The Salary Cap Defies Salary Capitalism (Part 1 of 4)

The salary cap is the most anti-American thing in America. Bold statement I know, with a big qualifier that America operates under capitalism. Because this is only about 70% the case, I will just say this: the salary cap is not just the biggest scam in sports, it’s the biggest farce in the entire entertainment industry.

Imagine how ridiculous it would sound to read the following: Disney has expressed interest in re-signing Harrison Ford for the next Star Wars installment. Both Disney leadership and Star War fans are hoping that Ford will show loyalty to the Star Wars franchise and fans and accept a substantial pay cut so that Disney is able to stay under the salary cap and sign other top actors for the movie.

That’s crazy talk, right? Even in a galaxy far far away. Yet this is an article we now read all the time in sports, like the huge discount Tim Duncan recently gave to the Spurs when he signed for $5 million per year–while his open market value is computed by Neil Greenberg at 23.2 million per year. When a player such as Duncan takes a below market deal to help his team afford other players within the salary cap, his public image soars and he is called ‘a team player’ and ‘someone who wants to win’. There is even a common term now to describe this phenomenon: giving “the hometown discount”. On the flip side, when Kobe Bryant accepted the Lakers offer in 2014 to become the highest paid player in the NBA , he was vilified and called selfish because of the damage done to the Lakers’ salary cap and their chance of winning.

How in the world did sports owners create a business paradigm where it’s prestigious for an employee to offer a discount to the billion dollar employer–or where an employee is deemed selfish who accepts a big contract?

The follow-up question all American business owners are immediately asking is: how in the world can we get in on this?

Does the salary cap even remotely sound like capitalism? Wait until you see how the numbers add up.

The salary cap sets a limit that defines the total amount each team can pay all its players. The NFL, for example, has a 2015 salary cap of $143.28 million per team, meaning $143.28 million covers the salaries for all 53 players on each team. The NFL has increased the cap number by $10 million a year over the past two years, a fact the NFL is selling as very generous act getting in line with the times. In the meantime, the NFL signed a $27 billion television contract running from 2013 until 2022 season. You read that right: BILLION. Furthermore, this $27 billion TV deal does not include other very lucrative revenue streams that NFL teams get, such as licensing Internet rights, ticket prices, merchandise sales, in-stadium advertising, food and beverage sales, and stadium naming rights. Levi’s paid the 49ers $220 million for stadium naming rights. The stadium naming rights alone covered about a year and a half of player salaries!

While these sports teams are printing money, it sure must be nice for them to have a system to limit player salaries.

It’s not just star players who are affected by the cap. At times middle tier veterans who still have value lose their spots in the league to unproven rookies who earn the minimum.

The salary cap combines socialist principles with monopolistic power. The advent of the salary cap is like an offshoot monetary system created just for sports– a monetary system created by powerful, rich people. This monetary system takes money from millionaires and gives it to billionaires.

It’s time to get rid of this complete shake down called the salary cap. It’s shocking to see NBA and NFL owners blatantly violating basic American codes of conduct. The salary cap does not reflect the free market and it is the most ‘un-perfect competition’ taking place in business today. This type of strong arming may belong in a totalitarian regime or a socialist state, but not in a country that trumpets free enterprise.

Next up in Part 2: Katy Perry Roars–Lebron James a Prime Salary Cap Example


3 thoughts on “The Salary Cap Defies Salary Capitalism (Part 1 of 4)

  1. Denise says:

    Those players are such victims!
    Dan, you realize that sports teams are a private business right and the ultimate free market right?
    How much money is a league going to make with no salary cap? Kobe, LeBron, shaq, curry, etc all in one team, winning all the championships means no one watches, no one goes to the games, no one buys the concessions and no one wears #30 jerseys. It’s a private business making a business decision so they can keep us idiots buying, buying, buying. Buying the crap I buy is the ULTIMATE free market.

  2. What Denise said.

    The NFL is a business and can pay their employees whatever they want. They can do that because they don’t have serious competition. If another league came along it might force the NFL to revisit the minimums, but…

  3. greg says:

    Right on! And it’s not just the salary cap. The Wall Street Journal had an editorial today pointing out that the state of Wisconsin is paying $250 million to cover half the costs of a new arena for the Milwaukee Bucks–so that the three billionaire owners will agree to stay in town for a few more years. All of this does sound a bit more like Putin’s Russia than our competitive capitalist system.

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