The NFL uses a system of keeping teams from making power houses like major league baseball teams do. They put a cap on teams so that they cannot pay all the good players in the league on one team. It’s called a salary cap. Here is how it works.
Despite the NFL's longevity, the league finds itself challenged by the current player free agency and team salary cap system. The salary cap is the result of league revenue sharing between teams and players, which is based on an agreement of defined gross revenues (DGR). The league then defines the share of DGR that will go to each franchise's player roster. The salary cap actually serves as a ceiling placed on spending which is equally applied to all teams. The formula for determining the salary cap is depicted below.7
C = (1/n) x s x DGR
n = number of teams
s = share
DGR = defined gross revenue
n = number of teams
s = share
DGR = defined gross revenue
In comparison to the other professional sports implementing the salary cap system, the NFL has proven to be the most effective at managing player salaries and the vastly expanding cost involved in operating the National Football league.
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