Quick Thoughts on New Rookie Options and CBA Revenue Split

The proposed CBA came out today and I just wanted to share a few thoughts on the brief look I had at it since we should know within a week if it is ratified or not. For the most part this CBA reads very much like an extension of the current agreement with some minor tweaks and Im sure some added things related to player safety and data controls (these are the type of things that we may touch on in a book but I’m more into the salary aspect of these things). There were two things that I wanted to talk about a bit- the new rookie option and the proposed revenue split.

One of the bigger changes deals with the 5th year rookie option and  to a lesser extend the proven performance escalator. Depending on where you are drafted these can be looked at as a win or a loss. Let’s start with the option year.

In the current CBA the option was either based on the NFL transition tag if you were drafted in the top 10 and then the 3rd through 25th contracts if you were outside of it. They did fix this to some extent such that every first round pick is treated the same. There are four levels that you can earn in the new CBA. The levels of pay are the 3rd through 25th average contract, 3rd through 20th average contract, transition tag (top 10), and franchise tag (top 5 contracts). The first one is the default while the others are based on playtime and pro bowl selections. Essentially to move up to the transition tag level you need one Pro Bowl in three years and two Pro Bowls in three years to land the franchise tag.

The Pro Bowl is essentially a popularity contest and is generally biased against good players on bad teams. Its easier if you play a skill position or are a pass rusher where you put up more overt stats but can be difficult as a young player to somehow get one let alone two Pro Bowls. A QB who sits his rookie year is really behind the eight ball.

Surprisingly they did not have an alternate possibility for All Pro inclusions, which are very difficult and can also be a popularity contest of sorts but can cover some players who fall through the public voting cracks. Nor did they have a high end playtime incentive. These could have been just another path besides the Pro Bowl.

For the lower part of the draft it’s a no harm no foul rule. They cant be hurt even if its difficult to gain from it. For the top though they may lose out. Players who get no Pro Bowl nods early will go from being a transition tag option to a 3rd through 20th option. That is going to be much lower and lead to more players potentially being locked into bad rookie deals. Will it impact a lot of players?  Probably not but its always best to cover all bases. As a side note I do think the potential of the higher end escalator may knock more running backs out of the first round but that’s not really a CBA issue.

The PPE is essentially similar with everything tied to Pro Bowls if you want to hit the higher PPE thresholds. In a sense its better than nothing since the last one had no way to escalate beyond the lowest tender based on playing time.

When it comes to the revenue split I am just still surprised that this is all the players got for a 17th game. The league basically moved from 46% of revenue to 48% of revenue in exchange for a 17th game. One of the neat things in this CBA is they do give us a number of $7.357 billion a year that is essentially the baseline for the television money the NFL brings in. While technically the split on media is higher than 46% (its 55% toward the calculation that floors out at 46% in the old CBA) I think it’s fair to use that number to determine what the players currently receive on a per game basis from the CBA.

If the players receive 46% of this figure they are receiving $3,384,220,000 of the TV money. That works out to $105,756,875 per team for the season. That payment for 16 games works out to be $6,609,804 per game.

If you run the calculations for 48% we get to $3,531,360,000 for the players of which $110,355,000 goes to each team. Those are both bigger numbers but now we are dividing that by 17 rather than 16. That works out to $6,491,471 per game or about $118,000 less per game than they pay in the current agreement. To balance out the NFL would have had to raise the revenue split to 48.9%.

Of course that’s not the entirely proper way to look at it. 17 games will bring in more revenue and the break even point there would require the media number to increase by a bit more than 2% over the 16 game schedule. That’s likely in the ballpark of $150M a year and they should surpass that easily. If the numbers worked out to something like a 30% increase in media rights on 17 games vs a 20% increase for 16 games that’s around an extra $140K per player for that added game. For a minimum salary player that is a lot. For a potential higher earner its not worth it at all.

In any event the ability to earn more based on the 17th game is strictly based on what type of raise the NFL can negotiate for that one extra game. If the disparity is not that large the players will likely not see the added increase that pushes contracts into a higher salary level. However if we use $2M  a year as our cutoff for yes or no on a vote its basically 65/35 for and that is probably why this will pass.  

Minimum Cash Spending in 2020

With free agency rapidly approaching one of the questions I am getting pretty often these days is about the spending requirements in the CBA. For those unfamiliar with the NFL CBA there is a rule that requires teams to spend at least 89% of the salary cap over a four year period. The current period, which began in 2017, ends this league year and could give some idea as to who will spend this year on contracts.

