Sherman & Co. need to take NFL Econ 101

Salary cap logoAs NFL players continue to grumble about how “underpaid” they are relative to the NBA (and MLB), Richard Sherman just doubled down with a challenge for players to be ready to strike when the NFL CBA expires after the 2020 season.

For a Stanford guy, Sherman is not very smart. He and these other whiners don’t even understand the economics of their own sport, they apparently can’t do simple math, and Sherman obviously has no grasp of the NFL’s labor history.

Comparing NFL salaries to the NBA and MLB is a fruitless apples-oranges exercise. The economics of each sport are entirely different. MLB owners have been historically weak; with no salary cap, that sport is a true capitalist’s game: Teams with the most money can buy their way into contention. The NBA has a soft cap that allows teams to spend more on their own free agents and is set up to reward average players with big pay days. The NFL, meanwhile, has a hard cap — a socialist system that attempts to give every club a chance and effectively limits the size of the largest contracts.

Of course, the biggest issue in the pay disparity is roster size. NFL rosters are double the size of MLB and more than triple the size of the NBA, so NFL players obviously must split their pie among more mouths. It’s basic math.

NFL players will get $6.5 billion in salary and benefits this year, but that has to be divided among about 2,000 players. That breaks down to around $3.25 million per player, which is less than the average 2016 salaries of the NBA ($6.2 million) and MLB ($4.4 million).

Roster size also explains why the NFL has far fewer $20 million players — just 14, to the NBA’s 40 and MLB’s 33. It’s the simple economics of a bigger player pool and a more team-equitable salary cap structure.

If NFL players have a beef with what they make, they partly have themselves to blame. In 2011, they chose to let the owners have more money in exchange for the players working less — reduced offseason practice time and less contact during the season. The players were so stuck on the lessened work time that they gave up their 50-50 share of league revenue, dipping to 47 percent (although they get 55 percent of TV revenue and have guaranteed minimum team spends built into the deal).

The players apparently want a bigger share starting in 2021, and Sherman thinks the players will have to strike to get it.

“If we want … to get anything done, players have to be willing to strike. That’s the thing that guys need to 100 percent realize,” said Sherman, who has very often shown his disdain for the league that pays him so well. “You’re going to have to miss games, you’re going to have to lose some money if you’re willing to make the point, because that’s how MLB and NBA got it done. They missed games, they struck, they flexed every bit of power they had, and it was awesome. It worked out for them.”

What Sherman is forgetting is that strikes have not worked out for NFL players, which is why there has not been one since 1987. In 1982, players wanted 55 percent of league revenues. They struck for 57 days, but infighting was rampant and the union settled on a short-term fix.

That led to another strike in 1987, as the union sought expanded free agency rights. That strike was much shorter — just 24 days — and resulted in no new deal for the players as many stars crossed the picket lines over the three weeks.

The fight for free agency continued in court, and the union eventually decertified so individual players (Freeman McNeil, et al.) could sue the league. In 1993, Reggie White and other players won unrestricted free agency, and the current system was born.

The CBA has been extended six times since that seminal year. The 2011 negotiations were acrimonious, though, with the union decertifying so players could sue after the league locked them out.

In the end, the owners won the financial battle as the players decided to focus on health and benefits. The owners went back over 50 percent of total revenue, got a rookie wage cap and kept the franchise and transition tags. The players got five fewer weeks of offseason programs and reduced contact practices during the season, added injury protection and retirement benefits, shorter rookie contracts and a status quo on the 16-game schedule.

Now, it sounds like the players want to reverse course and get back over 50 percent of revenue. To do that, they are going to have to be willing to give up something — most likely agree to an expanded season and/or remove practice restrictions.

If they aren’t willing to do that initially, or if they are looking for even more concessions, they can go down the path the 1980s players took. But Sherman should know a strike is a no-win move — because the union eventually will splinter and players will come back (Sherman saw a small sample of that with teammate Kam Chancellor’s solo strike in 2015).

What Sherman should have said is the union will have to decertify so players can again sue individually — as Tom Brady, Peyton Manning and others did in 2011. But an antitrust lawsuit is really just another bargaining ploy. Both sides make too much money to kill the golden goose.

In the end, this likely will end up in mediation — again — and the sides will reshuffle the deck and deal out the cards for a new CBA.

Before we get to that point, though, Sherman and his fellow NFL players need to grasp the NFL’s basic economic model and understand they will never make the same kind of money as NBA and MLB players.

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6 thoughts on “Sherman & Co. need to take NFL Econ 101”

  1. I’m not sure why you call the current system “socialist,” which conventionally refers to state ownership. Even Green Bay doesn’t meet that standard. “Monopoly” is a better fit, I think – which makes the owners monopsonists in the labor market. Reference to a first-year economics text will confirm that wages in a monoposony are depressed relative to the efficient, free market level. In other words, standard economics predicts that the workers will get screwed in a market like the NFL.

    I’m not competent to judge whether a players’ strike would win them an increased share of the NFL’s revenue, but it seems to me that they deserve the cash much more than the owners, who really contribute very little to the show. It’s not like they’re innovative entrepreneurs, like Brin or Musk.

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    1. The NFL system as relates to the teams is definitely socialist — almost everything is shared and split evenly by the teams.

      As for the monopoly idea, all of these leagues are mini-monopolies — with one entity presiding over a group of independent businesses. They walk in a very gray area here, both competing and collaborating. And have been challenged on it in court several times.

      As for who deserves the money, 50-50 seems a good split. Like any business, the employees work for the owners. But, in this case, the employees get to share in profits. Every employee of every company would love to have that setup.

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      1. H Brown is correct: socialism is public ownership and operation of the means of production. An even split is just how the owners divvy the spoils — the fact that the split is even doesn’t make it socialistic.

        If NFL teams were owned an operated by the taxpayers of each tax-paying entity, there would be an argument for socialism.

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  2. The thing I don’t understand is *total games played.* That has to be a major factor. 16 v 82 v 162? Granted football is the most physically demanding of the three and obviously the most injury prone, but for simple math. A 16 million dollars contract is a million a game. Not bad. I could live on that. To put it equally, Robinson Cano would need a 162 million dollars contract or Kevin Durant, 82 million. Maybe I’m missing something or just being to simplistic. Anyways,I’ll shut up and go back to my 50-60 hr/ week job that pays oh, I don’t know, maybe Richard’s 1st quarter salary?

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    1. Yeah, I almost included the per-game, per-player average of each sport off the most recent salary data: NFL $131k, NBA $76k, MLB $27k. But, to your point, each NFL game probably is as physically demanding as five NBA games and 10 MLB games — in which case that NFL number looks low by comparison again. I think the main issues are roster numbers and how each league divides its pie — factors that aren’t going to change very much.

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    2. This isn’t the question, though — the issue is distribution of revenue, which is pretty much generated by the players.

      Look it this way:

      Two sports, each of which has 10 teams of 10 players each. Sport A has a 1-game season and requires no contact; Sport B is a contact sport with a 100-game season. Both sports generate $100,000 per team per season; revenue is split 50/50. Given this, the players in both sports will have the same average salary. That one team plays 99 more games and that they might play a more punishing game doesn’t come into play.

      No one knows what the “fair” split in the NFL is because the labor market is not a free market. We can debate why that is so, but there’s little doubt that team owners do not want a labor market with no salary cap.

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