by Brandon “C.F Brando” Reiter
Imagine you are negotiating a raise with your manager…
They look at your proposal and say, “sorry, you’re a great asset to us, but this raise would put us over our salary limit for the company.”
And you respond, “but the company has enough money to give me this raise?”
“And you believe I’m worth it?”
“Without a doubt.”
“But you can’t give me the raise because there’s a salary limit?”
“Yes, but it’s not our company’s policy, it’s the industry’s. Every company in our industry has to abide by the same limit,” they say.
You consider your options. “So, I could either stay here and make less money than we both know I’m worth, or I could find another company with more salary ‘room’?”
“That’s right, except there are only about 30 other companies, and only about 5 of them have enough room for this type of salary”
“Oh and they’re located in very random places across the country. Milwaukee, Indianapolis, maybe Utah?”
“But even they probably wouldn’t want to pay you.”
“So what can I do?”
“Sign this deal.”
While professional athletes are known for signing astronomically high contracts, they are subject to scenarios like this one.
Collective bargaining agreements known as (CBAs) are agreements between player organizations of professional sports leagues and the team owner’s. You may have heard the term “lockout” before, and that is what comes when the two sides can’t come to an agreement on a new CBA prior to the expiration of the one in place. Currently, the MLB and the MLBPA have not agreed to a new CBA and are facing a potential lockout, as their current CBA is set to expire tomorrow, 2/28/2022.
Baseball is unique to the other sports in the sense that it does not utilize a “Salary Cap”, however under the previous CBA if team payroll went over a certain amount, they were financially penalized with a “luxury tax” penalty. The NBA & NFL both utilize a salary cap that is derived from a certain percentage of the league revenue, while the NHL utilizes upper and lower “limits” for their salaries (very similar to a Salary Cap).
Let’s take a look at how the salary caps (and limits) are calculated for these three leagues, as well as how the luxury tax was assessed in the expring MLB CBA:
The NBA (2017 CBA)
Calculated by multiplying projected “Basketball Related Income” by 44.74%, subtracting projected player benefits, and then dividing the result by 30 (the amount of teams).
The “Minimum Team Salary” is the minimum total team salary that a team must have for a Salary Cap Year (90% of the Salary Cap).
NFL (2020 CBA)
The NFL breaks up their revenue into three different categories and assigns a different percentage for each awarded to the players, which they refer to as “The Player Cost”. According to the current CBA, The “Player Cost Amount” is be calculated by the sum of 55% of projected League Media Revenue, 45% of projected NFL Ventures/Postseason Revenue, 40% of projected Local Revenue, and 50% of the net revenue for new line of business projects, less 47.5% of the Joint Contribution Amount (amount contributed to retirement and benefits).
NHL (2020 CBA)
During the 2020-2021 season, the limits were set at the following amounts:
• Upper Limit = $81.5 Million
• Midpoint = $70.9 Million
• Lower Limit = $60.2 Million
According to the CBA, the Upper Limit increases if “Hockey Related Revenue” surpasses $3.3 Billion.
MLB Luxury Tax
Each year, clubs who carry payrolls above a threshold are taxed on each dollar above the threshold, with the tax rate increasing based on the number of consecutive years a club has exceeded the threshold.
A team’s Competitive Balance Tax figure is determined using the average annual value of each player’s contract on the 40-man roster, plus any additional player benefits. Every team’s final CBT figure is calculated at the end of each season.
In 2021 the threshold was $210 Million Dollars.
Now with all these restrictions in mind, let’s look at how the average player salaries looked during the 2019-2020 season:
As we see here, of the 4 major sports described above, it looks like the NBA players get the best deal, but this is largely due in part because they have the fewest amount of players on each team.
Now, let’s take a look at the 20 largest sports contracts in America:
|#||Player||Leage||Contract Length||Total Contract||Salary/Year||Salary/Game|
|1||Patrick Mahomes||NFL||10 years (2020–2030)||$ 503,000,000||$41,916,667||$ 2,465,686|
|2||Mike Trout||MLB||12 years (2019–2030)||$ 426,500,000||$35,541,667||$ 219,393|
|3||Mookie Betts||MLB||12 years (2020–2032)||$ 365,000,000||$30,416,667||$ 187,757|
|4||Francisco Lindor||MLB||10 years (2022–2031)||$ 341,000,000||$34,100,000||$ 210,494|
|5||Fernando Tatís Jr.||MLB||14 years (2021–2034)||$ 340,000,000||$24,285,714||$ 149,912|
|6||Bryce Harper||MLB||13 years (2019–2031)||$ 330,000,000||$25,384,615||$ 156,695|
|7||Giancarlo Stanton||MLB||13 years (2015–2027)||$ 325,000,000||$25,000,000||$ 154,320|
|8||Gerrit Cole||MLB||9 years (2020–2028)||$ 324,000,000||$36,000,000||$ 222,222|
|9||Manny Machado||MLB||10 years (2019–2028)||$ 300,000,000||$30,000,000||$ 185,185|
|10||Alex Rodriguez||MLB||10 years (2008–2017)||$ 275,000,000||$27,500,000||$ 169,753|
|11||Nolan Arenado||MLB||8 years (2019–2026)||$ 260,000,000||$32,500,000||$ 200,617|
|12||Josh Allen||NFL||6 years (2022–2027)||$ 258,000,000||$43,000,000||$ 2,529,412|
|13||Alex Rodriguez||MLB||10 years (2001–2010)||$ 252,000,000||$25,200,000||$ 155,555|
|14||Miguel Cabrera||MLB||8 years (2016–2023)||$ 248,000,000||$31,000,000||$ 191,358|
|15||Anthony Rendon||MLB||7 years (2020–2026)||$ 245,000,000||$35,000,000||$ 216,049|
|16||Stephen Strasburg||MLB||7 years (2020–2026)||$ 245,000,000||$35,000,000||$ 216,049|
|17||Albert Pujols||MLB||10 years (2012–2021)||$ 240,000,000||$24,000,000||$ 148,148|
|18||Robinson Canó||MLB||10 years (2014–2023)||$ 240,000,000||$24,000,000||$ 148,148|
|19||Giannis Antetokounmpo||NBA||5 years (2021–2026)||$ 228,200,830||$45,640,166||$ 556,587|
|20||James Harden||NBA||6 years (2017–2023)||$ 228,000,000||$38,000,000||$ 463,414|
Despite the NBA having the highest average, only two of them made this list which has 15 different MLB players on it (A-Rod twice). While the MLB system is definitely far from perfect, it is closer to real world scenario than the other sports as despite making half the annual average revnue as the NFL, their best players dominate the top of this list. Probably, because there is no “hard” cap on the salaries they can offer, allowing them to go “all in” on certain players, while the other league’s are bound by these hard limits.
Anyways, the point of this is not to throw a pity party for billionaire athlete’s, but just to say that these salary limits the league’s get away with imposing on their players goes directly against the American idea of free trade, market value, and basic anti-trust laws. Each of these leagues, essentially operate monopolies, generate billions of dollars, and use their monopolistic authority to control how their employees are compensated.
And yes you did read this right, Robinson Cano has a $240 Million contract.