The business of the NFL has continued uninterrupted through the pandemic, burrowing ahead through originally scheduled dates for free agency, the draft and schedule release. While every other major American sports league has suspended or canceled operations, the NFL is “playing through” the pandemic. Business as usual.
In a relative sense, the NFL is extremely fortunate due to the timing of this national turbulence, with the only disruption being adjustment away from in-person voluntary workouts (teams have seamlessly moved to virtual sessions). The NFL can watch and learn how other leagues navigate the three “T’s”—testing, tracing and treatment—in the weeks ahead.
Yet beyond the perceived normalcy of this offseason, the big questions remain, such as: Will there be a 2020 NFL season? And if so, with or without fans? And if so, will it be 16 games or some shorter version? Despite the NFL’s confidence, no one truly knows, but preparations must be made, including those revolving around business of football. In assessing what is next in this space, we start, as we always do, with the Collective Bargaining Agreement. And, as fate would have it, the current CBA was ratified by the players—by the slimmest of margins—literally hours before the pandemic took hold.
With that extraordinary timing, let’s examine the CBA’s answers—or lack thereof—to big picture questions about the sport going forward.
Much has been made about the NBA having a force majeure clause—it actually has the word “epidemic” in it—allowing teams to discontinue player payments in the event of forces beyond the league’s control. Armed with that leverage, the NBA negotiated a 25% reduction in player payroll beginning May 1 that could potentially last well into next season. So, you ask, does the NFL have a similar force majeure clause? The answer: technically yes, but practically no (yes, I am a lawyer).
Article 2, Section 5 of the CBA contains a force majeure clause, but it concerns international games; specifically, having more of them. The CBA otherwise limits the number of international games each season to 10 (there have been no more than four in past seasons). That limit is adjustable, however, if “a Club is displaced from its existing stadium due to force majeure events, construction or renovation.” Obviously there is no applicability to the present crisis, as due to the global nature of the pandemic, the NFL has announced there would be no international games this season.
As for a reference to any kind of “stoppage,” the CBA only prohibits labor actions such as strikes (initiated by players) or lockouts (initiated by owners).
Without CBA guidance on force majeure or stoppages, we look to the formation of a committee on safety for some guidance during the pandemic.
Accountability and Care Committee
The CBA expanded this joint NFL-NFLPA committee, whose task is to “develop and issue joint position statements on health and safety issues relevant to and impacting professional football players.” Although primarily meant to address head safety, there are procedures in place to ensure a safe workplace which, of course, will be integral to playing this fall with lingering contagion issues. The Committee will complete “an annual comprehensive review of Club rehabilitation equipment, facilities and modalities, and thereafter establish and implement minimum standards concerning these areas.”
Although the committee does not have the power to bind either side, this group may end up being vitally important for return-to-play protocols, both generally and following infection.
2021 salary cap impact
In all my years both managing an NFL salary cap and analyzing the business of the NFL, I never imagined discussing the possibility of a cap decrease from one year to the next, but that is now a very real possibility.
The NFL is obviously hopeful to play a full 16-game season, whether sequentially as laid out or altered in some way. Despite this optimism, however, there remains the distinct possibility of canceled games. Looking to the CBA for guidance on what would happen in that event, it addresses this regarding the cap formula of All Revenue (AR):
“If one or more weeks of any NFL season are cancelled or AR for any League Year substantially decreases, in either case due to a terrorist or military action, natural disaster, or similar event, the parties shall engage in good faith negotiations to adjust the provisions of this Agreement with respect to the projection of AR and the Salary Cap for the following League Year so that AR for the following League Year is projected in a fair manner consistent with the changed revenue projection caused by such action.”
Translation: If and when the NFL loses revenue due to an event beyond its control—and the pandemic certainly qualifies—the players feel the pain along with them.
Obviously canceled games will negatively impact the 2021 cap. Even without canceled games, however, realistic projections about the pandemic do not forecast packed stadiums in September. And although the NFL is better insulated against lack of fans than other leagues—with massive national media contracts and shared revenue—it is not immune to significant revenue losses that the lack of fans would bring. Losses would stem not only from vanishing gate receipts but also from ancillary revenue streams such as gameday sponsor activations, premium seating sales, parking, concessions, merchandise, etc. And these losses will be reflected in AR and manifested in a difficult and painful collective “pay cut” for players in 2021.
As to how much lower the cap sink from 2020 to 2021, that is unclear. My sense, though, is that players and owners would work to “smooth” the decrease over multiple years ahead. Usually, any smoothing or “flattening” discussion is about future increases in cap, but we’re well beyond the word “usually” right now.
2020 payroll impact
The 2020 cap was set at $198.2 million per team in February as the pandemic was percolating. Although the cap is set and player contracts are intact, I fear that this will not be a normal year for player payroll even if all games are played. Players will feel some pain not only next year, but this year as well.
As mentioned in this space previously, there is insufficient CBA accountability in team minimum spending requirements, as teams must only spend 89% of the cap (90% in the new CBA) with inspection only over four-year tranches (three-year tranches in the new CBA). With revenue diminution being felt, NFL teams may choose to go lighter on player payroll this year and, with low CBA accountability, can do so with impunity.
How would teams skimp on spending with existing 2020 player contracts, you ask? Well, as anyone familiar with the business of the NFL knows, teams regularly release veteran players on non-guaranteed (and sometimes even guaranteed) contracts, mostly without any lingering financial obligation. Just this week the Bengals removed $17.5 million (Andy Dalton) and the Seahawks removed close to $10 million (D.J. Fluker, Justin Britt) from their player payroll. My sense is there will be similar bloodletting, even more than a “normal” year, in coming weeks and months.
Standard Player Contract
Finally, beyond the collective contract between the NFL and NFLPA, there is boilerplate language in every player’s Standard Player Contract (SPC).
Paragraph 6 of the SPC states that players will “earn their yearly salaries over the course of the applicable regular season, commencing with the first regular-season game played by Club in such season."
The NFL Management Council would likely take the position that players should not receive any of their yearly salaries unless and until the 2020 season begins, whenever that may be. Were the 2020 season shortened, the NFL would look to the above provision and prorate salaries according to number of games played. And in the unfortunate scenario of a canceled 2020 season, the NFL would likely take the same position, arguing that Paragraph 6 of the SPC expressly requires “the first regular season played by Club in such season” to be played.
Of course, Paragraph 6 only deals with salaries and not signing or offseason roster bonuses, which would appear to be safe (although per-game roster bonuses are obviously at risk).
It is everyone’s hope that we are not talking about Paragraph 6 of the SPC in a couple of months.
More bargaining ahead
The NFL and NFLPA just spent a year negotiating an 11-year contract. I am sure both sides felt relieved to be done, and not to see each other at the bargaining table for years to come. So much for that.
The return to the bargaining table has already begun, as safety precautions for a potential season during this crisis mandate that the two sides work together on safety issues. More tense subjects such as future shrinking caps and flattening of player costs lie ahead. Clearly, this is not the way the NFL and NFLPA wanted to kick off their new agreement.
One final note on this subject. While NFL franchise values may—or may not—be taking a hit right now, we know that their values will continue to rise once this pandemic is in the rearview mirror. When owners ask (demand) the players share in their short-term losses, the players should, in turn, ask the owners to share in their long-term gains. That should stop the conversation pretty quickly.
In a sports world full of uncertainty, one certainty will always hold true: The business of sports never stops.
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