NFL Collective Bargaining Agreement

Article 12
Revenue Accounting and Calculation of the Salary Cap

Section 6
Calculation of the Player Cost Amount and Salary Cap

(a)

Revenue Buckets. AR shall be subdivided into three categories for purposes of calculating the Player Cost Amount and Salary Cap: (1) League Media AR; (2) NFL Ventures/Postseason AR; and (3) Local AR.

(a)(i)

League Media. League Media AR shall consist of the revenues arising from (1) television rights sold or licensed either nationally or packaged on a regional basis for the telecast or broadcast of live or near-live transmission of entire or near-entire NFL games (but not highlights) via broadcast or cable television, satellite, internet, or other media (but not for up to sixteen regular season games telecast or broadcast by the NFL Network); (2) international television rights for live and delayed games; (3) national terrestrial, satellite, and internet radio; and (4) the Copyright Royalty Tribunal. For the avoidance of doubt, as of the 2019 League Year the only revenues that would fall into category (1) are the rights fees paid by FOX (for the NFC afternoon package and the Thursday Night Football package), CBS (for the AFC afternoon package), ESPN (for the Monday Night Football package, but not for the digital and international rights, which shall be in the Ventures bucket), and NBC (for the Sunday Night Football package) (in each of the foregoing cases, following the allocation of rights fees as set forth in the parties’ side letter agreement of February 8, 2018), DIRECTV (for the Sunday Ticket package, but not for the separate NFL Network carriage agreement), Verizon (but, without prejudice to the parties’ positions on any other issue, only for the revenues associated with the right to sell advertising during live NFL games, and not for revenues associated with any other rights, which are included in the NFL Ventures/Postseason Bucket), and Amazon (for the digital simulcast rights for the FOX Thursday Night Football package, but not for the SVOD content and other ancillary rights which are included in the NFL Ventures/Postseason Bucket); the only revenues that would fall into category (3) are the rights fees paid by Westwood One (for the national terrestrial radio package), Sirius (for the national satellite radio package), and Tune-In (for the national Internet radio package).

(a)(ii)

NFL Ventures/Postseason. NFL Ventures/Postseason AR shall consist of: (A) revenues (other than those described in Subsection (i) above) arising from the operation of postseason NFL games received or to be received by the NFL or NFL affiliates (as opposed to by Club or Club Affiliates); and (B) revenues (other than those described in Subsection (i) above) arising from operation of NFL-affiliated entities (including without limitation NFL Ventures, NFL Network, NFL Properties, NFL Enterprises, NFL Productions, and NFL Digital (including NFL.com and NFL Mobile). For the avoidance of doubt, revenues in this category include without limitation: (1) all revenues of NFL Network, including those related to the broadcast, telecast or distribution of live NFL games and the RedZone channel; and (2) the revenues of NFL Ventures/NFL Digital from the agreement with Verizon (other than as described above); the revenues of NFL Ventures/NFL Digital from the Game Pass product (to the extent that it only distributes out-of-market games); the revenues from NFL Ventures/NFL Films from the NFL Films agreement with ESPN; in each of the cases listed after (2) above, as such agreements existed as of the 2019 League Year.

(a)(iii)

Local. Local AR shall consist of all AR received or to be received by the Clubs or Club Affiliates and not included in League Media AR or NFL Ventures/Postseason AR. For the avoidance of doubt, Local AR shall include revenues from the sale or license by Clubs of preseason game television rights.

(a)(iv)

Bundled Rights. If, in future League Years, League Media rights are bundled and sold or licensed with other rights that would be within the Ventures or Local AR “bucket,” the parties will discuss in good faith the appropriate bucket allocation of the revenues for such rights. In the absence of agreement, the issue shall be resolved by an “Allocation Arbitrator,” who shall be jointly selected by the parties. The parties shall each propose an allocation to the Allocation Arbitrator, who will decide which proposed allocation to adopt (i.e., a “baseball-style” arbitration). This Subsection shall not apply to any of the current contracts specified in Subsections (i) and (ii) above.

(a)(v)

No Migration. No AR may be included in more than one of these categories, and all AR must be included in one of these categories. Revenue for substantially similar rights, services, sales, etc. as for the 2019 League Year shall not migrate into another revenue bucket in subsequent League Years regardless of the entity which receives or generates the AR in such subsequent League Years.

(b)

[Omitted].

