Revenue Accounting and Calculation of the Salary Cap
Section 1All Revenues
For purposes of this Article, and anywhere else stated in this Agreement, revenues shall be accounted for in the manner set forth below.
All Revenues (“AR”) means the aggregate revenues received or to be received on an accrual basis, for or with respect to a League Year during the term of this Agreement, by the NFL and all NFL Clubs (and their designees), from all sources, whether known or unknown, derived from, relating to or arising out of the performance of players in NFL football games, with only the specific exceptions set forth below. AR shall include, without limitation:
Regular season, preseason, and postseason gate receipts including ticket revenue from “luxury boxes,” suites, and premium seating among NFL Clubs in all cases net of (A) admission taxes, (B) taxes on tickets regularly paid to governmental authorities by Clubs or Club Affiliates, provided such taxes are deducted for purposes of calculating gate receipts subject to revenue sharing and (C) surcharges paid to stadium or municipal authorities which are deducted for purposes of calculating gate receipts subject to revenue sharing. For purposes of this Subsection, unless otherwise expressly agreed to by the parties, the portion of ticket revenue attributable to luxury boxes, suites and premium seating shall be the face value of the ticket, or any additional amounts which are subject to gate receipt sharing among NFL Clubs. Revenues from premium charges on ticket sales in excess of the face value of the ticket (e.g., rebates from ticketing sources) shall be included in AR. Credit card charges related to ticket sales are not considered a deductible “surcharge” and will not be offset against gate receipts. If a Club charges a service fee on the tickets it sells in excess of the face value of the ticket, on a ticket account basis and not on a per-ticket basis (up to a reasonable maximum amount prescribed by League policy, which as of the effective date of this Agreement is $4 per ticket account), such service fee will not be AR;
Revenues related to gambling on any aspect of NFL games, any performance of NFL players in NFL games or in any other NFL/Club-related activity, or any other NFL/Club-related activity, including without limitation revenues from gambling on the outcome of NFL games or any performance of players in NFL games or in NFL/Club-related activity (including without limitation revenues derived from the licensing of NFL games or player data), gambling-related sponsorship revenues, operation of gambling of any kind in an NFL stadium, use of NFL/Club-related telecasts or other content by gambling-related businesses, use of NFL/Club licensed gambling applications, and revenues related to ensuring the gambling-related integrity of NFL games or other NFL/Club-related activity (“Gambling Revenues”).
For Gambling Revenues generated by operation of gambling-related businesses located: (i) in or physically attached to an NFL Stadium (defined for purposes of this Section as being “in” the Stadium); or (ii) within 200 feet of the outer wall of an NFL Stadium or the point of entry to an NFL Stadium at which a ticket is required, whichever distance is greater (defined for purposes of this Section as being “near” (but not “in”) the Stadium), including revenue from non-football gambling (e.g., revenues from slot machines located in or physically attached to an NFL Stadium), all revenue actually received or to be received by a Club or Club Affiliate (or the NFL or any NFL-related entity) during the season (e.g., rent payment or other payment to the Club, but in no event to include any gambling revenues received by an unrelated entity) will be included in AR, with the “season” for purposes of this provision defined as the start of the Club’s training camp through the last game played by the Club. For Gambling Revenues generated by operation of gambling-related businesses in an NFL Stadium during the offseason, only fifty percent (50%) of revenue actually received by the Club or Club Affiliate (or the NFL or any NFLrelated entity) will be included in AR. For Gambling Revenues generated by operation of gambling-related businesses near an NFL Stadium, including revenue from non-football gambling (e.g., revenues from slot machines), all revenue received or to be received by a Club or Club Affiliate (or the NFL or any NFL-related entity) during the season (e.g., rent payment or other payment to the Club, but in no event to include any gambling revenues received by the unrelated entity) will be included in AR; for Gambling Revenues generated near such an NFL Stadium during the offseason, only thirty-three percent (33%) of revenue actually received by the Club or Club Affiliate (or the NFL or any NFL-related entity) will be included in AR.
For any Gambling Revenues generated by operation of gambling-related businesses located: (i) in (as defined above in Section (B) as being “in” the Stadium); or (ii) near the Stadium (as defined above in Section (B) as being “near” an NFL Stadium), that is not received by a Club or Club Affiliate (or the NFL or any NFL-related entity), but where the Club or Club Affiliate (or the NFL or any NFL-related entity) is a noncontrolling minority owner in such business, such revenue from such location shall be included in AR on a pro-rata basis based upon the NFL or Club’s (or related party’s) ownership stake in that entity, using the same in-season/offseason and location formula set forth above; provided, however, that this Subsection shall not apply to any passive ownership in which the stake of the Club or Club Affiliate is five percent (5%) or less. Should the NFL or any Club (or related party) own five percent (5%) or less in a passive ownership of a gambling-related business located in or near an NFL Stadium, revenue from such location shall not be included in AR. Subject to the preceding definitions, for any Gambling Revenues generated by operation of gambling-related businesses located in or near an NFL Stadium that is received by a Club or a Related Entity (or the NFL or any NFL-related entity) (but not a “Non-Controlled Related Entity”), one hundred percent (100%) of such revenue from such location shall be included in AR subject to the same in-season/offseason formula set forth above (e.g., in the offseason should such business be in an NFL Stadium, fifty percent (50%) of such revenue shall be included in AR; if such business is near, but not in, a Stadium, thirty-three percent (33%) of such revenue will be included in AR).
Notwithstanding the above, 100% of revenue received for all NFL/Club-gambling-related licensing fees shall be included in AR.
