Since 2014, you could set your watch to the NFL's salary cap going up by at least $10 million each offseason. This March was no different when the league announced the 2020 salary cap would be set at $198.2 million, up from its $188.2 million watermark the previous year.
Armed with a fresh CBA and new TV contracts on the horizon, players and their representatives figured the money was soon about to flow in. A $10 million increase year-over-year would eventually be considered a small bump with the expected spikes that were due to come this decade.
Those spikes could still occur, but it's hard to imagine the 2021 salary cap will even match this year's cap without some massaging. The league, the union, teams, players and agents are all -- or should be -- bracing for a hit. Short of a collectively bargained negotiation between team owners and the NFL Players Association, next year's cap could potentially fall by tens of millions in the worst-case scenario.
"The way (the salary cap) is structured, the players will lose money because the league loses money," one high-ranking team source tells me. "By the formula, you're losing."
As explained in Part I of this series, local revenue is all but guaranteed to take a major step back this year. Team owners and the NFL agreed to a proposal just this week that will raise each team's debt limit from $350 million to $500 million in preparation for such a hit.
Local revenue makes up a portion of the total revenue that is split between the team owners and players, with the lion's share of the money coming from television contracts. This past season, players received 47 percent of all revenue, but the new CBA guarantees players 48 percent of all revenue in the 2021 season, with the potential for a half-percentage point more once the 17th game is added to the schedule, possibly as soon as 2022.
That's why players and their representation were anticipating cap spikes in coming years. Now a much smaller revenue pie will bring a smaller cap number. And the long-term impact of this pandemic remains unclear, so we likely are looking at more than a one-year dip.
Who loses out most?
To be sure, NFL players will be paid according to their contracts this season. There is no "force majeure" in the NFL CBA like in the NBA. And some sort of sweeping, across-the-board pay cut for all players in the event of a salary cap dip will never be agreed to by the union.
Before we get to potential solutions, let's look at the potential problems here. Games played with no fans would represent a loss of anywhere between $70-100 million in gate receipts, concessions and parking for each NFL teams, on top of any loss of associated sponsorship dollars. If the cap nosedives to, say, $140 million in 2021, that sort of hit would send shockwaves through the NFL for years to come.
First, you'd see a greater willingness for teams to extend the franchise tag to top players set to become unrestricted free agents, sources on both the player and team sides told me. The formula for the non-exclusive tag is tied to a percentage of the cap, and should the cap decrease, so would the tag number. A player like JuJu Smith-Schuster would get the short end of the stick here.
Secondly, the young quarterbacks ready to break the bank may have to wait a while longer. Without some cap massaging, it'll be difficult for the Cowboys, Texans and Chiefs to pay Dak Prescott, Deshaun Watson and Patrick Mahomes, respectively, what they deserve. A contract anywhere close to $40 million per year could wind up costing a disproportionate amount of the cap for 2021.
"If I were that team, what's the hurry?," said a team executive not attached to any of those three franchises. "With that amount of uncertainty and money being discussed, it's not like they're lining up tomorrow to play."
And in that vein, as one player representative pointed out, the Atlanta Falcons could field a team of Matt Ryan, Julio Jones, Grady Jarrett, Jake Matthews, Dante Fowler Jr. and Deion Jones in 2021 and have about $3.7 million in cap space for the rest of the team under this hypothetical $140 million salary cap.
Atlanta isn't alone in how its team is constructed with several high-priced veterans. But the Falcons and others like them anticipated incremental salary cap increases that would make deals like what Ryan and Jones got palatable as the years went along.
Teams like the Falcons and Eagles (who have 12 players accounting individually for more than $10 million against the cap in 2021) would look to their big-ticket players and try to convert some of that guaranteed base into a signing bonus to create cap relief, similar to what Jared Goff did for the Rams this offseason. That won't fix everything, though, and multiple sources indicated one group in particular that will get hit the hardest.
"You know what group has the potential to get screwed? Who's really going to hurt is the NFL's middle class," one agent told me.
Players on league-minimum salaries make up about 60 percent of the NFL already. That surely would increase as a team attempts to keep stud players and make cuts elsewhere. Say goodbye to the $7 million-per-year linebacker and watch as the league's middle class moves from the endangered species list to extinct.
What can be done?
It doesn't have to be this way, of course. There are potential solutions. The first and best option for the league is to find new money, but that's not as easy as it sounds.
All revenue in the NFL comes from three main sources or buckets: league media (as in broadcast rights), postseason money and local revenue. The money made from this upcoming postseason, which factors into 2021's salary cap, should see an increase with the expanded playoffs and additional games.
In late April, Amazon and the NFL renewed their streaming partnership for the Thursday Night Football package and added exclusive rights for a late-season Saturday game. That's new rights money that will be included in next year's cap, too.
The NFL has built in the ability to slide the regular season schedule later in the year, resulting in a season still being played into January with the Super Bowl not being played until late February or early March. One source said you could "ride the wave of the vaccine" or therapeutic treatment that could come by then, allowing fans to come to games and avoiding the local revenue loss that's currently anticipated.
Though some of the above may happen in the coming months, ultimately the league and the NFL Players Association will have to sit down at the table and collectively bargain a solution.
Though the CBA doesn't explicitly have a section on what happens if fans can't attend games due to a once-in-a-century pandemic, sources point to Article 12, Section 1 of the document for guidance on what's next.
"[I]f… AR (all revenue) 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."
The most common theory floated by sources is that the two sides will agree to borrow against future earnings. "You may have a flat cap for like two years," one team executive said, "or minimal increase in two or three years from now." Some sources indicated the league and union could "borrow" or "rearrange" benefits money, but I'm told that's not on the table for the union and, separately, would be a PR nightmare for both the league and union.
For now, that seems like the most realistic option. No new money and no new agreement by the start of the next league year will be a path to mutually assured destruction in the event of a woefully smaller salary cap. Players not on the All-Pro level won't see the money they were counting on since they'll have been released, and team owners will see years of team building crumble due to those terminated contracts.
Each side has its fate tied to the other. It may not be the sort of bloodsport the fight for the new CBA was, but both team owners and the union should be taping up and putting their gloves back on.
