Is The New Cost Structure of the NFL Too Expensive for the 49ers?

Ownership is reportedly upset with the new payroll costs of the team, and that could lead to major changes.

April 19, 2012; Santa Clara, CA, USA; Santa Clara mayor Jamie Matthew speaks with San Francisco 49ers co-chairman Denise DeBartolo York and chief executive officer Jed York during the groundbreaking ceremony at the site of the new 49ers Stadium. Mandatory Credit: Kelley L Cox-Imagn Images / Kelley L Cox-Imagn Images

SI’s Grant Cohn has heard from a trusted source that 49ers ownership is concerned about the growing payroll costs of the team and blames Kyle Shanahan and John Lynch. The source indicates that Lynch and Shanahan are on the hot seat for this season and could be let go after the season if the team does not win the Super Bowl.

49ers CEO Jed York has committed to paying Brandon Aiyuk $47 million in cash by April 1, 2025 and Trent Williams $48 million cash upfront. Nearly $100 million in cash. Ownership concerns over costs ring true after those payments.

Reportedly the 49ers roster has gone over budget for this year and is cutting into the team’s expected profit margins. While the huge cash outlays are a clever use of the cap rules, ownership can’t be happy about it, nor would they want this to become a standard practice.

Most 49er fans will question this report given the team’s on-field success of two Super Bowl appearances and playing in three of the last four NFC Championship Games, but reportedly, this is about the money – and not having any rings to show for it.

The First Domino

The driver of the increased payroll is the rich extension the team gave to Christian McCaffrey this summer. He was already the highest paid at his position and given a raise above that, along with significant guaranteed money and bonuses.

That deal in and of itself didn’t take the payroll over a desired limit, but the contract had predictable consequences. Trent Williams asked for similar treatment and just got it. John Lynch admits Williams’ request took he and Shanahan by surprise.

The response to McCaffrey’s extension isn’t over yet. Two more impact veterans can be expected to ask for the same deal: George Kittle and Fred Warner. When is up to them.

If Shanahan and Lynch didn’t foresee that, they have a problem. The McCaffrey deal can’t exist in a vacuum on this roster when Williams, Kittle and Warner have all played similar roles in the success of the team, and for more years.

What one receives they all do. I predicted this when the extension was announced, and I’m surprised that Shanahan and Lynch didn’t anticipate Williams’ response or the timing of it.

With the McCaffrey extension, Shanahan and Lynch doubled down on the team’s impact veterans. The cap hit can be manipulated, but the upfront cost to management cannot be taken for granted. York signed off on it and paid it, and the team should contend this year, but apparently that’s accompanied by an expectation to win a championship. This season.

The lesson from the NBA

When sports leagues get new television deals the league is flush in cash and the salary gap goes up. In the NBA, the players refused to smooth out the cap growth, preferring a single year spike that caused some chaos in team spending.

The NFL does have player cooperation for smoothing and the cap is on a steep growth curve. $255.4 million this year, up to $300 million by 2026. When the cap goes up that quickly, payrolls go up with it, the cost of doing business goes up. Agents know the cap is not a barrier to market value deals for players and hold out for it.

The NBA had two television deals that changed the cost structure significantly, in 2016 and this year. The value of franchises goes up quickly, but so do the payrolls.

What was doable for an ownership group under one tv deal became too great in the next, leading to a high number of franchise sales. The Phoenix Suns sold for $4 billion in February 2023, the Milwaukee Bucks at $3.5 billion two months later, and the Dallas Mavericks for $3.5 billion in December. Controlling interest in the Boston Celtics is now up for sale, with the team valued by Forbes at $4.7 billion.

Could that be the 49ers’ fate?

Anticipating the cost concerns, NFL owners just voted to allow themselves to sell up to a ten percent stake of the team to league-approved private equity firms. The 49ers are valued by Forbes at $6 billion. A 10% stake would bring in at least $600 million, and under a speculative deal, potentially as much as $1 billion.

The NBA has proven that new tv deals will lead to cash infusion but also a need for deeper pockets to cover rapidly expanding payrolls and operating expenses. Can the Yorks handle that escalation? With a private equity sale perhaps, it’ll be worth tracking that activity leaguewide.

In the midterm though, ownership of sports franchises will require ever deepening pockets. Firing Lynch and Shanahan for a high payroll isn’t going to change the structural issues. Higher tv money, higher cap, higher payroll. Unavoidable.

Could Shanahan and Lynch be let go?

If ownership are serious about a cost crackdown, Lynch and Shanahan could be part of the solution, despite their level of on-field success.

The Niners are looking at a series of spikes in payroll costs with Brock Purdy’s extension expected to be in the $55 million to $60 million per year range, several free agents including Charvarius Ward, Deommodore Lenoir, and Dre Greenlaw, plus the looming McCaffrey extensions for Kittle and Warner. It will be more expensive than this summer.

When the possibility of letting go of Shanahan is mentioned, some fans become autobots asking, “ok who?” and mention Jim Tomsula. But this off-season there are two, six time Super Bowl champion Bill Belichick, I’d pass, and Detroit Offensive Coordinator Ben Johnson, one of the brightest offensive minds in the game. The Tomsulabots are answered.

Whether the Niners will be interviewing, we’ll see, but the report indicates a friction on finances that will likely be repeated next year.

Irish playwright Oscar Wilde put it well. “When I was young, I thought that money was the most important thing in life; now that I am old I know that it is.”