For purposes of this Agreement, Gambling Revenues from wagers shall be calculated as: (i) the aggregate net difference between gaming wins and losses (not the total amount wagered) net of all excise taxes or other gambling or gaming-related taxes or surcharges actually paid or owed; or (ii) any greater amount received by the NFL or the Club (or any related entity), net of all excise taxes or other gambling or gaming-related taxes or surcharges actually paid or owed.
Nothing in this subsection otherwise limits the amount of Gambling Revenue included in AR if such revenue was received or to be received as part of stadium lease or use agreement negotiation.
Except as expressly provided in Subsection (B), non-football gambling revenues are not AR.
Except as expressly provided in Subsection (C), the provisions of Section 1(a)(iv)(5) of this Article shall apply to any Non-Controlled Related Entities engaged in Gambling Revenues-related transactions
Proceeds from the sale or conveyance of any right to receive any of the revenues described above.
Notwithstanding Subsection (A) above or any other provision of this Agreement: [The following provision is intended to clarify and set forth the principles to govern the sale of a current or future owned-and-controlled NFL business. This is intended to set forth the treatment of the proceeds of the sale transaction and also ensure that players receive their share of a fair market value rights fee from ongoing operations of the business post-transaction. Except as set forth in this Subsection, this provision shall neither limit nor expand the definition of AR]: Proceeds from the sale or conveyance of an NFL owned-and-controlled business (e.g., NFL Films or NFL Network) (in whole or in part), or of any equity interest therein (in whole or in part), shall not constitute AR. Notwithstanding the foregoing sentence, if the business going forward is no longer controlled by the NFL, only the fair market value of the rights provided by the NFL for which amounts are paid (or imputed by the NFL) for that business (a rights fee being required) to the NFL or NFL Clubs (or their designees (i.e., a third party to whom the NFL or Club or Club Affiliate directs that amount be paid)) for the rights to attend, broadcast, distribute, market, license, or sell any other product or service in connection with NFL games, or in connection with any other NFL-related intellectual property (e.g., requiring a rights or licensing fee or other payments made to the NFL or its Clubs (or their designees (i.e., a third party to whom the NFL or Club or Club Affiliate directs that amount be paid)), shall be included in AR, but no revenue, dividends, distributions, or other income generated by or paid to that business) shall be included in AR. The fees paid by the acquiring entity to the NFL or NFL Clubs (or their designees (i.e., a third party to whom the NFL or Club or Club Affiliate directs that amount be paid)) for the rights set forth above to attend, broadcast, distribute, market, license, or sell any other product or service in connection with NFL games, or in connection with any other NFL-related intellectual property, to the NFL following the closing of such sale or conveyance shall be included in AR each League Year at no less than the “fair market value” to the NFL or NFL Clubs of such rights. For the avoidance of doubt: (a) the sale or conveyance of an owned-and-controlled business will be limited to the existing lines of business generating AR in each entity as identified in Appendix CC, which shall be updated annually by the NFL to reflect changes to existing lines of business and include any new lines of business that generate AR; (b) the fair market value of the rights included in AR each League Year may be a larger or smaller amount than the AR that was generated by the NFL owned-and-controlled business prior to such sale or conveyance; and (c) the sale or conveyance of an NFL owned-and-controlled business that includes lines of business not identified in Appendix CC or added in subsequent years may create a separate obligation to pay an additional rights payment to reflect the lines of business not identified in the Appendix. The Accountants shall have access to the payment terms of any such contracts to confirm that the amount paid for such rights reflects fair market value. Should the parties disagree as to the fair market value of the rights or licensing fees paid (or imputed) by the new entity, such dispute must be filed within one year of the payment and it will be resolved by the System Arbitrator. Any shortfall in fair market value determined by the System Arbitrator shall be added to AR each applicable year in which the entity has acquired the ability to use the NFL rights. The NFLPA shall have the right to review Appendix CC to confirm that the “lines of business” listed for each owned-and-controlled entity is complete. The NFLPA shall have the right to challenge the accuracy of Appendix CC using the System Arbitrator procedure. Nothing in the foregoing shall affect or limit application of the Agreement’s “No Double Counting” provision.
Proceeds including Copyright Royalty Tribunal and extended market payments from the sale, license or other conveyance of the right to broadcast or exhibit NFL preseason, regular season and playoff games on radio and television including, without limitation, network, local, cable, pay television, satellite encryption, international broadcasts, delayed broadcasts, and all other means of distribution;
Revenues derived from concessions, parking, local advertising and promotion, signage, magazine advertising, local sponsorship agreements, stadium clubs, luxury box income other than that described in Section 1(a)(i)(1) above (with “Super suites” (i.e., suites substantially larger in size than the largest suite regularly available for sale in the stadium) to have no additional value imputed in respect of them by virtue of such status), Internet operations (including merchandise sales), and sales of programs and novelties;
The consolidated revenue generated by NFL Ventures L.P. (“NFL Ventures”) (including but not limited to those categories of revenue currently or formerly generated by NFL Ventures’ subsidiaries, NFL Properties LLC, NFL Enterprises LLC, and NFL Productions LLC d/b/a NFL Films, but excluding from NFL Ventures’ revenue any revenues otherwise included in AR pursuant to Subsections (a)(i)(1)–(3) above or Subsection (a)(i)(5) below). AR from NFL Properties LLC and NFL Productions LLC shall be calculated on a one-year lag, consistent with the parties’ past practice under the Prior Agreement.
