The NFL Rookie Cap: an empirical analysis of one of the NFL's most closely guarded secrets.

Abstract: This article presented an empirical analysis of the relationship between the portion of the "Entering Player Pool" (Rookie Cap) for each of the 32 National Football League franchises and that franchise's draft selections. Although the formula for determining each franchise's Rookie Cap is closely guarded by the NFL, the author hypothesized that it should be possible to model the deterministic structure used to calculate franchise spending for each rookie's contract. The OLS-estimated models revealed statistically significant relationships between groups segmented by draft selection order and each franchise's Rookie Cap. The model was verified in an out-of-sample test using the Rookie Cap values for the 2007 NFL season. It was found to have a mean absolute percentage error of 2.1%. The implications of these findings were contrary to language in the NFL Collective Bargaining Agreement, as the majority of rookie contracts are implicitly determined by each franchise's Rookie Cap. The published estimates of each selection's NFL determined cap value will provide useful bargaining information for rookie contracts. Key Words: Draft; football; NFL; Rookie; Player Pool Introduction: Each spring, the NFL Annual Player Selection Meeting is held in New York City to "draft" the top eligible collegiate talent, swelling the rosters of the 32 NFL franchises and saturating fans with conversation topics till fall. One of these topics, rookie salaries, in particular the closely guarded formula for creating each franchise' Rookie Cap, is the purpose of this paper. History: With the 1993 Collective Bargaining Agreement (CBA) between the National Football League (the owners) and the National Football League Players Association (the players), the Entering Player Pool was introduced (Levine, 1996). The Rookie Cap is the specific pool of money within each franchise's salary cap that is reserved for the signing of recently drafted athletes and any undrafted rookie free agents. More precisely, like the League Salary cap that establishes the ceiling for the total for a given franchise in a given year, the Rookie Cap is the maximum amount that franchises can spend on rookie contracts. The sum of each franchise's Rookie Cap comprises the league-wide Entering Player Pool. Rookie contracts are multi-year deals that generally include bonuses ranging from a simple signing bonus for players drafted after round one to reporting bonuses and more complex incentive clauses for players drafted in the first round. To further complicate matters, agents with first round draft picks often need to contend with rigid franchise policies that may prohibit longer-term contracts or incentive bonuses (Cole, 2006). The net effect of these variations is that teams of attorneys and agents write and rewrite these contracts to maximize the amount of money for their clients, while trying to keep the player's salary cap charge beneath a threshold essentially dictated by his portion of the Rookie Cap. Each player's salary cap charge is computed by summing his base salary and a portion of his bonuses, determined by prorating his bonus amount over the years of his contract, not to exceed the number of years remaining under the current CBA. Purpose: Each year, as mandated by the CBA, the league-wide salary cap rises in accordance with increases in league revenues. The Rookie Cap rises in tandem, keeping rookie salaries from rising more quickly than their veteran peers. Created by the NFL Management Council, the formula of exactly how each team's Rookie Cap number is determined is unknown. However, it is based on the number and round of each franchise's draft selections. Article XVII of the amended 2006 CBA states: "The list of each Formula Allotment attributed to each draft selection shall be agreed to by the NFL and the NFLPA, and shall not be disclosed to Clubs, Players, Player Agents or the public. …