...Haertzen TO: Dr. Stanley SUBJECT: Collective Bargaining and its Accounting Impact on NFL Franchises Introduction The purpose of this memo is to describe to the reader the basic structure of the NFL Collective Bargaining Agreement and its impact on the accounting decisions of a traditional franchise in the National Football League. Just like most other businesses, an NFL franchise is a business whose goal is to generate as much profit as possible while precisely adhering to specific rules and regulations of not only the IRS, but also the league itself. This mainly includes the league’s Collective Bargaining Agreement, which contains certain rules that owners have creatively exploited. The activities of franchise league owners are often viewed as being limited to acquiring, managing, and trading players, but few understand that there are complex accounting practices that go on in the team offices that make all of these transactions possible. The following paragraphs will begin to examine what NFL franchise owners have to account for with the CBA and how they maximize profits with these limitations. What is the CBA? The NFL’s Collective Bargaining Agreement (CBA) is an agreement between the franchise owners of each NFL team and the NFL Player’s Association. It is split into two separate concepts that are also intertwined: revenue sharing and player compensation. The NFL uses these two components to promote competitive balance in the league, and it is something...
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...NFL Case Study 1. Discuss the factors that have resulted in the NFL becoming “America’s Game” and the most popular sport in the country? The fundamental reason for NFL becoming “America’s Game” and the most popular sport in the country is because the NFL was able to market the sport as an entertainment business. Leveraging television and the fact that American football was only played in America, the NFL was able to create a “holiday” feel that was unique and that American’s took pride in, as a result paid more attention to the sport. Another contributing factor was to control the quality of the product. Making sure that each team had the resources to perform professionally and one team could not gain absolute advantage was crucial to maintaining a competitive parity. To do this the NFL implemented controlling cost and revenue sharing, in which the lowest earning team could compete with the highest earning team. 2. Explain the dynamics behind the competitive balance in the NFL versus other U.S. based properties as well as other leagues globally. The NFL has two methods of maintaining parity. Amongst the teams, the NFL uses revenue sharing in three ways: “1. National Revenue Sharing: All national revenue was pooled and split evenly between the teams at the end of the year. 2: Gate Revenue Sharing: Visiting team share was pooled and split evenly. Supplemental revenue sharing: focusing on teams’ local income, teams with higher local revenues transferred a significant...
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...Revenue sharing is a factor that affects the management of professional sports. It is often used in sports as a way to improve competitive balance among member organizations despite varying economic conditions and market capacities. Every league acknowledges that the purpose of revenue sharing is to allow a closer range of payroll spending that might otherwise not be accomplished, preventing large market teams from controlling the allocation of high-priced free agents (Kesenne, 2006). Television rights and licensing agreements play a huge role in revenue sharing. The National Football League and CBS created a revenue sharing model that included televising all regular season games for an annual fee of $4.65 million and by 2014 the NFL earned a share of $4.9 billion (Stone, 2015). Often times, the media exploits financial figures that are included within the revenue sharing agreement. The National Football League teams share more than sixty one percent of total revenues generated by the league which lends itself to good business. The NFL also shares ticket and merchandise revenues with all teams except for the Dallas Cowboys which keeps revenue generated from merchandise sales and does not receive any from the other thirty-one teams (Kesenne, 2006). Each of the NFL franchises retain suite, club seating and sponsor revenues from naming rights and other properties. In 2014, the NFL generated $10 billion in revenue and is projected to generate up to $25 billion in 2025 (Stone...
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...The Source of the NFL LOCKOUT Colin Quinn NCM 501 SLP 2 Trident University BACKGROUND AND SETTINGS The National Football League (NFL) experienced its first work stoppage since 1987 when the owners locked out the players that make up the National Football League Players Association (NFLPA) on March 12, 2011 (Judge, 2011.) The lockout was set in motion when the owners exercised there option to opt out of the collective bargaining agreement (CBA) on May 20, 2008 causing the CBA to expire on March 3, 2011 (NFL, 2008.) The Intra-organizational conflict the owners had was the revenue sharing of $9.3 billion the league generated annually. The owners claimed that because of inflation and the increased costs of utilities that the $1 billion credit off the top of the revenue was just not enough to sustain revenue growth and wanted the credit to be increased to $2.4 billion. This meant that the players needed to take an 18% cut of the revenue share to give the owners what they want. In addition the owners wanted to increase the regular season by two games by decreasing the preseason from four games to two games, which the players clearly did not want. Finally, both sides wanted to implement a rookie wage scale but disagreed on how to redistribute the money saved on rookie wages (Oestmann, 2011.) These conflicts in negotiations, along with the owners and NFLPA’s inability to come to a new agreement before the expiration of the CBA forced the owners to lockout their players from the...