Barter income, which shall be valued at 90% of the fair market value of the goods or services received;
The value of equity instruments unconditionally received from third parties by the NFL or member Clubs (i.e., not equity instruments in business entities formed and owned exclusively by the NFL, NFL Ventures L.P. or any of its affiliates, or the member Clubs) derived from, relating to or arising out of the performance of players in NFL football games shall be included in AR beginning in the League Year in which the equity instrument vests at the fair value of such instrument on the date of such vesting, amortized over ten years. In subsequent League Years within the amortization period, the amortized amount shall be adjusted pursuant to the Black Sholes option pricing model methodology or as otherwise agreed. After the amortization period ends, the full amount of the Black Sholes (or other agreed) methodology shall be included in AR. In the event that the equity instrument is sold, AR for that League Year shall be the proceeds less the AR previously recognized.
Revenues received by a Club or Club Affiliate pursuant to a stadium lease or directly related stadium-use agreement with an unaffiliated third party, where the amount of such revenues is determined based upon activities that are unrelated to NFL football, in circumstances where the involved Club or Club Affiliate is not required to make a non-de minimis investment of capital or cash to receive such revenue (provided that the provisions of this Subsection (1)(a)(i)(7) shall not be retroactively applied to include in AR revenues generated from nonfootball business opportunities arising out of leases or other stadium use agreements entered into prior to January 1, 1993, the financial terms of which have not been amended since such date);
Recoveries under business interruption insurance policies that are received by any League- or Club-related entity, to the extent that such recoveries compensate such entity for lost revenues that would have been included in AR. The amount of such recoveries shall be included in AR net of (1) premiums paid for the policy/policies recovered under in the League Year(s) that include the events and the recoveries; and (2) deductible and unreimbursed expenses arising out of or related to the events giving rise to the insurance claim/recovery. Any lump sum payments will be allocated under the method separately agreed to by the parties;
Any expense reimbursements received by a Club or Club Affiliate from a governmental entity in connection with a stadium lease or a directly related stadium-use agreement, except as provided in Subsections 1(a)(ii)(2)(E)–(F) and (J) below;
The following items are excluded from AR:
“Taxes/surcharges” on regular season, preseason, and postseason gate receipts (including ticket revenue from “luxury boxes,” suites, and premium seating) which are comprised of (A) admission taxes, (B) taxes on tickets regularly paid to governmental authorities by Clubs or Club Affiliates, provided such taxes are deducted for purposes of calculating gate receipts subject to revenue sharing and (C) surcharges paid to stadium or municipal authorities which are deducted for purposes of calculating gate receipts subject to revenue sharing (which amounts approximated in the aggregate $156 million for the 2019 League Year);
Revenues derived from wholesale merchandising opportunities (i.e., the manufacture and distribution of merchandise to third-party retailers) conducted by Dallas Cowboys Merchandising (“DCM”) other than any related royalty payments to any League entity, Club or Club Affiliate; and
Revenues from the PSLs sold by the New York Jets and New York Giants that are dedicated to the construction of New Meadowlands Stadium, including the amortization to League Years during the term of this Agreement of such previously-sold PSLs (which amounts are projected as of the effective date of this Agreement to be approximately $40 million for the 2020 League Year).
Any PSLs that were excluded from the calculation of Total Revenues under the 2006 CBA or from AR under the Prior Agreement, to the extent that the amortization schedule has not expired; and
Any PSRs or naming rights or cornerstone sponsorship proceeds that were excluded from the calculation of AR under the Prior Agreement, to the extent that the amortization schedule has not expired.
The following is a nonexclusive list of examples of revenues received by the NFL and/or NFL Clubs which are not derived from, and do not relate to or arise out of the performance of players in NFL football games (and are therefore not “AR”):
Proceeds from the assignment, sale or trade of Player Contracts, proceeds from the sale of any existing NFL franchise (or any interest therein) or the grant of NFL expansion franchises, franchise relocation fees, dues or capital contributions received by the NFL, fines, “revenue sharing” among NFL Teams, interest income, insurance recoveries (other than those net business interruption insurance recoveries that are described in Section 1(a)(i)(8) above), sales of interests in real estate and non-AR-related property, and Club cheerleader revenues (provided that, if such cheerleader revenue is provided by an entity with which the Club has another commercial relationship, the Accountants will review the transactions and determine the appropriateness of any revenue allocations);
Revenues generated from stadium events unrelated to NFL football (e.g., concerts, soccer games) in which the Club or a Club Affiliate makes a non-de minimis investment of capital or cash, and the value of, and revenues generated from, stadiumrelated businesses and/or opportunities unrelated to NFL football in which the Club or an affiliate must invest a non-de minimis amount of capital, cash, or effort to generate revenue (other than real estate development opportunities, which are subject to Subsection 1(a)(ii)(I) below);
The value of promotional spots (e.g., television or radio spots) that are received from time to time by the NFL under national media contracts solely for its own use (either to promote the NFL’s own football related businesses (and not the businesses of any other party), or for charitable purposes) and not for resale (although for clarity, the NFL’s promotional spots may include references to or depict logos or marks of third party sponsors or providers (e.g., an advertisement promoting the NFL Shop may show merchandise with NFL sponsor logos) as long as the third-party does not provide consideration to be referenced or depicted in such spots);
The value of complimentary or other no-charge tickets distributed by a Club, up to 320,000 League-wide across all preseason games (i.e., an average of 5,000 tickets per preseason game), and up to 17,000 tickets per-Club across all home regular season games (i.e., an average of 2,125 tickets per regular season game) allocated at the Club’s discretion, provided that such tickets are excluded from visiting team sharing requirements. NFLPA approval is required for any exclusion from AR of such tickets above the levels set forth in this Subsection.