(c)

Player Cost Amounts. For each League Year, the Player Cost Amount and Salary Cap shall be calculated using the information from the Special Purpose Letters in the following four-step manner:

(c)(i)

Calculation of the Projected Player Cost Amount. The Player Cost Amount shall be calculated initially as the sum of: (1) 55% of projected League Media AR; (2) 45% of projected NFL Ventures/Postseason AR (other than AR from new line of business projects pursuant to Subsection 1(a)(xii)(2) above); (3) 40% of projected Local AR; and (4), if applicable, 50% of the net AR for new line of business projects pursuant to Subsection 1(a)(xiii)(2) above; less (5) 47.5% of the Joint Contribution Amount.

(c)(ii)

Bands.

(c)(ii)(A)

If, in the 2020 League Year, the Player Cost Amount before application of the Stadium Credit is greater than 48.5% of Projected AR then the Player Cost Amount shall be reduced to 48.5% of Projected AR. If, in the 2020 League Year, the Player Cost Amount is less than 47% of Projected AR, the Player Cost Amount shall be increased to 47% of Projected AR.

(c)(ii)(B)

If, in the 2021–2030 League Years, the Player Cost Amount before application of the Stadium Credit is greater than 48.5% of Projected AR then the Player Cost Amount shall be reduced to 48.5% of Projected AR. If, in any of these League Years, the Player Cost Amount is less than 48% of Projected AR, the Player Cost Amount shall be increased to 48% of Projected AR.

(c)(iii)

Application of Stadium Credit. The Player Cost Amount shall be reduced by the Stadium Credit, provided that, after application of the Stadium Credit, the Player Cost Amount shall not be below: 47% of Projected AR for the 2020 League Year; or 48% of Projected AR for the 2021–2030 League Years. If, in the 2020 League Year, application of the Stadium Credit and/or the LA Exclusion (as described above) would result in a Player Cost Amount below 47% of Projected AR, then the Player Cost Amount shall be increased to 47% of Projected AR. If, in the 2021–2030 League Years, application of the Stadium Credit and/or the LA Exclusion (as described above) would result in a Player Cost Amount below 48% of Projected AR, then the Player Cost Amount shall be increased to 48% of Projected AR.

(c)(iv)

Media Kicker. In any League Year in which the NFL elects to have a 17game regular season and has negotiated “New Media Contracts” (as defined below) (a “Covered Season”), the Player Cost Amount (as calculated pursuant to Subsections (i)– (iii) above) may be increased by the Media Kicker. As set forth below, the Media Kicker will apply in a Covered Season in which the “Average Annual Value” of the “New Media Contracts” exceeds a certain threshold. The amount of the Media Kicker will be calculated in accordance with the process set forth in this Subsection.

(c)(iv)(A)

Definitions. For purposes of this Subsection:

(c)(iv)(A)(1)

“Current Average”: The average annual League Media AR for the 2014– 2022 seasons. For purposes of determining the Current Average, League Media AR shall mean the revenues from television rights sold or licensed either nationally or packaged on a regional basis for the telecast, broadcast, or streaming of live or near-live transmission of entire or near-entire NFL games (but not highlights) on broadcast, cable, satellite, internet, or other media (but not for up to sixteen regular season games telecast or broadcast by the NFL Network) from: (i) ESPN (for the Monday Night Football Package); (ii) CBS (for the Sunday afternoon package); (iii) FOX (for the Sunday afternoon package and the Thursday Night Football broadcast package); (iv) NBC (for the Sunday Night Football package) (in cases (i)–(iv) using the allocations from those contracts as set forth in the Parties’ February 8, 2018 side letter agreement); (v) DIRECTV (for the Sunday Ticket package); (vi) Verizon (for the value of the rights to stream live games, but not for highlights, ancillary programming, sponsorships, enhancements, or ad sales on NFL Network); and (vii) live- or near-live entire or near-entire game content delivered via digital simulcast or streaming (e.g., “all access” / “Over-The-Top” (“OTT”) products). The parties agree that the Current Average is $7.357 billion.

(c)(iv)(A)(2)

“New Media Contracts”: The contracts (or portions thereof) for television rights entered into after the 2020 League Year for the 2020 League Year or beyond sold or licensed either nationally or packaged on a regional basis for the telecast or broadcast of live or near-live transmission of entire or near-entire NFL games (but not highlights) on broadcast, cable, satellite, internet, or other media (but not for up to seventeen regular season games telecast or broadcast by the NFL Network) substantially similar in scope to such rights for up to a 17-game season in the contracts from which the Current Average described above is derived. The same allocations from the parties’ February 8, 2018 side letter agreement will apply to the determination of the value of the New Media Contracts. The NFL has committed to negotiate at least one New Media Contract for the 2021 League Year should the NFL elect to have a seventeen-game regular season in the 2021 League Year.

