To start off 2020, Carolina Panthers owner David Tepper threw around some cash in an unprecedented way.
Tepper, a billionaire financial mogul who runs Appaloosa Management and earned $1.5 billion in 2017, seems to disregard the price tags when salary markets come into play.
Tepper hired former Baylor head coach Matt Rhule to a seven-year $60 million contract Jan. 7, a move that will at least double his $4.11 million salary at Baylor in 2019.
Rhule is poised to earn up to $70 million in the contract with incentives such as performance bonuses for winning championships and achieving other such accomplishments. To boot, Tepper had to pay a $6 million buyout fee to free Rhule from his Baylor contract, making the total contract worth up to $76 million from Tepper’s perspective.
In the end, Tepper and the Panthers got a coach who has succeeded in turning around both Temple and Baylor’s football programs, but who has also only spent a single season on an NFL sideline back in 2012 with the New York Giants.
To say Rhule is unproven would be fitting, as college success does not necessarily correlate with success at the NFL level. Current Alabama coach Nick Saban, arguably one of the most accomplished coaches in college sports history, was 15-17 in his two lone seasons leading the Miami Dolphins after his success at LSU and Michigan State, before he returned to the college ranks and established his legacy as Alabama’s most successful coach with a 0.864 winning percentage in his tenure.
Steve Spurrier had a 197-75-2 record leading Duke, Florida and South Carolina on the collegiate stage but failed on the professional level as the coach of the Washington, D.C. NFL team with a record of 12-20. Bobby Petrino won an Orange Bowl with Louisville and had a 75-26 record in college but could not last even a full season with the Atlanta Falcons before getting ousted.
Changing focus back to salaries, Tepper paid far above market value for Rhule. Rhule’s $8.57 million average annual salary, not including incentives, immediately places him as the sixth-highest paid coach in the NFL. This ranks him higher than Mike Tomlin, Andy Reid and John Harbaugh, all coaches who have led their teams to the Super Bowl.
In theory, when an outlier like Rhule’s contract occurs, the market should correct itself to combat this trend toward excessive salaries. Professional sport salary markets, however, do not self-correct. With NFL agents demanding the most for their clients and the NFL rule book not placing limits on coaches’ salaries — coaching contracts are outside of the salary cap’s jurisdiction — future contracts will likely skyrocket. Indeed, the average NFL coach salary may exceed $10 million, according to a CNBC interview with an anonymous NFL agent.
Oklahoma Head Coach Lincoln Riley, who is continuously seen as a top NFL coaching candidate, may be the next college coach to take an NFL job. Riley arguably has a more impressive resume than Rhule has now, as Riley has led the Sooners to three straight 12-win seasons to go with three consecutive College Football Playoff appearances.
Fast forward to one year from now on the NFL’s infamous “Black Monday,” the day following the end of the regular season when poor performing teams historically fire their head coaches, and we may see Riley take a job with the Bengals, Lions or Chargers, who all finished the 2019-20 season at the bottom of their divisions and are in search of a turn-around season in the coming year.
In any case, Riley will look at Rhule’s paycheck and demand an annual salary of $9.5 or $10 million. Riley has, undoubtedly, seized an opportunity and will get paid accordingly, contributing to a rising trend of coaches new to the professional level earning millions in their first year in the league.
The problem of upward trending salaries may become all the more apparent when Tomlin or Reed’s contract expires or the Patriots try to keep Bill Belichick, who makes $12 million per season, coaching into his 70s. These coaches could look at the turn of events and then demand $12 to $15 million per season.
To be honest, coaches with the success of these three, and others like John Harbaugh and Pete Carroll, should be paid top dollar in the NFL. The problem is that it was not one of their peers who reset the salary market. Instead, it was an outsider in the name of Matt Rhule who did just that.
While Tepper will go on with his life unaffected by the $8.5 million salary he will soon pay his coach, we may see a league where head coaches start to make four and five times the average NFL salary of around $3 million.
As Rhule awaits a substantial payday at the end of his first season on the professional stage, we must begin to question who’s actually playing the game.
Playing for Profit is an economic column looking at how money shapes the sports people love.