Specifically designated day-of-game expense reimbursements received by a Club or Club Affiliate from a governmental entity, where such reimbursements are for legitimate expenses that the Club or Club Affiliate has incurred that the governmental entity previously incurred (including in connection with the Club’s occupancy of a prior stadium, if the reimbursements arise out of the construction of a new stadium). This exclusion shall not apply to expense reimbursements received in connection with concession sales, operation of parking facilities, signage or advertising sales, or any other revenue generating activity at the stadium other than the conduct of the game itself (e.g., expense reimbursements for game-day security previously provided by the police, and post-game stadium clean-up previously provided by a municipality, are not treated as AR, if such reimbursement otherwise qualifies). All claims for this exclusion shall be supported by appropriate documentation evidencing the extent to which the Club or Club Affiliate incurred the designated day-of-game expense and the extent to which the governmental entity previously incurred the expense;
In addition to the amounts described in Subsection (E) above, 65% of other (i.e., non-day of game) operating or maintenance expense reimbursements only for the specific Teams and agreements as per Paragraph 3 of the letter agreement under the Prior Agreement dated November 21, 2007. If a Club has reimbursements under both Subsection (E) above and this Subsection (F), the allocation as between the two categories shall be consistent with how the parties treated such reimbursements under the Prior Agreement.
Investments in or contributions toward the purchase of concession equipment by concessionaires on behalf of a Club or a Club’s Stadium, and the value of provided elements related to the operation and maintenance of the soft drink equipment in the Club’s Stadium (i.e., dispensing/vending equipment, service). For the purpose of this Section:
- (i) The parties have agreed that the “equipment” and “provided elements related to the operation and maintenance of the soft drink equipment” that are not considered AR under this Section include, without limitation, the following items: (a) beer or soft-drink dispensing machines and the value of any provided elements related to the operation and maintenance of the beer or soft drink equipment in the Club’s stadium (i.e., dispensing/vending equipment, service); (b) cash registers, credit card readers, computers, printers, or other electronic equipment that is/are used solely in concession areas (including point-of-sale electronic hardware, software, and related wiring and internet equipment) or outside of such areas by food or beverage vendors (e.g., hand held ordering devices); (c) condiment, serving, or other food or beverage carts; (d) digital menu boards; (e) concessions electronic signage, or menu boards (electronic or not electronic); (f) food preparation machines such as broilers, fryers, grills, heat lamps, ice machines, mixers, ovens, ranges, popcorn machines, refrigerators, sinks, warming units, and wrapping machines; (g) non-disposable smallwares; (h) food preparation and serving tables; (i) shelving used in concession areas; (j) concession-related vending machines; (k) sanitation dispensers; (l) water conditioners and filters; (m) water heaters; (n) dishwashers and waste disposal equipment; (o) portable fire protection equipment such as extinguishers, in each case (k)–(o), only when dedicated for use exclusively in or for concession areas; and (p) internet, cabling, or other electronic transmission equipment directly and exclusively used with any of the equipment identified above.
- (ii) The parties have agreed that the “equipment” and “provided elements related to the operation and maintenance of the soft drink equipment” that are not considered AR under this Section do not include, without limitation, the following items: (a) air conditioners, air heaters, carpentry, carpeting, ceilings, electrical, flooring, furnaces, insulation, lighting (other than heat lamps used for food preparation or service), painting, plumbing, non-electronic signage, tilting, or wall coverings; (b) architectural, design, contractor, installation or other services related to concession areas (except for maintenance or service costs covered by Subsection (G)(i)(a) above); (c) artwork; (d) buckets, mops, brooms, vacuum cleaners, or other cleaning or maintenance items; (e) construction buildout costs (other than the cost of specific equipment identified in Subsection (G)(i) above; (f) disposable smallwares; (g) financing costs; (h)–(i)[omitted]; (j) chairs, tables, bars (fixed or movable), or other furniture, other than food serving or preparation tables; (k) forklifts, golf carts, trailers, trucks, or other means of transportation; (l) hand-held electronic devices that are used for purposes other than ordering food or beverages, and are located outside of concession areas and operated by persons other than food or beverage vendors (e.g., multi-function handheld devices that are used by fans outside concession areas); (m) internet, cabling, or other electronic transmission equipment not directly and exclusively used with any of the equipment identified in Subsection (G)(i) above; (n) leasehold improvements; (o) maintenance or service costs other than for beverage dispensers as provided in Subsection G(i)(a) above; (p) security equipment or safes; (q) shop equipment; (r) surfacing; (s) time clocks; (t) uniforms or other clothing; and (u) items described in Subsections (G)(ii)(k)–(o) that are not dedicated for use exclusively in or for concession areas.
- (iii) The amount considered as “equipment” for the above subsections includes the purchase price of the item along with any related shipping and taxes. The parties will discuss in good faith regarding whether any particular replacement parts used to repair equipment itself qualifies as “equipment” under the terms of this Section 1(a)(ii)(2)(G); and
- (iv) To the extent that an item is not described in the foregoing, its status will be determined by whether it is closer in nature to the items described in Subsection (G)(i) or Subsection (G)(ii), unless the parties expressly agree in writing otherwise.
- (v) To the extent that any amounts are deemed to be non-qualifying under this Subsection, they will be included in AR amortized over five (5) years.
