How is the NFL Salary Cap determined?
Answer: The Cap is determined through a complicated calculation system, which has changed with the latest extension of the CBA. The Cap is based on income that the teams earn during a League Year. Originally that "pot" was limited to what was known as Defined Gross Revenues (DGR), which consisted of the money earned from the national televison contract, ticket sales, and NFL merchandise sales. In 2006 the CBA was modified, and the "pot" was expanded to include total revenue. Thus, other sources of revenue, including such other items as naming rights and local advertising, were added. As was the case with the original DGR, the expanded revenue is divided equally amongst all 32 teams for purposes of calculating the salary cap.
For all of you nerds out there, here is the actual mathematical calculation:
The newest edition of the CBA has a term, "All Revenues" (AR), which pretty much includes all revenue streams. The CBA spells ou the particulars over the course of about 10 pages, but in a nutshell the AR includes ticket sales, revenue from luxury box suites and premium seating, local and national broadcasting (TV/radio/Internet) royalties, concessions, parking, local advertising, stadium leasing, and merchadising. The AR is then divided into 3 distinct brackets: League Media (essentially revue from regular-season games), NFL Ventures/Post Season (self-explanatory) and Local (more or less revenue generated from preseason games). Now, fo r the part that you have been waiting for, the distibution of these revenues:
Projected AR x CBA Percentage = Players Share of AR. This is called the Player Cost Amount. For 2011, that amount is $4,556,800,000 (roughly $142.4 M per team).
Player Cost Amount minus Projected League wide Benefits = Amount Available for Player Salaries. For 2011, that amount is $3,852,000,000.
Amount Available for Player Salaries / Number of Teams = Unadjusted Salary Cap per Team. For 2011, that amount is (3,852,000,000/32 =) $120.375 M.
The CBA Percentage is as follows: Players receive 55% of AR (Media), 45% of AR (NFL Venture/Post Season) and 40% of AR (Local). Overall, the players receive between 47% and 48.5% of total revenue. More specifically, in years 2012-2014 the overall percentage is capped at 48%. For years 2015-2020 the percentage is capped at 48.5%.