How Every Month Of March Makes Athletes Millionaires

Every big professional sport has millionaires. In the National Football League, some dutifully save their six-figure salaries until they hit that magical seven-figure number while some get their millions all at once. Some of those breakthrough moments happen when a player’s first team decides to make a huge commitment to them for many years to come. Other times, it could be a player’s second or third team that ties the metaphorical knot. For those players that decide that they want to leave their team, they have March circled on the calendar as a big payday. This is because that is when the NFL’s free agency period begins. However, what exactly is free agency in the NFL and how exactly does it make athletes into millionaires?

Contracts

In order to understand how free agency works, it is necessary to understand how contracts work in the NFL. Starting at the beginning, before a player plays for a team, they sign a contract. The contract determines the payout as well as a plethora of details about how the employment will be structured and the commitments from each party.

Regarding payout, it can be given as a signing bonus, a salary, or using performance-based criteria. When talking about performance-based bonuses, examples of criteria may include, but are not limited to if a player wins a certain number of games or if they do well enough in a certain area of statistics. Essentially, teams have the power to assign bonuses to any feat they can negotiate.

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In addition, contracts soft lock players to their teams for a number of pre-determined years. The specific number of years is also negotiated between a player, his agent, and the football team in question.

The actual mechanism of this lock is that if a team were to fire or “cut” a player before the expiration of the contract, the player is entitled to a sum that is often greater than that of his original salary. The term for the amount of money that is paid out after cutting a player is called “dead money,” per NFL.com. After looking at a number of contracts reported by Spotrac, it is commonplace for dead money payments to become smaller as the contract comes closer to expiring, thus increasing the ease of cutting a player later than sooner.

However, teams can also trade players to other teams in order to avoid paying the dead money in some cases unless the contract contains a “no-trade clause.” Teams can also use their only “franchise tag” on a player in order to restrict their ability to find a new team.

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In terms of payout size, contracts can be as small as five figures or as big as the salary cap allows. Quarterback Patrick Mahomes of the Kansas City Chiefs currently is playing on a deal that averages $45 million per year, according to Spotrac. The salary cap is basically a limit of how much money can be spent in a year on a team’s players. The limit is assigned by the NFL and essentially forced on all 32 NFL teams.

A player’s position matters when looking at how much they can make. Quarterbacks tend to make the most money as they are usually the most important position. Established quarterbacks tend to make $10s of millions per year while newer quarterbacks tend to make under $10 million per year. According to Spotrac, every other position tends to earn up to around $20 million per year, with only a handful of players approaching $20 million.

In order to fully understand free agency, one must understand the shape that contracts for successful players take relative to someone’s experience in the NFL. After thumbing through various Spotrac contract histories, contracts are given to players in this way. First contracts are usually pretty small compared to where they can go. The first one lasts for around four years and takes most players into their mid-twenties. The second contract is usually quite a bit bigger and also lasts for around four years, leading the player to their late 20s. A player’s third contract is usually the absolute peak of his earnings per year and lasts around three to four years. The next contract usually throws earnings down a cliff and lasts only one to three years. Every other contract usually becomes a cheap, rookie-sized one-year deal until the player retires in his early-mid thirties.

Generally speaking, contracts peak on their second or third deal while the rookie and fourth contracts can be similar and every contract after the fourth can be sub-rookie money or less than five million dollars per year.

Effects On Free Agency

The NFL’s free agency period takes place every March. This year, it started on March 17th. When players have a reason to leave their team, usually in the search for more money, they usually use free agency. Assuming they are not franchise-tagged first, players can “test” free agency. Once a free agent, they find themselves in a job search like most other professionals experience. They meet with teams for interviews, listen to offers, and make a decision on their next team within a few days or weeks. The longer the search goes, the smaller the payout in many instances. Therefore, the incentive to join a new team quickly is ever-present.

For the players that are in demand, teams will get into bidding wars trying to get the best player. Players in the middle of a bidding war get to sit back and watch as the teams send in progressively bigger offers until one wins the player. Many players dream of this moment because they can easily quadruple their earnings, assuming they are desirable enough. Then, once the new contract has been signed, they can run out and build their car collection and get a new mansion. This is how March makes millionaires out of athletes and turns millionaires into multi-millionaires.

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Source: Spotrac, Pro Football Network, NFL

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