The value of luxury boxes that are (1) used by a Club owner for personal purposes or to promote the Club or the owner’s other business interests; or (2) provided to stadium authorities, municipalities, and/or governmental officials, or (3) used or made available for use by the owner(s) of the visiting Club, or (4) provided for the use of a Club head coach; in each case where no revenue is actually received by the Club or a Club Affiliate, except that the value of such luxury boxes will be imputed as AR unless at least one luxury box in the stadium is available and unsold; provided that, in no event shall revenue be imputed for one luxury box that is used by the owner(s) of the Club, and one luxury box that is used or made available for use by the owner(s) of the Visiting Club. Without limiting the foregoing, the value of any luxury box that is provided to a former Club owner in connection with the sale of a Club shall be imputed into AR unless the prior owner is obliged to pay the club periodic consideration (i.e., annual rent) in connection with such use, in which case such consideration will be included as revenue in AR.
Revenues derived from real estate development opportunities in conjunction with or related to any stadium lease, land purchase agreement or other arrangement, provided that such revenues are not substitutions for revenues that would otherwise be included in AR.
Any amounts a Club or any Club Affiliate receives as reimbursement for capital improvements, repairs, or maintenance, from governmental entities obligated to fund or maintain such stadiums under the terms of the lease or other operating agreement (e.g., as the NFLPA has agreed with respect to Denver), where such reimbursement arises when the funding obligation previously resided with the stadium landlord in the stadium lease or operating agreement, and the Club subsequently agreed to assume such obligation and be reimbursed for such expenditures, without any other consideration being exchanged, and in amounts no greater than previously was the responsibility of the stadium landlord. In order to be subject to this provision, the NFL and the applicable Club shall provide the NFLPA with written documentation of the actual audited costs of such improvements, repairs, or maintenance, and the NFLPA Auditor shall have the right to audit the actual costs and reimbursements and the terms of the operating agreement. For the avoidance of doubt, this Subsection is not intended to affect the existing treatment of other public funding of stadium construction or renovation.
Television Revenue Used To Fund Stadium Construction/Renovation. Notwithstanding any other provision of this Agreement, the NFLPA and the NFL may agree, on a case-by-case basis, with no limitation on their exercise of discretion, not to include in AR network television revenue to the extent that such revenue is used to fund the construction or renovation of a stadium that results in an increase in AR.
Related Entities. The parties hereto acknowledge that for purposes of determining AR:
NFL Teams may, during the term of this Agreement, be owned and controlled by persons or entities that will receive revenues for a grant of rights encompassing both (a) rights from the NFL Team so owned or controlled (the revenue from which is includable in AR) and (b) other rights owned or controlled by such persons or entities (the revenue from such other rights not being includable in AR), and that, in such circumstances, allocations would therefore have to be made among the rights and revenues described in this Section 1(a);
NFL Teams may, during the term of this Agreement, receive revenue for the grant of rights to third parties which are owned or controlled by the persons or entities owning or controlling such NFL Teams (hereinafter “Related Entities”); and
The reasonableness and includability in AR of such allocations and transactions between Related Entities shall be determined by the Accountants, in accordance with the procedures described below.
Any entity which has the same ownership as the NFL, any NFL Affiliate (including without limitation NFL Ventures or any of its subsidiaries), or a Club, or is controlled by the same persons or entities which own or control the NFL, any NFL Affiliate, or a Club, and is engaged in AR-related transactions with the NFL, any NFL Affiliate, or a Club will be treated as the same entity as the NFL, any NFL Affiliate, or Club, as applicable, for the purposes of the AR Reporting Package and any audit with respect thereto.
For any entity which does not fit the rule set forth in Subsection (4) above, but which has partial common ownership with the NFL, any NFL Affiliate, or a Club, and which is engaged in AR-related transactions with the NFL, any NFL Affiliate, or the Club (a “Non-Controlled Related Entity”), if the NFL, any NFL Affiliate or a Club contracts with such a Non-Controlled Related Entity for the right to provide goods or services (other than ticket or broadcast rights), revenues from the sale of which would be included in AR if sold directly by the NFL, any NFL Affiliate, or the Club, only the amount paid by the Non-Controlled Related Entity to the NFL, any NFL Affiliate, or the Club for the right to provide such goods or services (which amount must be negotiated in good faith and should reflect the amount that an independent third party would pay for the right to provide such goods or services) shall be included in AR. (For example, if a Club contracts with a Non-Controlled Related Entity when it could have contracted with an independent third party to be the concessionaire at a stadium, AR shall include the concessionaire fee, but not the revenues received by the Non-Controlled Related Entity for the sale of concessions.) The Local Accountants and Accountants shall have access to the payment terms of any such contracts to confirm that the amount paid reflects fair market value. If there is a dispute about whether the amount reflects fair market value, the issue shall be resolved by a jointly-appointed arbitrator who has experience in the line of business in question, and the fair market value shall be included in AR.
In the event of a question whether a business or enterprise owned (wholly or in part) by a Club, Club Affiliate, or Club owner is or is not involved in AR-related transactions, the NFLPA agrees to accept the written certification from the certified accountant of such business or enterprise, that such business or enterprise is not involved in AR-related transactions. Notwithstanding the foregoing, the NFLPA may seek an order from the System Arbitrator granting access to the records of such business or enterprise if it demonstrates that there is a reasonable basis for asserting that such business or enterprise is involved in AR-related activity.
Rounding. For the purposes of any amounts to be calculated or used pursuant to this Agreement with respect to AR, Projected AR, Benefits, Projected Benefits, the Player Cost Amount, Cash Spending, and the Stadium Credit, such amounts shall be rounded to the nearest $1,000. For purposes of any percentage to be calculated or used pursuant to this Agreement, unless otherwise specifically provided, such percentages shall be rounded to the nearest one-one hundredth of one percent (e.g., 47.00%).
