Change in NFL Revenue Sharing?

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(Sports Business Journal, October 14, 2013)

The revenue sharing amongst NFL teams that has helped many of the lower-profit teams stay afloat is now likely coming to an end.  In the early 1990s the NFL developed a Supplemental Revenue Sharing (SRS) plan  to help the weaker, lower-revenue teams be able to fund a competitive team.  It has worked well for the past two decades but is now seemingly coming to an end.  The SRS has recently surpassed $100 million which was the ceiling for the fund.  One of the major reasons that revenue transfer is becoming irrelevant is because during the collective-bargaining agreements (CBA) in 2011, the owners saw a large shift in percentage of profit from the players to the owners.  Many of the teams throughout the NFL are happy about not having to pay into the SRS anymore, but not all teams see it this way.

During the NFL owners’ meeting in Washington D.C. last week, an age old debate was resurrected.  The owners discussed the disparity between the high-profit teams and the low-profit teams.  Even though the NFL as an organization is secure in financial health, the team with the highest-revenue doubles the profits of the team with the lowest-revenue.  Indianapolis Colts owner Jim Irsay is very troubled by this and believes that the SRS should be kept as a rainy day fund for these low revenue producing teams.

Among the 32 NFL teams, half to three-quarters of national and local revenue is distributed equally.  After the SRS was established, it became common for the high-revenue clubs to shift dollars to the low quartile of clubs. Over the years this has caused friction and public distaste between the two extremities of NFL teams.  This feud has diminished in the recent years after the CBA as only three teams qualified for the $5-$10 million stipend this year, and the number of teams looks to continue to reduce.  The NFL hopes that the SRS will slowly dissipate over the next decade and will not be an issue when the next CBA arrives.