I had this idea of writing about the NFL and where the money comes from and how it's distributed. My degree minors in Sport Management so i've taken a number of classes that discuss the financial aspect of major sport leagues. There's a lot to be learned and I think a lot of people aren't real savvy to it, I think this will help a lot of people get a better idea of what the NFL work stoppage is all about as well. So the next few entrys are going to be about basic financial concepts in the NFL, this going over player salaries.
First off a little bit of history about professional football, you have to know where it came from before you can understand where it's going...right? In the late 19th century (1800's) professional football began as a student operated venture of one school versus another school with little more scheduling than a, "Hey, you wanna play a game next week?" These games were played primarly by the 'good ol' boys' from schools like Yale, Harvard, Princeton, etc. Mostly schools that are now part of the Ivy league. These were the schools that had been around the longest and had the capital to do such things.
(i'm going to begin being vague with dates, they are of little consequence and I don't want to have to source my information)
As popularity of the sport slowly grew more schools became interested and the first instances of recruiting were seen. In the day in age when college football was beginning, professional football and collegiate football was not different. It wasn't until the 1920's and 30's that schools began distancing themselves from what could be considered professional football. This is also about the time that the adminstrative boards at the schools required a more concrete and organized approach to the sport. The sport was growing as were fatal injuries. There was also pressure from the government, the first Roosevelt if i remember correctly was threatening to ban the sport if something wasn't done to make it safer.
From 1930 to the early 60's there was massive reform in the sport. Professional and Collegiate had made significant strides away from one another. MANY teams had been fielded and folded under severe financial obligations, unsecure income, and bankruptcy via flaky owners. By this time the NFL had also become a central figure of football and spent the 50's financially squashing rival leagues, even though the NFL itself was very unstable and wasn't even able to dream about their fiscal future that was in store.
In steps Pete Rozelle. (Rozelle did far more than build the modern day NFL, but this blog will be reserved primarly for the modern day finances of the NFL)
Because so many teams would come and go the league was very unpredictable. Rozelle instilled in the owners a "League think" concept and was able to convince owners to sacrifice a little for the betterment of the league as a whole, eventually building them all a greater fortune. Rozelle was also able to build the NFL a more stable financial income. TV contracts. He negotiated gate and ticket incomes between teams. As I write this I keep coming up with things that Rozelle did for the NFL and realize that I could just keep going.
Now on to modern day.
NFLPA is the National Football Players Association, a lot of syllabuls for 'labor union'. I hear a lot of people talk about NFL players as though they don't need such things. On the contrary. almost 90% of NFL players are dead, bankrupt, or divorced within 5 years of retiring. These same players that make lucrative amounts of money don't make nearly as much as one thinks they do. Their contracts are also set up to minimize the amount of money that they make. Let's use simple numbers to make things easy. You want a player on your team, we'll say his name is Adam. Adam is good. Really good.
When a player is brought in to sign his contract they will levy his participation and roster spot with a signing bonus, this is a kind of guarantee to the player that whe won't get cut. The signing bonus is paid to the player regardless of his playing time, status on the team, and regardless of how long he's on the team. Therefore the team isn't going to pay a $10million signing bonus to someone they are unsure of. Now onto the actual salary of the player. Adam is a younger guy who has yet to hit his prime in the league and could really be an impact player for a few years to come so the team wants to sign him to a 5 year contract. With the projection of success in ticket sales, his jersey sales, and other apparel the team will say that he's worth $100 million over the next 5 years.
This is where many people lose scope of what a player really has to deal with. Adam's deal is 5 years $100 million. NFL contracts are heavely back loaded, meaning that, the major of his money is made his last year, so this is more appropriately what his salary will look like:
Year 1: $2 million
Year 2: $8 million
Year 3: $15 million
Year 4: $25 million
Year 5: $50 million
Back loading the contract is the way that the teams are able to sign such huge contracts that may never be filled. See, if Adam gets into his 3rd year with the team and hasn't lived up the expectations that team had for him when they first signed him, they have the right to cut him in which case they aren't obligated to pay him for the last 3 years in his contract.
On top of that I think people neglect to realize the expenses of an NFL player as well. I'm not talking about the cars, the houses, or personal bills-i'm talking about their financial obligations. Labor unions cost money, they have labor dues just like Safeway employees or Lowe's employees, except they are more expensive, significantly more expensive. NFL players pay taxes just like anyone else, they also pay for agents, personell/media reps, nutrtional guidance, personal training during the off-season, etc. I've never read a statistic on this but I have read some sources that suggest that a typical NFL player will only see about 20-35% of his salary. That percentage goes up as salary increases, because higher profile players make more money and therefore require more services, such as financial counseling, financial lawyers (to protect from that best friend in 3rd grade that claims he taught the players everything he knows), investors, etc.
I know that many people don't care about this and still feel that they make far too much money and they have little sympathy for their problems. I'm merely trying to enlighten people about the topic. I also have a question for those nay sayers, rarity many times constitutes a higher price. These men get paid as much as they do because they're incredibly physically gifted and put their health on the line and commit themselves to something they love for 24/7, literally eating, breathing, and living the game. If any one person were to do that they too would probably also make a lot of money doing something they love but most people don't truly love anything enough to do it as long as NFL players do.
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