Happy Leap Day! February 29th only happens once every 4 years so make it worth it by reading SportsBall. Today we have:

💸📝🏆 Someone finally explained a Salary Cap
🏀📈♺ NBA Stock prices
👮⛳️🥸 Cinderella golf story

We’ve been posting these stories and more on LinkedIn so if you need a timeline cleanse from “These 7 tips saved my 20’s” give us a follow here

LEARNING MODULE 💡 

What is a Salary Cap? 🧢

Most weeks we mention an athlete’s contract of some sort. Exclaiming, “wow, Shohei Ohtani just signed a $700 million deal” doesn’t hit the same if you don’t know about the Salary Cap. 🥱

In sports, the athletes are the product while the Salary Cap is the Quickbooks. 🤓 The budgeting. The finances. The tax implications, the boring stuff.

To put it succinctly, the Salary Cap is the total amount of money each team is permitted to spend on their entire roster. The determination of this cap is straightforward: the league's annual revenue is split equally between the players and the owners. ⚖️

A good old-fashioned revenue-sharing model.

This means that when the league has a good year financially (more Taylor Swift), half of the extra money goes to the players. In business terms, the athletes are like a sales team that works on commission.

Let’s look at the NFL’s 2023 season:

📺 Most watched Super Bowl ever with 123 million viewers
💃 More female fans than ever with the Taylor Swift extravaganza
🏆 Patrick Mahomes and the Chiefs validate their dynasty

Although revenue numbers published yet, it’s safe to say the graph is going up and to the right 📈, resulting in the league just announcing a 13% bump in Salary Cap for next year.

What next?

Say you’re a general manager of a team. The boss puts $255 million in your hand and says, “do whatever you want with it…” what’s next? 🤑

Instead of buying a yacht, you unfortunately have to go and build a team with that cash. There are 53 roster spots on each NFL team and everyone gets at least $750k (league minimum), so how do you split it up?

Do you pay everyone equally at $4.8 million a piece? 👯 Noooooo way. That leads to no star players, no good action, and no fans.

What you do is strategically sign contracts in important positions, making sure the megastars are well-paid while loading up on a cheap supporting cast.

There’s a method to the madness. Sure you can spend hours mocking up perfect teams and contracts but the rough blueprint is out there.

The chart below shows the current 15 most expensive players on each NFL team and what percentage of the Salary Cap each one gets. After the top 3, the spreads get a lot tighter and standardized across the league.

Bringing it full circle ⭕️

More people watching sports = more money for the league

More money for the league = a higher Salary Cap

A higher Salary Cap = players get paid more

Players get paid more = a better product on the field or court

A better product = more people watching sports

Then it starts all over again. 🔄 This lesson used the NFL as an example but there are so many more intricacies with the other sports we’ll dive into in future editions.

THIS PAST WEEK ⏮

Bullish on the NBA 📈 🏀

In our most random data visualization yet, we created a derived share price for NBA teams based on wins/losses this season and compared it to the performance of companies in the stock market. Check it out at the link below, you may be surprised how many similarities there are.

Our favorite is the Boeing 🛩️ x Orlando Magic 🪄

One Game Left 🏀

The countdown is nearing its conclusion. The Iowa Hawkeyes, led by Caitlin Clark, have only one game remaining this season before they advance to the playoffs.

Following a commanding victory and Clark's impressive 33-point performance against Minnesota last night, she now needs only 18 points to surpass the all-time NCAA scoring record set by Pete Maravich.

In line with the theme of shattering records, the average ticket price for Iowa's next game has reached $557, marking the highest ever for any women's basketball game, including professional. 💸 Fans are eagerly queuing up to potentially witness this historic moment.

While it's not guaranteed that the record will be broken on Sunday, Caitlin's past performances suggest there's a 91% chance 🧮 she'll achieve this milestone.

The NIL Train Keeps Rolling 🚊

Remember when we talked about college athletes getting paid under the table through shadowy university "collectives"? The ones where donors drop bags of cash to support the team, and then, through these so-called charities, the money makes its way into the players' pockets?

Well, those collectives’ lives just got even easier.

A federal judge just passed a ruling that the NCAA can’t prohibit NIL negotiation before an athlete commits to a school. 🙊 It’s the same as when LinkedIn was forced to put salaries up for jobs in California on their site rather than candidates interviewing and hoping for the right number. 🤞

Now, collectives can negotiate as much as they please beforehand, making un-refusable offers to 17-year-old athletes. Just imagine the leverage mismatch when a Texas oil baron 🤠 sits down with a high schooler to talk financials.

In practice, this will almost certainly favor the schools with the biggest donors and is another step toward athletes being granted employee status on a national scale.

ATHLETE OF THE WEEK 🏆

Glow Up ⛳️

Jake Knapp just won his first PGA event this weekend, the Mexico Open. While the win was impressive, the journey to get to this point is even more inspiring ⬇️

We’ve all worked a crappy job to keep things afloat before.

Jake was a club bouncer 👮 to keep his pro golf dreams alive. I was a janitor in college 🧹 to keep beer money in my pocket. We aren’t that different.

Thanks for reading and have a great weekend!

— Riley and Claire

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