 10th) at NFL Labor News, the league's website dedicated to explaining the issues. The NFL tells us
"The principal issue is ensuring that the agreement is structured in a way that provides incentives for the clubs to invest, innovate and improve the game for the benefit of the fans over the long term."
I doubt the players would see that as the principal issue. Rather, I would guess the players would take the subtext of the following as the underlying issue:
"The NFL clubs earn very substantial revenues. But they also have very substantial expenses. The largest of these expenses is player compensation. The clubs have been obligated by the CBA to spend more than half their revenues on player salaries and benefits. In addition, the clubs must spend significant and growing amounts on stadium construction, operations and improvements to respond to the interests and demands of our fans."
In other words, the owners want a bigger slice of the revenues that professional football generates. Ownership views ALL the revenue as theirs, and only agreed to give a substantial portion of it to players because they were forced to do so. Like there would be any revenue without players. I wonder how many people pay to see the Cowboys because Jerry Jones is the owner? I am sure many Redskin fans would pay to get that franchise AWAY from Daniel Snyder.

The NFL view continues with:
The current labor agreement does not adequately recognize the costs of generating the revenues, the majority of which go to the players; nor does the agreement recognize that those costs have increased substantially — and at an ever increasing rate — in recent years.
Lest we forget, clubs do actually AGREE to player contracts. When Matthew Stafford signed his rookie contract with the Detroit Lions in 2009, worth $72 million with $41.7 million of it guaranteed, the ownership of the Lions had to sign too. The thing about contracts entered into voluntarily is that both sides can say no if the terms are not to their liking. Labor costs aren't rising all by themselves; the owners are influential participants in their increasing.

But more importantly, the logic is backwards. Players and owners negotiate a share of the revenues from the enterprise that will be paid to the players. If the revenues rise, then the dollars going to players rise too, but the percentage is fixed. Likewise, if revenues rise, the dollars going to the owners also rise but, again, the percentage is fixed. In other words, player compensation goes up because revenues go up. And the only ways player compensation goes up at an ever increasing rate are 1) if revenues do, 2) if the owners negotiated a contract that calls for the share of revenues going to players to rise each year by an ever increasing amount, or 3) both 1) and 2) hold. The CBA that the owners opted not to extend called for player shares of revenues net of benefits of 57.5% in 2008 and 2009, and player shares of 58% in 2010 and 2011. These figures mean the share going to player compensation is only rising at an ever increasing rate if revenues are doing so or if benefits are doing so. Perhaps it is benefits, on which I have no information, but I doubt that is the main issue.

This post is already getting too long. I commend the NFL Labor website to anyone interested in learning about the uncapped year and the issues at hand. Just remember this website is the NFL owners' view of the situation. Players surely will view it quite differently. As a football fan I can only hope that the two sides reach an agreement quickly and amicably so we fans don't have to go through a strike, lockout or canceled season.

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Tuesday, January 19, 2010

"Yankee Premium" Updates 

In 2005 I explored the "Yankee Premium, how much of the Yankee payroll reflected a revenue advantage relative to the rest of baseball and how much reflected the ability of NYY players to negotiate away the revenue advantage into their own pockets.

Here's an update for 2009 salary data where I match Yankee players with players from other teams whose productivity are "in the neighborhood" of the Yankee. The question is, what is the pay rate of a comparable players in terms of production and freedom of movement. I'm not using any sophisticated matching technique, so there's plenty of room to quibble, sometimes that that the match is not good enough and sometimes too good. There's not offensive match for A-Rod among third basemen, but someone like David Wright would be much cheaper than Mike Young. Joe Mauer's years of service are much less than Posada, but Mauer is mobile. The point is not any specific match, but the aggregate amounts. Where one player is considered a better fielder, I've tried to compensate with batting stats such as Mike Cameron and Johnny Damon in a position, CF, where fielding matters more.

Player (Salary, Career OPS or ERA, Years)

1B: Teixeira ($20.6, 0.923, 7) Howard ($15.5, 0.961, 6)
2B: Cano ($6.0, 0.818, 5) Kinsler ($3.2, 0.814, 4)
SS: Jeter ($21.6, 0.847, 15) Tejada ($14.8, 0.810, 13)
3B: Rodriguez ($33.0, 0.966, 16) Young ($13.0, 0.798, 10)
C: Posada ($13.1, 0.885, 15) Mauer ($10.5, 0.892, 6)
OF: Damon ($13.0, 0.854, 15) Cameron ($10.0, 0.788, 15)
OF: Matsui ($13.0, 0.852, 7) Werth ($2.5, 0.827, 7)
OF: Swisher ($5.4, 0.869, 6) Hawpe ($5.5, 0.875, 5)
SP: Sabbathia ($15.3, 3.62, 9) Buerhle ($14.0, 3.80, 9)
SP: Burnett ($16.5, 3.84, 11) Fuentes ($8.5, 3.47, 9)
SP: Pettitte ($5.5, 4.20, 15) Garcia ($10, 4.08, 10)
RP: Riveria ($15, 2.25, 15) K-Rod ($9.1, 2.53, 8)

Yankees: $178m Non-Yankees: $116

A close-to-comparable team has a labor market price tag of about 65 percent of the Yankee total for these key positions. In other words, the Yankee players extracted nearly 40% in "rent" above their market values from the Yankees because they are just as aware as anyone else of the Yankee revenue advantage.

My point is not that the players dissipate all of the revenue advantage of the Yankees. Rather, using gross payroll differences vastly overstates the Yankees advantage. The rent capture by players means that the Yankees must spend their money wisely to make it translate into wins, as the period of the 1980s-early 1990s showed.

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