(c)(iv)(A)(3)

“Average Annual Value” (“AAV”): The Average Annual Value for the New Media Contracts is determined by dividing the total League Media AR from those contracts (using the definitions and method described in Subsection (2) above) by the number of seasons covered by those contracts. Average Annual Value will be recalculated upon any negotiation or renegotiation of a New Media Contract during the term of this Agreement. In the event that a New Media Contract (in whole or in part) covers a partial season, the revenue for such season for purposes of the new AAV calculation shall be determined based on a full-year equivalent value. In the event that there are New Media Contracts of different lengths, the AAV of the New Media Contracts as a whole shall be determined by calculating the AAV of each component contract over the term of that contract and summing the total.

(c)(iv)(A)(4)

“Kicker Threshold”: For the purpose of the calculation of the Media Kicker, the Parties agree to set thirty-five percent (35%) as the threshold deal-over-deal average increase for new media agreements. In other words, the Kicker Threshold is 135% of the Current Average, or $7.357 × 135%, or $9.932 billion. In order for the Media Kicker to apply in a Covered Season, the actual AAV of the New Media Contracts must exceed the Kicker Threshold.

(c)(iv)(B)

Calculation. The Media Kicker shall be calculated using the following steps:

(c)(iv)(B)(1)

Subtract the Current Average from the AAV of the New Media Contracts, divide by the Current Average, multiply by 100, and round the result to the nearest onehundredth to determine the “Actual Deal-Over-Deal Average Increase” or “ADODAI,” which is expressed as a percentage. If ADODAI is less than or equal to 35%, then there will be no Media Kicker.,

(c)(iv)(B)(2)

If the ADODAI is greater than 35%, determine the applicable Kicker Player Cost Percentage (“Kicker PC %”) using the Slotted Player Cost % Methodology reflected in Appendix AA.

(c)(iv)(B)(3)

Multiply the Kicker PC % by Projected AR for the League Year to determine the “Kicker Value” (subject to a True-Up based on any difference between Projected AR and actual AR, as provided for in Subsection (C) below).

(c)(iv)(B)(4)

Increase the Player Cost Amount by the Kicker Value. As indicated in Appendix AA (“Slotted PC %”), by way of illustration, without limitation: (i) if the ADODAI is 60%, then the Kicker Value will increase the Player Cost Amount for each season covered by the New Media Contracts to 48.5% of AR prior to application of any Kicker Bank as described in Subsection (F) below; (ii) if the ADODAI exceeds 60%, then the NFL shall be entitled to a recoupment as described in Subsection (5) below; (iii) if the ADODAI is 75%, then the Kicker Value will increase the Player Cost Amount for each season covered by the New Media Contracts to 48.5% of AR prior to: (1) the recoupment described in Subsection (5) below; and (2) application of any Kicker Bank as described in Subsection (F) below; (iv) if the ADODAI is 100%, then the Kicker Value will increase the Player Cost Amount for each season covered by the New Media Contracts to 48.6% of AR prior to: (1) the recoupment described in Subsection (5) below; and (2) application of any Kicker Bank as described in Subsection (F) below; (v) if the ADODAI is 110%, then the Kicker Value will increase the Player Cost Amount for each season covered by the New Media Contracts to 48.7% of AR prior to: (1) the recoupment described in Subsection (5) below; and (2) application of any Kicker Bank as described in Subsection (F) below; and (vi) if the ADODAI is 120%, then the Kicker Value will increase the Player Cost Amount for each season covered by the New Media Contracts to 48.8% of AR prior to: (1) the recoupment described in Subsection (5) below; and (2) application of any Kicker Bank as described in Subsection (F) below.

(c)(iv)(B)(5)

If the ADODAI is greater than 60% of the Current Average, then the NFL shall be entitled to a “recoupment” of a portion of the Media Kicker (“Kicker Credit”) related to the ADODAI “corridor” between 60–70%, calculated in accordance with the agreed-upon methodology (“Kicker Credit Calculation”). In such circumstances, the Player Cost Amount will be reduced by the applicable Kicker Credit, provided that such recoupment cannot reduce the Player Cost Amount below 48.4% of AR prior to application of any Kicker Bank as described in Subsection (F) below. The Kicker Credit shall be calculated on an annual basis; the actual amount of the Kicker Credit in each League Year will be determined by applying this methodology to the total amount of AR for that League Year.

(c)(iv)(B)(6)

If the ADODAI exceeds 120%, there will be no additional amounts added to the Media Kicker (i.e., the Media Kicker will be calculated as if the ADODAI was 120%), prior to application of any Kicker Bank as described in Subsection (F) below.