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...turmoil. Eventually, the players agreed to a salary cap in return for free agency and an enhanced share of league revenues. Since then, the CBA has been extended several times, most recently in 2006. Seeing as how the 2006 extension passed by an overwhelming 30-2 vote among league owners, you’d think they would be fine with just extending the current agreement as it stands now. That couldn’t be further from the truth. In fact, the reason we’re even talking about this now is because in 2008, a mere two years after the extension was signed, the owners unanimously voted to opt out of the agreement two years early (Brown). The concrete agreement might have seemed like a great idea at the time, but now the owner’s feel like the they were cheated. The theory is that former NFLPA executive director, Gene Upshaw caught the NFL Commissioner Paul Tagliabue in a moment of weakness and capitalized on the situation to push through an extension that would be feasible for the players only (Brown). Tagliabue was preparing to step down from his 17-year tenure as NFL Commissioner, which was marked by an unprecedented lack of labor strife. Not wanting to tarnish that legacy of harmonious relations between players and owners, Tagliabue was allegedly persuaded by Upshaw to sell the owners on a deal that gave players a 59.6% cut of revenues (Brown). The owners were given a new revenue sharing plan with the new deal, which would make the league’s 15 most profitable franchises make payments to help subsidize...
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...bargains, and the effects union bargaining has on the NFLPA. NFLPA’s Benefits of Joining a Union The initial reasons for beginning to unionize were to get paid for playing in exhibition games and filing lawsuits against the NFL. Players were not paid to play in exhibition games. In addition, in 1946, National Football League (NFL) owners created a rule that banned players for 5 years if he switched leagues to the new All-America Football Conference (AAFC). Players still switched leagues for increased salaries. After switching leagues, Bill Radovich was banned by the NFL and filed the first lawsuit against the NFL with the help of Creighton Miller. More on this lawsuit later. Miller, a former player and current lawyer, helped form the NFLPA in 1956. Miller fought for minimum salaries, league paid uniforms and equipment, and medical benefits. Throughout the years, the NFLPA has fought for these and additional benefits like better health insurance including dental, pensions, revenue sharing, free agency, etc. The Unionization Process The process of unionization took some time for the NFLPA. The initial attempts started in 1943 when Roy Zimmerman refused to play without being paid. He was subsequently traded to another team. As mentioned above, in 1946, NFL owners banned league transfers. The NFLPA was actually formed when two players from Cleveland contacted Creighton Miller. Miller played football at Notre Dame before becoming a lawyer. In 1956, 11 out of 12 teams in...
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...Major Leagues The 1990s and early 2000s was a period of substantial growth for professional sports at all levels. The number of teams in the Big 4 major leagues grew from 103 franchises in 1989 to 122 franchises by 2001. During that time, the National Hockey League (NHL) added eight expansion teams, Major League Baseball (MLB) added four, the National Football League (NFL) added three, and the National Basketball Association (NBA) added five teams. In addition, several new leagues were launched in the 1990s with aspirations of becoming prominent national properties, most notably Major League Soccer (MLS) and the Women's National Basketball Association (WNBA). By 2001, each of the Big 4 leagues had reached a saturation point, having established franchises in nearly every market capable of sustaining a major sports property. A few markets remain available for certain leagues. For example, Los Angeles has not had an NFL team since the Rams abandoned LA for a new stadium in St. Louis in 1995. While the NFL would love to have a franchise in the country’s 3rd largest television market, the lack of a modern, “NFL-ready” stadium has prevented a team from filling this attractive...
