A team can face huge penalties if it goes over the cap, or if it tries to dance around the limit. In 2012, the NFL reduced by $46 million the salary caps of the Washington Redskins and the Dallas Cowboys. The Redskins lost $36 million in salary cap space, and the Cowboys took a $10 million hit after "front-loading" contracts in 2010 when there was no salary cap in place [source: Trotter].
The NFL warned teams not to structure their contracts that way. The league said that by dumping salaries into the uncapped year, both Washington and Dallas would have had more money in upcoming seasons to pay for high-impact players and veteran stars. According to the NFL, the two teams "created an unacceptable risk to future competitive balance" [source: Trotter].
So what does the salary cap mean for you? Research shows the cap doesn't affect the price of tickets and merchandise, but it does affect the way a team keeps and acquires players. More important, the cap allows bad and good teams to compete on a level playing field. In theory, and sometimes in practice, a not-so-good team can lure a major talent away from a better team because everyone has the same amount of money to work with. As a result, many experts agree that the salary cap allows sports teams to achieve a competitive balance [source: Neiger].
Author's Note: How does the NFL salary cap work?
Do salary caps help make a sports league competitive? The short answer is probably yes, although there are other, different factors including luxury taxes and reverse-order drafts. Still, an argument can be made that the salary cap doesn't hurt. Within the last 30 NFL seasons, 14 different NFL teams have won the Super Bowl, while 25 different teams have appeared in the big game. Major League Baseball, which also has a salary cap, has similar numbers: 18 different teams have won the World Series in 30 seasons, and 25 different teams have made it to the series. The NBA, which has a salary cap, seems to be the least competitive. In that period, just eight different teams have won the NBA Finals, while only 19 different teams have made it to the finals.
- Brooke, Tyler. "How Does the Salary Cap Work in the NFL?" Bleacher Report. June 10, 2013. (April 1, 2014) http://bleacherreport.com/articles/1665623-how-does-the-salary-cap-work-in-the-nfl
- Isidore, Chris. "Why football is still a money machine." CNN Money. Feb. 1, 2013. (April 1, 2014) http://money.cnn.com/2013/02/01/news/companies/nfl-money-super-bowl/
- La Canfora, Jason. "2014 NFL salary cap: Where each team stands as free agency looms." CBSsports.com. March 3, 2014 (April 1, 2014) http://www.cbssports.com/nfl/writer/jason-la-canfora/24466063/nfl-salary-cap-where-each-team-stands-as-free-agency-looms
- Lackner, Al. "Salary Cap FAQ." Ask the Commish.com. (April 2, 2014) http://www.askthecommish.com/SalaryCap/faq.aspx
- Neiger, Chris. "How Salary Caps Changed Sports." Investopedia. Sept. 28, 2010. (April 3, 2014) http://www.investopedia.com/financial-edge/0910/how-salary-caps-changed-sports.aspx
- Trotter, Jim. "Cowboys, Redskins file complaint over salary cap penalties." Sports Illustrated. March 25, 2012. (April, 3, 2014) http://sportsillustrated.cnn.com/2012/football/nfl/03/25/cowboys.redskins.complaint/index.html