6.15.3 Behind the Financial Scenes of the NFL (research essay)

Intro

In the past we used hobbies and interests to keep us calm, have something to focus on,  and make us happy. Sports on the other hand can give us an extreme rush of excitement, having you feel on top of the world, to feeling like you are having a terrible heart attack because your heart is beating out of your chest in pain. Sports can give you a wide range of emotions, especially if you have a favorite team, such as the Cleveland Browns. On the field it is an endless possibility of what can happen, and so much that could happen to a team. We always wonder when a team is bad or when our team’s market is struggling, why we do not simply get new players to try to get a better team, which will in theory improve the market. Finances in the National Football League can be both tricky, and confusing. All this money made by the league is not given directly to players and coaches, but is restricted and involved in media relationships, sponsorships, player contracts, coaching contracts, aspects of stadium operations, and new regulations.

The basis of this research essay will focus on how finances function in the National Football League. In doing this I will pull examples from the Cleveland Browns, and other organizations. In 2020 alone the NFL made around $12.2 billion, which NFL Commissioner Roger Goodell expects to increase to be upward of $27 billion by the 2027 season (Eckstein). This essay will break down the way in which this money is used in the NFL, as well as how it is distributed amongst the league.

Background

The National Football League Hall of Fame in Canton, Ohio holds all the history and records of everything that has transpired throughout the game in history. It shows AFC/NFC Championship rings, Super Bowl rings and trophies, Most Valuable Player Awards, broken records, the bronze busts of Hall of Fame players and coaches, and so much more. Behind all this glory the NFL has a rich history.

On the night of September 17th, 1920, 14 men including the first president of the NFL, then APFA (American Professional Football Association), Jim Thorpe, met at Ralph Hay’s Dealership to have a meeting into creating a professional football league (Klein 1). About a month after this meeting they had finally made a deal with teams from Ohio, Illinois, Indiana and New York to turn this dream into a reality (Klein 1). As any new business venture does, there were many issues that had to be solved such as player salaries, having more exposure because of how big of  a market college football has always been, and teams competing to get players from bigger markets as they do today in free agency, but without the red tape and regulations.

The Front Office

The NFL today is much more structured as the front office handles most of the transactions within their own team. The four key positions of the front office are the General Manager, CEO, the Director of Pro Personnel, and the Director of College Scouting. Andrew Berry is the big name heard around the Cleveland Browns as he is the General Manager. He has done a great job acquiring pieces to help the Browns become more successful in the future. He has been busy locking up contracts for the core players in the organizations to ensure a strong foundation. You will learn more about his ability as you continue to read, and be informed on NFL finances, through examples.

His job as the General Manager is important as he speaks directly to the owner to make their dreams a reality. The owners in Cleveland are Jimmy and Dee Haslam. The job of Andrew Berry includes hiring coaches, building the personnel department, coordinating the way college athletes are scouted, and building a strong team under the salary cap and other guidelines that align with the rules and regulations of the NFL policy (Paul Thelen). The Director of Pro Personnel works under the General Manager who helps deal with the players already in the League. This is important in finances as the Director looks at other teams in comparison to their own as well, as the player market is constantly changing with different aspects within a contract. The Director of College Scouting is exactly what it sounds like. This Director stays in touch with the General Manager and receives the reports from the scouts who evaluated these players in the field. The most important person the CEO, in the Browns case this is also the owner who was mentioned earlier by the names of Jimmy and Dee Haslam,  handles “…seeking advertisers, marketing the team’s brand, setting ticket prices, coordinating the team’s travel logistics, stadium maintenance, payroll and other similar tasks” (Thelen).

Player Contracts

Proven veteran players all want to be paid for what they believe they are worth. Sometimes players fresh out of the NFL Draft try to negotiate terms before signing a contract because they believe they deserve more than they are offered because of their statistics in college and how much they believe their performance will grow. The veteran minimum in the NFL is dependent on how long you have played on a team, versus the rookie minimum, minimum amount you can pay an athlete after they graduate college, is $660,000 in the year 2020 (Valerie Doyle).

When teams sign players to play for them they want to do it based on who fits the scheme the best for their coach, in correlation with the chemistry that will take place between the players on and off the field, previous production, are they affordable in the market, and will they get me to a Superbowl. If a team decides to release a player it is usually because they do not fit any of these categories or, they are not producing, those players are unhappy with their role within the organization.