Though our cash numbers that we trace are not going to be 100% accurate they should give us a pretty strong estimate of the teams that are in danger of not meeting the 89% threshold. Through last season we did not have any teams that were under $473.9M in spending, which was the mark required to be on pace to hit the 89% mark. The teams that were closest, the Cowboys, Ravens, Colts, and Chargers were all between $477M and $485M. There is a quirk in the rules that could impact teams in cap trouble (spending on bonuses in contracts in February of 2017 should not count towards spending but we track them as cash for the year)  which means maybe the Cowboys and Ravens were slightly under but if it’s the case it should not be by much.

Assuming the cap reaches $200 million this year the four year spending number will jump to $651.8M. Per our estimates we have 11 teams that are under that mark. Of those 11, six should be compliant just by signing their draft picks. Those teams are the Cardinals, Buccaneers, Patriots, Giants, Broncos, and Dolphins. That should leave us with six teams that may have little choice but to spend in free agency this year. Let’s take a look at those teams.

Colts, $43M under– The Colts have pretty much avoided spending in free agency the last few years even with a huge surplus of cap space.  Last year when the unexpected retirement of Andrew Luck came down and the team surprisingly did not ask him to repay millions in bonuses paid just months before the retirement and then followed it up by a seemingly crazy decision to agree to a one year, $28 million extension for Jacoby Brissett I surmised that the team was going to be so far under the spending limit that both decisions were in part driven by this. Seeing how far under they are now I think backs that up. Indianapolis will likely make up half of their shortage in the draft but they will most likely have to finally go out and spend at least a bit in free agency this year especially if they do not keep tackle Anthony Castonzo. The Colts may not want to get tied down to anyone for too long so this may wind up being the landing spot for “rehab” projects that take a one year deal in the hope of improving their stock.

Cowboys, $45 million under- Despite what most people think of the Cowboys they have basically managed a low cost roster for years now. They have a reputation for spending wildly but the fact is they have not really signed a notable free agent in ages. They should hit this number with two tags this year on Dak Prescott and Amari Cooper. Even if Cooper signs elsewhere just the tag for Prescott should be enough since they have other free agents to sign plus $14 million in draft pick bonuses to pay out. So I would not expect them to be forced into anything in free agency.

Ravens, $47 million under– Between a tight salary cap and a cautious approach to extensions and free agency the Ravens have been one of the lowest cost teams in the NFL. Certainly this year they got the most bang for the buck with a low cost team that outperformed all expectations going into the season. The team will probably spend around $15 million on draft picks so they are still well under. This is likely part of the reason why rumors are circulating that the team is considering franchising Matt Judon. A tag for Judon would cost around $16 million and put them much closer to the number. Even if the tag was simply just to trade him part of that logic I am sure is that the most they could receive as compensation is a 3 and that would require extra care in free agency something they couldn’t pull off last year with Za’Darius Smith.  The Ravens did increase payroll last year (they went from being close to the lowest spending team in the NFL for 17 and 18  to around 20th in 2019) and did sign Earl Thomas and Mark Ingram but if there was a year for this team to be even more active in free agency this is probably the year. This is probably a logical spot for some veteran players to chase a ring.

Chargers, $48 million under– The Chargers have more or less been resigned to the fact that they were not going to be a legit competitor last year only adding veteran Thomas Davis and backup QB Tyrod Taylor as UFA’s last season. The team will spend $25 million on their first two draft picks alone so its around $20 million they need to spend. I could see this going one of two ways. Either the team signs a few veterans and someone like Marcus Mariota to just hit the minimum spending number or they try to make a splash for their move and go after either Tom Brady or Drew Brees (I personally cant see Brees leaving the Saints but you never know) , tag tight end Hunter Henry, and actually spend quite a bit in free agency to compete. I see this as one of the more fascinating teams in free agency this year that could stun some people with their decisions.

Bills, $53 million under– Buffalo had to go into a spending freeze due to the mess that the roster was a few years ago and just started to spend a bit last year as they came out from it. The team will only cover around $16M in draft pick spending so the Bills look to be a hit destination for free agents. The team has a huge surplus in cap space so they can probably structure a number of contracts favorably to maintain flexibility after 2021. Buffalo hasn’t signed a notable free agent in ages and I could see that changing this year. While I don’t think anyone is sold on Josh Allen as the guy this is the window to take advantage of his contract so if there is a time to take more risks its 2020 for Buffalo.

