With the rumored jump in the salary cap from $143 to $155 million, teams will have significantly more to spend on players, about $384 million league wide. Considering that we are in a period where the cap is consistently rising close to 8% the uncertainty that existed in years past about finances should be gone. The question is what should this jump really mean to free agents? Some will argue that contracts should grow at 8% across the board to keep up with the cap, basically a salary cap inflation mechanism. Teams will shoot that down of course, saying contracts don’t work that way. That’s been true but really only because it’s simply been the way of doing business and is accepted as such. The reality is plyers this year should be getting raises far greater than 8%.
Translating the cap increase into free agent dollars
To really see how much more teams have to spend we will need to make a few adjustments to our figure. Our biggest reduction comes from the 89% spending rule which is what the two sides have agreed each team will need to spend over a 4 year period. League-wide this is actually much greater, but since we are looking at individual teams, using the 89% figure is more realistic. That drops the total down by about $42 million.
Rookie signing bonuses will increase with the rising cap. This is a sunk cost that the league can’t avoid. It is money lost to veteran players based on the CBA. By my estimates that will be just under $36 million in added costs.
The NFL also mandates $15,000 raises on the minimum salaries for players signed in 2016. Last year we had around 360 players on the lowest possible salary and about 460 players with at least one credited season playing on a minimum salary level contract. We can assume those numbers to be about constant, which will equal close to $12 million.
Tenders will increase for ROFR and 2nd round RFAs by $126,000 and $193,000. If we assume the same number of tagged players and those earning the PPE we can slice off another $7 million. Finally Practice Squad players will earn another $1.6 million.
|11 % Keep||$42,240,000|
|2nd Rd Tender||$2,123,000|
So in real terms the NFL has $284.8 million more to spend on players this year than last.
The Real Payment Pool
I’m sure the easy argument from the NFL is that they have in a given season somewhere in the ballpark of 1,825 players to pay and that increase means about $156,000 raise per player. Hence the inflation rate is relatively low to consider. This is why generally the market rate at a position stays stagnant despite the cap increases that are occurring.
The truth is the majority of those 1,825 players are already under contract and won’t earn any of that raise. The contracts were all signed with a $143.28 million cap or less in mind and under those terms. Teams were going to lock themselves into salary increases or decreases independent of the salary cap change.
The $284 million should be distributed to just a handful of players, those who will receive new contracts for more than the minimums(those who will earn the minimums are already factored into the raise) in 2016. These are the players who are unrestricted free agents, street free agents, and extended players. Al of the money should be distributed to that group of players.
I have estimated that there are 465 UFAs this year. I’ll assume about 60% will sign contracts for this year. Based on last year’s group of free agents about 70 of those players would sign minimum contracts and not count towards any added increase in spending over the year before. I’m going to also assume that the same amount of street free agents and extensions will occur- a total of 106.
So realistically the league has an extra $284 million to spend on 315 players, a raise of about $900,000 per player. That’s a big increase over the $156,000 that is probably too easily accepted.
The Money Allocation
Not all players in the NFL are treated equally and expecting $900,000 per player as a raise is not realistic. To divide that money up I broke up the veteran contract pool into 10% tiers. 10% of players earn an annual value in excess of $10 million. The next 10% earn between $7.7 million and $10 million. I did that all the way down to players earning a non minimum of $840K+. We can then calculate the percentage of money that is invested in each group to allocate our added $284 million:
|Tier||Floor||% $ Allocation||Extra FA Dollars|
Now all we have to do is allocate it per player. To do that Ill assume the same breakdown of extensions and street signings and assign unrestricted signings using the same percentage as signed last season. Here is our expected signings per tier.
Not surprisingly we ca see how few tier 1 free agents ever make it to the end of their contracts. Many of those players are probably selling themselves short by signing extensions especially if they are done within the current context of the market.
Here is how much new money should be asked for above the comparable players on a per year basis. The APY Increase is based on the average value per tier.
|Tier||Total Signings||Extra FA Dollars||APY Increase||% APY Increase|
So really this is the kind of increase players should be looking for. Teams have somewhere in the ballpark of 20% more dollars to spend on free agents. This should be the real rate of inflation sought by agents. If you represent a player whose comp list earns around $11 million per season you should be seeking around $13 million. If you have a $7 million player the real price this year should be $8.5 million per year.
Generally the league won’t work this way. Teams lagging the 89% numbers will use some big signing bonuses to meet limits by next March. Outliers like Suh do nothing to help the market because nobody can justify the contract so really it’s a strong draft period that is needed. Most positions stay relatively stagnant until a large influx of talent all hits free agency at the same time. This is what has pushed the prices of 34 defensive ends, wide receivers, centers, and cornerbacks in the last two years. Quarterbacks benefitted greatly from the 2004/05 draft periods and the 08 draft. Eventually those players end up taking more of the new dollars that the cap increases should see spread around the league more evenly year by year. If I had to guess this year we’ll see more jumps from safeties, pass rushers, and possibly cornerbacks and offensive tackles.
But really everyone should be able to take part in the added money each year. The money is there, players just have to strongly push for it in free agency as a whole. The way we hear rumors of collusion between teams setting artificial salary limits, players need to get those rumors started as well on their end.
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.