The market for quarterbacks skyrocketing across the NFL, with a new name taking over the top spot as the highest paid in league history every season for three straight seasons now. Matt Ryan’s recent $30M per year contract broke a new threshold for the league, and some observers have commented that Aaron Rodgers could reset the top paid quarterback market even before the 2018 season begins.
I took a quick look at part of what is feeding this rapid acceleration in the price tag for quarterbacks on Friday, and over the weekend it emerged that Russell Wilson and his camp expect to have the franchise tag applied for the 2020 season.
Now, I don’t mean to pat myself on the back or toot my own horn or point out how correct I was on this, but I’ve been beating this drum for months.
Hawks fans aren't goimg to want to hear this, but there's likely to be a rookie wage scale reset and huge minimum salary increase in 2021 (new CBA), so it might make sense to use the franchise tag on Wilson in 2020 and not extend him until the dust settles on the new CBA. https://t.co/LT7KKqszDX— John Gilbert (@SeahawksMachine) March 6, 2018
Now, what do I mean when I talk about a rookie wage scale reset and huge minimum salary increase? Well, first let me lay some groundwork for what the salary cap constraints could be as the league transitions into the next CBA. The biggest thing to keep in mind is that the salary cap not only went flat, it actually decreased before staying flat for roughly four seasons when the current CBA was adopted.
This was primarily because of two reasons. The first of those reasons was that the players moved some of their money around from present day salary to future retirement and healthcare benefits. With all of the talk surrounding CTE and the impact of football on the future health of players, it won’t be a surprise to see the players once again opt for some of the revenues allocated to the players to be shifted to improve future healthcare and retirement benefits yet again.
Any allocation of money to these kind of benefits has an outsized effect on revenue shifts. This is because while there are only about two thousand current NFL players at any given time, there are tens of thousands of former players who have qualified for these benefits. Any such shift won’t be huge, but it’s enough to be material and contribute to the cap potentially stagnating.
The second reason the cap stagnated was that the NFLPA lost the negotiations with the owners pretty handily. Now, we can debate all day whether the players or owners won, but I firmly believe, and many experts agree that the owners won because they are now taking a larger share of the revenues compared to the players than they were before. My side of the argument can be boiled down pretty simply using the following chart, which shows league revenue growth in red and the salary cap allocation for player salaries in blue.
It doesn’t take a PhD in chartreadingology to see that the gap between NFL revenue growth and player salary growth was blown wide open in 2011 and has only continued to grow since then. The owners won, plain and simple.
Moving on from there, there is an even bigger matter is at play which could contribute to a cap crunch. As mentioned above, the NFL has adopted a new CBA twice since the 1993 agreement which put the salary cap in place, and on each of those occasions minimum salaries saw a drastic increase. From 2005 to 2006 rookie minimum salaries increased to $275,000 from $230,000 (19.6%) and from 2010 to 2011 rookie minimum salaries increased to $375,000 from $320,000 (17.2%). Those percentage increases are the extreme end of things because rookie salaries obviously represent the smallest salaries, while the absolute dollar amount of salary increases was uniform across the board. However, even more experienced players saw double digit increases in salaries.
Thus, the first thing to account for under the cap in the next CBA will be a likely massive increase in minimum salaries. If there are thirty to forty players on the roster on a minimum salary at any given time, a minimum salary increase in line with the percentage increases seen in each of the last two CBAs likely adds a minimum of $3-5M in base salary to each team’s obligations. The reason for this is that by the time the 2020 season arrives, the absolute league minimum salary will be $510,000, so a 15-20% increase in that salary would mean about $100,000 in addition cap charges for every single player on the roster. That’s akin to telling every team in the middle of the 2021 offseason that they suddenly have to account for Eddie Lacy eating up $4M in cap.
Further, I also expect there to be a large reset upwards for much of the rookie wage scale that goes beyond any expected minimum salary increases. The rookie wage scale was put in place by the union in order to take money out of the hands of unproved rookies and put it in the hands of veterans. Unfortunately for many veteran players, what has happened is that with the rookie wage scale keeping salaries down, veterans have lost money as many teams have transitioned to using younger, less expensive players for whom earnings are capped.
I anticipate this will lead to a somewhat intricate proven performance escalator that allows players on their rookie contracts to get paid more and get paid earlier than under the current system.
Thus, between a material increase in the rookie wage scale and minimum salaries, then combining those with a potentially stagnating cap from revenue reallocation to future benefits, it’s highly possible - perhaps even likely - for a situation to emerge where there is a cap crunch similar to 2011-2013 when the new CBA went into effect.
What this all means is that teams may not want to be in a situation where a quarterback is eating up an increasing portion of the salary cap heading into a timeframe where the portions of the roster on rookie contracts and minimum salary deals are seeing drastic increases, but the overall cap is flat or potentially decreasing. That kind of situation could put a hard squeeze on teams, and they’d be forced to choose between retaining their quarterback or paring the rest of the roster down to a minimum. It was this type of squeeze that created free agent periods that were less than stellar in the early years of the current CBA, and it was in this market that John Schneider, who had positioned the Seahawks well for a similar situation, was able to sign both Cliff Avril and Michael Bennett to very affordable deals.
What this all adds up to mean is that when Russell Wilson’s contract expires in 2019, the team could very easily be expected to use the franchise tag on Wilson because using the tag in 2020. Doing so would take the team through the end of the current CBA with Wilson still at the helm, while buying the team the time necessary to see what happens with the CBA and how the salary cap settles out.
In short, it gives the team the flexibility necessary to keep the rest of the roster competitive while keeping its options open on the most expensive player on the team.