Friday, February 23, 2024

NFL Salary Cap Increases, Kinda Like Purse Increases, Not Really

They announced the NFL salary cap has ballooned to $255M in 2024, an increase of about 100% since 2014. It's staggering. 

This increase has its pluses and minuses. 

The good:

  • Teams can spend more on their star players that were destined to leave, if they wish. If there's enough cap room to sign a Gabe Davis or Danielle Hunter who are very happy with their teams and city and life, Buffalo and Minnesota fans can be happy. If it adds to stickiness of rosters, it's all good. 
  • Athletes can choose many sports to play. If growth is happening it means more opportunity. Growth is always good. 
  • A rising tide floats all boats. Viewership up, ticket sales up, everyone benefits. The salary cap growth helps the $1M per year player, and the $50M per year player. 

The bad:

  • Ticket cost has increased, TV deals are splintering the viewer landscape angering fans, player jerseys cost an arm and a leg. 
  • The higher the labor cost the lower the spend on the ancillary, some of it very important. 

The bottom line with the NFL, however - things are growing, the ecosystem is healthy, and it's reflected in the cap. 

In horse racing, we've seen purse increases which many may think means things are okay, but these have not been driven by a healthy, sound business. 

Handle is not increasing; revenue from handle has gone down, not up. 

Outside the Triple Crown, the sport pays television to show it, not the other way around. 

We don't sell Irad Ortiz jerseys. The sport's popularity is not rising. 

Maybe we should just be happy purses are up, because they have to be doing something positive, right? I really don't know about that. 

On the low end, inflation has been deadly to the small trainer. They can't make enough money. Purses have not gone up enough, and sadly, if the purses do rise to high levels - say where a 5 claimer has a purse of $15k or $20k - the supertrainers swoop in, crowding out the small timer.

On the high end, how many barns with fifty or more big priced horses does the sport need? Clearly more than one or two. Hong Kong horse racing has barn caps for a reason. If horse racing was the NFL, and Todd Pletcher was Patrick Mahomes, he'd be making a billion a year, and Joe Burrow four million. 

The NFL has ended up with a growing business fuelled by revenue growth. Its foundation is not without problems, but it is sound. 

Horse racing has not put that money to good use, because the foundation is not sound. In some spaces it's downright unbelievable. 

The answer to all of this is beyond my pay grade. But, the NFL's model of revenue up purses up is what horse racing has to show some semblance of. Purses up handle down means the present is okay, but there is no future at all.

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