Last week, an arbitrator ruled that over the last three years, the NFL withheld approximately $120 million in ticket revenue from a pool of money shared with its players.
Matthew Futterman of the Wall Street Journal reported that of that shared revenue, about $50 million should be directed to player salaries, since players receive 40 percent of ticket sales (local revenue) under the current collective bargaining agreement (CBA).
Since the money must be returned to the shared pool immediately, the NFL Player’s Association (NFLPA) calculates the 2016 salary cap will increase by $1.5 million per team. The error was discovered in the NFLPA’s ongoing audit of league finances.
According to Futterman, the money was “mischaracterized” by the league as “waived gate” revenue, which didn’t fit into any existing exemption category in the CBA:
This dispute stemmed from provisions of the collective bargaining agreement that allow NFL teams to exclude certain money from the pool that determines its players’ share of revenues. Players receive 40 percent of local revenues, which mainly come from tickets sales, 45 percent of sponsorship money, revenues from the post-season and NFL Ventures, such as NFL.com and the NFL Network, and 55 percent of the revenues from media deals.
Teams can exclude money from the sale of personal seat licenses, premium seating, and from mega-deals with corporations to put their names on stadiums. The NFLPA agreed to these exclusions because teams often use these funds to help finance renovations and the construction of new stadiums, which significantly increase revenue and the amount of money that gets shared with the players.
NFL spokesperson Brian McCarthy described the dispute as a “technical accounting issue,” and said it would not impact the financing of future stadium projects.
Despite the fact that it took the NFLPA three years to notice, the union sees the discovery of this discrepant and the arbitrator’s union as proof of its strength.
“They created an exemption out of a fiction and they got caught,” said DeMaurice Smith, executive director of the NFLPA. “People have become accustomed to how we protect our rights when it comes to player discipline. We are equally diligent when it comes to getting our share of revenues.”
In 2014, the NFL made $12 billion in revenue, and made a profit of almost $1 billion. Embattled commissioner Roger Goodell alone made $34.1 million. While last year’s revenue hasn’t been reported yet, before the season began the league expected its revenue to be about $13 billion. Reuters reported that in 2015, the league’s sponsorship revenue alone rose 4.4 percent to $1.2 billion.
While superstar players like Tom Brady and Cam Newton are raking in the contract money and endorsements, most NFL players aren’t nearly as comfortable. Last season, the NFL minimum salary was $435,000 and practice squad players earned a minimum of $6,600 a week. This is significant money, of course, but it’s important to note that the average NFL career is only 3.3 years.