(c)(iv)(C)

True-Ups. Calculations related to the Media Kicker will be subject to the same True-Up procedures as other True-Ups in Article 12 based on differences between Projected and actual AR. To the extent that the Media Kicker based on Projected AR is greater or lesser than the Media Kicker later calculated based on actual AR for that League Year, the difference (positive or negative) shall be applied as a True-Up to the next Salary Cap (except as provided in the Final League Year as set forth in Section 3(b)(iv)).

(c)(iv)(D)

No Acceleration Into this Agreement. If one or more of the New Media Contracts extend beyond the term of this Agreement, there shall be no acceleration of revenues into the League Years covered by this Agreement, and the Media Kicker calculation shall cease as of the last League Year covered by this Agreement, provided that the NFLPA reserves the right to challenge whether the revenues for rights for seasons after this Agreement are significantly disproportionate to the revenues for rights for seasons within this Agreement (taking into account the time-value of money and any differences that may exist in the scope of rights for seasons within and seasons after this Agreement) and were negotiated in that manner for a principal purpose of reducing the Media Kicker. If the NFLPA establishes the foregoing by a clear preponderance of the evidence, then the System Arbitrator shall have the authority to reallocate any amounts into the Media Kicker calculation that are found to be improperly attributed to League Years after the end of this Agreement.

(c)(iv)(E)

Amended Contracts for Non-Covered Seasons. If, after the start of the 2020 League Year, the NFL negotiates any New Media Contracts that do not contemplate or reflect a 17-game regular season, and the NFL subsequently negotiates New Media Contracts with the same counterpart(ies) for any Covered Season, any incremental television revenues from the first set of such New Media Contracts will be included in, and sloped in the same manner as, the AAV from the second set of such New Media Contracts for purposes of determining the Media Kicker.

(c)(iv)(F)

Multiple Rounds of New Media Contracts. If there are multiple rounds of New Media Contracts, the Media Kicker will be “reset” upon execution of the second (or any subsequent) round of New Media Contracts in the following manner:

(c)(iv)(F)(1)

Determine the AAV of the New Media Contracts as a whole (i.e., divide the total League Media AR in those contracts for any Covered Season under this Agreement by the total number of Covered Seasons under this Agreement covered by those contracts).

(c)(iv)(F)(2)

Subtract the Current Average from the resulting, updated AAV from Subsection (1), divide by the Current Average, multiply by 100, and round the result to the nearest one-hundredth to determine the overall ADODAI.

(c)(iv)(F)(3)

If this ADODAI is greater than 35%, determine the applicable Kicker Player Cost Percentage (“Kicker PC %”) using the Slotted Player Cost % Methodology reflected in Appendix AA.

(c)(iv)(F)(4)

Multiply the Kicker PC % by Total AR for the current League Year and any prior League Years covered by the New Media Contracts to determine the revised “Kicker Value” for each such League Year.

(c)(iv)(F)(5)

Determine the applicable Kicker Credit (if any) for the current League Year and any prior League Years covered by the New Media Contracts using the updated ADODAI.

(c)(iv)(F)(6)

For any prior League Years, determine the amount (if any) of the Kicker Bank that results by subtracting the sum of the original Kicker Value and Kicker Credit from the sum of the revised Kicker Value and Kicker Credit for that League Year. The Kicker Bank for any League Year can be either a positive or negative number. The Cumulative Kicker Bank is the sum of the Kicker Banks for each prior League Year.

(c)(iv)(F)(7)

For the current League Year, increase the Player Cost Amount by the Kicker Value, then reduce it by the Kicker Credit, and then adjust it by a percentage of the Cumulative Bank, which percentage shall be the same percentage as the AR from the New Media Contracts in that League Year is to the total value of the New Media Contracts with respect to League Years under this Agreement (e.g., if the AR from the first League Year covered by the New Media Contracts is 10% of the total value of the New Media Contracts with respect to League Years covered by this Agreement, then 10% of the Cumulative Bank (whether that is a positive or negative number) shall be applied in that first League Year). For the avoidance of doubt, the Kicker Bank (which operates in effect as a “trueup”) can result in a final Player Cost Amount that exceeds the ceiling or is lower than the floor that would otherwise apply.

(c)(iv)(F)(8)

In the event a new round of New Media Contracts would not result in an increase (or decrease) in the Salary Cap of $100,000 or more (per Club), the reset of the Media Kicker shall be deferred until any subsequent round meets that threshold.

(c)(v)

Salary Cap. The Salary Cap for a League Year shall be the Player Cost Amount for that League Year less Projected Benefits for that League Year, divided by the number of Clubs in the League in that League Year, adjusted by any applicable True Up.