By the numbers: how revenue-sharing could work for the CFL, how a flat cap could work for players

The ongoing collective bargaining battle between the CFL and its players' association is primarily about the philosophicaldivide on how the league's salary cap should be determined, and that's why this week's resumption of talksmay not get far. The league favours a flat cap that would be set at a predetermined level each year, while the players would prefer to recalculate the cap each year as a percentage of league revenues. Both sides have sniped back and forth on this, saying the other's proposed system is so far-fetched that it's not even worth consideration. However, examining the numbers makes it clear that there is a revenue-sharing system out there that wouldn't "threaten the very existence of the CFL," and also that there is a flat cap system out there that would give the players a fair deal. If both sides proved willing to move on philosophy and talk numbers under the other side's preferred system, a deal could be struck.

First, let's consider the league's contention that a revenue-sharing percentage model "doesn't fit with the realities of our business." Players are already making money, though, and that money logically represents a percentage of league revenues. For example, last year's $4.4 million salary cap would represent 23.7 per cent of the Edmonton Eskimos' reported 2013 operating revenues of $18.6 million or 18.2 per cent of the Winnipeg Blue Bombers' reported (PDF) 2013 operating revenues of $24.2 million. Other clubs haven't released their 2013 financials yet, but estimates of the Saskatchewan Roughriders' 2013 revenues have come in as high as $60 million, which would make a $4.4 million cap just 7.3 per cent of their revenues. On the other end, the Montreal Alouettes reportedly only earned $12 to $14 million in revenues a few years ago, but even using that $12 million number and not accounting for revenue increases since then, a $4.4 million cap would be 36.7 per cent of their gross revenues. Thus, there clearly is some percentage of team revenues that can be allocated to salaries without ruining the league financially. The debate is just over what that percentage is.

The players' proposal for 2014 is actually a flat cap of $6.24 million, but that's based off 35 per cent of estimated revenues league-wide after taking out the high and the low team. That assumes that the league mean revenue (this is a mean, not a median, so it may not necessarily be any one team's exact revenue) is $17.8 million. Given that both Edmonton and Winnipeg made more than that despite terrible non-playoff seasons, that figure doesn't seem out of the realm of plausibility, so let's assume it's accurate for now. Here's what various percentages of that revenue would translate into in terms of a salary cap:

So, the $4.4 million cap last year was essentially 25 per cent of league revenues, and it obviously didn't bankrupt the league. Going to 35 per cent as the players have proposed for 2014 would be a substantial increase ($1.8 million per team) in per-team costs, though. However, it's worth noting that team revenues are not expected to remain static in 2014; the league's new TV deal is expected to give each team at least a $2.7 million boost annually over what they were previously making, so even the players' proposal would still leave each team with another $900,000 in pocket if their other revenues and costs remained static. How do the player percentages and resulting salary caps work out if we boost that mean revenue by $2.7 million (to $20.5 million per team)? Take a look:

Here's what each proposed percentage cap would look like with 2013 mean revenues ($17.8 million) and projected 2014 mean revenues ($20.5 million):

Thus, while the CFL may not want to go as high as the players' proposed 35 per cent, there definitely is a deal that could be made under a percentage system at, say, 25 per cent. That would be a cap of around $5,125,000 per team per season to start, which is slightly better than the league's latest offer ($4,800,000 this year), but not by a huge amount; it would also result in a per-team increase of just $725,000, leaving each team almost $2 million in gains in TV revenue that wouldn't be touched by the players. It would make sense for the league to propose something along these lines instead of just repeating "Revenue sharing will threaten our existence," a mantra that's up there with "Four legs good, two legs bad" at this point.

What about for the players? Well, there are definitely flat caps that wouldn't hurt them too much either. If the league's so philosophically opposed to a revenue-tied cap, why not give them that, but insist on a much higher flat cap in return? If the CFLPA said "Fine, we'll take a flat cap and avoid revenue sharing for now, but it's going to be a $6.24 million flat cap," bargaining conversations might get somewhere. In fact, these philosophical dogmas might just turn into valuable leverage; whichever side concedes on that point could do so in order to strike a better deal. The players might prefer a revenue-sharing model, but according to these numbers, a flat cap of $6.24 million would likely work out better for them than 25 per cent of total revenues. Conversely, the league might hate the idea of revenue-sharing, but its teams might pay out far less if they gave the players 20 per cent or less of revenues instead of a fixed cap. Philosophy's all well and good, but dollars and cents make valuable points of their own, and both sides should keep that in mind during these negotiations.