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Cowboys cap complications: How the unexpected is muddying the Dak Prescott negotiations

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The NFL and NFLPA have to work out salary cap contingencies. Those could directly impact Dallas and their quarterback.

David Benavidez v J’Leon Love
Another issue to blame on the pandemic.
Photo by Tom Pennington/Getty Images

We are weary of the endless reports on the contract stalemate between the Dallas Cowboys and franchise quarterback Dak Prescott. Rest assured, this is not another breakdown of rumors about offers and demands, or one more opinion on what should be done by whom to get things moving. This is about unique issues that are facing the NFL and how they make a never-simple process even more difficult. The ongoing coronavirus pandemic threatens to seriously impact revenues. Revenues are what determine the salary cap, which directly affects contracts. Now, the league and the player’s union are trying to work out how to handle things. There are already reasons why neither side is in a hurry to work something out for Prescott. This is just one more - and it may be one of the biggest.

Ian Rapoport, Mike Garafolo, and Judy Battista have jointly written an article at NFL.com about the issues at stake. When the new CBA was approved, we thought things were going to go smoothly for a decade. But no one expected the situation we face with the expected start of the season just a bit over three months away. That means a new round of potentially contentious negotiations.

Multiple sources say the NFL and NFLPA both acknowledge that important negotiations are coming quickly to determine how to handle yearly salary caps for 2020 and beyond, considering there are likely to be steep revenue losses with limited or no fans in the stands. This sets up a scenario where both sides will have to come to agreements on every possible contingency on how COVID-19 could affect the season before anyone plays a game.

Not only will the two sides be looking at all the ifs and maybes for football, they will also be closely watching what is going on with other pro sports that are trying to restart before the scheduled September 10th NFL kickoff.

The NFL has had the luxury of waiting, biding its time and watching the other professional leagues, while MLB and its union in particular has engaged in acrimonious and sometimes tone-deaf talks for how to compensate players and what the season will look like. Those involved in football want to handle it now before it gets to that point.

For consumers of the NFL product like us, there are many facts and nuances that we may not be aware of. One thing that some don’t understand is why a bunch of billionaire owners cannot just suck it up and pay their players. However, that is something that incorrectly conflates net worth and cash flow. Yes, Jerry Jones is a multi-billionaire. However, he doesn’t have those billions sitting in a checking account. Most of it is tied up in property, including the Star and AT&T Stadium, various other business ventures such as his ownership of real estate, hospitality services, and a pizza chain, and the famous Draft Yacht. While some will provide cash flow, the revenues from broadcasts and from ticket and concession sales for home games are where the players’ paychecks come from. Besides, with the current economic struggles, those other ventures are not producing as much income, and in the case of those hospitality operations, are shut down just as much as football at the moment. Without the revenues from the networks and streaming services, there is no money to pay the players, short of taking out some huge loans. Obviously, none of the owners are going to be eager to take on a debt load for that.

So how bad might things be? Here is what the NFL.com article has to say:

The salary cap (currently $198.2 million for 2020) is calculated based on expected revenue, but there’s also a mechanism where it rises or falls based on unexpectedly higher or lower revenue in the previous season. That will be the case this year in relation to the 2021 cap with fewer (or no) fans in the stands. How bad will the revenue losses be?

The worst-case scenario is that every game is played in a completely empty stadium, leading to what sources have estimated as a $4 or $5 billion drop — about a third of revenue. Under that scenario, teams could bring in $40 to $80 million less than expected. The losses are likely to be less than that, because it is expected that some fans will be able to attend games in some stadiums, although stadiums won’t be packed. Still, if there are huge revenue losses, the 2021 cap will be impacted.

But no one wants to see the cap drop because that has consequences for teams and players. And neither side wants a situation where the cap drops significantly in 2021 then rebounds with the new TV deals in 2022. It makes it extremely difficult for teams to conduct business or do extensions.

Note that last sentence, which directly bears on the Prescott negotiations. With that kind of uncertainty, it is hard to come to terms on large, multi-year deals. And as noted in that article, it just isn’t Dallas that is struggling with that issue. Some teams might consider releasing veterans with big contracts and smaller dead money hits if things go badly.

There is also the specter of possible cancellations if the pandemic revs back up this fall or winter. That also has to be included in the planning for things.

In hindsight, this is just one more argument that the Cowboys should have worked harder on getting Prescott’s deal done earlier. However, the pandemic was a completely unanticipated event. It is hard to fault the team for not seeing that.

All this may well affect the franchise tag, especially if Prescott were to play on it this year and we have to endure this pain again next offseason. A serious revenue hit with accompanying salary reductions, which is one thing the CBA allows for, could make a second tag less lucrative for the player, and more palatable for the team. But as with all of this, that deals with unknowns.

If your head kinda hurts, you get it.

Beyond the specific concerns this raises for one specific contract negotiation, there are other potentially serious impacts for Dallas. Over the Cap has an article looking ahead at 2021 cap space throughout the NFL, and the news there is not terribly good for the Cowboys. They rank in the bottom of four tiers in this projection. Of necessity, the article has to use a lot of assumptions that may change, but the fact is that Dallas looks in worse shape than three quarters of the league. On a more positive note, the article does point out that the Cowboys have a lot of ways to increase the space through restructuring. And getting a deal done with Prescott also would allow them to structure it to make things more manageable.

It is not a lot of fun to have to worry about a possible drawn-out and acrimonious new negotiation between the NFL and NFLPA. They have seldom played well with one another, with the union feeling that they have been jobbed in some aspects the last two CBAs - not without justification. But this is just another part of the new abnormal.

And one more thing about which we have to keep you informed.