A lot has been made recently in the news of the 2021 salary cap situation. Based on the previous season’s revenue, the NFL salary cap has been climbing steadily over the years. But with the uncertainty in revenue for 2020, the NFL and Players Association negotiated a salary cap floor for the 2021 season of $175 million per team.
With the 2020 salary cap being $198.2 million, the reduction in the cap could have many teams scrambling once their 2020 season is complete. If the salary cap is reduced by more than $23 million for 2021, the Pittsburgh Steelers are one of seven teams who are already over the cap the way things stand for next season according to overthecap.com .
Here are the teams in the worst cap shape in 2021 if there is a $175M cap (includes current cap as carryover)— Jason_OTC (@Jason_OTC) August 9, 2020
1. Saints- -$70M
2. Eagles- -$67M
3. Falcons- -$39M
4. Steelers- -$17M
5. Raiders- -$15M
6. Chiefs- -$14M
7. Texans -$4M
8. Bears- $1M
9. Vikings- $2M
10. Cowboys- $2M
But is a $175 million salary cap guaranteed for 2021? Is there anything that can be done to save their being a setback?
First and foremost, the NFL has to play a complete 2020 season or else a reduced salary cap will be inevitable. Revenue is generated by games being played. If games are not played, then there goes the revenue.
But what about the revenue lost from ticket sales due to a reduced capacity of fans in the stands, if they are allowed at all?
First, let’s see what kind of number we are dealing with in order to keep the salary cap the same in 2021. For the 2020 season, the $198.2 million of the salary cap does not equate to the full 47% of the revenue from the previous year as $44.7 million per team is allotted for benefits and performance-based pay.
With the players share of the 2019 revenue coming in at $242.9 million, it can be calculated the total revenue from 2019 for the entire NFL was approximately $16.5 billion. In order for the players share to be the same following the 2020 season, the NFL would need $16.2 billion in revenue in order to be the same payout as the players share will be increased to 48%.
In a May 18, 2020, article from Forbes.com, it was estimated that about $5.5 billion, or 38% of the total revenue generated by the NFL, comes from individual teams stadiums based on the financials from the 2018 season.
One other thing to remember is the salary cap is based on total team revenue which is added up from all 32 teams. So even though some teams make more money with their stadiums than others, it is all averaged out when determining the salary cap.
For the sake of argument, we’re going to round the amount of money lost if there are no fans in the stadium in the NFL games to $5 billion for the 2020 season. Yes, it could be estimated to be more based on past years, but the NFL could make almost $0.5 billion less in 2020 without affecting the salary cap.
So is it possible for the NFL to make up a $5 billion difference? Here are several ways it could be done:
If the NFL can average 20% capacity across the league over the entire season, there is at least $1 billion to be made up right there. The simple math is 20% of $5 billion, although the revenue could be more even with this amount. So even if your favorite team can’t have fans in the stands, don’t wish it away for everyone as the added revenue from any stadium will help the salary cap.
It was announced earlier this year the NFL will allow teams to sell advertising space on tarps which will cover the first 8 to 10 rows of each stadium. Of course, if there are no fans in the stadium, additional seats would be tarped and perhaps more advertising would be sold. But how much revenue could this generate?
Let’s say for a game, a company pays the same for an advertisement which will be seen at various times as they would pay for a 30-second commercial during a regular-season game. For the 2019 season, this number came in at over $400,000, but we’ll use this number just to be safe. If teams can have 10 advertisements on the seats, it would generate $4 million a game. Multiply that by the 256 regular-season games, and there’s another billion dollars made up in lost revenue.
Could teams possibly get more for the advertisements, or could they have more than 10 available? It’s hard to say, but I hope my estimates are on the lower end.
Televised games on Saturdays
It has already been reported that the NFL is working on a plan to move some of their games to Saturdays if there is no college football played in the fall of 2020. It is unclear at this time how these games would be televised, but if the NFL can work it out where they are covered nationally with three time slots on a Saturday each week, they could really bring in some extra income.
It is already estimated the two additional playoff games will add $150 million in revenue for 2020. If a single playoff game generates $75 million in revenue, perhaps three regular-season games each week could combine for another $60 million. If this is the case, if the NFL uses Saturday’s all 17 weeks of the season, there is another $1 billion gained in revenue.
I know, these are not additional games so how can they make money? The answer is quite simple: Rather than have the typical five timeslots each week when games could be played (one Thursday, three Sunday, and one Monday), there would be eight different scheduled times for NFL games to take place. Rather than having more overlap where games are being played at the same time, spreading them out will only increase viewership, advertising, and networks paying to broadcast additional games.
A new TV deal
Whether or not the NFL is going to work out their new deal for TV rights for the 2020 season is unclear at this time. It was reported in March the negotiations had begun, but with uncertainty of the 2020 season it’s hard to say how things will work out. But if the NFL can reach new television deals, it could see an increase in revenue of $1 billion, $2 billion, or even more for the 2020 season.
So will the NFL lose money without fans in the stands? Yes. Will they find a way to make some of their money back? I’m sure they will. Notice this exercise doesn’t even take into account revenue lost from preseason games. It was more or less looking at the notion of seeing how the NFL can make up some money. If they’re able to pull off these various things throughout the season, the salary cap situation in 2021 may not be as dire as some think.
But remember, everything is based off of the NFL being able to play a complete 2020 season. If part (or all) of the season gets canceled, then the $175 million salary cap floor for 2021 will be the reality teams have to live with.