The NFL gleefully rolled out its 2020 schedule last week, as though it might be easy right now for a Saints fan to map out that big trip to Vegas for a Week 2 throwdown on a Monday night at the New Raiders.
We're in the middle of a pandemic, with no clear end in sight. If games get canceled or stadiums are required to be empty or even near-empty this fall, that will have a substantial impact on league revenues. And the NFL's 2021 salary cap could take a major hit, which would be significant for players and teams alike when it comes to paying out current contracts and negotiating new deals with star players such as Cowboys quarterback Dak Prescott.
The NFL (like the NBA and NHL) has a cap on annual team spending and a relatively clear delineation of how those cap resources can be allocated: On a macro level, the collective bargaining agreement mandates that players get 47% of revenues this year, with increases to 48% and slightly beyond in the years ahead. This is true whether revenues go up or down.
For the past decade, as revenues have risen substantially, this split has worked to benefit both management and players; since 2013, the NFL's salary cap has jumped 61.1% to $198.2 million. The windfall from national TV broadcast rights - far and away the league's biggest moneymaker - has long offered the tantalizing promise of more cash for everyone for the foreseeable future.
The league and the NFLPA even reached an agreement on a new CBA in mid-March based in part on the potential of keeping the spigot on. Then the pandemic struck, with public-health recommendations that included stay-at-home orders and calls for social distancing that have since been coupled with scattershot calls to reopen from various levels of government. All of it points to an uncertain future.
Any scheduling contingencies could force revenues downward, which in turn would limit what teams can spend under the cap. That could put a significant number of players' jobs at risk. However, there could be a way to mitigate the pain for both players and owners.
As Jason Fitzgerald of Over the Cap recently explained, there are three main components to the NFL's revenue pie: those big-ass national TV contracts; what's called NFL Ventures (think the fees associated with NFL Network on your cable bill, among other related components); and locally generated income (such as ticket sales, concessions, parking, stadium advertising, preseason rights fees, local radio, naming rights, etc.).
The Packers are a publicly owned corporate non-profit; as a result, they're required to release their financial information, which can serve as a gauge of the rest of the league. The Packers' financials indicate that they brought in $274.3 million in national revenues (mostly from network TV), plus $203.7 million in local revenue. Even if one were to assume that TV revenue is locked in for 2020, there stands to be a substantial decrease on the local side, of which the players receive roughly 40%.
Under normal circumstances, the Packers' local revenue could have risen to $210 million this year, based on the change indicated by their financials from 2018 to 2019. But depending on whether all games are canceled - at one extreme - or some games are played in empty or near-empty stadiums, Fitzgerald used some back-of-a-napkin math to determine that each team could be looking at a reduction in cap space ranging from $30 million to $80 million.
It's not hard to see that this could make it tough for teams to remain cap compliant by committing to all of their player contracts in 2021. "As teams become more aware of this … they will likely begin cutting veterans with non-guaranteed contracts left and right to cut down on costs for the year and to maximize cap carryover for 2021," Fitzgerald wrote. "They can always hire the players back if the season returns or if they need them the next year, likely at a reduced cost."
There are a couple of caveats to this, however. For one thing, the CBA includes a canceled-games clause that seems to account for an unforeseen scenario like a pandemic (emphasis mine; AR stands for "all revenues"):
If one or more weeks of any NFL season are canceled or (all revenues) 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.
In other words, the league and the NFLPA are required to hammer out a solution that's amenable to both sides. Additionally, as Fitzgerald later discovered, another CBA clause stipulates that projected revenues are calculated based on a formula that combines the prior year's revenues with any anticipated changes in the current year. All of this seems to allow the league and the players to use credits to spread any potential cap impact across a period of years.
From what I've been told, the league and the NFLPA have not yet discussed how to proceed, because everything right now is a hypothetical. But the possibility of a $30 million-$80 million cap reduction isn't sustainable.
If that reduction is $30 million, Fitzgerald estimates that 10-12 teams risk being over the cap in 2021, based on where those teams are right now along with anticipated cap growth under normal circumstances. "If you go to the bigger number ($80 million), you're probably looking at 30 teams - 29, 28 teams that would be over right now," Fitzgerald said on the "OTC Podcast" last week. "That's not feasible, that's not workable. There's really no way to do that."
Fitzgerald suggests that the NFL and the NFLPA should sit down to work out a contingency plan sooner rather than later, so as to avoid the likelihood of teams "releasing a lot of veteran players left and right" in August to preserve cap space for 2021.
"Guys who are not superstars, guys who are not difference-makers, which is the majority of the league - you're going to look to release those players," Fitzgerald said.
Major League Baseball doesn't have the same language in its CBA about possible reductions in the number of games played in a season or loss of gate revenue as it relates to its player contracts. Owners and players worked out a deal in late March to cover some of the issues but are now engaged in contentious talks about how to pay players in a shortened season, which is also a proxy battle in advance of a much larger labor war to come.
The NFL and NFLPA already codified an opportunity to arrive at a mutual agreement that eases the burden for a bunch of veteran players. Let's see how they use it.
Dom Cosentino is a senior features writer at theScore.