Subject to Subsection 1(a)(vi)(6) and Subsection 4(f) below, AR shall not include PSL proceeds that are unequivocally dedicated to stadium construction or stadium renovation projects commenced after the start of the Prior Agreement, and that have received a waiver of any applicable League requirement of sharing of “gross receipts”;
Except as set forth in Subsection (1) above, AR shall include all revenues from PSLs received by, or received by a third party and used, directly or indirectly, for the benefit of, the NFL or any Team or Team Affiliate, subject to any deduction for taxes as provided in Section 1(a)(i) above and the provisions of Subsection (3) below with respect to PSL refunds. Such revenues shall be allocated in equal portions, commencing in the League Year in which they are received, over the remaining life of the PSL, subject to a maximum allocation period of fifteen years; provided, however, that Interest from the League Year the revenues are received until the League Years the revenues are allocated into AR shall be imputed and included in AR, in equal portions over such periods.
For purposes of this Agreement, the term “PSL” shall include any and all instruments of any nature, whether of temporary or permanent duration, that give the purchaser the right to acquire or retain tickets to NFL games and shall include, without limitation, seat options; seat bonds; and suite bonds or long-term conveyances of suite occupancy rights where proceeds are unequivocally dedicated to stadium construction (e.g., Founders’ Suite Programs) that directly or indirectly give purchasers the right to acquire NFL tickets. PSL revenues shall also include revenues from any other device (e.g., periodic payments such as surcharges, loge maintenance fees, etc.) that the NFL and the NFLPA agree constitutes a PSL.
PSL revenues shall be reported net of actual refunds made in the year for which such revenues are reported. If an amount has been refunded, then the refunded amount shall be deducted from PSL revenues used in the calculation of AR. If there is a non-contingent contractual commitment to refund, but the refund is to be made at a later date, then the only amount included is the Interest on the refund. Otherwise, all amounts are included regardless of any refund contingencies. If a refund contingency occurs and money previously included as PSL revenue is refunded, the NFL shall receive a credit against AR (i.e., League-wide AR shall be reduced) in the amount of the refund the next League Year.
In the event of a payment default and/or forfeiture of PSL revenue being received on an installment payment plan, the unamortized portion of such revenue, in excess of cash received, shall no longer be included in AR upon the date, and to the extent, of default/forfeiture. In the event that cash received at the time of the default/forfeiture exceeds life-to-date amortization of PSL revenue, amortization will continue as scheduled until equaling the amount of cash received. In the event that any such PSLs are re-sold, and the re-sale does not meet the criteria of Subsection 1(a)(vi)(1) above, the re-sale will be included in AR and amortized over the life of the PSL up to a maximum of fifteen years.
Exclusions from AR of PSL revenue in respect of funding for stadium projects initiated after the 2005 League Year will terminate upon sale of the recipient franchise if the waiver from revenue sharing also terminates.
Premium Seat Revenues (“PSRs”).
Subject to Subsection 1(a)(vii)(4) and Subsection 4(f) below, AR shall not include PSR proceeds that are used for stadium construction or stadium renovation projects commenced after the start of the Prior Agreement, and that have received a waiver of any applicable League requirement of sharing of “gross receipts.”
Except as provided in Subsection (1) above, AR shall include all PSRs net of amounts described in Subsection 1(a)(i)(1).
For purposes of this Agreement, the term “PSR” shall mean the revenue from any periodic charge in excess of the ticket price that is required to be paid to acquire or retain any ticket to NFL games (other than PSL revenues and charges for purchase or rental of luxury suites), including charges in respect of any amenities required to be purchased in connection with any ticket.
Exclusions from AR of PSR revenue in respect of funding for stadium projects initiated after the 2005 League Year will terminate upon sale of the recipient franchise if the waiver from revenue sharing also terminates.
Naming Rights/Cornerstone Sponsorships.
Subject to Subsections 1(a)(viii)(3)–(4) and Subsection 4(f) below, AR shall not include naming rights and cornerstone sponsorship proceeds that are used for stadium construction or stadium renovation projects commenced after the start of the Prior Agreement, and that have received a waiver of any applicable League requirement of sharing of “gross receipts.”
Except as provided in Subsection (1) above, AR shall include all naming rights and cornerstone sponsorship proceeds.
Exclusions from AR of naming rights revenue in respect of funding for stadium projects initiated after the 2005 League Year will terminate upon sale of the recipient franchise if the waiver from revenue sharing also terminates.
For any stadium construction or renovation project initiated after the 2020 League Year with $150 million or more of the cost funded by the Club or Club Affiliates (with the threshold increased as of the 2026 League Year to $175 million):
“cornerstone sponsorship proceeds” means, for any such stadium, the six (6) stadium-related sponsorships for new stadiums, and, alternatively, four (4) stadiumrelated sponsorships for stadiums with renovation project(s), in each case that exceeds the threshold, with respect to sponsorship elements/deliverables comparable to those in existing cornerstone sponsorship agreements other than the naming rights partner, where such sponsorship shall be used to support the construction or renovation project. Clubs shall be required to declare which sponsorships, meeting this definition, shall be considered “cornerstone sponsorships” upon execution of such sponsorship agreement. This declaration must be made within two years of the completion of all phases of such construction or renovation project. Cornerstone sponsorships may only be replaced upon expiration of the cornerstone sponsorship agreement, unless a cornerstone sponsor becomes unable or unwilling to meet its obligations under the agreement. At no time may a Club have more than six (6) or four (4) cornerstone sponsorships, as applicable, regardless of the number of construction/renovation projects that have been approved.
