A Guide to the NFL Salary Cap, Including the Franchise Tag, Guaranteed Money and Signing Bonuses

Including the Franchise Tag, Guaranteed Money and Signing Bonuses

The NFL salary cap is a hotly debated and confusing topic. While most fans of the NFL know the basics - my team is over the salary cap, so we can't sign that great free agent we desperately need - beyond that it can get a bit cloudy. The NFL salary cap is convoluted and contains a handful of tricks and loopholes that teams can take advantage of, and potentially pay for later. Let's start with the basics.

How is the NFL salary cap determined?

The NFL salary cap, which has now been around for well over a decade, was based on a percentage of Defined Gross Revenue,or DGR. The biggest pieces of DGR are the multibillion dollar television contracts. The DGR for the NFL salary cap also includes ticket sales and merchandise sales. What DGR didn't include was local revenue, which includes sponsorships like stadium naming rights. However, those local revenue streams are now included into the salary cap pot, called total revenue.

It doesn't matter whose team makes more money, the total revenue is divided evenly by 32, setting the salary cap for each team. (So, there should no longer be any complaining about how your team is in a small market and can't get the top guys to come to town.) Currently, the players rake home an approximate 57% share of total revenue. The share was higher - in the low to mid 60s - when using the DGR system, but even with a lower percentage, it results in an increased salary cap due to the larger starting revenue pool. With seemingly no limits to the popularity of the NFL and because television contracts are always increasing, so is the salary cap. The cap started at roughly $35 million in 1994 and 14 years later, it has increased itself more than threefold, to over $115 million per team per season.

Another important aspect of the NFL salary cap to remember is that it's unbreakable, and no team is above its law. In the NBA, you can go above the salary cap if you're willing to pay a so called "luxury tax". In the NFL, there are no ifs ands or buts about it, the cap is the cap. But...

What's the deal with signing bonuses and guaranteed money?