The Lions are Number One!
The NFL Players Association (NFLPA) tweeted out the following graphic showing the Detroit Lions in the lower right part of the image spending more cash than any other franchise in 2017. There are a few interesting features about the image that have to do with the collective bargaining agreement (CBA) we will explain before discussing what it all means. Let us first make sure we know what we are looking at:
Salary Floor: First, in the upper left, the NFLPA has highlighted a range of franchises with “teams below 89%” on the side: Dallas, Kansas City, New York (Jets), Indianapolis, and Houston. That is referring to a rule pointed out in a follow-up tweet by the NFLPA stating each team must actually pay out in cash at least 89 percent of whatever the unadjusted salary cap per team is:
Things to note: The 2018 League year is the second year of the four-year rolling average period for minimum cash spending.— NFLPA (@NFLPA) February 26, 2018
During this period:
Each club must spend a cash minimum of 89% of the salary cap.
The league-wide cash minimum must reach 95% of the salary cap.
SB Nation Cleveland Browns site Dawgs by Nature had a nice explanation of this rule and its effects on how a team manages the salary cap. The bottom line is this was a concession to the players to ensure teams actually spend the money instead of deliberately underspending. From the Pro Football Talk article by Greg Rosenthal linked earlier:
Salary floors: Players accepted a relatively low salary cap in exchange for the raising the minimum teams have to spend. This can’t be underestimated. 99% of the salary cap must be spent in cash in aggregate between 2011-2012. The league-wide number falls to 95% after that. Teams must spend at least 89% of the cap from 2013-2016 and 2017-2020.
This helps ensure teams that were way under the cap in recent years like the Bengals and Bucs spend more.
League-wide Player Payrolls: In the lower left, the NFLPA graphic shows “total spending” equal to roughly $5.274 billion and in the bottom right a “leaguewide percentage average” of 98.69 percent. That is based on the fact that the league’s unadjusted salary cap figure rose to about $167 million per team in 2017. This is determined by figuring out how much of the expected revenue in 2017 will be set aside for player costs and then dividing by 32 among all the teams.
Players get 55 percent of the league media revenue, 45 percent of the playoff and NFL corporate ventures (e.g. NFL Network, NFL Films) revenues, then deduct whatever their player-side contribution is for things like health care, retirement, charities, and the like. According to Daniel Kaplan at Street and Smith’s Sports Business Journal, the elements that fueled the rise from $155 million to $167 million in 2017 were the new Thursday Night football media stream and Minnesota’s new stadium.
Doing the back-of-the-envelope calculation shows this lines up rather well with the numbers on the NFLPA graphic: 32 * $167 million = $5.344 billion. Taking that and multiplying by the leaguewide average percentage gets us $5.344 * 0.9869 = $5.27399 billion, which is what the NFLPA put down after rounding.
The Detroit Lions row: Using that unadjusted cap value, we can understand what is on the row in the table for the Lions. The table shows cash spending for player costs of $204.467 million. That is ((204.467)/(167)) = 1.22435, or 122.44 percent of $167 million when rounded to the nearest hundredth.
How does this differ from salary cap concerns?
As mentioned by Nate Atkins at Mlive, the most obvious difference between cash actually paid out in 2017 versus when the expenditure is counted against the salary cap is by front-loading the cash costs in the form of prorated bonuses. Most of the time fans wonder about how their favorite team will maximize the talent on the field while staying under the salary cap, but the front office of the team has to also think about the real world of operational finances.
Cash spending on player costs brings to mind a story about the expensive free agents Bill Parcells brought to the New York Jets in the late 1990s. Longtime owner Leon Hess fired Rich Kotite and brought in Parcells in 1997 with orders to spare no expense: he was tired of waiting and wanted to win now. From the book Hess: The Last Oil Baron by Tina Davis and Jessica Resnick-Ault, Parcells and the front office worried about how much cash outlays were required to bring in free agent talent (p. 136):
Parcells tells of a story of calling Leon to inform him of yet another expensive player contract. “I don’t give a shit,” Leon told him. “If you run out of money, come over here to the oil company and we’ll get some more for you this afternoon.”
Made plain by the magnitude of the numbers in the NFLPA graphic, professional football is big business and teams these days are run as tight professional ships by tremendously qualified executives like President Rod Wood of the Lions. Like any other business, football teams need to manage their cash flows well, and there are many intricate rules built into the CBA that fans usually are not aware of. For example, consider the escrow accounts used for fully guaranteed contracts. In Jason Fitzgerald and Vijay Natarajan’s Crunching Numbers, they explain this aspect of contracts (p. 56):
According to Article 26 in the 2011 CBA, teams are required to fund contracts guaranteed for skill in a separate (escrow) account to ensure the player will be compensated at the proper time. This requirement essentially blocks teams from using excess cash for investments or other needs that benefit ownership.
There is a distinction for injury-only guarantees, which do not need to have the money tied up in escrow. Instead, the team only needs to pay cash when the player is actually injured and qualifies. That is a huge boon in flexibility to the team financially:
This is one of the reasons why teams are willing to concede millions of dollars in vesting injury guarantees but almost no fully guaranteed salary beyond the first contract year. Team negotiators will often argue that the team is unable to offer full guarantees extending beyond one season because placing millions of dollars in escrow compromises the working capital of a team.
From the fan’s perspective, this may not be very interesting. But it is certainly of great interest to the people running the team. All of this cash stuff is absolutely on the “business side” of the Lions and not the “football side.”
Okay, so... what?
A lot of people are probably going to try and make this out to be some kind of indicator that the Lions were more committed to winning or making a huge bet in 2017 or something, but it really is nothing of the sort. Think about the entity blasting the information out. The NFLPA is committed to making sure its members are taken care of, and that players are paid for their blood and sweat. The tweeted graphic is an expression of pride on the union’s members being paid their concrete amounts rather than the phantom values on voidable contracts, and that’s all.
Just three of the 10 highest-spending teams made the playoffs last season. https://t.co/E4mDFsVhyI— Chris Burke (@ChrisBurkeNFL) February 27, 2018
So, in the end, Zac Snyder over at Detroit Jock City has the right idea: leading the NFL in cash spending doesn’t really mean anything. All it means is the Lions happened to sign a couple of big extensions and free agents with the cash expenditure up front for cap hits that will come later in those contracts. Not really exciting, but it’s true.