Are NFL Players Overpaid?

NFL players are paid handsomely, no doubt about it. Those stratospheric figures we hear bandied about on ESPN may seem outrageous. But are the players who suit up on Sundays overcompensated?

Recently, Arizona Cardinals cornerback Patrick Peterson's new five-year/$70 million contract raised eyebrows, especially from a recently signed Richard Sherman – who now appears disrespected over his four-year/$56 million contract. And who can forget Aaron Rodgers' eye-popping five-year/$110 million contract a year prior?

I don't think Aaron Rodgers is looking for change. Source: Wikimedia Commons

It's easy to say that NFL athletes are overpaid. And while on absolute terms, NFL pay seems excessive, on a comparative basis, the numbers don't appear to bear that out.

A little background
The NFL is a revenue-producing giant, pulling in roughly $9 billion a year through a combination of television rights, ticket sales, advertising rights, and merchandise sales. 

The rules dictate that you can keep a 53-man roster, so on that basis, each one of those NFL athletes is worth $5.3 million a year. Obviously there are other employees of the National Football League, but when it comes to on-the-field talent -- what we pay for -- there are 53 eligible employees we pay to see on each team.

The collective bargaining agreement
A few years back, the NFL engaged in an acrimonious collective bargaining negotiation with the NFL Players Association. At the heart of the matter was the revenue-sharing policy – and it appears that the NFL owners won. The revenue split went from nearly 50/50 to the NFL owners now taking 53% and the players taking 47%. The salary cap, or the figure NFL teams should stay below, now hovers around $133 million per year, or $4.25 billion on a total basis.

Russell Wilson, perhaps contemplating his next contract. Source: Wikimedia Commons

And while the big, splashy contracts tend to make the front page, there are a host of athletes that aren't paid as well. The rookie contract was dramatically curbed in favor of the owner -- so much so that Super-Bowl-winning Seattle Seahawks  quarterback Russell Wilson is set to earn $3 million over four years. 

About that 47%
Even on a comparative basis, salaries eating up 47% of revenue doesn't seem out of the ballpark, and may even seem a little light. For comparison, education and health-care salaries can average above 50% of revenue.

The one rule in regard to salaries is that there really aren't any rules. However, as a percentage of revenue, two broad outlines seem to form: skill and scalability. Jobs that have a high degree of both tend to pay a larger percentage of revenue than ones that do not.

Jobs that can be easily replicated by another employee -- take fast food or retail -- tend to pay on the lower end of that scale. The Society for Human Resource Management estimates that only 18% of revenue goes toward salaries in retail. NFL players are highly skilled. Not too many individuals can throw a perfect 70-yard spiral or run at a 4.3/40 clip to catch it.

Scalability helps as well. The NFL is certainly capable of handling increased demand. To increase ticket sales, it only needs to build rather modest stadium additions -- some are even taxpayer-funded. TV contracts and advertising revenue don't depend on more product, but rather a higher-quality product.

Final thoughts
On an absolute basis, NFL players appear overpaid – but that's not how you should view them. On a comparative basis, in many ways, they are underpaid. They are a highly skilled workforce putting out a product that many people pay top dollar to see. From a small base of nearly 1,700 on-the-field employees, they are able to drive nearly $9 billion in revenue. Keeping less than half seems reasonable.

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Comments from our Foolish Readers

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  • Report this Comment On August 12, 2014, at 6:31 PM, notyouagain wrote:

    I won't pay to see any professional sports. If they're on TV and I'm wanting to see the game, fine.

    But to help pay the outrageous salaries of pro sports figures and get charged $6 for a hot dog and $9 for a beer? Nah. I'll stay home.

    These people get the best job in the world. They get to play a game they love for a living. I'm all for them getting rich, but I won't have any part of helping to pay them more than they could ever spend even if they tried.

    Consider this: what if you hate baseball and never watch it?

    Doesn't matter. You still help pay these bloated salaries every time you buy a new car.

    Car companies advertise and pay mighty big dollars to do so during MLB games. You think part of the money you fork over for a new car isn't allocated to help defray that cost?

    Is it fair for non-baseball fans to be forced to help pay for that?

    These guys live and get rich never getting up before daylight to clock in at a job they hate.

    Let them make oodles of money. But nobody...NOBODY...deserves MY contribution towards more money than they could spend in a lifetime to play a game. They'll never get it, either...I never buy new cars and I don't go to games.

  • Report this Comment On August 12, 2014, at 7:00 PM, notyouagain wrote:

    Yes, I realize I changed the subject to baseball.

    When the NFL decided to take back a lowlife who tortured dogs and reward him by making him rich beyond his wildest dreams in spite of what he'd done, I never even watched a football game on TV again.

  • Report this Comment On August 14, 2014, at 12:21 AM, TMFJCar wrote:

    @notyouagain,

    Interesting takeaway but I think you are being myopic here. You are paying for a host of things when you buy many products. You are paying for athletes, celebrities, overpaid CEOs, and in many cases senators and congressmen. Seems kind of unfair to call out one group.

    Take those insane political ads that say "call XXX and tell them they are awful..." They are even worse because they are tax deductible. Yah, the tax money missed because of these ads is being borrowed and eventually we'll all have to repay. So that's crazy to me.

    Not that I disagree with you but it's an economy. Money will flow to those that provide value (even if it's just perceived). Somebody in some marketing department thinks giving money to athletes is a smart deal and it makes more money than they are paying them. If that's true perhaps less of your money is going there than you think.

    Thanks for your comments. I find your commentary valuable and well thought out, something that we find here more than other sites but you in particular.

    TMFJCar -- the author

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