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NFL salary cap could fall in 2021 due to revenue loss from coronavirus

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With the specter of potentially empty stadiums hanging over the 2020 NFL season, analysts point to a major concern: the loss of local revenue could lead to a fall in the salary cap for the first time in recent memory.

Coronavirus Pandemic Causes Climate Of Anxiety And Changing Routines In America Photo by Kevin C. Cox/Getty Images

In the 2020 offseason, the Falcons were one of the teams with the least amount of salary cap space heading into free agency. With some cuts, restructures, and other moves, Atlanta was able to dig themselves out of trouble and even sign a major free agent deal with pass rusher Dante Fowler Jr. A big part of the reason the team was even above water in the first place, however, was the annual increase in the NFL’s salary cap that we’ve come to expect.

While that increase has varied over the years, it’s generally been pretty consistent: year-to-year, we could expect to see the cap rise by at least $10M. Perhaps more if the year had been particularly successful. Teams bake that in to their negotiations and cap calculations—it’s why we see so many backloaded deals and cap hits being pushed into the future. Under normal circumstances, we could expect the cap to continue to rise in 2021 in beyond—perhaps even more significantly when you factor in the expanded postseason and the potential to add a 17th game.

The recent coronavirus crisis could throw a wrench into all those calculations, however, according to analysis by CBS Sports. With the specter of potentially empty stadiums lingering into the start of the season and beyond coupled with the overall state of the US economy, there is a significant risk that revenue for the NFL might actually fall for the first time in recent memory. As the salary cap is based on league revenue, that could cause the cap to drop as well.

While the league makes a major portion of its revenue from TV and broadcasting deals, a significant chunk still comes from what is referred to as “local revenue”. This includes season tickets, tickets to individual games, concessions and stadium revenue, and merchandising. If no fans are allowed in the stadiums, all of those revenue streams essentially disappear.

Even with the expected uptick in revenue from the expanded playoffs and new broadcast deals, the complete and total loss of local revenue streams would cause a precipitous fall in overall league earnings—which would have a negative impact on the salary cap. In a worst-case scenario where fans aren’t allowed to be present for the entire season, we could be talking about the salary cap falling by tens of millions of dollars.

NFL teams are not prepared at all for the salary cap to drop—and that’s putting it mildly. Teams that had a healthy cap situation with eyes on building for the future would suddenly find themselves cash-strapped, and teams spending close to the limit would be so far underwater that even star players would be forced onto the chopping block. This would also cause further struggles for the NFL’s “middle class”, the mid-range veterans making between $3-8M/year. This is already a struggling group that could find themselves all but extinct in 2021 and beyond.

While this sounds like a very gloomy scenario, there are still options for the league to prevent it from happening. The NFL could attempt to find new revenue streams: new or expanded TV/streaming deals and adding a 17th game to the season in 2020 could be possible options. Postponing the season slightly to wait on the development of a vaccine or effective therapeutic treatment could also limit revenue loss if successful.

However, there’s always the chance that these efforts still come up short. In that case, the owners and the NFLPA could attempt to negotiate a work-around for the 2021 season. This could involve borrowing against future earnings in an effort to stabilize the cap, or changing the way the salary cap is calculated for 2021. Essentially, the league would be artificially inflating the 2021 cap (probably keeping it at or near the 2020 level) by “borrowing” revenue from the 2021 season and beyond.

We may also see teams—who are almost certainly aware of the possibility for a flat or decreased salary cap in 2021—be more conservative with their spending this season. Teams like Atlanta, who will be getting upwards of $10M in cap space after June 1st from the Desmond Trufant cut, could actually elect to save that money instead of spending it. Any money not spent in 2020 would “roll over” into 2021—which could give the Falcons some extra breathing room at worst, or extra spending money if the current season ends up going as planned.

Either way, we’re in for what is likely to be an unprecedented NFL season in 2020. We’ll continue to hope that things are more or less back to some semblance of normal in time for the season to start in September. If not, we may be in for a 2021 season in which we’re still feeling the effects of coronavirus.