Thanks to Seton Hall who asked me if the cap will rise significantly, i suspected it might but wasn't positive. After running the numbers, it is unclear if the cap will rise too much before 2014 when TV network deals are re-worked. All 4 networks, Fox, CBS, NBC and ESPN will be re-negotiated or will jump for 2014
Right now many teams are scrambling to work under the new CBA and the relatively low salary cap of $120.375mm (considering in 2009 the cap was $128mm and last year it was uncapped) Technically you are allowed to "borrow" $3mm from a future year cap and $3.5mm can be used to protect veterans with more than 5 years experience. So in essence the real cap is $126.375.
Right now everyone is probably thinking that nnamdi and santonio contracts will be crushing to their respective team's cap space. Teams may have problems this year and next but after that the cap should rise pretty quickly. Let's say this year that Dallas inks a deal for naming rights of $30mm/year, 40% goes to the players ($12mm total and each team's cap increases by $375,000). giants/jets should also see a lot of local revenue increases with their new stadium in it's 2nd year. The salary cap should be no less than $130mm and maybe $135mm as the TV contracts have built in escalators.
The salary cap starting in 2012 will be computed based on certain percentages of the revenue streams. It works like this: 55% of TV broadcast rights, 45% of things like NFL Merchandise, NFL Network, Red Zone, and Sunday Ticket, and 40% are added to calculate the cap. The only money taken out of the cap seems to be a small credit for new stadiums. The league guarantees 47% and no more than 48.5% of the total revenue to the players. If we look at the TV contracts players get 55%, in 2014 ESPN will jump to $1.8-1.9b per year with the inclusion of moblie & internet rights. All tv contracts have been extended thru 2013 but the networks especially Fox, CBS & NBC should probably be no less than a 50% increase and possibly a 100% jump.
ESPN / $8.8B / $1.1B / 2006-2013
Fox / $4.27B / $712.5M / 2006-2011
CBS / $3.73B / $622.5M / 2006-2011
NBC / $3.6B / $600.0M /2006-2011
In 2014 overall TV revenue should jump sharply and of course the salary cap should also rise significantly. Let's take a look at this year and see if we can't project it out. PLEASE NOTE: it is impossible to calculate 100% accurately b/c we do not know the true revenue breakdowns as the owners (except GB) do not release their financials. However, for our purposes, this analysis should do fine and it should be pretty close.
Last year total league revenue was $9.3b, we know the broadcast TV listed above totalled $3.035b. Before doing this analysis I had assumed this year's salary cap was a negotiated number, however, after running the numbers it fits well into last year's revenue numbers:
|revenue (billions)||revenue stream||player %||cap $ by stream|
|$3.035||broadcast tv (espn, fox, cbs, nbc)||55%||$1.669|
|$1.760||tickets (avg $55mm/team * 32 teams)||45%||$0.792|
|$1.200||direct tv, nfl network, etc.||45%||$0.540|
|$2.150||local (luxury boxes, hot dogs, programs, naming rights)||40%||$0.860|
|$1.168||merchandise (avg $32.5mm * 32)||45%||$0.526|
Ok, so my estimate of $4.387b based upon the new CBA makes sense if you add 5% for revenue increases, you get to $143.944mm/team salary & benes which is only slightly off from the $142.4mm ($120.375 cap / $22.025 benefits) for this year. Now if we look at the numbers for 2014 season you can project the new salary cap based on the following % increases for TV (i also added 18% revenue increase (6%/yr) for all other revenue streams >> this is very conservative based on NFL historical revenue increases). It is my opinion that the three TV revenue deals go up by at least 50% and possibly 100%, without pro football the networks are SOL, they have to have football even if it is a loss leader. Take a look at the estimated salary cap in 2014:
|2014 TV revenue increase||total player comp||2014 cap||benefits|
These numbers are probably too low as the TV revenue number i am starting with of $3.035b for 2011 may be closer to $4b. But it doesn't really matter, at the start of 2014 the salary cap will almost certainly be $160-175mm and possibly more. How we get there from here is the key question? Will the cap only be $128mm next year and $135mm in 2013 then jump by $25-35mm in one year? There are many variables such as the economy and strength of stadium naming rights. Either way, 2014 is probably the year to be a FA.
NFL is the only show that isn't TIVOed like crazy and i think the league is setting up for a big payday for 2014 season. If teams can slide under the cap for the next two years, cap will be less of an issue starting in 2014. Of course if you take on huge contracts in 2014 b/c the TV revenue will be a one-time increase.
One other thing about this new CBA, leaguewide the teams must spend 99% of the salary cap during the next two years. So if my thinking is right and without the actual CBA language, some teams like Tampa Bay will not spend 99% of $120.375mm, instead they will wait until the last minute, calculate how much over other teams are and then spend the bare minimum to bring the league wide average up to 99%.
If there is a big jump in TV revenue as is expected, players will be sitting pretty and this will be a great CBA for them to work under. Also, because players only get 40% of local revenue, low revenue teams will see some relief from the cap going up because Jerry Jones signed Apple or Google to pay $100mm/yr naming rights. Although Apple or Google Stadium just doesn't sound right. Now if a team moves to LA and builds a stadium in the shape of a glass apple Steve Jobs will jump all over that:)
Hope this analysis makes sense and is as accurate as possible.