As a player enters the league for the most part they all have the same goals. Fresh out of college a player wants to enter the league with the mindset of winning in the hopes of winning the Lombardi Trophy, to become the best to ever play at their position, to influence kids younger than them in their communities, and to become a first ballot Hall of Famer. Often when a player gets drafted and is with a team they will serve their rookie contracts, and in the process reflect on what their next move will be. Their draft position is dependent on the impact made by the player in his collegiate career, combine performance, pro-day performance, basic football knowledge, how they fit in different systems, and the personality of the player.

 A good example of this is the contract extension with Cleveland Browns cornerback out of Nordonia High School, and from the Ohio State University, Denzel Ward. Denzel Ward was drafted by the Browns in 2018 as the 4th overall pick. His original draft contract was set to expire after the 2022 season was concluded. Throughout the year and all off-season there was back and forth between Denzel Ward and the front office of the Browns, spearheaded by Andrew Berry, in regards to his future in the NFL. Denzel wanted to stay in Cleveland but they had to come up with a contract that was favorable to both parties. As of April 18th, 2022 at 2:25pm the Twitter account of Adam Schefter announced “Browns are signing Pro-Bowl CB Denzel Ward to a 5-year, $100.5 million contract extension that includes $71.25 million guaranteed, per source. (@AdamSchefter)”. This deal reset the market for cornerbacks, and other positions in the secondary, as Andrew Berry and co. made Denzel Ward the highest paid defensive back in the game.

This contract was constructed uniquely to fit the needs of both Denzel and the Cleveland Browns organization. This contract did not include a signing bonus because he was already part of the team. Usually a player picked from a new team or free agency receives one. A signing bonus is “an upfront payment a player receives to sign his contract”(Front Office Football). An example of a signing bonus from the aspect of the Cleveland Browns is the acquisition of quarterback Deshaun Watson, who was given around $45 million at his signing (“Browns Announce Trade for Texans Quarterback Deshaun Watson”). The bonus also helps a team so that they will not take a big hit towards the salary cap in their first year of play as they can acquire new pieces to fit around their new quarterback. If they were to go over the salary cap they will be fined by the league. “The salary cap refers to a set amount of money that each NFL team is allowed to spend on player salaries for any given league year”(Tyler Brooke). If  a richer team with a bigger market does not follow the rules of the salary cap they would be fined and given penalties. The salary cap is important because it makes sure that no one can use their funds to steal all of the best players and have them on one team.  A performance based incentive is often seen in contracts with unproven players, or a player who is older, or either struggling in performance, or with health. A performance based incentive works as if a player gets this amount of sacks, or gets this amount of tackles, then he will receive an extra $250,000.

There are also negative effects on a player’s contract which can cause someone to receive a smaller salary besides performance such as age, as well as age with position, and health. There is a reason why you see Quarterbacks in the league last in their 40s versus running backs. As a Quarterback you do not get hit nearly as much as any other position on the gridiron besides kickers and punters. “Athletes in the National Football League have extremely short careers due to the physically demanding nature of football, creating a unique trajectory of earnings”(Patel p.2).  A running back has to be physical every down, being the nail most of the time rather than a hammer. Their position is so physical that they are constantly bruised, hurt, and beaten by the defense, they do not have much protection as their job is to literally run through the defense.

Coaches Contracts

Even when a team gets an exceptional group of athletes together, it does not mean anything if they do not have a coach who can lead them in the right direction. A coach is evaluated by how they can adapt to a scheme which will fit a certain organization, the winning percentage of their record, their teaching philosophy, the leadership they possess, and many other values. When the front office is looking for a coach they have to come correctly, with a respectable price point to start negotiations if there is mutual interest after an interview. Many owners like coaches who are as aggressive or passive as they are in the way they view game strategy. An example of this is crucial fourth down play calling. A study has shown that it is beneficial and more effective to go for it on fourth down when the team with the ball is on the 95 yard line, or the 5 yard line going toward the end zone primarily with situations in 4th and 2 or shorter when trying to score a touchdown(Will Palmquist et al, p. 4-5),  In American football you get four downs to get a first down and keep the ball, unless you score, or commit or turnover. Without extra penalties, or any nontraditional circumstances you have 10 yards to convert a first down. Typically the team who gets more first downs wins the game because they have possession for a longer time, even though this is nowhere near 100% accurate, as a variety of circumstances in football can change the outcome drastically.

Television/Streaming Deals

Fans are able to watch their favorite team compete through Television deals, different streaming apps, and local networks. The NFL has secured contracts with ESPN, Amazon , CBS and more. An example of how media deals are structured are with negotiation between the NFL and media coverage is with CBS.

