In January 1965, Joe Namath, a quarterback from the University of Alabama, signed a contract with the New York Jets worth for the outrageous sum of $427,000.
It was the most lucrative contract ever signed by a rookie — a three-year deal that included an annual salary of $25,000, a whopping $200,00 bonus, a green Lincoln and $30,000 for attorney’s fees.
Cleveland Browns owner Art Modell grumbled that “contracts like the one Namath got can be the ruination of the game.”
It didn’t ruin the game, but in the decades since then, as player salaries rose to insane heights, others echoed the same sentiment.
Every step up the pay scale spelled doom for the NFL (or NBA or MLB).
So what would Modell and his contemporaries have thought of the spending spree that’s underway this offseason? NFL teams have awarded contract extensions as if they are printing money.
Twenty players have received new contracts that are each worth more than $70 million, and half of them are worth $100 million or much more.
And here’s the part that would’ve probably killed Modell: most of the contracts are fully guaranteed.
Whether they run for 10 yards or 1,000, whether they miss the season or not, they get their millions.
Quarterback Deshaun Watson, who hasn’t played since 2020 because of criminal accusations, signed a five-year deal with the Cleveland Browns worth $230 million — fully guaranteed.
The Los Angeles Rams gave quarterback Matt Stafford a four-year deal worth $160 million, $130 million guaranteed.
Quarterback Aaron Rodgers agreed to a three-year, fully guaranteed contract worth $150 million with the Green Bay Packers.
Those receiving $100M deals or more consisted of four quarterbacks, four wide receivers, a linebacker and a cornerback.
The top 10 deals add up to $1.5 billion, $962 million of it guaranteed.
According to Spotrac, there are 25 players who have contracts worth more than $100 million. Forty players have contracts worth more than $90 million, and 100 players at $58 million or more.
Most of the money is guaranteed.
If fans wonder how players can demand such money, maybe they’re asking the wrong question.
How can teams afford to pay players so much money? The answer of course is that those teams are worth a lot of money.
According to Forbes, despite a 20% drop in revenue in 2020 because of the pandemic, the average value of NFL franchises rose 14% to $3.48 billion in 2021.
Forbes’ valuations of the teams: Dallas Cowboys $6.5 billion, New England Patriots $5 billion, New York Giants $4.85 billion, Rams $4.8 billion and Washington Commanders $4.2 billion.
According to Statista, the average franchise value of NFL teams from 2000 to 2008 more than doubled from $423 million to more than $1 billion.
By 2020 the average surpassed $3 billion.
Sports is a huge business. When someone buys ownership in today’s NFL, they’re not doing it merely because they’re fans; they’re successful businessmen who are buying in because the return on investment is mind-boggling.
Nuwire Investor did the math in 2020. The San Francisco 49ers were bought for $13 million in 1977. Their current value is $3.5 billion. That’s a return of 26,823%.
The Giants were purchased for $150 million in 1991. They are valued at $3.9 billion. That’s a return of 2,500%.
The Patriots were bought for $172 million in 1994; their current value is $4.1 billion — a return of 2,283%.
The Cowboys were bought for $150 million in 1989; they are valued at $5.5 billion (now worth another billion) for a return of 3,566%.
One more: The Chicago Bears were purchased by the late George Halas in 1920 for $100. Their current value: $3.45 billion — or a return of $3,499,999,900 – or 4,449,999,900%.
Not a bad 102-year investment.
This is attracting the new-money crowd from the business world. Rob Walton, the Walmart heir, is in the process of buying the Denver Broncos for $4.65 billion.
Steve Bisciotti, who made his fortune via the country’s largest privately owned staffing and recruiting company, bought a part of the Baltimore Ravens in 2000 and another part of the team in 2004, for a total of $900 million.
David Tepper, a hedge fund manager, bought the Carolina Panthers for $2.257 billion.
It’s the same story in other professional sports. Steve Ballmer, former CEO of Microsoft, bought the NBA’s LA Clippers.
Dan Gilbert, co-founder of Quicken Loans, bought the Cleveland Cavaliers. Robert Pera, founder of an international communications technology company, bought the Memphis Grizzlies.
And there are others like them — Mark Cuban, Tilman Fertitta, Shad Khan ….
Stan Kroenke, who married another Walmart heir (Ann Walton), made his money in real estate development. Now he owns the holding company for not one but nine professional sports teams (two are in the name of his wife) in soccer, hockey, lacrosse, football (the NFL’s Rams) and basketball (the NBA’s Denver Nuggets).
What other business can promise such extraordinary returns while being recession and pandemic proof.
As for the challenge of operating cash, there is playoff revenue, TV money, merchandise and ticket sales and it’s a cinch to borrow money against equity.
So while teams are paying players seemingly insane amounts of money to play for them, they are also building insane equity.
They can afford to pay Rodgers $50 million and they’re not ruining the game.