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...Organizational Structure MGT 230 John Jones James Baliey October 6, 2015 The NFL in its entirety is a very complex organization with each team consisting of its own organizational structure. Each team of the NFL is a franchise, the bought a license from the NFL in order to play under the rules and regulations of the league. Each team then gains the perks of being broadcast through the networks contracted by the NFL. The league is also split into two conferences, each with four different divisions based on region: north, south, east, and west. The two conferences stem from a merger of the NFL and AFL that was announced in 1966. . The Constitution and Bylaws of the NFL, as they are today, were set in place in 1970 after the AFL and NFL merged. However, these rules can be amended each year at an annual meeting with a three-fourths vote from the member clubs, or teams. The highest executive in the NFL is the Commissioner, and has the most power within the league. The Commissioner, currently Roger Goodell, has oversight over the entire league as the principal executive officer. Rather than a board of directors, Goodell has final authority in the way the league functions. The voting requirements and procedures for the selection of or successor to the office of Commissioner are determined by the affirmative vote of two-thirds of the members, or teams, of the league. The group which casts the vote is known as the Executive Committee consisting of one individual to represent each...
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... i.) Net Marketing Contribution is defined as Sales Revenues x Percent Gross Profit – Marketing Expenses; while Net Profit = Sales Revenue – Cost of Goods Soles – Operating Expenses. Sales revenues are made up by the following: Market Demand x Market Share x Average Selling Price x Channel Discount. Consequently, if one of these is changed, revenues can greatly vary as well and a marketing strategy with multiple product lines will cause further variability. With multiple product lines, the NMC is a functional tool in categorizing marketing profitability for each product line. To fully grasp the impact for marketing profitability though, net profit should be calculated, without the “least profitable” product. When there are fewer product lines, or the product lines are performing at a relatively comparable rate, the NMC will simply give you the numbers you need. Usually the Marketing Manager will find the Net Marketing Contribution most useful, while an accountant or financial analyst would be most interested in the net profit ii.) 4. Broad and narrow marketing definitions greatly affect the direction of every organization, once one is decided upon. As seen in this case, the NFL “broadly” defines their market, which plays a main factor in its success. A narrow market focus only addresses articulated needs of customers, which leaves a large part of the potential market unserved (unfulfilled market potential). The NFL brand on the other hand, has practically permeated every...
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...1. In a symmetric model, team 1 and team 2 would invest money until they reach Nash equilibrium and their profits are maximized. Since this model is a symmetric model, both teams have the same incentive to win and therefore at equilibrium it can be assumed that win% for team 1 will equal the win% for team 2. Knowing these givens and the equation given, profits for team 1 can be found as followed: π1 = Vw1 – t1 → V(2-g)/4 π1 = (500)(2-.5)/4 π1 = 187.5 The profit can then be plugged back into the initial equation to determine team 1’s investment: π1 = Vw1 – t1 The win percentages for both teams will be .5 because .5 + .5 = 100% in a symmetric model 187.5 = 500(.5) – t1 t1= 62.5 Since this is a symmetric model, it is assumed that the investments and profits for team 1 will equal team 2’s investments and profits. π1 = π2 187.5 = π2 t1 = t2 62.5 = t2 2. For model 1, profits are larger when g=1/2 because the investments made by both teams are lower and therefore π1 = Vw1 – t1 will result in higher profits. The reason team 1 and team 2’s investments will be lower is because there is less incentive to invest when the advantage for investing goes down, as it does with a lower sensitivity parameter. A lower g (sensitivity parameter) means that teams need to investment less to yield a higher win%. The following graph shows the difference in profits for g=1 and g= ½: 3. To calculate the Nash equilibrium for an asymmetric...
