Economic No-Brainer: Players Lose Too Much If They Don't Play Now

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Economic No-Brainer: Players Lose Too Much If They Don't Play Now
Players need to tell these two that they want to play

From a business 101 perspective, the players need to get back to work and they need to do it now. Football brings out a lot of emotions in people so it's no surprise that the dispute between the NFL and NFL-PA generates thousands of opinions drenched in animosity.

I think its time to set aside the animosity and look at this from a purely economical perspective.

A staple in the free market in the USA is that "those who take the greatest financial risk get the greatest rewards." In this case, the owners take the biggest risk, so why shouldn't the owner (of any business) be rewarded if there is success?

The business owner is the one who mortgages their lives away, hoping that hard work, due diligence in the industry and a strong product or service will eventually pay off for them financially.

This is the case in any business, so the NFL should be no different. Now, let's talk some numbers.

The 59.6 percent currently paid by NFL owners is just remuneration for the players' salaries. This does not include the costs of all the support staff such as VP, GM, coaches, scouts, doctors, physiotherapists, trainers, dietitians, office staff, lawyers, accountants, etc. (The Denver Broncos have 173 staff members outside of the rosters, not including the 26 cheerleaders or the Owner, Pat Bowlen).

The 59.6 percent does not include all of the equipment both game related (balls, shoes, weight rooms, uniforms, training suits, helmets, etc), business related (computers, faxes, office equipment, office furniture, offices, etc) or health related (MRI, x-ray, splints, braces, medication, etc). It does not include the power bills, gas, sewage, telephones or property tax on the stadium.

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Of course, it does not include the hundreds of millions on the state of the art stadiums for the fans and the players pleasure and comfort, nor does it cover the maintenance and upkeep of those stadiums as well as any practice facilities.

The 59.6 percent does not include travel, accommodations, food or anything else in taking an entire football team and the staff (those of you who have taken your family on vacation have a good idea what it costs for four or five people, so imagine 100 flying people across the country, housing them and feeding them for two preseason, eight regular season and hopefully a couple post-season games).

The 59.6 percent does not include advertising or any charitable donations to the teams community. And of course, it does not include your friend and mine, state, municipal and federal taxes.

All of this and probably more needs to be paid before the owner sees one single cent, and it needs to be paid from 40.6 percent of the revenue.

So, let's talk profit.

Depending on the industry, the average American corporation NET profits between three percent and 10 percent, according to http://www.referenceforbusiness.com/encyclopedia/Per-Pro/Profit-Margin.html.

$30 million per year plus between these two great QB's.

For argument sake, let us say the NFL is near the middle at 6.5 percent (though it could easily be much less, since the expenses to an NFL team are so much higher than average with the best medical, best facilities, best equipment...you get where I'm going).

The Washington Redskins had a total revenue of $345 million dollars, according to Sports Illustrated, and they easily had the highest revenue of all the teams who ranged from $230 to $280 million. Based on our assumption that an NFL teams NET income is 6.5 percent, then Daniel Snyder earned $22.5 million dollars last year.

Take out his tax and he is around 10-12 million.

That sounds like a lot of money to most of us, but when you consider his investment is close to $1 Billion, then his return on investment is quite poor. The other owners would make between $14 million to $18.2 million before tax income.

Now we know what the owners pay and what they make, so let's look at the players.

Currently the owners pay 59.6 percent of their income to player salaries. That is a huge number when you consider that the average American corporation pays 40% of their revenue to employees. 19.6 percent difference is huge. Julius Peppers, Carson Palmer, Payton manning, Nmandi Asomugha and Ben Roethlisberger all make between $14 million and $16.4 million this year, which is more than many of the owners earn.

So not to skew the story here, I want to mention that the average player salary is $770,000 and the average signing bonus is $1.3 million, for a total of $2 million per year.

That is more than many Americans will make in a lifetime, but that is not my point. Nor is it my point that some NFL employees make more than the owner. This was just some information for you, my reader, to digest while I make the point of why the players need to play now.

Even if the players were to receive a whopping 10 percent increase, which they wouldn't get and are not even asking for, they would never, in their entire career, make up what they will lose if this season is lost due to lockout.

NFL.com states that the average players career is 3.5 seasons long (of course, there are exceptions, but those guys shouldn't have to worry about money and if they do, they have far bigger worries than this labor agreement).

This means that on average, using $770K salary and $1.3 million in bonuses, the player will make $7 million in their career (consider that it takes the average person 115 years at $60K/year to earn $7 million).

Here's the main point: Even if the players lose half the season, they lose $1 million, it would take them an extra 10 years of playing with a 10 percent increase (which we know they can't get and are not even asking for) to make up for that lost money. That means the player needs to be productive enough to stay in the NFL for 13.5 years to make that money, yet the average career is only 3.5 years.

For those guys who make $8 million, it makes it even more impossible to make that up. This is why they need to play now.

The solution is simple. Take the five percent rollback which means the owners knock $2 billion of the top before they divide the money up. So, instead of making $2 million per year, they make $1.9 million per year for 3.5 years for a total of $6,650,000.

The alternative is lose a year and make a total of $5 million for your career and sit back for the next 20 years wondering what you could have done with the extra $1.65 million that you didn't get because you figured you should be paid more than the owners (and that is if after one year out of football, you are still going to make the team competing against two new years of college drafts).

Union officials are not going to lose out on this money, it's only the players. This is an absolute economic no-brainer here guys, get out on the field for your own sake and get back to work.

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