Notwithstanding anything else in this Agreement, and without limitation: (i) revenue derived from tickets, suites, fees to enter club suites or any other part of the stadium, PSLs, PSRs, luxury boxes, concession sales, parking, sales of programs and novelties, pouring rights, and naming rights for practice/training facilities, shall not be subject to exclusion hereunder; and (ii) a sponsorship agreement must have at least fifty-five percent (55%) of revenues attributable to sponsorship elements/deliverables related to the stadium (including tickets, suites and the IP value of the sponsorship) to qualify as a cornerstone sponsorship.
Notwithstanding Subsections (vi)–(viii) above, for any AR exclusions subject to the Cap Effect Guarantee described in Subsection 4(f) below: there shall be no requirement of a waiver from sharing of “gross receipts” provided that there is an economically-equivalent method of League support for such project (e.g., relief from payment of a League assessment). The NFL shall provide the NFLPA with prior notice of any such economically-equivalent method used with respect to such exclusions.
Notwithstanding Subsections (vi)–(viii) above, the NFL shall have the right to include in AR any revenues that would otherwise qualify for exclusion from AR under those Subsections.
For the avoidance of doubt, Subsections (vii)–(viii) above do not require that specific funds from PSRs, naming rights, or cornerstone sponsorship proceeds be traceable to specific payments supporting construction or renovation projects for the exclusion to apply (recognizing that these proceeds are among the sources of funds to pay construction costs or related debt service), nor does the exclusion of PSLs, PSRs, naming rights and cornerstone sponsorship proceeds under Subsections (vi)–(viii) above permit the aggregate exclusion from AR of amounts that would exceed the actual private costs of such construction or renovation projects.
Los Angeles Stadium.
Notwithstanding any other provision of this Agreement, but subject to Subsection (x)(5) below, the NFL shall be entitled to exclude from AR: (i) the Los Angeles Fan Club memberships (PSLs) as previously agreed as set forth in the parties’ prior letter agreements on this subject; and (ii) thirty percent (30%) of the Incremental Revenue generated by the Los Angeles Rams and Los Angeles Chargers (as defined in this Section, the “LA Incremental Revenue Exclusion”) until such time that the total exclusions equal the private cost (including, without limitation, financing costs) to construct the stadium, net of PSLs plus interest, as defined in Section 1(a)(xiv). Financing costs shall be calculated at the NFL’s long-term borrowing rate as of the opening of the stadium.
“Incremental Revenue” shall be total AR, net of PSLs, generated by the Los Angeles Rams and the Los Angeles Chargers from the Los Angeles stadium, less each Club’s baseline revenue. The baseline years for the Los Angeles Rams and Los Angeles Chargers shall be 2015 and 2016, respectively, with resulting baseline revenues of $56,864,000 (Rams) and $90,025,000 (Chargers).
No additional Stadium Credits or AR exclusions will be taken for the Los Angeles stadium project.
All of the parties’ agreements with respect to Los Angeles shall be without prejudice to any treatment the parties may agree upon for any future stadium or after this Agreement.
For purposes of this Section:
Projected AR shall be initially calculated as if the PSR, cornerstone and naming rights AR exclusions for the Rams and Chargers for the 2020 League Year totaled $98 million (the “Baseline LA Exclusions”). The Baseline LA Exclusions shall be re-set after the 2020 League Year based on the amounts of PSR, cornerstone and naming rights revenues actually received or to be received on an accrual basis by the Chargers and Rams or their respective Stadcos for the 2020 League Year (with any cornerstone and naming rights revenues received in a lump-sum payment amortized over the life of the naming rights/cornerstone sponsorship agreement up to a maximum of fifteen years) from the list of eleven (11) sponsorships identified at the time of the stadium’s opening as cornerstone sponsors, in addition to the naming rights partners. For the avoidance of doubt, the NFLPA accepts the NFL’s representation that the sponsorships identified qualified as naming rights and cornerstone sponsorships, and the review contemplated by this Section for those sponsorships is limited to determining the total amounts received from those sponsorships (e.g., there will be no challenge as to whether any of these specific Los Angeles sponsorships identified at the time of agreement meets the definition of a cornerstone sponsor).
After the 2020 League Year, the cornerstone, PSR and naming rights com-ponents of the Baseline Exclusion shall be the total amounts actually received or to be received on an accrual basis by the Chargers and Rams or their respective Stadcos for that year (with any cornerstone and naming rights revenues received in a lump-sum payment amortized over the life of the naming rights/cornerstone sponsorship agreement up to a maximum of fifteen years). Should any of the “original” eleven (11) designated Los Angeles cornerstone sponsorships become unable or unwilling to meet its obligations under the agreement, the Clubs shall have the opportunity to designate a replacement cornerstone sponsorship to meet the stadium funding and financing amounts, up to the same amount of any such sponsorship being replaced.
If the LA Incremental Revenue Exclusion is greater than the Baseline LA Exclusion, then, notwithstanding any other provision of this Agreement, the Local AR from the Los Angeles stadium shall be increased by the difference between the LA Incremental Revenue Exclusion and the Baseline LA Exclusions. Conversely, if the LA Incremental Revenue Exclusion is less than the Baseline LA Exclusion, then the Local AR from the Los Angeles stadium shall be reduced by the same difference.