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...The NFL in Europe: Will it make dollars, does it make sense? Table of Contents 1. Football in America: Playing on Its Home Turf 1.1 Football Surpasses Baseball as America’s Favorite Pastime 1.2 Football Generates Billions of Dollars for Owners and Players 1.3 The Economics of Football Goes Beyond the Playing Field 2. Football Goes Global 2.1 The Super Bowl Introduces Football to the Rest of the World 2.2 NFL Europe Provides a Testing Ground for NFL 2.3 English Crowds Flock to See NFL Visitors 2.4 Commissioner Wants to Take the League to England and Beyond 3. Looking to the Future: Is It the Right Move 3.1 New Legions of Fans Could Enhance Profits and the Sport’s Popularity 3.2 Why the Move Might Be Counterproductive 3.3 Why stop at London? 4. The NFL in Europe Is Imminent, But Is It the Correct Move? 4.1 Questions Still Remain about London’s Viability 4.2 Final Conclusion The NFL in Europe: Will it make dollars, does it make sense? 1. Football in America: Playing on Its Home Turf 1.1 Football Surpasses Baseball as America’s Favorite Pastime There was a time when baseball was the most popular sport in the United States. Football used to be an afterthought for most sports fans. In the first half of the 20th century, baseball was king and football was fighting for its survival. In fact, football was considered on the same level as professional basketball, boxing, golf and horse racing. That all started to change in the 1960s when professional...
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...Sport Television Rights Out of the Big Four (NFL, MLB, NBA, and NHL), Major League Baseball has the largest annual media contract with over 850 billion worth. Network television with 3 billion, Cable TV with 2.4 billion, Satellite TV with 700 million, Terrestrial Radio with 55 million, Satellite Radio with 650 million, an video games with 150 million. These media coverage contracts include the big games such as MBL Playoffs and the World Series. The discrepancy in the value of media contracts for the different sports is as follows; National Football League (NFL) contracts for network TV, cable TV, and satelli9te TV is over a billion a year. Video games are such as EA sports contracts are 350 million a year. No contracts with internet and radio. Major League Baseball (MBL) contracts for all TV and radio are estimated over millions and billions a year. No contracts with the internet. National Basketball League (NBA) contracts for network and cable are estimated in the billions a year. No big satellite TV contracts other that Direct TV who covers exclusive out of market games. No contracts with radio, video games, and the internet. National Hockey League (NHL) contracts for network television are revenue- sharing agreements with NBC and Canada’s CBC. Cable TV has a 120 million contract for 3 years. Satellite TV has out of market games with Direct TV. No radio contracts. There...
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...Running head: COMPETATIVE ADVANTAGE AND PRO SPORTS Competative Advantage and Pro Sports Cynthia Moreno University of Phoenix MGT 488 Ricky Lovitt Abstract Competitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Competitive advantage occurs when an organization acquires or develops an attribute or combination of attributes that allows it to outperform its competitors. “A firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential player” (Barney 1991 cited by Clulow et al.2003, p. 221). To gain competitive advantage a business strategy of a firm manipulates the various resources over which it has direct control and these resources have the ability to generate competitive advantage (Reed and Fillippi 1990 cited by Rijamampianina 2003, p. 362). There are two of competitive advantages: comparative advantage and differential advantage. We will address differential advantage in this paper and how it applies to the business of professional sports. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers. Four criteria that determine a firm's competitive capabilities in the marketplace and judging a firm’s resources are as follows: 1. Are they Valuable? (do they enable a firm to...
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...Football Conference. These conferences consist of 32 teams are divided into four divisions. The NFL players union was first formed as a result of poor conditions involving health care and threats to a player’s livelihood in the event of injury. Over time several events were instrumental in establishing the essential benefits that players have today. This paper will outline background information on the NFL while identifying some legal issues that the organization may encounter while determining which federal, state, or local laws could be affected as a result of these legal issues. Recommendations to minimize possible litigation will be provided along with addressing the organizations benefits of joining a union along with detailing the unionization and bargaining process and the effects this has on the organization. Professional football has become the most prevalent sport in America and the NFL has become the most prized sports enterprise in the world. The league sold more than 17 million game tickets in 2008 and an estimated three-quarters of the American population watched at least one NFL game on television (Shmoop Editorial Team, 2008). The NFL season culminates with a championship game; The Super Bowl held in February and has become one of the most popular happenings in American pop culture history. This has not been always the case. During its inception in the 1920s, the NFL struggled to find acceptance and stability for several years and did not become popular until...
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...United States and potentially the world, and it is all due to Walter Camp (Buckley 1). The National Football League, or NFL, originated from a merger of just a few teams to a league of thirty-two teams in all corners of the United States (Buckley 1). Each year, these teams compete in 256 regular...
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