math in the news: 6/20/11

6/20/11

Profits vs. Salaries

• Football is a game, but the NFL is a business.

• Each of the 32 teams in the NFL is a separate business that generates revenue and has its own expenses.

• At the root of the disagreement between the players and owners is the combination of revenue and expenses.


• The NFL does not own any teams, but serves as a trade association that manages many aspects of the business, including how players get drafted and how the rules of the game are enforced.


• But the most important role of the NFL is its revenue-generation. Billions of dollars are generated from broadcast, cable, radio, and other media.

• This money is shared evenly among the teams.


• From an owner’s perspective these are the revenue and expense items they need to contend with.

• As with all businesses, the revenue MUST be greater than the expenses.

• Notice that player salaries are part of the owner’s expenses.


• From a player’s perspective these are the main sources of income and expenses.

• The top-tier players usually get the most lucrative sponsorship deals, but even less-well-known players can get a sponsorship contracts, for example, with local car dealerships.


• Player salaries are the biggest bone of contention between players and owners.

• For owners, the player salaries make up the biggest part of their expense budget.

• Players know that an NFL career can be relatively short, so it’s important to make as much money as possible.


• Why is the length of a player’s career important? • The total earnings an NFL player will make is based on the number of

years played and the average yearly salary, as shown above.


• This table shows the mean and median salaries for each team during the 09-10 NFL season.

• We can use this data set to find the mean and median for all players.


• Using the data, we find the mean and median salaries. Note the huge disparity from one statistic to the other. Why is this?

• Each team has huge outliers, based on the fact that the top-tier players get paid much, much more than the rest of the team.

• The median is the better statistic to use for the average salary.

Mean Median

$1,870,998 $839,320


• How long is a player’s career?• This is a point of controversy between

the NFL Player’s Association (NFLPA) and the owners. The NFLPA says the average player’s career is 3.5 years. The NFL puts the average closer to 9.

• This data set, provided by the NFL (http://nfllabor.com), is for the 288 players who began their careers between 1993-2002 and were on a 2010 NFL roster.

• You can use this data set to find the mean and median career spans for these players.

{12, 9, 10, 10, 10, 11, 13, 9, 10, 8, 12, 13, 11, 8, 11, 10, 8, 8, 11, 11, 12, 10, 8, 11, 9, 10, 9, 14, 13, 8, 8, 8, 8, 8, 11, 10, 9, 8, 11, 9, 9, 9, 11, 15, 9, 8, 12, 12, 9, 13, 8, 8, 8, 10, 10, 11, 9, 14, 10, 8, 11, 11, 8, 8, 12, 13, 8, 9, 8, 10, 9, 10, 9, 8, 12, 11, 8, 9, 11, 8, 14, 8, 11, 8, 9, 14, 8, 8, 8, 9, 9, 10, 12, 9, 11, 9, 8, 8, 10, 9, 9, 8, 10, 11, 8, 9, 10, 12, 8, 8, 8, 8, 9, 10, 10, 12, 17, 9, 8, 12, 9, 12, 10, 12, 14, 9, 13, 8, 8, 10, 9, 9, 10, 8, 10, 13, 11, 14, 9, 13, 10, 11, 9, 11, 8, 13, 8, 8, 8, 13, 11, 10, 8, 9, 11, 10, 9, 10, 9, 12, 9, 8, 9, 8, 10, 9, 8, 15, 11, 13, 8, 8, 10, 10, 9, 10, 9, 9, 9, 17, 10, 10, 9, 8, 13, 16, 8, 13, 8, 9, 11, 9, 10, 8, 8, 10, 10, 8, 9, 8, 13, 9, 9, 9, 12, 12, 8, 13, 8, 9, 8, 9, 8, 8, 11, 12, 16, 16, 10, 10, 11, 8, 8, 8, 10, 8, 8, 9, 12, 14, 14, 8, 11, 8, 9, 9, 8, 9, 10, 15, 9, 8, 11, 9, 12, 8, 8, 10, 9, 10, 10, 10, 8, 8, 10, 13, 8, 8, 8, 9, 8, 8, 8, 15, 11, 8, 12, 8, 9, 8, 11, 8, 9, 14, 12, 10, 15, 8, 8, 12, 8, 11, 9, 8, 9, 12, 11, 8}

http://nfllabor.com/



• A box-and-whisker plot of the data shows that the median career length is 9 seasons. (Note that the left whisker overlaps the lowest value.)


• Meanwhile, the NFLPA claims that the average length of a football player’s career is 3.5 years.

• How did they arrive at this number? They used a weighted average of the seasons played starting in 2010 for all players. The table on the right shows the calculation.


• Finally, Roger Goodell, the NFL Commissioner, puts the average career length at 6 years. (Source: http://nfllabor.com.)

• He bases his number on active players who are on the field, and leaves out those on the second string, who usually sit on the bench during a game.

In fact, if a player makes an opening day roster, his career is very close to six years. If you are a first-round draft choice, the average career is close to nine years. That 3.5-year average is really a misrepresentation. What it adds is a lot of players who don’t make an NFL roster and it brings down the average.




Why is this important? Depending on which average you use, the total career earnings for an average player vary dramatically. As you can see, the differences amount to millions of dollars.


• There is an inverse relationship between the career span and the average salary:

– If players have longer careers, then they can get a lower salary and still have high lifetime career earnings.

– If players have shorter careers, then it makes sense to pay them a higher average salary.

• This graph summarizes the NFLPA’s and owners’ preferences.


• The main delay with a new Collective Bargaining Agreement is around player salaries. Although nearly all of the 32 NFL teams are privately held companies—so that we don’t have access to their income statements—one team is a public company.

• The Green Bay Packers are a public company and have released income statements. This graph shows how much player salaries make up the team’s expenses. It is by far the biggest part.


• The current NFL revenue-sharing model has $1 billion set aside for team expenses, with the remainder split between owners and players as shown in the graph.

• For the new Collective Bargaining Agreement, the NFLPA wants to keep the status quo, while the owners want more money for operating expenses and a more even distribution of the remainder.


• What will the new Collective Bargaining Agreement look like?

• STAY TUNED! We will update this report once the final Agreement is in place.

• We will also see how the new Agreement deals with the following issues.

• Issues to be resolved:– Assumptions on the average

player’s career span.– Will future NFL seasons

consist of 18 games?– How much will be set aside

for team operating expenses?– What will be the revenue split

between owners and players?

math in the news: 6/20/11

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