“Viacom/CBS gets a new multi-platform deal. CBS will continue to be the primary home for AFC games on Sunday afternoons, which will now be streamed on new subscription service Paramount Plus as well as air on CBS Television. Under the $2.1 billion-per-season deal, CBS is locking down 78 consecutive years as an NFL TV partner. It will get to air three Super Bowls during the contract, in 2023, 2027 and 2031”(Jakob Eckstein).

In this deal, like many others, CBS took exclusive rights on streaming certain games in a specific division. It even gave their streaming service a new line to receive revenue, and a premium on coverage in some Superbowl games. This is important since this is one of the biggest events streamed on TV throughout the whole year. This shows how part of this billion dollar industry is making billions just from one outlet. Imagine how much they bring in with the other 5 main platforms as well. This includes NBC, ESPN, ABC, FOX, and even Amazon has an exclusive deal.

Stadium Operations

Big parts of stadium operations include concessions, security, landscaping, cleaning and maintenance, security, the type of stadium itself, and so much more. The operations may be different based on the type of stadium you play at and rather its grass or artificial turf. A dome stadium is favorable to some as it is an indoor facility, so the weather will not always be a factor in games. Oftentimes teams that play in stadiums are more successful than teams without one because of the weather, as they have more fan support which also leads to an increase of a lot more money made (Rodney J. Paul et al. p.5). My personal favorite stadium is the traditional outdoor stadium that most teams play. These stadiums are open to weather and wind, most if not all highschool stadiums are open. The one other type of stadium is the hybrid stadium which is really a dome stadium that includes a roof that retracts open and closed depending on the conditions.

The price for landscaping can change drastically with the use of artificial turf instead of natural grown grass. Artificial turf does have some cosmetic and financial advantages, but if you have played football or any outdoor sport as long as I have you will notice there are big differences. Artificial turf is not as easy to stick to with cleats, which lead to a large number of injuries. When athletes randomly fall or get hurt running on a field this is usually because of the turf, sometimes we call it the green monster who comes up and grabs you. It does not hold rain and soil as much as grass does as it is made to drain fast. Artificial turf also feels much harder to get hit on as there is rubber on it as it falls and the foundation of it is an even layer of gravel.

Natural grass both inside and outside of the stadium take a lot of work and time to upkeep, as I have been a landscaper myself in the past. There is the preparation that takes place to make sure the field is in the best condition possible. In some sports, there are cases in which a field is in such a bad position you cannot play on. For example, in baseball if the sand starts to form large puddles the umpire will call the game. Bad field conditions can also lead to injury and cause an unsafe environment. Other aspects of landscaping include all the greenery right outside of the stadium to make sure it gives a beautiful image to the city around it.

Throughout sporting events fans always want to eat as it takes hours long for a game to conclude with commercial breaks and so forth, even though there are only 4 quarters with 15 minutes of time each. Like a mall or any other business that resells the products of another company, the NFL uses vendors to sell food. Like any other team in the National Football League The Cleveland Browns raise a higher price than what a restaurant would normally sell food for to create a large profit.

Security is needed to control the traffic of fans, players, media personnel, and anyone else in or around an NFL stadium. They are paid to make sure the peace is kept. They will not use force unless they necessarily need to. Most are unarmed, but many stadiums also use the police force to help with this security as there are always thousands of loud, crazy, and drunk fans trying to root for their teams. They also are the people at the gate who screen you, pat you down, put you through the metal detectors, and check your ticket as you enter a stadium.

Conclusion

This essay will serve to help fans, and athletes alike understand and be informed on the aspects of finances in football. Athletes trying to go to the next level have to learn how to be financially responsible and careful when they are in the process of contract negotiations, not just from different teams, but from bad agents as well. Players will then be able to go to front office meetings with some understanding on how to use this financial literacy, and communication, to use their skills, personality, and what they can give to an organization as a way to bargain for what they believe they deserve.

Fans will be able to know more about the market in the NFL, how the league is as wealthy as it is, why their favorite team cannot afford a specific player, why a team may need to rebuild, why their favorite player may leave to go to another team, and so much more. Someone trying to learn and possibly gain a career in sports could use this information to teach themselves on how money is moved, and how it is evaluated. It is a million dollar market that many have minimal knowledge on.

