Before the announcement of new NFL TV rights deals, the outlook on the NFL Salary Cap was not good. In fact, the sky seemed to be falling. Covid-19 drastically changed plans for the National Football League. Why? Because people were barely leaving their houses, much less attending a football game in a crowd of seventy thousand. No people in the stands meant no one purchasing tickets to visit games, which meant much, much less income for the NFL.
The 2020 season cost the NFL an estimated 3-4 billion dollars in revenue lost. That’s a huge sum of money for any business, no matter how big. Following the loss of money, the salary cap in the NFL, which had been expected to go up, was now heading for a nosedive. In fact, the salary cap estimate was at 175 million, almost 40 million less than had been projected before Covid-19 hit. Hence the aforementioned feeling of the sky falling. However, new NFL TV rights deals are being cut right now, and that news is a very encouraging sign that the salary cap might be somewhat reasonable this season.
The NFL TV rights deals are the most obvious sign of the salary cap possibly coming in at a much higher amount than originally expected, but there are a couple more reasons that support the argument that the salary cap should and will go up. I want to preface this article by clarifying what I mean when I say the salary cap will go up; I believe that the NFL Salary Cap will go up from the 180 million floor that the NFL announced to teams last week. I am not saying that the salary cap will be over 200 million as it had been projected to be before the season began, however.
Will The NFL TV Rights Ensure a Rising Salary Cap?
The NFL TV Deals mean more money…and a lot of it
The NFL is reportedly looking for a 70 to 100 percent increase in rights fees from the last contract. The NFL sells its NFL TV rights as packages, and currently, they are selling these packages in 10-year increments. CBS, Fox, and NBC all remain in line as partners with the NFL. Amazon is also currently in negotiation with the NFL to host the Thursday Night Football package. ESPN currently has the rights to Monday Night Football, but that contract is up at the end of 2021.
These deals are great, but how much money is the NFL going to gain from all of it? The Amazon deal alone will probably net 1 billion dollars a year for the NFL. At a 100 percent increase from previous deals, the NFL could look to garner over 3-4 billion a year from CBS, FOX, and NBC. ESPN could also join that mix but Disney has said they will not pay anywhere near 3.8 billion a year for a new deal, that number was the original asking price from the NFL.
In total, the NFL TV rights deals are estimated to pay over 100 billion dollars in 10 years to the NFL, a staggering amount. The huge increase in payment that the NFL will receive can only mean good things for the salary cap. The NFL can afford to borrow from future years to pay for the 2021 season, even if the salary cap does not come in at the original estimate. News broke earlier last week that solidifies the belief that the Salary Cap will go up this year.
The salary cap has a floor
Last week, the NFL announced to its teams that the salary cap floor is $180 million. This news was huge. It meant that the original estimate of 175 was wrong. Also, because the NFL stated that 180 million would be “the floor”, there is potential and even an expectation that the floor will be exceeded.
For example, a Salary Cap floor of 180 million meant that the Pittsburgh Steelers simply had to restructure and extend Ben Roethlisberger‘s contract to be cap compliant. At $175 million, the Steelers might have had to cut a player to be cap compliant. This floor makes it easier for the New Orleans Saints to be cap compliant, though they have a long way to go and are still 47 million OVER the cap. Simply put, a salary cap floor means more money, and that is always good news for cash-strapped teams.
A lowered salary cap equals less entertainment
Speaking of cash-strapped teams, let’s take a quick look at the Saints. Currently over the salary cap by 47 million, they have a lot of work to do to be cap compliant. Though it is a bed of their own making and they will have to let good players leave the team for free agency, no one wants to see all their best players leave. It simply isn’t good business for the league. In an entertainment industry, who wants to watch something that doesn’t entertain? No one. The Saints without players like Alvin Kamara or Michael Thomas are not going to be a product that people want to watch.
The NFL knows this. They can’t and won’t present a half-baked product to the world and hope to make a healthy profit from it. They have to let the salary cap go up, even if they have to borrow against future years to do it. The league doesn’t want viewers to tune into a bunch of teams that were not able to afford any good players, and thus are playing with backups. The NFL is an entertainment business, and they must present an enticing product if they want to engage fans and thus make a profit.
The salary cap must rise this year from its 180 million dollar floor. Anywhere from 190-200 million is not unreasonable. The NFL TV rights deals make it much easier to procure the money necessary for an increase. Actually, the NFL TV rights deals are the driving force behind the hope that the salary cap will go up. The announcement of a salary cap floor indicates that the NFL is headed in this direction. And the idea of teams fielding backups or worse on game day is not something the NFL even wants to think about. Everything points to the salary cap going up from 180 million. The only question is, by how much?