There are a few other considerations this year for some of these teams. If they were to extend or restructure players after the season (February 2021) or late in the season signing bonuses should count to help teams meet the number. If the CBA is not extended there are rules that would make it more difficult to do (i.e. extending a Josh Allen in February might not be the easiest thing to accomplish) but it is another route to hit the necessary spending.

The other big question is how do teams approach contracts now that the CBA could expire? I think this year’s free agent group is very strong and we should see a record number of double digit annual contract values being signed but since most teams don’t need to spend will they see this as an opportunity to try to break the union? 

The last time the CBA was set to expire spending hit record lows relative to the salary cap. In part that was because of rules (free agency was more restrictive in 2010 with a number of UFA’s being classified as restricted) but if you want to break any potential strike one of the ways to do that is to not be aggressive in free agency. This week we have seen reports of the NFLPA attempting to advise the players as to how much it would really cost to strike and if there is a thought that this could occur teams may “independently” come to the same conclusion that overspending in 2020 is not wise which could make for a very different free agent period.

NFL CBA Suggestion Series

Earlier this year I partnered with my co-author of Crunching Numbers, Vijay Natarajan, to touch on 10 things that we thought should be worth looking at in the next CBA. Some may be a bit out of reach but its better to aim high than just settle for something because its easier. Here are the links to the 10 articles.

CBA Suggestion Number 1: Reducing the Length of Rookie Contracts to Two Years

CBA Suggestion Number 2: Revamp the Rookie Contract Rules

CBA Suggestion Number 3: Increase Mandatory Injury Protection

CBA Suggestion Number 4: Raise Team and League Wide Spending Requirements

CBA Suggestion Number 5: Reinstitute Salary Cap minimum Spending

CBA Suggestion Number 6: Salary Cap Amnesty Clause

CBA Suggestion Number 7: The Elimination of the Funding Rule

CBA Suggestion Number 8: Improve the Revenue Split

CBA Suggestion Number 9: Revamp the Franchise Tag System

CBA Suggestion Number 10: Increase Minimum Salaries

CBA Suggestion Number 10: Increase Minimum Salaries

Generally when people begin discussing improved contracts for players the talk immediately turns to rules that benefit the star players. That type of talk misses the bigger point. The majority of the NFL are not star players. At the end of last season, roughly 60% of the players under contract were playing on minimum salaries with minor bonuses. If the players ever want to potentially stage a strike or play hardball with the owners there has to be something for the small guy who constitutes the majority of the league and the biggest thing that can be given to them is a major pay raise with their base salaries.

Continue reading CBA Suggestion Number 10: Increase Minimum Salaries »

CBA Suggestion Number 9: Revamping the Franchise Tag System

The NFL is never going to eliminate the franchise (or transition) tag system but it is clear that it needs a major overhaul. The franchise tag is a provision of the CBA that allows a team to retain the rights to a pending free agent based on an average of the five largest salaries over the past five years as a percentage of the salary cap. The player is free to negotiate with another team when the “non-exclusive” tag is used but the cost of signing the player is two first round draft selections, which effectively blocks the player from free agency. Continue reading CBA Suggestion Number 9: Revamping the Franchise Tag System »

CBA Suggestion Number 8: Improving the Revenue Split

The current CBA ties player costs to three “buckets”- League Media, NFL Ventures, and Local Revenues- with varying percentages going to the players for each bucket. However, the bigger thing is that the NFL has capped off player costs at 48.5% while also adding in a floor (a percentage it can not go lower than) of 47%. Continue reading CBA Suggestion Number 8: Improving the Revenue Split »

CBA Suggestion Number 7: The Elimination of the Funding Rule

Every now and then you will hear about obscure CBA rules and perhaps none is more obscure than the funding rule. Article 26 (Salaries), Section 9 (Funding of Deferred and Guaranteed Contracts) discusses the funding rule which is a requirement that any guaranteed, other than injury guarantees, needs to be set aside in an escrow account, by each NFL team. This is one of those rules that has helped prevent players from negotiating guaranteed salaries in future NFL seasons because it requires so much liquidity up front by NFL owners. Continue reading CBA Suggestion Number 7: The Elimination of the Funding Rule »