So the NFL has their new TV deals in place and I am getting all kinds of questions about the salary cap impact of the new television deals. While this isn’t really my focus area I figured we could have a little fun with it and run through some guesstimates.
The first thing to get out of the way is the immediate impact of the TV deals on the cap. Quite frankly there probably will not be any. The last television deal that was signed happened way back in late 2011, less than a year after the NFL locked out the players and a few months after the two sides agreed to a new CBA. Those television contracts were negotiated for the 2014 to 2022 seasons.
Even though the new contract was agreed to in 2011 there was zero noticeable impact to the NFL salary cap until the 2014 season. The cap during that era was flat. It was negotiated to be $120.375 million for 2011 and in 2012 grew to just $120.6 million. In 2013 it was just $123 million. In 2014 it jumped by $10 million. So I would imagine that the old TV contracts will still be honored for this year and next year, not causing this amazing leap in cap room.
Now one thing that may cause a little bit more of a jump now is that the NFL does have the ability to immediately add a 17th game to the schedule which should increase revenues. I know that last year the NFL estimated that extra playoff games would lead to $150 million in revenue, so an extra regular season game likely should do the same. That said I have a feeling that this was already included in their estimates for this season since they were deep into TV negotiations and it would explain the big delay in setting the salary cap this season.
Prior to the pandemic the NFL salary cap growth was steady as could be.
|Year||Salary Cap||$ Change||% Change|
Basically, the cap grew from around $10 to $12 million in any given season. 2020 was the only year below 6% and I believe I remember reading (I am too lazy to look it up) that the union took some added benefits that year which caused the cap to not grow as much. Anyway I think it safe to assume that if the pandemic does not exist the salary cap this year would have been around $210 million and then $221 million in 2022. Maybe with the additional game we bump that by a few million so lets say $225 million is where we should be in 2022 if there was no pandemic (we probably won’t be there since there is still a shortage to account for).
The other thing to keep in mind is that the when we see the above numbers we see steady growth and not a flat cap for 7 years. That means that revenues are growing each year and a good portion of those revenues are from the TV contracts. So while everyone is treating this as if the NFL is going to immediately get somewhere around $10 billion in TV money in 2023 and $10 billion every year thereafter, they will ease into all that money, just like they did above. How will they ease into it? We can look at the Green Bay Packers financial statements to get an idea. Here is how the Packers broke down their national revenue from 2011 to 2020.
|Year||National Revenue (millions)||$ Change||% Change|
Their 2015 report represents the year in which the new TV contract kicked in and you can see it was the big change, however it continues to rise for each season. Now this doesn’t account for just the TV deals but I would imagine they make up most of the growth here. What if we applied the same growth rates?
|Year||National Revenue (millions)||$ Change||% Change|
Now the players get a bigger pie from the TV media but everything is pretty much capped off so lets call it 49%. Of that 49% probably 15% goes to various benefit pools and the rest goes to the salary cap. So based on this I guess we would be going from around $10 million a year growth to something like $17 million a season from the increase in TV revenues and typical growth in the other revenue streams.
Given that 2023 may still be impacted by Covid my guess is our first real big spike year hits in 2024 with the cap probably in the range of $260 million. It should reach $300 million by 2027. But I don’t anticipate this massive jump from $200 to $300 million in the course of 1 year. That has never been the way the NFL does business nor would it make sense for their TV partners to just do flat payments.
For whatever reason there has been a negative sentiment on the timing of the announcement of these deals. If they were going to impact the cap this year the NFL has to adjust the cap if they didn’t project them. So given all the circumstances and the pressure from the NFLPA on the cap number I am sure that everything was accounted for here.
There is also nothing wrong with the NFL making more money. For every additional penny that the NFL negotiates for the league it is an additional penny for the NFL players. Players will only earn more as the revenue streams grow. The way that the money is broken down is collectively bargained by both sides. Everyone is going to benefit from this. Do the owners make the most out of it? Absolutely they do but they always have. It’s a revenue share between two sides. Nothing that happened in these negotiations was going to change the fact that teams lost a ton of revenue this year. It wasn’t going to change the salary cap that is bargained between the two sides. If there is a problem with it then it is something that should be addressed in the next CBA. But yesterday was a good day for everyone who will be working with the NFL not just those 31 main owners of the franchises.