Allocations Over League Years. The parties may agree to allocate AR received or to be received on an accrual basis in a particular League Year over one or more other League Years.
Cancelled Games. If one or more weeks of any NFL season are cancelled or AR for any League Year substantially decreases, in either case due to a terrorist or military action, natural disaster, or similar event, the parties shall engage in good faith negotiations to adjust the provisions of this Agreement with respect to the projection of AR and the Salary Cap for the following League Year so that AR for the following League Year is projected in a fair manner consistent with the changed revenue projection caused by such action.
No expense deductions shall be permitted to be taken in calculating AR, and all expense deductions that were previously permitted in the calculation of “Total Revenues” or “Defined Gross Revenues” or “Excluded Defined Gross Revenues” shall not be used in calculating AR, except as expressly provided herein.
An expense deduction for the reasonable and customary direct costs and initial investment (collectively, “direct costs”) for projects in new lines of business of NFL Ventures may be taken, subject to the following rules:
Absent NFLPA approval, there may be no more than three projects in new lines of business to receive deductions in any League Year (i.e., for the 2012 League Year, there can be three projects in new lines of business receiving deductions; for the 2013 League Year, there could be six projects in new lines of business (three that began in 2012 and three that began in 2013).
Absent NFLPA approval, a project in a new line of business shall not qualify for this deduction if it has more than $15,250,000 in direct costs in a League Year. This limit shall increase in each League Year after the 20182 League Year by the percentage change in AR.
Absent NFLPA approval, there may be no more than $182,989,000 in direct costs across all projects that qualify for the deduction in the 2018 League Year (i.e., a maximum deduction of $91,495,000). For the avoidance of doubt, this Subsection (C) is subject to the requirements of Subsections (A) and (B) above. This maximum deduction amount shall increase each subsequent League Year by the same percentage increase (if any) of AR;
The expense deduction for the first three years of any qualifying new line of business project shall be 50% of the direct costs in each such League Year;
The expense deduction for years four through five of any qualifying new line of business project shall be 25% of the direct costs in each such League Year;
Unless the parties agree otherwise, after five years no further deductions shall be taken for any such project (and revenues from such projects shall be included in AR in the 45% bucket as described below);
The NFL shall provide the NFLPA with notice of the projects for which it will take the expense deduction, including the provision of business plans and budgets (subject to reasonable confidentiality and non-compete terms);
Pursuant to the provisions of Section 3 below, the Accountants shall review, and the NFLPA shall have audit rights regarding, such deductions to ensure their accuracy and reasonableness;
Deductions allowed shall be netted against related revenues, and the netting of expenses cannot result in a negative number (e.g., if 50% of the direct costs for a project exceed its revenues, the AR count for such project shall be zero).
For purposes of this Subsection 1(a)(xiii)(2), if the NFL adds additional International Series regular season games (i.e., more than one International Series regular season game in any given League Year), each additional International Series game shall constitute a new line of business project, and further provided that the payment made by the NFL to reimburse the participating Clubs for lost revenue (which payment is included in AR) shall not be included in determining whether such Series is subject to either of the direct cost limits referenced in Subsection (B) or (C) above.
Interest. Unless otherwise specified, as used in this Article, “Interest” means interest calculated on an annual compounded basis using the one-year Treasury yields at constant maturities rate as published in The Wall Street Journal on February 1 (or the next date published) of the League Year in which the amount to receive interest accrues, is awarded, or occurs, as the case may be. If this rate is not published in The Wall Street Journal for any reason, the website of the Federal Reserve (http://www.federalreserve.gov) shall be used to obtain the interest rate.
No Double-Counting. No revenue may be included in AR more than once. All intra-company transactions between or among the NFL, any NFL Affiliate, Clubs, and Club Affiliates shall be eliminated in accordance with GAAP (treating all such transactions on a pro forma consolidated basis) (except as provided in Subsection 1(a)(xiii)(J) above) for purposes of calculating AR. For any joint venture, if AR rights are granted to the venture, which in turn pays the NFL or the Clubs for the rights granted, the value of the rights shall only be included in AR once.
Subject to their reasonable business judgment, the NFL and each NFL Team shall act in good faith and use commercially reasonable efforts to increase AR for each playing season during the term of this Agreement and not shift revenues attributable to League Years within the term of this Agreement to League Years after the term. There shall be no obligation to accelerate into League Years within the term of this Agreement revenues attributable to League Years following expiration of this Agreement. In evaluating compliance with this Subsection, the parties and the System Arbitrator shall consider and give substantial weight to the reasonable business judgment of the NFL or the NFL Team but no deference will be applied where the NFL is alleged to have deferred or forgone revenues of $1 billion or more for the purpose of securing leverage in collective bargaining, in which case any finding of non-compliance shall require proof by a clear preponderance of the evidence. The following is a list of decisions in respect of which the business judgment of the NFL or an NFL Team shall conclusively be deemed reasonable: franchise location; stadium capacity or configuration; ticket or suite prices; number and location of games played; whether to outsource or operate a line of business; and whether to accept or decline a sponsorship, advertising or naming rights opportunity. The foregoing list shall not limit in any manner the circumstances in which the business judgment of the NFL or an NFL Team may be deemed reasonable.
Additional Accounting Rules. The calculation of AR shall be further subject to the rules set forth in Section 10 below.
Revenue-related Arbitrators. Wherever this Article provides for a jointly-retained arbitrator to resolve a revenue-related dispute, and if the parties cannot agree on the identity of such arbitrator, the parties shall use the procedures set forth in Article 15, Section 6 to select the arbitrator.