This has confirmed a lot more information that I have known about the National Football League. I have known a lot about the operations, rules and regulation of the game, how each position on the gridiron is played, the workload that comes with the sport, the terminology that comes with it, the physical prowess you need to compete at a high level, and so much more. This research has given me a deep dive on why my favorite team, the Cleveland Browns, were able to be so aggressive into keeping their young nucleus together, locking them up in contracts for years to come. It also helped me to see other functions that are not paid attention to in the NFL, with the media, stadium operations, and so much more.

Works Cited

Brooke, Tyler. “How Does the Salary Cap Work in the NFL?” Bleacher Report, Bleacher Report, 3 Oct. 2017, https://bleacherreport.com/articles/1665623-how-does-the-salary-cap-work-in-the-nfl.

Eckstein, Jakob. “How the NFL Makes Money: TV Is King, Streaming and Gambling on Horizon.” Investopedia, Investopedia, 30 Jan. 2022, https://www.investopedia.com/articles/personal-finance/062515/how-nfl-makes-money.asp.

Published by Front Office Football FOF’s founder, et al. “NFL Contracts Explained: Signing Bonus.” Front Office Football, 20 Dec. 2020, https://frontofficenfl.com/2017/03/10/nfl-contracts-explained-signing-bonus/.

Klein, Christopher “The Birth of the National Football League.” History.com, A&E Television Networks, 4 Sept. 2014, https://www.history.com/news/the-birth-of-the-national-football-league.

Mulholland, Jason, and Shane T. Jensen. “Optimizing the allocation of funds of an NFL team under the salary cap.” International Journal of Forecasting 35.2 (2019): 767-775.

“NFL’s New TV Rights Deals, Explained: What $100 Billion Package Means for Fans in 2023 and Beyond.” Sporting News, 19 Mar. 2021, https://www.sportingnews.com/us/nfl/news/nfl-tv-rights-deals-explained/z4rlycwog3jz1f6pqdqoegbxf.

Patel, Bunsee. “The Age-Position Effect in the NFL Free-Agent Labor Market.” (2020).

Palmquist, Will, Ryan Elmore, and Benjamin Williams. “Fourth Down Decision Making: Challenging the Conservative Nature of NFL Coaches.” DU Undergraduate Research Journal Archive 2.1 (2021): 6.

Paul, Rodney J., Justin Andrew Ehrlich, and Jeremy Losak. “Expanding upon the weather: cloud cover and barometric pressure as determinants of attendance for NFL games.” Managerial Finance (2020).

Staff, Around the NFL. “Browns Announce Trade for Texans Quarterback Deshaun Watson.” NFL.com, NFL, 21 Mar. 2022, https://www.nfl.com/news/deshaun-watson-browns-trade-texans-quarterback-haslam-berry-stefanski.

Sutelan, Edward. “Deshaun Watson Contract Details: Browns to Give Qb Most Guaranteed Money in NFL History.” Sporting News, 30 Mar. 2022, https://www.sportingnews.com/us/nfl/news/deshaun-watson-contract-details-browns-guaranteed-money/erazcoeyuphbjztpnkljuxud.

Schefter, Adam (@AdamSchefter) “Browns are signing Pro-Bowl CB Denzel Ward to a 5-year, $100.5 million contract extension that includes $71.25 million guaranteed, per source. At age 24, Ward is the highest-paid CB in NFL history. Tory Dandy of CAA Sports, who negotiated the contract, confirmed the deal to ESPN.” April, 18, 2022. 2:25pm Tweet

 Adam Schefter on Twitter: “Browns are signing Pro-Bowl CB Denzel Ward to a 5-year, $100.5 million contract extension that includes $71.25 million guaranteed, per source. At age 24, Ward is the highest-paid CB in NFL history. Tory Dandy of CAA Sports, who negotiated the contract, confirmed the deal to ESPN” / Twitter

Thelen, Paul. “What Exactly Does Each Member of an NFL Team’s Front Office Do?” Bleacher Report, Bleacher Report, 3 Oct. 2017, https://bleacherreport.com/articles/1666258-what-exactly-does-each-member-of-a-teams-front-office-do.

Doyle, Valerie. “FAQ: How Much Is NFL Veteran Minimum?” Website of the Charity Organization, 7 Nov. 2021, https://www.gakcc.org/interesting-for-veterans/faq-how-much-is-nfl-veteran-minimum.html#:~:text=What%20is%20the%20%EE%80%80NFL%EE%80%81%20%EE%80%80veteran%EE%80%81%20%EE%80%80minimum%EE%80%81%20salary%202021%3F,new%20CBA%20the%20%EE%80%80minimum%EE%80%81%20salary%20was%20%24610%2C000.%20.